Big pharma interest in contract manufacturing is creating growth, finds report
Frost & Sullivan expects European contract manufacturing revenues to reach US$20.75bn by 2018
Big pharma is increasingly viewing the outsourcing of pharmaceutical manufacturing as a strategic move that would enable the major industry players to focus on their core competencies such as r&d, finds a Frost & Sullivan report.
At the same time, the patent expiry of key blockbuster drugs worth US$45bn and biologics worth US$30bn is expected to reduce the capacity utilisation rates of their manufacturing facilities by 50%, thereby making outsourcing a viable option.
New analysis from Frost & Sullivan, European Pharmaceutical and Biotech Contract Manufacturing Markets, finds that the European pharmaceutical contract manufacturing market earned revenues of $10.02bn in 2011 and forecasts that this will rise to $20.75bn by 2018. Over the same period, the European biotech contract manufacturing market is set to expand from $1.21bn to around $2.67bn.
Big pharma companies contribute between 10–25% of the total revenues of contract manufacturing organisations (CMOs) in Europe and the report anticipates that this will rise to 40% by 2013, and up to 50% by 2018.
‘The impact of the economic crisis, coupled with the poor performance of the venture capital industry in Europe, has underlined the popularity of contract manufacturing as it has become synonymous with cost-cutting and the timely entry of products into the market,’ said Frost & Sullivan research analyst Aiswariya Chidambaram.
But stringent regulatory requirements are likely to place pressure on CMOs. As the regulatory environment in Europe becomes progressively strict owing to contamination issues, safety compliance and drug recalls, the cost of gaining regulatory approvals will make up a major chunk of fixed costs for CMOs.
Despite this challenge, Frost & Sullivan says market prospects are extremely buoyant, projecting that the European pharmaceutical contract manufacturing market will grow at a compound annual growth rate (CAGR) of 10.9% from 2011–2018, with its biotech counterpart poised to register a CAGR of 12.1% over the same period.
Chidambaram warns that although the demand for manufacturing capacity is rising, a careful weighing of benefits and risks is required by CMOs when planning capacity expansions or they could be hit by over-capacity, which, in turn, could lead to the acquisition of smaller CMOs by larger ones.
‘Promisingly, there is tremendous untapped potential for CMOs which are properly positioned and at the forefront of technology in the capital-intensive and technology driven contract manufacturing market,’ she added.
