Investors and strategic partners expect technical risk when evaluating early-stage drug development programs.
However, certain CMC (Chemistry, Manufacturing, and Controls) red flags are immediate causes for concern—and can quickly lower valuations, delay deals, or even derail partnerships altogether.
Here are five of the most common CMC issues that investors view as serious red flags during due diligence.
1. Lack of Defined Regulatory Starting Materials
Regulatory starting materials must be clearly defined, justified, and aligned with FDA and ICH Q11 expectations.
Failure to properly define starting materials early can result in major regulatory setbacks, requiring costly rework of process development and resubmissions.
Warning signs investors look for:
- Vague or incomplete starting material justifications
- Designation of starting materials too far into the synthetic process (ie too close to the DS)
- No documentation linking starting materials to final drug substance quality
Best practice:
Establish starting material strategy early in development, document decisions clearly, and be prepared to defend them.
2. Weak Process Understanding
If a company cannot demonstrate basic understanding of its manufacturing process and critical process parameters (CPPs), or lack of them, investors will view the technical risk as high.
This is particularly damaging near pivotal trials or commercial manufacturing scale-up.
Warning signs investors look for:
- No mapping of critical quality attributes (CQAs) to manufacturing steps
- Limited process characterization work
- Unclear strategy for process validation
Best practice:
Proactively build process understanding in parallel with clinical development, not after.
3. Inadequate Stability Data
Stability data is a core component of any regulatory submission.
Weak or incomplete stability programs can delay approval, increase regulatory scrutiny, and raise doubts about product shelf life.
Warning signs investors look for:
- Overreliance on accelerated stability data without real-time support
- Lack of a defined ongoing stability program
- Missing container closure system integrity testing
Best practice:
Start real-time stability studies early and align them with intended commercial packaging and shelf life expectations.
4. Fragile Supply Chains
Investors expect companies to have backup strategies for critical materials, drug substance, and drug product manufacturing.
A fragile supply chain dramatically increases business risk.
Warning signs investors look for:
- Single-source critical raw materials without alternatives
- Unclear supply chain agreements or quality agreements
Best practice:
Establish plans for redundancy in supply chains early and document plans for supply chain resilience.
5. Incomplete Control Strategies
Investors want to see that a company has built a coherent, risk-based control strategy that will stand up to regulatory review.
An incomplete or poorly justified control strategy increases the risk of FDA questions, complete response letters, or delays.
Warning signs investors look for:
- CQAs and CPPs not well defined or understood
- Release specifications based solely on limited clinical data without broader justification
- No lifecycle plan for control strategy evolution through scale-up
Best practice:
Develop a control strategy appropriate for each stage of development—and plan ahead for post-approval lifecycle management.
Final Thoughts
Early identification and mitigation of CMC red flags can substantially improve a company’s positioning during fundraising and partnership negotiations.
CMC diligence is no longer just a late-stage concern; it is critical from the earliest rounds.
At DSI, we help companies audit their CMC programs, eliminate high-risk gaps, and prepare compelling technical narratives for investors and partners.
Addressing red flags proactively is one of the best ways to protect and enhance the value of your development program.
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