The global pharmaceutical CMO market was valued at USD 120.29 billion in 2020, and it is expected to reach USD 195.70 billion by 2026, registering a CAGR of 7.85% from 2021 to 2026. COVID-19 pandemic has had a beneficial effect on contract manufacturing services overall. There were multiple opportunities for CMOs in clinical trial manufacturing, where there is a large pipeline of drugs and both mega- and small-cap companies outsource to partners for pipeline advancement. The pandemic has also freed up internal capacity at big pharma, as some have outsourced some existing products, such as Pfizer, which outsourced many internally manufactured drugs to CMOs.
- CMOs are consolidating as a means of enhancing profitability in the competitive market. Through consolidation, the large CMOs could expand their geographical presence and penetrate multiple markets. For instance, in January 2020, South Korea's Celltrion, a biosimilar maker, announced plans to invest USD 514 million over five years for its new plant in Wuhan, China's most extensive biologics facility with a capacity of 120,000 liters. The new facility is designed to develop and manufacture its biologics for the local market and perform contract work for Chinese biotech companies' emerging wave.
- Additionally, the pharmaceutical companies have been directing their priorities toward the core areas of competency. Hence, they prefer not to dispense available resources, expertise, and technology on formulating the final dose of medicines. The increased competition and shrinking profit margins compelled the pharmaceutical companies to revisit their production processes and R&D activities instead of manufacturing the formulated drug to stay competitive in the market.
- Furthermore, the complexity of the biopharmaceuticals, coupled with the highly personalized medical therapies and devices, drive the increased complexity in the operations of the supply chain and lead to increasing reliance on contract manufacturing. Factors such as these are helpful in the proliferation of the CMO market. In March 2021, Fujifilm Diosynth Biotechnologies selected Holly Springs, North Carolina, for its new JPY 200 billion large-scale cell-culture biomanufacturing site. The new facility will provide large-scale cell-culture manufacturing for bulk drug-substance production. The facility is expected to be operational by the spring of 2025.
- Moreover, contract manufacturing services are estimated to dominate the market for research services in the pharmaceutical sector, as the increased demand is expected for active pharmaceutical ingredients (API) and finished dose formulations in the future. The Asia Pacific region, particularly India and China, is the prominent region in the CMO industry due to considerably lower manufacturing costs than in North America and Europe and favorable regulations. While India and China have established themselves as significant suppliers of API manufacturing services, the US remains the primary hub for pharmaceutical development outsourcing.
- The most significant factor boosting the growth of CMOs in the pharmaceutical industry in the Asia-Pacific region is the growing need for robust processes and production technologies, which have proven highly effective in meeting regulatory requirements. India's CMO market is expected to grow due to the country's large population base and a sharp increase in demand for injectable drugs, especially in cancer research.
- Further, the pharmaceutical industry is currently facing a significant issue in poor capacity utilization rates. According to Twix Pharmaceutical Services, compared with the consumer products industry, where accurate utilization rates are maintained above 85%, existing pharmaceutical manufacturing capacity utilization across the entire industry network hovers near 30-35%. The requirement to improve capacity utilization and increase productivity and efficiency are significant for CMOs as customers want delivery on time and in full at a fair price.
Key Market Trends
Active Pharmaceutical Ingredient (API) Manufacturing Accounts for the Largest Market Share
- The demand for API manufacturing has been witnessing sustained growth over the last few years. It is anticipated to continue rising steadily, with additional patent expiries expected in the future and a significant increase in the global generic production capacities.
- Most of the companies in the industry are increasingly focusing on the development of biological APIs, which is driving the API manufacturing segment of the market studied. The general prescription drugs subsegment has more demand for API manufacturing as compared to the OTC drugs.
- Further, significant factors driving the growth of the API manufacturing segment include the increasing government initiatives in the healthcare sector, innovation in biologics, and a rise in the incidence of cancer and age-related diseases. However, strict regulatory policies in regions such as Europe may hinder the sector’s growth.
