Analysts are bullish on 2026 growth outlook for CDMOs

On the heels of meetings last week with contract development and manufacturing organizations (CDMOs) at the CPHI Frankfurt conference, William Blair analysts see a light at the end of the tunnel for the pharmaceutical outsourcing and services sector.

After meeting with more than 30 companies at CPHI Frankfurt, the analysts in a Tuesday note to investors said they are “bullish” on the growth outlook for CDMOs in 2026. They left the conference feeling “more optimistic” about the outlook for the space next year.

In their discussions at CPHI Frankfurt, CDMOs “unanimously confirmed that industry capacity, particularly for large-scale biologics drug substance manufacturing and aseptic fill-finish, remains insufficient to meet current demand, and that demand should be capable of supporting recently announced material capacity expansions from CDMOs and large pharma” the analysts wrote.

At the same time, they concluded that commercial manufacturing demand “remains robust, supported by strong drug approvals over the last couple of years, a healthy outlook for drug sales moving forward, and a growing appetite for outsourcing.”

While the majority of CDMOs characterized the 2025 pricing environment as more competitive than last year, the analysts said manufacturing input prices — such as wages and energy costs — have been “stabilizing, helping to limit pressure on CDMO margins, and it appears that most biopharma customers are still willing to pay a premium for manufacturing quality and reliability, especially for U.S. capacity in high-demand areas.”

An analysis published last week by De Facto found that CDMOs in China and the U.S. are best positioned to capitalize on outsourcing trends. The analysis from Brian Scanlan, advisor of life sciences at Edgewater Capital Partners, predicts that American and Chinese CDMOs will experience the fastest growth, with antibody-drug conjugates (ADCs), monoclonal antibodies (mAbs), proteolysis targeting chimeras (PROTACs), and sterile filling anticipated to drive demand in 2026.

William Blair’s assessment found elevated demand within biologics manufacturing, including ADCs, mammalian drug substance, as well as fill-finish for cartridges, prefilled syringes, and vials — driven in part by the surge in GLP-1 drugs and biopharma’s move towards more user-friendly formats and away from older formats like ampoules.

“Beyond biologics, our conversations around small molecule demand were also generally upbeat, especially for certain complex capabilities like highly potent manufacturing and spray drying services (which can help improve a drug’s solubility and bioavailability),” the analysts commented.

Tariffs and drug pricing

A big topic of conversation at CPHI Frankfurt was the potential impact on the CDMO industry from the Trump administration’s pharma-specific tariff and drug pricing policies, according to William Blair analysts.

“The general sentiment from the CDMOs we spoke with suggested that, regardless of the ultimate outcome of either policy, customer interest in U.S. manufacturing capacity is reaching a fever pitch,” the analysts wrote. “Most CDMOs we spoke with that currently have U.S. capacity noted increased inbounds and many other global CDMOs indicated potential interest in building out capacity in the U.S.”

Large CDMOs like Lonza and Thermo Fisher Scientific — which have ample capacity capable of supporting U.S. and global drug developers across modalities, locations, stage of development, and type of work — will benefit most from this regionalization trend, according to the analysts, as well as smaller players such as Siegfried and Lifecore Biomedical.

The analysts continue to see Lonza’s $1.2 billion acquisition in 2024 of Roche’s large-scale mammalian drug substance facility in Vacaville, California, as a “home run” as the CDMO recently signed its fourth significant long-term commercial supply agreement.

“While Lonza’s Swiss CDMO peer, Siegfried, has more limited U.S. capacity, it should benefit from high demand for complex small molecule services, like spray drying,” the analysts wrote. “We also believe Lifecore is well-positioned to win additional near-term fill-finish business given its available U.S. capacity in high-demand areas like cartridge filling.”

Thermo Fisher’s CDMO business is positioned to “benefit from a combination of all of these tailwinds, namely tight capacity for biologic drug substance and fill/finish (especially given disruption at Catalent) and growing demand for U.S. capacity and a one-stop-shop services suite,” according to the analysts.

At CPHI Frankfurt, the analysts also commented that several CDMOs indicated that customers are “moving business away from Catalent following its recent acquisition by Novo Holdings and several public issues with quality control.”

Different opinions on FDA impacts

Gil Roth, president of the Pharma & Biopharma Outsourcing Association (PBOA), told a panel session at CPHI Frankfurt that he worries about the impact of certain U.S. government policies beyond potential tariffs and drug pricing.

“If the FDA is put under significant stress due to job cuts and funding issues, that could potentially impact drug review timelines,” Roth said. “And, if that happens, all of this gets blown up. That’s what I really get concerned with because if investors can no longer trust in user fee goal dates for review timelines, maybe they find somewhere else to invest.”

Yet, despite budget and headcount cuts at the FDA and the ongoing U.S. government shutdown, all CDMOs that William Blair analysts spoke with at CPHI Frankfurt “indicated that their customers’ U.S. clinical and approval timelines remain largely unaffected and are progressing as planned.”

The analysts also noted a recent biotech funding improvement which “leaves us optimistic about a near-term clinical rebound, with the $10 billion raised in October representing a 50%-plus increase year-over-year and a nearly 40% increase sequentially.”