Frost & Sullivan predicts big pharma companies will account for half of revenues at CMOs (contract manufacturing organisations) by 2018, up from less than one-quarter today. The surge is expected to come as big pharma companies contend with post-patent loss overcapacity and economic pressures.
Aiswariya Chidambaram, research analyst at Frost & Sullivan, wrote: “As pharmaceutical and biotech companies strive to enhance their internal core competencies, outsourcing is likely to become increasingly entrenched as a strategic manufacturing option.”
The European pharma CMO market will exceed $20bn (€15bn) by 2018, double its value last year, Frost & Sullivan found. Revenues for biotech CMOs in Europe will also double by 2018 to hit $2.7bn. Both are predicted to have double-digit CAGRs (compound annual growth rates) from 2011 to 2018.
Rising demand for biologics contract manufacturing services will push up capacity utilisation rates. In 2011 Frost & Sullivan estimated European biologics CMO capacity use was 84.5 per cent; by 2018 it is predicted to have risen to 88.3 per cent.
Growth & consolidation
European biotech CMOs will benefit from predicted biosimilars growth and increased outsourcing of upstream and downstream processing, as well as fill and finish activities. CMOs should still be wary of over-expanding though.
“Although the demand for manufacturing capacity is rising, a careful weighing of benefits and risks is required by CMOs while planning capacity expansions lest they be hit by over capacity, which, in turn, could lead to the acquisition of smaller CMOs by larger ones”, Chidambaram wrote.
Industry observers have predicted an uptick in CMO consolidation but the sector is still fragmented. Increased outsourcing by large pharma companies and the rise of big strategic deals, like in the CRO (contract research organisation) sector, could provide the trigger for more takeovers though.