CMO use on the up, low margins ahead

11-Aug-2015 - Last updated on 13-Aug-2015 at 13:42 GMT

CMOs are looking to consolidate to increase their margins

Contract manufacturing will rise over the next five years as drugmakers feel the pressure to reduce supply chain time, and choose to focus on in-house R&D rather than conduct their own manufacturing.

Finished drug manufacturing by CMOs (contract manufacturing organisations) is expected to grow 10% between now and 2020, although active pharmaceutical ingredients are the largest segment of the contract market, according to research by Mordor Intelligence.

Market research consultant Agasthya Bellamkonda told Outsourcing-Pharma.com the global CMO market is expected to grow at a compound annual rate of 6.4%, led especially by deals in North America.

Fractured Market

Catalent (12.11%), Patheon (5.85%), Haupt (5.58%) (bought by Aenova two years ago), and Aenova's main business (5.04%) are vendors with the greatest global market share, with Patheon taking the prize for the highest number of FDA new drug approvals.

Mordor attributed decreasing margins for CMOs to the large number of players in the market and said companies are therefore looking to consolidate. Bellamkonda told us the recent spate of CMO mergers and acquisitions will continue for at least four years, especially in the highly fragmented North American market as contract houses look to combine offerings to target the varied portfolios of big pharma customers.

North American CMOs’ market share – currently 41% - is expected to grow at a CAGR of 3.7% by 2020, Mordor predicted, driven mainly by solid dose formulation.

CMOs are also expanding services to contract packaging and quality testing in response to demand from pharma for one-stop shops. Third party logistics providers like DHL are extending their offerings to include pharmaceutical contract packaging services, he added.

Aesica

Mordor named CDMO Aesica as a growing contract manufacturer to watch. The UK company received FDA approvals in February 2015 for its bulk manufacturing and packaging plants in Germany.

The market research company said Aesica has time-saving and cost reduction expertise and is in a strong position to benefit from future market growth “through further expansion in Europe, the United States and Asia and by increasing the number of strategic partners.”