Active Pharmaceutical Ingredients CDMO Market

Market Overview

The global active pharmaceutical ingredients CDMO market size was valued at USD 93.42 billion in 2022. It is estimated to reach USD 164.65 billion by 2031, growing at a CAGR of 6.5% during the forecast period (2023–2031).

According to the FDA, an active pharmaceutical ingredient (API) is any substance or combination of substances intended to be employed in producing a drug or medical product. The API is the component of a medicine that has the desired effect when used to diagnose, treat, mitigate, or prevent a disease or to modify a person's or animal's structure or any other function. Producing APIs is a sophisticated, specialized process requiring skillful chemistry, biology, and engineering integration.

A company or organization in the pharmaceutical industry that provides drug development and manufacturing services is known as a contract development and manufacturing organization (CDMO). As a means of outsourcing medication development and manufacturing, pharmaceutical corporations work well with CDMOs. The quality of APIs significantly impacts the efficacy and safety of drugs. Hence, selecting a CDMO that can deliver the appropriate API at the requisite strength, quality, and purity is crucial for pharmaceutical businesses.

Highlights

• Traditional API dominates the product segment
• Synthetic dominates the synthesis segment
• Oncology dominates the application segment
• Asia Pacific is the highest shareholder in the global market

Market Dynamics

Global Active Pharmaceutical Ingredients CDMO Market Drivers

Increasing Pharmaceutical R&D Investments

The Congressional Budget Office U.S. Pharmaceutical industry alone spent USD 83 billion on pharmaceutical R&D, ten times more than in 1980. The 2019 PhRMA member annual survey, released with Biopharmaceutical Research Industry Profile in 2019, revealed that roughly out of USD 5 of revenue, every USD 1 was devoted to R&D in the previous year. This investment in R&D is driving advancements in biopharmaceutical companies to discover new treatments and cures.

Furthermore, the Congressional Budget Office also reported that from 2010 to 2019, the sale of approved new drugs increased by 60%, with 59 new drugs being approved in 2018. Many biopharmaceutical companies outsource their R&D activities, be it the production of novel monoclonal antibodies, small molecules, or protein products for rapid market commercialization. The rising incidence of chronic diseases, the advent of biologics and biosimilars, and increasing government initiatives to boost the pharmaceutical sector are among the factors expected to increase pharmaceutical R&D spending globally, fueling the market's growth.

Rising Demand for Generic Drugs

Generic drugs are introduced to the market once the branded medications' patents expire and are relatively reasonably priced, encouraging more people to use them. Countries like China and India are hotspots for developing and manufacturing generic drugs. In 2020, a generic drug program by the U.S. FDA approved or tentatively approved 948 generic drug applications (ANDAs), out of which 50 were original applications. In total, 72 first generic drugs were approved by FDA in 2020. In addition, a generic drug costs 30% to 90% less than branded drugs because the cost and time required from developing to commercializing novel drugs are high. According to IQVIA, increasing utilization of cheap generics in pharmerging markets (China, India, etc.) is a crucial contributor to market growth for generic drugs, thereby boosting market growth.

Global Active Pharmaceutical Ingredients CDMO Market Restraint

Compliance Issues with Outsourcing

Outsourcing is considerably faster than licensing, as negotiating a license is mostly a tedious process; however, a CDMO may have multiple ongoing projects with various clients that can lead to capacity constraints and substantial lead times for production. In addition, outsourcing the activity makes the outsourcing company lose some control over operations, leading to inefficiencies in communication and decision-making. Another drawback is that it can be challenging to maintain the confidentiality of intellectual property while outsourcing. Many companies must share sensitive information, which can lead to data breaches and loss of tribal knowledge and process understanding. Usually, outsourcing agreements involve secondary intellectual property; nevertheless, a customer occasionally must disclose primary IP. The main component is the core intellectual property, which may lead to infringement problems and impede market expansion.

