Axial Discovery - Onshoring biomanufacturing
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Onshoring biomanufacturing
Driven by the theme of onshoring biomanufacturing, it is imperative that a US-version of WuXi is built. Resilience has a shot, but so many more companies need to emerge to take advantage of the opportunity and reinvent the CRO. WuXi was founded by Ge Li in 2000 as a services company for synthetic chemistry. Each and every year the company rolled out a new offering: manufacturing, bioanalysis, formulation, AMDET. Charles Rivers Laboratories had the opportunity to buy WuXi in 2010 but ended up nixing the deal. Over the following decade, WuXi grew into one of the largest and most innovative contract-research organizations (CRO) in the world and positioned itself to dominate discovery services globally.
WuXi has been able to win for 6 key reasons:
Labor arbitrage - being in China gives WuXi access to a large amount of talent at much lower wages
Scale - Wuxi has a suite of services done at a large-scale built over 2 decades. The company offers services for a wide range of modalities from small molecules to biologics and cell/gene therapies. They provide discovery, development, and manufacturing services and even offer things like medical device testing and genomics products.
Flexible deal structures - WuXi has been flexible in the terms it provides to its customers. The company offers fee-for-service contracts with various milestones and royalties on some of the products if appropriate. Beyond services, WuXi is also aggressive with joint ventures and investing.
Founder-led company - Ge Li still runs the company and is motivated to complete his vision
Regulation - if a company outside of China wants to bring a drug, especially biologics, to China, they must meet regulatory requirements by repeating the development and manufacturing process in China again. This is a lucrative business for WuXi.
Standardization - WuXi gets lock-in by getting customers early and fully-integrating from discovery to manufacturing
These 6 drivers enabled WuXi to dominate services from discovery to development and finally to manufacturing. Now WuXi has set its sights on internal product development. The first example of this was WuXi spinning off its biologics manufacturing business into WuXi Biologics in 2015. This gives a glimpse into the future for WuXi in cell and gene therapies and beyond. WuXi Biologics focuses on fully integrating services for biologics drug development: (1) drug discovery, (2), pre-clinical work, (3) phase 1/2 clinical development, (4) services for pivotal studies, (5) commercial manufacturing. This end-to-end platform allows any customer to plug into WuXi but more importantly makes biologics development a lot more accessible. For WuXi Biologics, it’s probably more valuable that they get companies as early as possible because they will spend increasingly higher amounts as the research and trials progresses. Because WuXi Biologics is such an essential component for smaller companies with less resources and to larger ones that want access to the Chinese market, the company has been able to get royalties on some of the products produced from their services and are set up to build an internal pipeline.
It seems obvious that WuXi has the potential to take control of the global CRO market. With such a dominant position, there is a need to build a US-version. The end-state is easy to comprehend - it’s WuXi. But what are good first moves?:
Focusing on higher value products like cell and gene therapies
Building technology-enabled services that can take on WuXi’s labor advantages
Rolling up services to become fully-integrated at least for a region or specific area then expanding