In-house manufacturing investments ‘trounce’ outsourcing spend, report finds

13-Nov-2014 - Last updated on 13-Nov-2014 at 10:22 GMT

Biopharma companies are not likely to outsource a larger chunk of their manufacturing than they have in the past 10 years, according to a new report from PharmSource.

Jim Miller, lead author of the report called Bio/Pharma CapEx Trends: Sponsor Spending on In-House Capacity Trounces Outsourcing, said that based on detailed research and analysis of the financial investments biopharma companies are making in their manufacturing capacity, it’s clear that companies would rather “make than buy.”

Miller told Outsourcing-Pharma.com that biologics development and emerging market capacity are the two factors driving Big Pharma and large generic companies’ capacity investments. But he also cautioned that the higher spend will not necessarily be a bad sign for CMOs (contract manufacturing organizations), which can still take advantage of small and virtual pharma companies currently flush with cash.

“Big Pharma is generally outsourcing 25-30% of product and I don’t expect that percentage to change or grow,” he said. “The kinds of things where they’re likely to outsource are projects with older tech -- small molecule API or solid dose…or not mature technologies that are well understood and aren’t changing a lot.”

In developing the report, PharmSource’s experts researched financial data for nearly 250 publicly traded companies, along with a data set of 84 announced manufacturing and R&D infrastructure investment projects.

“It’s fair to say that Big Pharma and big generic companies always have had a preference for in-house manufacturing and can frankly afford to invest in their own facilities and especially true for the newer technologies, the more strategic – biologics, mammalian cell culture and injectables manufacturing,” Miller told us.

But don’t expect CMOs to halt their investments in capacity expansions, he noted. “If anything CMOs are investing more in the next two years, not necessarily because of Big Pharma, but because of the early stage companies -- those companies are very well financed and they have a lot of products in their pipelines.”

Miller said the data captures the bulk of industry capital spending and paints a representative picture of how companies are investing in facilities and equipment.

“In addition to biologics, we’re seeing a lot of investment in facilities for emerging markets – new facilities in China and Russia in particular,” Miller told us.