Recipharm’s outlook: The evolution of the CDMO market

In recent years, pharmaceutical outsourcing has grown in popularity amongst drug developers across the industry. Companies are increasingly outsourcing to contract development and manufacturing organisations (CDMOs) due to the benefits outside expertise can bring to their business.

So, what are the benefits and how are current CDMO market trends shaping Recipharm’s 2019 global strategy?

Pharma CDMO Trends

According to the Quintiles IMS Institute, the pharmaceutical industry is expected to be worth $1.5 trillion by 2021. The key trends driving this level of demand for pharmaceutical products include the world’s ageing population, rising healthcare standards in developing countries and expensive breakthrough therapies. This rapid influx of demand means that companies are faced with higher R&D costs and a need to invest in new capabilities. Consequently, this makes it more difficult to lower the cost of pharmaceuticals, leading some companies to seek outsourcing partners to generate savings.

The CDMO Market

As the industry continues to grow, the CDMO market is increasingly segmenting. The outsourcing sector primarily segments by type of services, such as API development and manufacturing or drug delivery, however segmenting by technologies is also an emerging trend. Thirdly, segmenting by location is a popular approach.

CDMO activity predominantly occurs in Europe and the US. Although a main location, supplying to the European market from outside presents many hurdles, such as the need to retest imported products and the variations in packaging required due to the multiple languages spoken across the market. In contrast, the US market has a common language and regulatory landscape for 300 million citizens, which helps to reduce logistical issues. There is scope for mergers and acquisitions (M&A), with over 325,000 M&A transactions occurring in the US since 1985 [1], meaning that there is a large capacity for market penetration and market share. There is also an added possibility of President Donald Trump offering companies that relocate production to the US a financial incentive.

Although western markets are often favourable locations, emerging markets also attract the attention of CDMOs. For example, India is a prime location for the CDMO market as it has secured US Food and Drug Administration (FDA) approval for a large volume of its drug products and  is home to a highly skilled workforce. As the access to healthcare in emerging markets improves, and the level of generic manufacturers in India increases, there is a significant rise in demand due to the fact the country can cater for large volumes of product with more cost-efficiency.

Another way in which the outsourcing market is segmenting is by value proposition. Customer diversity continues to evolve along with the evolution of the CDMO market. In order to effectively respond to customer demands, the industry is prioritising their efforts around drug delivery, development support and scale-up reliability.

A prevailing trend in the CDMO market climate is a preference for outsourcing to CDMOs that provide a full-service offering.  This is because these CDMOs operate across multiple locations and markets, offering support throughout the entire drug development and manufacturing process and catering for varying regulation requirements. Outsourcing to a single CDMO enables drug developers to reduce complexity, and in some cases lessen time to market, as they are dealing with one team.

 “Capacity consolidators”, whereby CDMOs advance their services via acquisitions, are gaining momentum too.

Our Strategy

The top 10 companies in the CDMO market own less than 30% of the market, with the largest players holding only 2-4% each. Consolidation is a natural next step for large CDMOs that are equipped with sufficient financial resources.

Established in 1995, Recipharm has remained a leader in consolidation in the CDMO industry, acquiring 10 companies in various locations such as Europe, the US and Asia. In June 2018, Recipharm acquired Sanofi’s inhalation contract manufacturing business and its manufacturing facility in Holmes Chapel, UK. The acquisition of the business and facility has enabled us to use prime technologies to manufacture metered dose inhalers and nasal sprays. It has also provided us with access to development suites that cater specifically for dry powder and other inhalation technologies.

To meet customer needs, our M&A strategy focuses on acquiring niche CDMOs with in-demand capabilities and technologies. This enables us to enhance our technical services in multiple markets, continue to reduce complexity for our customers and offer value for money.

References

[1] IMAA Institute – United States – M&A Statistics https://imaa-institute.org/m-and-a-us-united-states/

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