Positive outlook for CDMOs at CPhI North America, but companies need to be ready for challenges
CPhI North America, running concurrently with InformEx, is a new addition to the global series of CPhI events. The organizers highlighted the size of the North American market and its importance in driving the pharmaceutical innovation life cycle as the reasons for launching this new event. During his opening remarks, Rutger Oudejans, brand director, pharma EMEA at UBM, explained that the uncertainty in Washington, D.C., brought about by the new administration is an additional reason to pay attention to the U.S. market: Will there be incentives for manufacturers to bring manufacturing back to America? What will be the future of the Affordable Care Act?
Over the course of the three days, CPhI Connect and InformEx Connect conferences, with support from the American Chemical Society (ACS), the Society of Chemical Manufacturers and Affiliates (SOCMA), and the United States Pharmacopeial Convention (USP), offered the attendees many hours of educational content on a diverse set of topics covering drug development, manufacturing, regulatory and outsourcing.
Positive outlook for the CDMO industry but companies need to be ready for challenges
Jim Miller, president of PharmSource Information Services, provided the audience with an overview of the contract development and manufacturing organization (CDMO) industry performance. He explained that 2016 was a good year for the industry and that 2017 is off to a good start. Miller said several parts of the industry have been growing at double digit rates. Looking at results posted by public companies in the space, he pointed out that contract manufacturers focused on small molecule manufacturing grew at 19% while companies focused on manufacturing large molecules grew even faster, at 22%. Companies in the drug product manufacturing and clinical research sectors grew at high single digit rates.
According to the analysis carried out by PharmSource, small molecule API is outsourced about 50% of the time and that trend hasn’t changed considerably over the past few years. However, in large molecules, there has been a dramatic drop in outsourcing; while 10 years ago 50% of molecules were outsourced, this past year only 25% were outsourced.
Miller said that a new CMO market segmentation is starting to emerge along a different dimension. About 25 CMOs are innovation focused and are involved in supporting new molecular entity (NME) development and launches. The other 400+ CMOs are focused on capacity and largely work later in the product life cycle and with generics.
These innovation-focused CMOs are associated with a majority of approvals. In the injectables space, he called out by name companies like Vetter, Patheon, Baxter, Pfizer, HollisterStier. In the solid dose space, he mentioned Patheon and Catalent. All these companies have a strong track record with the U.S. FDA and excel at process design, formulation design, understanding of global regulatory processes and QA support. Miller said this handful of companies can capture enhanced profit margins. Meanwhile, the capacity-focused CMOs are likely to be strong in only a single region, work with less complex products, and often have tight profit margins, he said.
Opportunities and challenges when serving small and medium v. large enterprises
Miller pointed out that smaller companies are very dependent on CDMO services. He said the CMO industry has highly penetrated the small and mid-sized industry, however, so any incremental growth would come from the growth of the SME segment rather than from gaining a bigger share of that segment. Recently, the SME space has had access to a good stream of funding and that appears to be continuing, which is good news for the CDMO industry. Miller urged the audience to continue to pay attention to financing trends.
Opportunities remain for growth in the big pharma space, Miller said, but he warned CMO organizations to expect challenges when seeking to expand in that segment of the market.
For more from Jim Miller on the outlook for CDMOs, as well as additional CPhI session highlights from Kate Kuhrt, click here for the full conference report.
Attending DCAT Sharp Sourcing June 27 in New Brunswick? Don’t miss Kate Kuhrt’s presentation “API Market Outlook (Supply & Demand),” exploring the latest global market data and API demand supply trends for innovator and generic drugs for developed and emerging markets. Learn more.