Emerging from the rough waters of the CDMO industry with a new chief executive at the helm, AGC Biologics is on a mission to reinvent itself as a manufacturing partner defined by friendliness and expertise at scale.
After going through a series of layoffs this year, AGC appointed new CEO Alberto Santagostino at the top of the month, recruiting the CDMO expert off a six-year stint as head of cell and gene technology at Swiss manufacturing juggernaut Lonza.
Now settling into his new role, Santagostino’s aim is to establish AGC’s reputation as a “natural, easy choice as an expert and friendly CDMO.”
Stressing that the new direction is more so reemphasizing AGC’s core strengths rather than reinventing them, Santagostino explained in an interview that the project is about “taking what is already good at scale.”
When it comes to skill and capability, “there are many CDMOs that are either very fresh to the game, or they’ve been pulled together on a spike of demand that was happening,” Santagostino noted. “They may not be where they’re supposed to be on expertise.”
AGC, while perhaps a smaller name in the contracting space, boasts some 30 years of manufacturing know-how, the CEO pointed out. In that time, the company has helped launch 25 commercial products, completed more than 90 successful regulatory inspections and worked with more than 250 clients across 400 different projects.
The company also has strong capabilities in areas like cell and gene and microbial manufacturing—areas Santagostino believes remain underappreciated and “untapped.”
As for AGC’s new, friendlier face, Santagostino noted that much of the industry is laser-focused on extracting value, with the result that customer relationships with their CDMO partners have often felt strained or transactional.
“That path is the path I really want to change,” he explained, noting that the company hopes to achieve this goal by avoiding pitfalls like patent litigation, political risk-taking and conflicting contracting.
Part and parcel to Santagostino’s goal to enhance AGC’s reputation is scaling the business.
“What I was doing at Lonza was taking small, operational [cell and gene therapies] and taking them to scale, and now it’s about repeating the same here.”
Despite enduring some hardships over the years, AGC has remained consistent on its quest to expand its manufacturing footprint, running production projects at sites in Milan, Copenhagen and Seattle, Washington.
The goal now, to hear Santagostino tell it, is to bring AGC’s network together into a “proper package” that can differentiate itself by being “simpler, easier and more approachable” than its CDMO peers.
Things certainly haven’t been easy for AGC in recent months as the company weathers many of the same hardships as its peers in a post-COVID contract manufacturing field.
Back in September, the company revealed it would lay off 68 employees at its cell and gene therapy plant in Longmont, Colorado, and idle certain operations at the facility. In rationalizing the decision, AGC pointed to biopharma spending cuts that have weighed heavily on CDMOs and other manufacturers.
Prior to the decision in Longmont, AGC in May said it would cut just under 4% of its global workforce, citing “changing economies” and “other external factors” that had prompted a right-sizing initiative at the company.
Speaking to AGC’s past struggles and layoff rounds, Santagostino noted that the issues the company faced stemmed, at least in part, from “COVID hangover,” where demand was plentiful, but growth was not properly supported.
Then, once demand started to wane as the pandemic receded, “it created a bit of a vacuum,” he explained.
Still, Santagostino was clear in his expectations for future rightsizing efforts at the company: “If you ask me, looking forward, no, there is going to be no major layoff or restructuring in the plan.”
He did caution, however, that AGC may have to make minor adjustments moving forward—growing in certain areas or downsizing in others—as part of the natural flow of business.
As for AGC’s Longmont cell and gene facility, Santagostino said the company is keeping its options open. He noted that the purchase of the facility from Novartis in 2021 was a “good strategic choice” and that AGC got the plant for a “good bargain.”
“The problem was that the site came with installed capacities from Novartis at a time that we were mostly focused on viral vector,” Santagostino said. “It was a little bit like having a super small operation in a big plant.”
To cope with the size disparity, AGC previously chose to consolidate cell and gene activities in Milan while keeping optionality for Longmont to perform manufacturing runs at commercial scale, Santagostino said.
“So, from a cell and gene perspective, Longmont is going to grow into commercial operations … and is going to be a very good base with virtually infinite capacity for AGC to progressively expand U.S. operations in terms of mammalian and potentially filling and finish.”
While Longmont certainly has a place in AGC’s future, a reopening isn’t going to happen overnight, with Santagostino stressing that the company plans to “grow with the client at scale.”
From Santagostino’s perspective, the field has gone from “a period of irrational optimism” around 2017 to 2021 to a phase of “irrational pessimism.”
Now, Santagostino hopes the industry is shaking off the doldrums to emerge fresh in an era of “rational realism.”
As for what that may look like, the CEO is predicting a period of “healthy growth,” though not quite at the heights seen during COVID-19.
Still, Santagostino voiced concerns about the emphasis many larger CDMOs continue to place on deploying large-scale capacity, which he figures could simply end up idle.
With regards to the current role of CDMOs in the life sciences industry, “we are experiencing a proliferation of modalities,” Santagostino said.
“This fragmentation on CMC technical development, it creates an environment where small companies cannot have capabilities in those technical aspects, because it’s going to be too daunting in terms of CapEx investment and capability search.”
Meanwhile, larger drugmakers “cannot cover it all,” either, Santagostino said.
CDMOs have emerged to fill the gaps. But capacity constraints and “unreasonable earning expectations” have made many of these contractors difficult to deal with for the drug developers, Santagostino explained.
In turn, Santagostino wants to turn AGC into a “safe harbor” that can handle smaller customers going from preclinical to commercial work and large drugmakers seeking a more straightforward partnership, too.