Global Active Pharmaceutical Ingredients CDMO Market Opportunities

Expanding Consumption of Biopharmaceuticals

Growth in markets of biologics, biosimilars, orphan drugs, personalized medicine, companion diagnostics, and adaptive trial designs is projected to boost the demand for API CDMO. As companies venture into newer fields, the growing need to comply with regulations increases the demand for specialized service providers with expertise in contract development and manufacturing affairs. The evolution of biological drugs has aided in overcoming concerns about the use of traditional synthetic drugs. These synthetic drugs are derived from synthetic chemicals that are otherwise not present in the human body and may cause adverse effects. Hence, biopharmaceutical companies are adopting biological processes to develop biologics targeting over 100 diseases. These biopharmaceuticals include monoclonal antibodies, vaccines, and gene and cell therapies. In addition, the emergence of biologics has helped address concerns associated with synthetic drugs/biosimilars, which is expected to drive demand for CDMO services in pharmaceutical industries.

Regional Analysis

Based on region, the global market is bifurcated into North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa.

Asia-Pacific Dominates the Global Market

Asia-Pacific is the most significant shareholder in the global market and is anticipated to grow at a CAGR of 8.7% during the forecast period. Asia-Pacific's active pharmaceutical ingredient CDMO market is expected to witness lucrative growth over the forecast period, owing to the increasing scope of opportunities, especially in Japan, China, and India. Factors such as improved regulatory framework, the high scope for cost savings, increased complexity, and robust drug pipeline are expected to drive the region's market. Furthermore, the availability of skilled workforce at a lower cost than in developed economies, such as the U.S., is anticipated to propel the market.

China holds the largest share in the Asia-Pacific market, primarily due to high pharmaceutical R&D investment. Increasing regulatory focus on quality control for manufacturing is one of the key factors expected to drive the market over the forecast period. Asia-Pacific has several regulatory agencies, such as the Pharmaceuticals and Medical Devices Agency (PMDA) in Japan, the Ministry of Food and Drug Safety (MFDS) in South Korea, and the Therapeutic Goods Administration (TGA) in Australia. Their strong influence over the market is expected to provide lucrative growth opportunities in the region. Moreover, an increase in pharmaceutical companies in China, India, and Japan is expected to impact the market during the forecast period positively.

North America is estimated to grow at a CAGR of 3.9% over the forecast period. North America's growth in the global market can be attributed to the presence of several established biotechnology and pharmaceutical companies. Growing R&D investments by life sciences and pharmaceutical companies are anticipated to increase the region's demand for API contract manufacturing. In addition, stringent regulations on manufacturing and quality of products are expected to create growth opportunities for domestic contract manufacturing services. The U.S. holds the largest share of North America's market and is projected to grow significantly over the forecast period. An increase in outsourcing practices by pharmaceutical companies and the support of CDMOs in reducing operational and capital expenses are responsible for its lucrative growth. Furthermore, the country's growing number of clinical trials further creates opportunities for active pharmaceutical ingredient CDMOs. For instance, according to WHO ICTRP, 147,213 clinical trials were conducted in the U.S. between 1999 and 2020.

Europe is one of the leading regions with advanced technologies and well-established infrastructure, resulting in improved healthcare facilities and patient care. The regulatory framework in the EU is expected to be subjected to significant changes, which may affect market access or entry. The market is expected to grow lucratively in this region due to stringent regulatory policies. The APIs must be produced following Good Manufacturing Practices (GMP) that are at least similar to the EU GMPs to be imported into Europe. Furthermore, established market players and superior manufacturing capabilities are anticipated to drive the market over the forecast period. Increasing investments by multinational companies are expected to boost the market.

Latin America's proximity to North America can help reduce supply chain concerns, boosting its market. Supportive regulatory frameworks and increased foreign collaborations will drive the market further. The region is expected to show lucrative growth owing to the cost-effective solutions offered by its CDMOs and an increase in the number of new regional players venturing into the pharmaceutical and biotechnology markets. An increase in contract research and manufacturing organizations venturing into this region is anticipated to drive the market over the forecast period further.

Outsourcing API development and manufacturing operations to the Middle East and Africa can offer advantages, such as cost-effectiveness with decent infrastructure. Government incentive schemes to increase domestic production, growing healthcare needs, and a brand-friendly environment have boosted the pharmaceutical and biotechnology industry in the region. This is expected to increase pharmaceutical and biotechnology operations outsourcing to CDMOs in the Middle East and Africa.

