Contract Pharmaceutical Manufacturing Market - Insights
Contract pharmaceutical manufacturing organizations are engaged in conducting various kinds of drug production and research activities for different pharmaceutical companies. In the present time, there is an extensive need for pharmaceutical contract research and manufacturing, as drug manufacturers are facing increased research and manufacturing costs resulting due to the expiration of many older drugs patents, competition from drug industry, and stringent government regulations for new drug development. Pharmaceutical manufacturers are capable to reduce manufacturing and research & development costs by outsourcing several processes that were previously done in-house, ranging from initial drug research studies to the entire manufacturing process.
Contract manufacturing organizations (CMOs) offers pre-formulation, formulation development, stability studies, method development, pre-clinical and clinical phase trial materials, late-stage clinical trial materials, scale-up, registration, and commercial drug production. For instance, according to Outsourcing Resources Supplement to Pharmaceutical Technology, 2016 report, around 80% of the products approved by U.S. FDA on behalf of small biotechnology or pharma companies are contract manufactured, whereas 50% of the products sponsored by mid-size companies (US$ 500 million to US$ 5 billion in revenues) uses a CMO to manufacture its products. Contract research organizations (CROs) offer effective services to pharmaceutical and biotechnology organizations by reducing cost and time required to conduct the clinical trials.
The global contract pharmaceutical manufacturing market size is estimated to be valued at US$ 127.9 billion in 2018, and is expected to witness a CAGR of 9.3% during the forecast period (2018–2026).
Global Contract Pharmaceutical Manufacturing Market Share, By Service Type: 2018 & 2026
Source: Coherent Market Insights Analysis (2018)
Growing Need to Outsource Small Molecules’ Manufacturing is expected to Augment Market Growth
Demand for small molecules is considerably high compared to large molecules, owing to its various advantages in manufacturing and clinical trial studies. For instance, according to Cambrex Corporation, 2017 report, small molecules dominates in the pharmaceutical industry, having 34 small molecule new entities being approved in 2017, which is the highest number in the last decade, by the U.S. Food and Drug Administration (FDA). Furthermore, small molecules can be engineered to deliver strong therapeutic effect with small dose, below 10 mgs and even micrograms.
In addition, according to the data published in BioPharm International Journal in October 2015, small-molecule pharmaceuticals accounted for 82% of all new drug application (NDA) approvals and 60% of all new molecular entities in 2014. Furthermore, it represented two-thirds of the drug development pipeline. Contract manufacturing organizations act as an additional manufacturer site in company’s multiple site supply network, providing backup capacity and increasing supply security.
Over half of the revenue of outsourced commercial manufacturing is attributed to drug product manufacture, which mostly includes oral solid dosage (OSD). Oral medication is more convenient for patients as compared to injections. Moreover, large pharmaceutical companies majorly outsource the production capabilities through contract manufacturing organizations by shifting its risk and economic burden of updating raw material and machinery changes in manufacturing faculty for new product.
Global Contract Pharmaceutical Manufacturing Market Share, By Molecule: 2018 & 2026
Source: Coherent Market Insights Analysis (2018)
Rising Demand for Generic Drugs is expected to Propel the Market Growth
Development of generic drugs offer opportunities for manufacturers, as consumers’ demand for cost-effective pharmaceuticals is increasing. Patients being treated for chronic disease using generic drug are more likely to continue their drug therapy and have their prescriptions refilled than those using branded drugs. Moreover, the expiration of patents, emerging markets, increasing geriatric population, rising prevalence of chronic diseases, and the efforts of governments and healthcare service providers have contributed to the increased use and acceptance of generic drugs. This increasing demand for generic drugs is offering lucrative growth opportunity for contract pharmaceutical manufacturing organizations in the near future.
Furthermore, adoption of novel manufacturing technologies, increased competition, and shrinking profit margins has compelled pharma companies to outsource its production processes and R&D of the drugs to contract research organization (CRO) and contract manufacturing organizations (CMO), to stay competitive in the market.
Outsourcing of generic drugs offers notable benefits when its manufacturing is done to supply to multiple customers (parent generic organization) with the same active pharmaceutical ingredient (API). Moreover, rising patent expiries and increasing preference of originator product manufacturing firms for contract research organizations to conduct clinical research is expected to show growth within the API small molecule segment for generics manufacturing.
However, regulatory concerns related to contract manufacturing processes are expected to restrict the contract pharmaceutical manufacturing market growth in the near future. Moreover, rising number of FDA inspections of foreign manufacturing facilities is uncovering more violative operations. The U.S. Food and Drug Administration (FDA) issues regulatory notices regarding violative production practices and inadequate quality control to CROs and CMOs. For instance, in November 2016, Dr. Reddy’s Laboratories received a warning letter from the FDA. The warning letter covered two facilities, which manufacture APIs at Srikakulam (Andhra Pradesh) and Miryalaguda (Telangana), and a cancer product manufacturing facility at Duvvada (AP) in India. To avoid the FDA warning or further casualties, manufacturers are required to ensure that its drugs are produced in accordance to FDA’s regulations ensuring product safety, identity, strength, quality, and purity.
Geographically, Asia Pacific is expected to offer conducive environment for growth in the contract pharmaceutical manufacturing market, owing to expanding healthcare infrastructure, lower operational cost of clinical trial, research, and manufacturing, and availability of skilled scientific manpower.
Furthermore, outsourcing of administrative process of research and manufacturing, to companies in emerging economies, especially BRIC (Brazil, Russia, India, and China) can substantially reduce time required to conduct clinical research and manufacturing and also reduce economic expenses. Furthermore, outsourcing in this region often offers access to a larger number of patients with quicker enrollment and in general, a shorter trial timeline from start to finish. This will in turn increase adoption of contract pharmaceutical manufacturing services in this region during the forecast period.
Some of the key players operating in the contract pharmaceutical manufacturing market are Accenture plc, Cognizant Technology Solutions, ATOS SE, Catalent, Inc., Covance, Inc., Boehringer Ingelheim GmbH, Genpact Limited, Lonza Group, PAREXEL International Corporation, Quintiles Transnational Corporation, Abbvie, Inc., Baxter International Inc., Dr. Reddy’s Laboratories Ltd., Aurobindo Pharma, Pfizer, Inc., The Almac Group, Teva Pharmaceutical Industries Ltd. and Piramal Enterprises Ltd.