Strategic partnerships driving consolidation of CDMO industry, says report

23-Jul-2014 - Last updated on 24-Jul-2014 at 12:42 GMT

Growth of Pharma strategic partnerships with contract development and manufacturing organisations (CDMOs) is driving consolidation, according to an industry report.

Global CDMO revenues reached just under $39bn (€29bn) in 2013 (not including $9bn of sales from pure-play API manufacturers) and - driven by pharma continuing to reduce its fixed costs through outsourcing, coupled with the growth of virtual biotech and pharma firms - is set to grow 24% to $48bn by 2015, according to a new market report by mergers & acquisitions advisory services firm 11T Partners.

From 2013 figures, the industry is reported to be made up of ten companies who hold a 26% share of the market (Catalent, Lonza and Aenova named the top three), with the next ten largest contributing a further 10%, and approximately 175 leading CDMOs making up the rest.

However, the March 2014 $2.65bn merger of Patheon and Royal DSM’s Pharmaceutical Products division created one of the largest CDMOs, DPx, and according to the report, the “fragmented nature and growth of strategic partnerships with customers suggests further consolidation.”

Whilst the trend for pharma to form strategic partnerships with contract research organisation (CROs) is well-established, such a shift from short-term sponsor-supplier contracts is beginning to become more prevalent in the CDMO industry.

DPx’ President of Pharmaceutical Development Services (PDS) Mike Lehmann told this publication in March that client discussions have moved away from basic operational contracts to be more strategic, though he was seeing small and mid-tiered pharma firms driving the change.

His comments were mirrored by ex-Director of External Supply at GSK, Jim Browne, though speaking at the recent Global Pharmaceutical Contract Manufacturing (GPCM) conference in London, UK, told delegates that strategic partnerships were “where most big pharma companies would like to go.”

Stages of development

The report also detailed on the penetration of outsourcing across the drug development process.

“Process Development and Formulations are growing industries due to increased number of biological and specialty products in the market,” it said, whilst API production is approaching maturity, with a 50-60% penetration rate.

Furthermore, 58% of current CDMO utilisation are for phase I/II scale-up and small manufacturing and packaging projects, 22% commercial manufacturing, 18% Phase III, and just 2% preclinical.