Segmental Analysis

The global market is segmented by product, synthesis, drug, application, and workflow.

Based on product, the global market is divided into traditional API, HP-API, antibody-drug conjugate, and others. 

The traditional API segment is responsible for the largest market share and is anticipated to grow at a CAGR of 4.4% over the forecast period. Traditional Active Pharmaceutical Ingredients (APIs) are produced using sophisticated industrial processes during the R&D and commercial production phases. In addition, the segment is growing owing to rising pharmaceutical R&D, growing cases of chronic diseases, increasing adoption of generics, and rising uptake of biopharmaceuticals. The rise in the adoption of high-tech therapeutics, the evolution of personalized medicines, and the emergence of innovative and novel delivery systems will likely boost the market growth.

Based on synthesis, the global Active Pharmaceutical Ingredients CDMO market is segmented into synthetic and biotech. 

The synthetic segment owns the highest market share and is estimated to grow at a CAGR of 6.4% during the forecast period. To achieve compliance with standards such as the cGMP, manufacturers frequently have to make substantial investments in their manufacturing facilities. This includes renovating production facilities, familiarizing employees with qualification standards and processes, and compiling a product efficacy and safety testing dossier that meets regulatory requirements. Furthermore, acquiring regulatory clearances is more expensive for small businesses. API synthesis sometimes necessitates using expensive and unusual building blocks and raw materials, which adds to the expense of producing APIs. Cost efficiency, time-saving, and specialized expertise offered by CDMOs will likely propel segment growth during the forecast period.

Based on drugs, the global Active Pharmaceutical Ingredients CDMO market is bifurcated into innovative and generic. 

The innovative segment is the highest contributor to the market and is projected to grow at a CAGR of 5.8% over the forecast period. The robust drug pipeline of major pharmaceutical players and increasing investment in pharmaceutical R&D will likely boost innovative drug segment growth during the forecast period. For instance, as of July 2021, Pfizer had 29 programs in phase I, 40 in phase II, 23 in phase III, and 8 in registration. Due to considerable study in this area, several unique drugs are now in the pipeline and are expected to be released during the forecast period.

Based on application, the global market is divided into oncology, hormonal, glaucoma, cardiovascular, diabetes, and others. 

The oncology segment is responsible for the largest market share and is estimated to grow at a CAGR of 7.0% over the forecast period. The market for oncology API CDMO is likely to expand with an increasing number of cancer cases globally. For instance, according to The Cancer Atlas, there will be 29 million cancer cases by 2040, up from nearly 18 million in 2018. Furthermore, according to the WHO, cancer is the leading cause of mortality globally, with approximately 10 million fatalities in 2020. The market for oncology API CDMO is projected to become 1.7 times itself between 2020 and 2028.

Based on workflow, the global Active Pharmaceutical Ingredients CDMO market is segmented into clinical and commercial. 

The commercial segment owns the highest market share and is expected to grow at a CAGR of 6.4% over the forecast period. At the commercial phase, the focus of pharmaceutical and biotechnology firms shifts. While increasing the throughput as rapidly as possible, companies must consider GMP compliance: scaling a 10-patient procedure to 100, 150, or 200 patients per month in compliance with regulations. It also entails expanding the QC testing laboratory to ensure product integrity and staying on the right side of a more active and ever-changing regulatory body. In addition, the labor paradigm previously serviced R&D activities will not work in the commercial space. This is where the role of CDMOs comes into play. CDMOs offer specialized expertise, time-saving, and cost-efficiency, likely propelling segment growth during the forecast period.

Recent Developments

• February 2023- Lonza will establish a new laboratory in Cambridge, Massachusetts, as part of the Swiss CDMO's strategy to grow its early development services (EDS) segment in North America.

• February 2023- Piramal Pharma Solutions, a division of Piramal Pharma Ltd that focuses on patients and is a Contract Development and Manufacturing Organization (CDMO), commenced making the first batches of active pharmaceutical ingredients (APIs) in brand-new reactor suites at its US facility in Riverview, Michigan.