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.
Pharmaceutical companies are now pushing hard to reduce overall manufacturing and research costs by outsourcing various processes related to research, development and manufacturing. Furthermore, patent expiration and generic drug competition, continue to fuel demand for pharmaceutical contract manufacturing organizations in the market.
Rising number of Food and Drug Administration (FDA) approvals and clinical trials are supporting growth of biopharmaceutical industry, which in turn is fueling growth of the contract pharmaceutical manufacturing market. For instance, according to ClinicalTrials.gov, from September 2008 to October 2018, there were around 288,064 clinical trial studies registered. In addition, there is a significant increase over the past few years with registered clinical studies of 205,428, 233,234, and 262,429 in 2015, 2016, and 2017, respectively.
Furthermore, stringent regulatory policies for clinical research studies and manufacturing make entire drug manufacturing process more complex, as it requires more resources to develop new drugs and biologics. These processes require expertise in broad scientific disciplines of preclinical, clinical, ancillary clinical in chemistry, packaging, manufacturing, project management, and regulatory affairs, which are provided by the CROs and CMOs. This is considered as a major reason for pharmaceutical companies to outsource clinical trials and manufacturing processes.
Contract manufacturing organizations (CMOs) provide wide range of manufacturing services, which include contract packaging, quality testing, and development service to pharmaceutical and biotechnology industries. Biopharmaceutical companies prefer CMOs due to the complexity involved in manufacturing process of biomolecules, as it consists of different shape, size, and behavior with significantly complex process than pharmaceutical drugs. Furthermore, by outsourcing manufacturing capabilities from contract manufacturing organization, allows recruiter firms to focus more on the research and development (R&D), product development, and marketing aspects.
Pharmaceutical market is increasingly concentered with generic products and is highly competitive with various companies located in Asia Pacific, which are entering into the developed markets such as the U.S., Germany, France, and the U.K. Rising number of patents expiring in the near future serves to be a major opportunity for generic drugs manufacturers to prosper in the market.
Furthermore, mergers and acquisitions between generic drug manufacturers, with major players focusing on enhancing their product portfolio through inorganic strategies, will support the addition of generic drug portfolio into company’s offering and thus, generating demand for CMOs to fulfil it.
For instance, in August 2016, Teva Pharmaceuticals Industries strengthened its position in the generic drugs market through acquisition of the generic segment of Allergan, plc for US$ 40.5 billion. This resulted in significant growth in revenue contribution of its generic drug segment, pegged at US$ 9.5 billion in 2016.
Key features of the study:
“*” marked represents similar segmentation in other categories in the respective section.
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