Pharmaceutical Contract Development and Manufacturing Organization (CDMO) Market

Market Overview

The global pharmaceutical contract development and manufacturing organization (CDMO) market size was valued at USD 172.96 billion in 2021. It is expected to reach USD 307.44 billion by 2030, growing at a CAGR of 6.6% during the forecast period (2022–2030).

A company that serves the pharmaceutical industry is known as a Contract Development and Manufacturing Organization (CDMO), and it provides clients with comprehensive services ranging from manufacturing to drug development. By outsourcing to a CDMO, pharmaceutical clients could improve their technical capabilities without adding to their overhead. Sales of goods and services used in pharmaceutical contract development and manufacturing make up the market for those products. To concentrate on research and development (R&D), marketing, and brand building for their products, some pharmaceutical companies contract out the manufacturing of their products. The pharmaceutical contract development and manufacturing market comprise manufacturing companies that perform contractually obligated drug and other pharmaceutical product production for other pharmaceutical companies.

Market Dynamics

Market Drivers

Increasing Investment in Research and Development

The United States is the world's largest market for pharmaceuticals and is where nearly half of all R&D expenditures in the biotechnology and pharmaceutical industries are made. As a result, CMOs are crucial players in this market and have invested in new infrastructure and technology to support a variety of outsourcing units. Companies are turning to research-based partnerships to locate high-end expertise, construct drug discovery, and invest in manufacturing in Asia, in addition to utilizing the advantages of an Asian location through internal investment. One of the fastest-growing pharmaceutical firms in China is Huapont, the largest professional manufacturer of dermatology and anti-tuberculosis drug products in China. Huapont is primarily dependent on product R&D and market expansion. CRO/CMOs can use their expertise to meet the needs of large generic, large pharmaceutical, and biotech companies, thanks to their R&D and complex manufacturing capabilities.

Growing Outsourcing by Major Pharmaceutical Companies

The outsourcing of pharmaceutical processes has progressed from low-value activities like bottling to higher-value ones like medical device engineering and research and development. An increase in patients undergoing medical operations, improvements in disease detection and diagnosis in emerging countries, and operational process outsourcing experience are all contributing to the growth of this industry. Like their counterparts in other sectors, pharmaceutical companies are increasingly concentrating their resources on their core activities while outsourcing specific tasks to specialized companies. Therefore, over the forecast period, it is anticipated that growing outsourcing volumes by major pharmaceutical companies will lucratively fuel the growth of the pharmaceutical CMO market.

Market Restraints

Rising Lead Time and Logistics Costs

Even though the costs of R&D are consistently rising, there are fewer and fewer processes that produce valuable outcomes. Many businesses have realized that shifting this portion of operations overseas and utilizing the pharmaceutical markets still in the premature stages of development are efficient cost-cutting strategies. Furthermore, many pharmaceutical firms have invested in AP biologics and injectable capabilities initiatives. Pharmaceutical firms have also sought suppliers offering contract manufacturing, contract packaging, and quality testing services. In addition, contract packaging services have been added to the service offerings of third-party logistic providers like DHL. Furthermore, CMOs will need to make more significant investments to become more agile to respond to changes in the manufacturing setup more quickly as the turnaround in formulations and technology keeps getting faster. These elements may limit the global pharmaceutical contract development and manufacturing organization market's ability to grow.

Market Opportunities

Growing Demand for Cell and Gene Therapies

Cell and gene therapies are highly specialized and can potentially address unmet medical needs related to treating various disorders. Many pharmaceutical companies and investors have invested money into developing and commercializing these therapies due to their promising therapeutic potential. Nine cell and gene therapies have received FDA approval as of February 2020. There will be about 362 cell and gene therapies in clinical trials by 2020. The demand for facilities that provide manufacturing services for these therapies rises due to the rising number of cell therapy candidates, their quick progression through the different stages of clinical development, and their complex manufacturing process.

