Contract Manufacturing & Development's Big Pharma Ascendency

CDMOs are taking their talents to the world stage in leading roles.

By Nice Insight

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With 2017’s fourth quarter economic data extremely strong, a new tax bill that lowers corporate rates and unemployment at historic lows, it is likely U.S. pharmaceutical consumption won’t be abating any time soon. The strong sustained growth of North American drug and healthcare consumption only serves to bolster the number QuintilesIMS projects for the world’s drug consumption, noting overall global drug spending is on track to reach $1.5 trillion by 2021.1

Most current statistics point to solid and continued spending on processing and manufacturing capabilities offered by contract development and manufacturing organizations (CDMOs), especially those planning on serving biopharmaceutical and biosimilar customers over the next decade.

As pharma-biotech moves past the first quarter of 2018, players serious about their role in the CDMO space are anticipating positive revenue growth and working their go-to-market strategies because they’ve spent the last three to four years positioning themselves tactically and operationally to pursue the opportunities the R&D pipeline continues to deliver. EvaluatePharma (who projects global pharmaceutical markets expanding at a CAGR of 6.3 percent) predicts R&D spending will maintain 2.8 percent CAGR through 2022 and that spend will add 50 percent more revenue over the same period.

For contract manufacturing and development service companies, opportunities for growth and success in the coming years will be predicated on their ability be strong, globally positioned strategic partners and leading actors on the world stage, which supported a robust level of high-level strategic maneuvering and tactical/operational spending by prominent CDMOs and other surprise players in 2017. Merger and acquisition activity reflected strategic intentions as did the character of operational/capacity expansions.

Looking at what’s driving pharma and CDMO business lately, contract manufacturing leaders continue to initiate organizational and operational strategies to compete for business in the active pharmaceutical ingredient (API) area and capturing more of its value by instituting efficient flexible manufacturing.

Last June, Clarivate Analytics’ Kate Kuhrt set the current API market at $140 billion on the supply side, a data point she presented on API supply and demand at DCAT Sharp Sourcing.2

CDMO1What’s the potential for 2018 and beyond? For now, Mordor Intelligence predicts the market for active pharmaceutical ingredients (APIs) is growing at a 6.5 percent CAGR and will reach $225 billion in 2021.3 Kuhrt explained the market is split roughly 60/40, with the larger portion going to in-house commercial producers and the smaller to contract manufacturing service suppliers.

With demand for API manufacturing support, and completing the development and commercialization pathway for biopharma, healthy growth rates are predicted for global pharmaceutical contract manufacturers. According to the Mordor Intelligence report “Pharmaceutical Contract Manufacturing Market - Growth, Analysis, Forecast to 2022” published October 2017, the market for contract manufacturing was valued at $65.10 billion in 2016 and is projected to reach $94.38 billion by 2022, during the forecast period from 2017 to 2022.4

However, to deliver the continued gifts of the pipeline to patients and consumers, contract services providers must also be able deliver on the rising curve of what good manufacturing practice is relative to manufacturing capability, and the operational excellence necessary to compete and win the development and manufacture of new, highly lucrative therapeutics on the global stage.

Drugs of all types are growing more sophisticated and tougher to manufacture without error. From small molecule formulations with time-release or anti-abuse features, to sophisticated biologics and personalized genetic treatments to popular biosimilar equivalents, all are headed for burgeoning global markets.5

Drug manufacturing complexity is also compounded by other factors including the arrival of highly engineered drug delivery devices and primary and secondary packaging that has as much to do with the value and effectiveness of the therapy as the API. Packaging in its own right echoes the larger contract services universe as its role in providing for the safety and security of the world’s pharmacy grows more complex and critical each day.6

Most in the industry are well aware of the challenge of providing safe, affordable and effective drugs, cost effectively. Big pharma is certainly driving the contract manufacturing supply chain. But the reasons for outsourcing more of everything to CDMOs have changed in response to competitive and socio-economic market forces driving drug consumption and regulation.

Nice Insight gathered input from more than 700 pharmaceutical industry professionals from across pharma (41 percent large, 36 percent medium-sized, 20 percent small and 3 percent emerging) and around the world (38 percent in the EU, 33 percent in N. America, and 29 percent in Asia). Results from the 2017 Nice Insight Contract Development and Manufacturing Survey offers insight into why the CDMO’s role in pharma-biotech has become so prominent and critical: The top reason survey participants engage CDMOs and contract services providers is “access to specialized technologies.”7

Parenterals big Production

Respondents are also seeking to improve quality and gain expertise in operational areas their organizations may not be as strong in delivering cost-effectively. Nice Insight CDMO survey data revealed that more than half (54 percent) engage contract providers for liquid dose form clinical-scale and commercial-scale drug product manufacturing services.CDMO2

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