- Moreover, according to the Indian Drug Manufacturers Association, as of Jul 2021, there has been a steep rise in the cost of raw materials for the essential drugs, called active pharmaceutical ingredients (API) in the pharma sector, by up to 140% in multiple cases since the pre-pandemic level, which is challenging for the industry. The overall increase, averaging around 50% owing to high-priced imports and supply disruptions from China, has raised concerns regarding the availability of drugs and could lead to shortages, primarily of those crucial in Covid therapy.
- Further, in April 2021, Piramal Pharma Solutions, a Contract Development and Manufacturing Organization (CDMO) of Piramal Pharma Limited, announced the acquisition of API manufacturer Hemmo Pharmaceuticals for INR 775 crore. With this acquisition, the company will develop and manufacture peptide APIs, as Hemmo has been one of the few synthetic peptide API manufacturers in the global market landscape.
- Also, custom API manufacturing services primarily refer to producing desired quantities of pharma APIs, intermediates, reference standards, fine chemicals, impurities, and other drug substances under GMP (Good Manufacturing Practices) guidelines.
Asia Pacific is Expected to Account For Significant Market Share
- China is becoming the most attractive outsourcing country. Most CMOs operating in China mainly offer API and bulk drug products manufacturing for approved generic and branded drugs. Some of the country's leading API and chemical intermediate CMOs include Asymchem Laboratories, Beijing Second Pharmaceutical, Chongqing Huapont Pharmaceutical, Shandong Xinhua Pharmaceutical, Venturepharm Laboratories, Porton Fine Chemicals, and Tianjin Pharmaceutical.
- The country recently surpassed India as the world leader in APIs and bulk drug materials manufacturing. While API manufacturing is common in China, most of the country's CMOs are limited to manufacturing liquid or solid dosage formulations. Many manufacturing facilities have not received the US or European CGMO certificate. As a result, they cannot produce finished dosage products for sale in these regions.
- Further, the pharmaceutical industry in India manufacturers a range of bulk drugs, which are the key ingredients with medicinal properties that form the basic raw materials for formulations. Currently, bulk drugs account for approximately one-fifth of the industry output, while formulations account for the rest. The country also has the expertise for active pharmaceutical ingredients (APIs) as it is the source of 60,000 generic brands across 60 therapeutic categories and manufactures more than 500 APIs.
- According to the CPhI Pharma Index 2020, India is the primary beneficiary for API manufacturing and CRO chemistry services outsourcing, rebalancing away from China. India has become a global pharmaceutical manufacturing hub for generic drugs and vaccines. One of the largest vaccine manufacturers, namely, the Serum Institute of India, operates from the country.
- Moreover, Drug manufacturing in Japan is regulated by GMP (soft regulation) and the Regulations for Buildings and Facilities of Pharmacies (hard regulation). The Pharmaceutical and Medical Device Agency (PMDA) is the regulatory body that, together with the Ministry of Health, Labor, and Welfare (MHLW), assigns responsibility for the production and quality control of drugs and medical devices to manufacturers in Japan. The continuously changing regulatory environment is proving favorable to both foreign and local companies.
- Further, an increasing sense of urgency, along with pricing pressures and intense competition from non-traditional players, is compelling Japanese pharmaceutical companies to transform their business models to concentrate more on innovation and cost-saving. This urged them to invest more in R&D, outsource their manufacturing operations, and expand external alliances to develop a more robust product pipeline, thereby driving the market for CMOs. For instance, in August 2020, Bushu Pharmaceuticals Ltd. announced a significant capital program costing USD 100 million to expand its footprint, capacity, and portfolio of services. It will invest in a 42,000-square-foot cold-chain warehouse that will aid its plan to become an inspection hub near Tokyo for its several multi-national pharmaceutical clients. It will also install eight new packaging lines; one of those lines will be used for prefilled packaging, and another will handle water-for-injection for the company's sterile fill offerings.
The pharmaceutical contract manufacturing market is highly competitive and consists of several major players. Moreover, in terms of market share, few of the major players currently dominate the market. These major players with a prominent share in the market are expanding their customer base across foreign countries. These companies are leveraging on strategic collaborative initiatives to increase their market share and increase their profitability. The companies operating in the market are also acquiring start-ups working on enterprise network equipment technologies to strengthen their product capabilities.