Regional Analysis

By Region, the global pharmaceutical contract development and manufacturing organization (CDMO) market is segmented 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 pharmaceutical contract development and manufacturing organization (CDMO) market and is expected to grow at a CAGR of 9% during the forecast period. Most Chinese CMOs produce API and bulk drug products for authorized branded and generic medications. The country recently overtook India in API and bulk drug ingredient production. Although China produces APIs, most CMOs can only make liquid or solid dosage forms; many factories lack the U.S. or European CGMO certification. They are restricted from selling completed dosage items in these regions, and shipments from China to the United States have dropped as a result of the ongoing trade war. Due to high Chinese import tariffs, U.S. manufacturers prefer CMOs from Japan, Australia, and India. As China's borders open and the middle class grows, the government focuses more on healthcare. The pharmaceutical business is supported by government spending, and the country is also improving its supply chain, infrastructure, and transportation options.

North America is expected to grow at a CAGR of 4.80%, generating USD 73.16 billion during the forecast period. In the United States, contract manufacturing organizations (CMOs) have developed from initially only offering essential manufacturing services to now offering a broad range of services to meet market and outsourcer demands. The country's pharmaceutical market is driven by the steadily expanding U.S. pharmaceutical industry and the increased outsourcing of large pharma companies concentrating on core competencies to increase profit margins. The country's stricter regulations guarantee that the CMOs' manufacturing and the final product will be of the highest possible quality. For instance, producing autologous or allogeneic therapies is complex, and the manufacturing facilities must be GMP accredited. Most of the nations are low- and lower-middle-income countries, and a few are upper- and high-income nations that face significant barriers to healthcare access. According to the licensing agreement, the companies are entitled to a technology transfer of the Remdesivir manufacturing process from Gilead, allowing them to scale up production quickly.

Europe is anticipated to grow steadily during the forecast period. The United Kingdom has specialized in higher technology manufacturing sectors like pharmaceuticals, alongside other major manufacturing nations like Germany, Japan, and the United States. India is a significant supplier to the United Kingdom (U.K.), along with Europe and the U.K. (between 20% and 25% of items sold in the U.K. are manufactured in the U.K.). Potentially, the United Kingdom needs more high-quality API production. Intense competition comes from India, China, and other developing economies. British manufacturers are urged to keep improving their production capabilities to maintain their competitive edge in the market. Strong I.P. regulations and expertise in this area have led to the substantial growth of injectables in the CMO market in the United Kingdom, while emerging markets are putting pressure on solid, semi-solid, and liquid dose formulations.

In Latin America, Brazil receives most foreign direct investments and is quickly developing into a central hub for pharmaceutical contract manufacturing. With a market share of 24.9% in 2019, Brazil was the second-largest market participant in Latin America for pharmaceutical contract manufacturing. The pharmaceutical companies are interested in entering the Brazilian market due to favorable factors like low manufacturing costs and the abundance of Good Manufacturing Practice (GMP)-certified plants, which is expanding the scope of the contract manufacturing industry in the nation. Over the forecast period, Brazil is anticipated to offer significant opportunities for contract service providers due to lower investments in R&D within the pharmaceutical sector. Recently, Telix Pharmaceuticals Limited announced the choice of Grupo RPH as the contract manufacturer and product distribution partner for the Brazilian market to develop diagnostic and therapeutic products based on radiopharmaceuticals.

The pharmaceutical market in the United Arab Emirates (UAE) is one of the most advanced in the world due to the country's advanced healthcare infrastructure and high per capita medical spending. In the United Arab Emirates, domestic producers have increased their drug manufacturing efforts. Pfizer, Novartis, GlaxoSmithKline (GSK), Merck, Abbvie, Eli Lily, Bayer, AstraZeneca, Sanofi, BMS, and Amgen have long had a presence in the country through contract production or local distribution channels, offering a market opportunity for the pharmaceutical contract development and manufacturing organization (CDMO) market. By 2024, IQVIA predicted that pharmaceutical sales in the nation would likely total USD 51 billion. Additionally, a greater understanding of the advantages of outsourcing pharmaceutical manufacturing is fueling demand.

