Host:
All right, it’s been a busy afternoon on day two at CPHI North America. We are in Philadelphia, rounding out the day. This is probably our 30th interview for the day, so great times.
My next guest needs no introduction: Gil Roth, the executive director and founder of the Pharma & Biopharma Outsourcing Association, PBOA.
You’ve been talking all day.
Gil Roth:
All two days.
Host:
All two days. So I’m going to just start right in with a hard question. I just got back from Amherst’s 35th reunion and got the news that Hampshire College, my alma mater, is closing. How do you feel about that?
Gil Roth:
I feel bad now. I did not have a great experience at Hampshire. I went there from 1990 to 1993. It’s this hippie-trippy school near Amherst, UMass, Smith, and Mount Holyoke. Those four schools collaborated to build Hampshire.
No curriculum. You design your own curriculum, no grades, oral exams, etc. I didn’t have a great time there, and I was very distraught nonetheless that it’s going away.
To me, that’s a symptom of this “return on investment” idea of education, where there’s no more room for people to just have learning for the sake of learning.
I got more out of my graduate school degree at St. John’s College. It’s sort of the opposite of Hampshire. Everyone has this fixed curriculum, great books, etc.
That said, it really bummed me out to see that Hampshire can’t survive in this day and age. Enrollments are down. Part of that is also due to foreign students no longer being welcome in America as they may have been in the past.
But yeah, just the cultural idea that that place is going to be gone bums me out. I’m going to meet a friend of mine from those days who lives in Western Massachusetts. We’re going to get together this summer and walk around the campus one last time.
Host:
Yes. And here’s how it filters into CPHI this year. Everybody’s graduating right now. Many of us are parents, and it’s hard to schedule things this time of year, hard to get here, because we’ve got kids and they’re growing.
So I spend a lot of time worrying about our kids and the job market and the environment they’re growing up into.
Do you talk to younger folks?
Gil Roth:
I don’t have kids, so as I was telling the previous interviewer, I haven’t shortchanged anyone’s childhood, so I feel pretty good about that.
But I’ve talked to younger workers within the CDMO space and in other areas, where I try to convey to them the lesson I did take from Hampshire, which was: learn how to learn.
You can focus in some super-specific area. If it’s a technical scientific area, yeah, go whole hog with that, pretty much.
This is something I learned back in my 20s when I first went back to Hampshire in 2002 to give a presentation. You will hate whatever field you go into immediately out of college. Five years after that, you’re going to be wondering, “Why didn’t I just take that Shakespeare class at UMass instead of just focusing on this one thing?”
Learn how to learn. Learn how to have that flexibility.
That was beneficial to me in the 90s, and that is hyper-accelerated today.
You go back 10 years and the insult to a lot of journalists and other folks was, “Learn how to code,” because what you do is worthless. Now they’re telling them coding means nothing because AI can solve everything for you.
Well, bad news. If you just told everybody a few years before to completely restructure their lives and education, and then tell them it’s all been torn up again, what you end up with is a lack of faith in the systems that are there.
That is symptomatic of some of the political changes and shifts we’re seeing in different directions.
So, learn how to learn, learn how to be flexible, and try to keep faith in the world, or at least find positive stuff within it.
Nothing specifically about PBOA or the pharma world, but you know.
Host:
Well, it was a long walk to get to my next question.
You had a talk this afternoon, which I had a chance to sit down and listen to. Always fascinating.
You talked about all the investment that big pharma is making in onshoring and building infrastructure here in the United States, with billions with a “B,” versus the contract CDMOs, where investments are millions with an “M.”
However, you made two insights that I thought were really interesting. One is: who’s going to work there? And the second is: in a couple of years, a lot of these investments will be abandoned and will be a buying opportunity for contract manufacturers.
Go into that a little bit.
Gil Roth:
In theory, it’s something I felt from the beginning. I’ve been around the space since 1999, and I’ve never worked at a pharma company or at a CMO.
I was at a trade magazine right next door, *Contract Pharma*. I helped found that magazine, and then 15 years later founded PBOA to represent the CMO sector.
That said, you observe stuff. One of the things I observed over the years was how large pharma was capable of building a multi-billion-dollar facility, maybe intended for one product, and never commissioning it, never starting production a single day, because the market changed or clinical trials changed differently.