- August 2021 - Pfizer Inc. and Trillium Therapeutics Inc. announced that the companies have entered into a definitive agreement under which Pfizer will acquire Trillium, a clinical-stage immuno-oncology company developing innovative therapies for the treatment of cancer. Under the agreement terms, Pfizer will acquire all outstanding shares of Trillium not already owned by Pfizer for an implied equity value of USD 2.26 billion, or USD 18.50 per share, in cash. This represents a 118% premium to the 60-day weighted average price for Trillium.
- May 2021 - Thermo Fisher Scientific Inc. has announced they will build and operate a 44,000-square-foot, state-of-the-art development, manufacturing, and collaboration center in leased space on UCSF's Mission Bay campus, including biomedical research facilities and hospitals. The site will offer clinical and commercial cGMP cell therapy manufacturing services and support UCSF and other partners.
- The market estimate (ME) sheet in Excel format
- 3 months of analyst support
1.2 Scope of the Study
4.2 Industry Attractiveness-Porter's Five Forces Analysis
4.2.1 Bargaining Power of Suppliers
4.2.2 Bargaining Power of Consumers
4.2.3 Threat of New Entrants
4.2.4 Intensity of Competitive Rivalry
4.2.5 Threat of Substitutes
4.3 Industry Value Chain Analysis
4.4 Industry Policies
4.5 Market Drivers
4.5.1 Increasing Outsourcing Volume by Pharmaceutical Companies
4.5.2 Increasing Investment in R&D
4.6 Market Restraints
4.6.1 Increasing Lead Time and Logistics Costs
4.6.2 Stringent Regulatory Requirements
4.6.3 Capacity Utilization Issues Affecting the Profitability of CMOs
4.7 Assessment of Impact of COVID-19 on the Market
6.1.1 Active Pharmaceutical Ingredient (API) Manufacturing
126.96.36.199 Small Molecule
188.8.131.52 Large Molecule
184.108.40.206 High Potency API (HPAPI)
6.1.2 Finished Dosage Formulation (FDF) Development and Manufacturing
220.127.116.11 Solid Dose Formulation
18.104.22.168 Liquid Dose Formulation
22.214.171.124 Injectable Dose Formulation
6.1.3 Secondary Packaging
6.2 By Geography
6.2.1 North America
126.96.36.199 Segmentation by Service Type
188.8.131.52 Segmentation by Country
184.108.40.206.1 United States
220.127.116.11 Segmentation by Service Type
18.104.22.168 Segmentation by Country
22.214.171.124.1 United Kingdom
126.96.36.199.5 Rest of Europe
6.2.3 Asia Pacific
188.8.131.52 Segmentation by Service Type
184.108.40.206 Segmentation by Country
220.127.116.11.5 Rest of Asia Pacific
6.2.4 Latin America
18.104.22.168 Segmentation by Service Type
22.214.171.124 Segmentation by Country
126.96.36.199.4 Rest of Latin America
6.2.5 Middle East and Africa
188.8.131.52 Segmentation by Service Type
184.108.40.206 Segmentation by Country
220.127.116.11.1 United Arab Emirates
18.104.22.168.2 Saudi Arabia
22.214.171.124.3 South Africa
126.96.36.199.4 Rest of Middle East and Africa
8.1.1 Catalent Inc.
8.1.2 Recipharm AB
8.1.3 Jubilant Biosys Ltd.(Jubilant Pharmova Ltd)
8.1.4 Patheon Inc. (Thermo Fisher Scientific Inc.)
8.1.5 Boehringer Ingelheim Group
8.1.6 Pfizer CentreSource (Pfizer Inc.)
8.1.7 Aenova Group
8.1.8 Famar SA
8.1.9 Baxter Biopharma Solutions (Baxter International Inc.)
8.1.10 Lonza Group AG
A selection of companies mentioned in this report includes:
- Catalent Inc.
- Recipharm AB
- Jubilant Biosys Ltd.(Jubilant Pharmova Ltd)
- Patheon Inc. (Thermo Fisher Scientific Inc.)
- Boehringer Ingelheim Group
- Pfizer CentreSource (Pfizer Inc.)
- Aenova Group
- Famar SA
- Baxter Biopharma Solutions (Baxter International Inc.)
- Lonza Group AG