In 2025, outsourcing small molecule drug development to CDMOs remains a strategic choice for biotech firms. However, beneath the surface of service quotes and milestone timelines, there lie hidden costs that can derail budgets and delay product launches. A careful analysis of recent contracts reveals several key areas of concern.
1. Underestimated Tech Transfer Costs
Many contracts highlight base fees for technology transfer but fail to detail the full scope of work required to replicate and scale processes in the CDMO’s facility. This often includes unanticipated analytical method validations, raw material requalification, and pilot-scale testing—all of which significantly inflate costs.
2. Regulatory Support Surprises
Support for IND or NDA submissions is typically outlined as "included" in CDMO agreements, but limited hours are often allocated. Any additional regulatory consulting or document revisions quickly become high-cost extras, especially when timelines are tight.
3. IP-Related Ambiguities
Intellectual property ownership of process improvements or novel analytical methods can be murky. Some CDMOs include clauses that give them partial rights to innovations developed during the engagement—an unexpected cost that impacts long-term competitive advantage.
4. Project Management Fees
While project oversight is expected, many CDMOs now include separate line items for “enhanced project management” or “strategic guidance,” which were previously bundled into the service fee. These add-on costs can exceed 10% of the contract value.
5. Delays and Change Orders
Timeline slippage is one of the costliest issues. Change orders due to formulation issues, stability failures, or supply chain delays can lead to rework, extended storage, or retesting. These are typically billed at premium rates.
Conclusion
CDMO partnerships are essential for accelerating small molecule programs, but developers must go beyond headline costs. A detailed, clause-by-clause contract review—and ongoing risk monitoring—is critical to avoid financial surprises in 2025’s competitive drug development landscape.
