This growth is due to be driven largely by high potency sterile drugs, protein-derived drugs and specialised production methods, such as chiral chemistry - activities often not included in the core competency of pharmaceutical and biotechnology drug makers, the report said.
Pressured by stricter regulations and escalating costs, large pharmaceutical companies have traditionally opted to outsource their manufacturing process to contract manufacturing organisations (CMOs), only to improve efficiency in cost and productivity, as well as obtaining a specific expertise not available in house.
The research, conducted by Kalorama Information, publishing division of MarketResearch.com, suggests that today, these factors still play a role, but companies are now focusing on strategy and the most dynamic CMO driver is rapidly becoming the innovative processes and production technologies these companies offer.
According to the report, outsourcing manufacturing operations is a strategic imperative that provides not only a cost effective alternative, but also improved efficiency, speed and flexibility, and the market is therefore expected to exceed $17.5bn in 2006, an eight per cent increase from last year.
At the root of this growth are a number of challenges that pharmaceutical companies now encounter, including the erosion of blockbuster sales and the increased generic competition.
The report suggests that while in the short-term blockbuster drugs should fuel growth, in the long-term, sales from current blockbusters, which begin to decline in 2006 as products lose patent protection, will be vulnerable in front of generic drugs, which represented more than half of the drug market last year.
In a bid to find a solution to these challenges, pharma companies now outsource a wide-range of manufacturing-related activities, including the production of active pharmaceutical ingredients (APIs) and chemical intermediaries, formulation, stability testing, packaging and labelling as well as whole drug products and drug delivery systems and more recently, biomanufacturing.
Indeed, biotechnology-based drugs have now also become a particular focus for contract manufacturing because by its very nature, biomanufacturing is a very complex, costly and labour-intensive process and these factors, coupled with ongoing labour shortages and staggering costs of building biomanufacturing facilities, are forcing many biopharma firms to turn to outsourcing for help as they struggle to make enough product to meet escalating demand.
"In the biopharmaceutical arena alone, when you consider that there are more than 250 clinical projects underway in the US this year - a jump of 29 per cent over last year - with 75 per cent of the projects being in the Phase III and Phase II stages of development, it's easy to see why the sheer number of biologics in the pipeline is creating this enormous market for outsourcing," said Anne Anscomb, the report's author.
According to the report, biomanufacturing is unsurprisingly the fastest growing segment in the contract-manufacturing sector and is expected to reach $2.5bn by the end of 2006.
In addition, the reports predicts sterile secondary contract manufacturing will reach $4bn in 2006, while primary contract manufacturing, the slowest growing sector in this market, is expected to reach approximately $11bn by the end of the year.