Maybe they got a better tax deal from some region.
The idea that that would not be a factor in some of the onshoring investment announcements today, and could potentially be part of the strategy or flexibility those companies are building in.
There was an article on Endpoints shortly after CPHI last year. The CEO of Resilience was the one who said bluntly, “Ten years from now, 75% of those sites will be up for sale.”
I think that was overestimating the timeline.
I don’t know how much capacity these companies need, or how many of the products they think they’re building for are actually going to progress.
But yeah, it’s a lot of announced capex.
As I mentioned in the presentation, the first few announcements were strictly capex, new expansions. After that, a lot of pharma companies started shading in all of their other U.S. expenditures just to come up with a big round number.
One of the largest companies, which I won’t name, announced $70 billion, and I cannot come up with any domestic buildout they need to commit to.
So it’s a bit puzzling in that way, unless the goal is to make as big a dollar show as you can.
For CDMOs, conversely, those are back-to-back slides where I show the in-house pharma versus CDMO announcements. For pharma, we can’t afford that. We have to make those announcements of things we’re actually going to build and things we’re actually going to use, and how many customers we’re going to serve.
Something I bring up when I show those slides, as I did recently to the Department of Commerce, is: there are the billions there and there are millions here.
That said, these millions are a force multiplier. What we do empowers a lot of companies, large and small, pharma and biopharma, and we serve a lot more patients.
I stereotypically say a Lilly facility that’s making one API, one product. There are other examples of this stuff. I just think of them with the oral GLP-1, which would be a huge benefit, but that’s one product and one API.
What our guys are doing is serving so many different customers and ultimately serving a lot of different patients.
Host:
PBOA sort of exists alongside the generics manufacturers in America. They have a separate association, the Association for Accessible Medicines.
Part of this conversation about onshoring is like you said: Lilly, GLP-1, single product, whereas there’s a lot more bang for your buck in generics.
Is that a true statement?
Gil Roth:
Within the generic space, in terms of onshoring, building, and investment, if you look over those slides of mine, there really aren’t any generic companies making those announcements.
For them, the economics of the generic sector in the U.S. is really difficult. Investing in that sort of expansion is a real challenge because of the cost structures for generics and the commitments you have to make to be able to supply.
It’s really tough.
There’s a lot of talk about trying to incentivize domestic API manufacturing for generics. It’s still a challenge to figure out how to do that and achieve cost structures where products can be supplied, and not just incentivize going to find the cheapest provider out there, who tends to be a Chinese ingredient guy.
But it’s a commodity, for sure.
Host:
PPA compliance is a term that I was introduced to this year. I guess that’s one of those things where if you’re a generics manufacturer and you manufacture in the United States, then you’ll get preferential treatment in your contracts with the government, like Medicare and Medicaid.
Gil Roth:
Yeah, that didn’t come up. I don’t know how valid that is or how much of that is executive-order driven versus actually coming from Congress, which would make it more meaningful.
But yeah, the generic guys, for a long time, have said the thing that would help their economics specifically is more long-term government contracts that would assure them of demand for their stuff, so that they could afford to go to higher-value regions rather than trying to find the cheapest providers they can find.
Host:
Fantastic. Listen, we’re out of time.
Gil Roth:
Oh jeez, we didn’t talk about CMO stuff.
Host:
We haven’t gotten to anything like that. We can do that next time.
Back to Hampshire College. If I remember, you had said no grades. What I remember is a lot of writing, a lot of reading, probably more than we even did at Amherst. You’re a big reader. What are you reading now?
Gil Roth:
What I brought with me on my Kindle right now is Salman Rushdie’s memoir about the assassination attempt from 2022, *Knife*.
The thing I read most recently and enjoyed was a collection of the letters of Harold Bloom, the literary critic. A friend of mine worked with his estate and put together a collection of his literary letters. They’re a delight because you get the understanding of a man who really loved reading and what it meant to him, and the writers he got to know over the course of his career.
Host:
That’s beautiful.
Gil Roth:
Yeah, it’s called *The Man Who Read Everything*.
Host:
Gil Roth, thank you so much for your time.
Gil Roth:
Great. Thanks, man. It’s my pleasure. Always good seeing you. Take care.
