Clinical data proves the biology works, but CMC dictates whether the asset makes money.

Biopharma M&A due diligence routinely discounts CMC risk, driven by fierce competition for sought-after assets and misplaced dealmaking incentives.

Flawed valuation models that assume all CMC risks are fixable

I suppose all CMC problems are fixable if we have infinite time and capital. In reality, the cumulative effect of iterative changes can destroy deal accretion.

Unlike clinical trial results, CMC failures are rarely binary. They may arrive piecemeal: qualify an alternate supplier, rerun a comparability study, tighten a specification. E.g., CorMedix lost years to CRLs in 2021 and 2022 over supplier site inspections and vial fill volumes before finally securing approval in 2023. Roche’s acquisition of Poseida Therapeutics and the regulatory friction around its lead allogeneic asset, P-BCMA-ALLO1, illustrate this trap: refining scale-up complexity or fixing CMO readiness can delay or decrease your predicted cash flow.

So, even if the FDA gives you the green light to go commercial, the decreased net present value (NPV) might make the project unfeasible.

Misaligned M&A Incentives

M&A incentives reward successful deal closure today. But Process performance qualification (PPQ) failures arise years later.

What are some good ideas on incorporating CMC success probabilities into valuation models?

Note: An adaptation of this writeup was released as a LinkedIn Post.