Segmental Analysis

The global pharmaceutical contract development and manufacturing organization (CDMO) market is segmented by service type – CMO segment and research phase - CRO segment.

Based on Service Type – CMO segment, the global pharmaceutical contract development and manufacturing organization market is bifurcated into active pharmaceutical ingredient (API) manufacturing, finished dosage formulation (FDF) development and manufacturing, and secondary packaging.

The active pharmaceutical ingredient (API) manufacturing segment is the highest contributor to the market and is expected to grow at a CAGR of 6.10% during the forecast period. Most businesses in this sector are concentrating more and more on developing biological APIs, fueling the market segment of API manufacturing under investigation. Compared to OTC drugs, the general prescription drug subsegment has a higher demand for API manufacturing. Additional factors influencing the growth of the API manufacturing sector include the expansion of government healthcare initiatives, advancements in biologics, and an increase in the prevalence of cancer and age-related diseases.

The finished dosage formulation (FDF) development and manufacturing are subdivided into solid dose formulation, liquid dose formulation, and injectable dose formulation. With the demand for injectable drugs, particularly in cancer research, the pharmaceutical contract manufacturing market is predicted to experience an upward trend. Cytotoxics are anticipated to be the primary growth drivers for the injectable dose formulation segment due to the strong demand for oncology and other high-potency medications (such as antibody conjugates, steroids, and IV fluids that require quick onset of action). Compared to different drug formulation types, injectable medications offer better recoveries. Therefore, it is anticipated that the growth of the injectable formulation segment will be driven by higher ROI, therapeutic efficiency, and quick onset of action.

Based on The Research Phase – CRO segment, the global pharmaceutical contract development and manufacturing organization market is bifurcated into pre-clinical, phase I, phase II, phase III, and phase IV.

The phase III segment owns the highest market share and is expected to grow at a CAGR of 9% during the forecast period. Phase III trials, which are randomized controlled multicenter studies, provide the most long-term safety data. Phase III studies investigate a novel drug's efficacy and safety over 6–12 months in a large patient group (a few hundred or more) since they mirror daily clinical life more closely than phase I or II trials. These trials are typically conducted on an outpatient basis, with no in-house days and an active comparator, because it may not be morally acceptable to subject patients to several months of placebo treatment. Large subject pools and long testing times make phase III trials the most expensive, time-consuming, and challenging to design and conduct. Therefore, drugs that perform poorly in phase II are not continued. Only 25 to 30% of phase II medicines advance to phase III. Additionally, Phase III studies are divided into phases IIIA and IIIB to simplify the research and produce more accurate results.

Phase II trials are frequently seen as a progression from phase I trials. Compared to phase I trials, they involve larger patient populations, typically 200–500 individuals. Phase II tests generally are intended to evaluate the drug's efficacy and to carry on with the phase I safety evaluations. Phase II studies aid in identifying and establishing therapeutic doses for the extensive phase III studies. Due to these requirements, there is a high demand for monitoring numerous complex parameters, which frequently calls for vast computing resources. These elements prompt the researchers to outsource their phase II studies. All newly diagnosed NSCLC patients must receive broad molecular profiling to ascertain what their ideal first-line therapy should be. Numerous advancements in NSCLC (Non-small cell lung cancer) treatment have enabled patients to live longer with their disease.

Recent Developments

• September 2022- In order to optimize the development, introduction, and supply of better patient treatments across multiple modalities, Catalent, the world leader in enabling biopharma, cell, gene, and consumer health partners, announced a USD 2.2 million expansion to its clinical supply facility in Singapore. The investment will allow the installation of 35 new freezers for ultra-low temperature (ULT) storage, expanding the site's footprint by almost 20% to 31,000 square feet.
• July 2022- A definitive agreement to develop TRB-1 and TRB-2, inhaled medications for the treatment of asthma and chronic obstructive pulmonary disease, was announced by Transpire Bio, a development-stage pharmaceutical company focused on developing inhaled therapeutics for pulmonary and systemic diseases (COPD).