The Total Addressable Market (TAM) for Pharmaceutical R&D Outsourcing was valued at USD 77.23 billion in 2022. It is estimated to reach USD 178.55 billion by 2031, growing at a CAGR of 9.76% during the forecast period (2023–2031).
In a world of exponentially growing information, increasingly sophisticated technology, and an unstable economic environment, pharmaceutical corporations are increasingly outsourcing research efforts to academia and private contract research organizations (CROs). Basic research through late-stage development is covered by outsourced R&D activities, including genetic engineering, target identification, target validation, assay development, hit candidates-as-a-service, hit discovery, and lead optimization.
New drug development is a highly regulated and time-consuming process. In the US, all medicines introduced to the market in the last three decades must go through the Food & Drug Administration (FDA)'s drug development process. Due to its complexity, many pharmaceutical companies rely on Contract Development and Manufacturing Organizations (CDMOs) for drug development. The research-based pharmaceutical industry is among the most innovative industries. It is responsible for developing new and improved small molecules and biologics to prevent and treat acute and chronic diseases.
Even though many global companies are using cloud infrastructure to make it easier for people to work from home, many may still need to optimize their cloud and data strategies to help with innovation, research, and development. The cloud can set up infrastructure instantly, grow or shrink as needed, and protect physical data centers and virtual networks, which makes it an excellent method to support research and development. In addition, enterprises can develop secure digital applications and platforms more quickly. Eventually, the cloud offers the potential to store and integrate information over a robust network. This feature allows organizations to have interoperable data and engage in teamwork, collaboration, and co-creation. The cloud enables data, and the cloud and data modernization strategies are inseparable.
Human genome sequencing data volumes are expected to reach 40 exabytes by 2025, and scientists spend up to 30%-40% of their time searching, combining, and cleaning data. The cloud could be a game-changer for getting pharmaceuticals to market faster and cheaper. It has already broken the world record for elastic genomic data analysis. As per several studies, sharing infrastructure and resources for master protocols can shorten research cycle time by 12–17% while saving 11–14% in overall costs, thus propelling the market growth.
AI significantly impacts healthcare, particularly in the pharmaceutical industry, where it is used for drug discovery and development, clinical trials, and pharmaceutical productivity. The steps involved in the drug discovery process are time-consuming. The life cycle of a new medicine from the lab to the pharmacy is a series of complex events that require time and development. These complex events can occur less frequently with the assistance of AI, and pharmaceutical companies can achieve their goal of developing a drug more quickly.
Pharmaceutical companies have achieved many breakthroughs but have yet to generate a return on their R&D investments. In R&D, the average investment in successful drug development is USD 2.6 billion. This cost includes the repeated success or failure of millions of compounds to obtain approval in the R&D process. Many pharmaceutical companies use cutting-edge technologies like AI and machine learning to produce high-quality results quickly. A massive amount of data can be generated from these projects, and AI can sort the correct information about experiments. In recent years, AI has been implemented more commonly in advanced experiments, driving the market's growth.
In 2019, the pharmaceutical industry invested 83 billion USD in research and development. These costs covered a variety of activities, including discovering and testing new drugs, developing step-by-step innovations such as product enhancements, and clinical testing aimed at safety monitoring or marketing. The percentage of revenue that pharmaceutical companies spend on R&D is also increasing. Developing new treatments is expensive and ambiguous, and many potential medicines never reach the market. The FDA approves only 12% of drugs that have undergone extensive preclinical testing and clinical trials. The development process also often takes more than ten years, during which the company receives no financial reward for investing in the development of the drug, hindering the market growth.
Experimental anti-cancer drugs dominate big pharma's attention and corporate funding, including lead generation platform technology, metabolism, ophthalmology, cardiovascular, central nervous system (CNS), dermatology, gastrointestinal (G.I.), and inflammation. Industry-leading corporate venture investors include Novartis, Astellas, Pfizer, S.R. One, Amgen, and J&J Development Corp. According to SVB, more than half of these new investments were in preclinical or Phase I companies.
An essential aspect of the U.S. biopharma innovation ecosystem is private investors' strong venture capital industry practicing equity investments in emerging biopharma companies. In recent years, venture capital investment in biotechnology startups has reached new heights. This investment includes the large amounts of money existing biopharma companies makeover and gives to biotechnology startups through their corporate venture capital (CVC) subsidiaries. A company engages in CVC activity, a subset of venture capital investment when it invests in an affiliate. Typically, a promising startup in the company's sector receives investment. Record-level investments across the biopharma industry have created many new opportunities in global healthcare.
The global pharmaceutical R&D outsourcing market is segmented by stage of development, product, company size, and therapy area.
By stage of development, the global market is divided into clinical and non-clinical.
The clinical segment is the highest contributor to the market and is anticipated to grow at a CAGR of 8.39% over the forecast period. The clinical trial design process begins with the developer thinking about what they want to accomplish in each trial phase and then starting the investigational drug process (IND). Phase I focuses on safety, while Phase II focuses on effectiveness. Researchers desire to determine whether the drug helps people with certain illnesses or conditions during this phase. The Phase III study gathers detailed information on safety and efficacy, examines different populations and doses, and uses this drug in combination with other drugs. If the FDA agrees that the study results are positive, it will approve the experimental drug or equipment. Phase IV drug or device trials will be conducted after the FDA approves its use. The efficacy and safety of devices or drugs are monitored in large and diverse populations.
In recent years, demand for outsourced non-clinical safety services has surged and is projected to grow faster during the forecast period. This growth is driven by recent increases in R&D spending and increased research outsourcing, which many pharmaceutical companies have traditionally maintained "in-house." This trend reflects the growing confidence that CROs can cost-effectively deliver quality products. As a result, CROs have established themselves in expanding markets and developed new strategies for vying for market share.
By product, the global market is segmented into small molecules and biologics.
The small molecules segment owns the highest market share and is anticipated to grow at a CAGR of 9.01% over the forecast period. Small molecule drugs are compounds with a molecular weight in the range of 0.1-1 kDa. This includes biomolecules such as fatty acids, glucose, amino acids, and cholesterol and secondary metabolites such as alkaloids, lipids, glycosides, and natural phenols. The development of small molecule drug discovery can be complicated and difficult. A typical system starts with hit identification and assay development and goes on to select preclinical candidates. Small molecules are not as popular as biologics and other epidemic therapies, but they dominate most medicines, and research on small molecules is increasing.
Biological products include a wide range of things, such as vaccines, gene therapy, tissues, recombinant therapeutic proteins, blood and blood parts, allergens, and somatic cells. Biologics can be made of sugars, proteins, nucleic acids, or complex mixtures. They can also be living things like cells and tissues. Biologics are made from natural sources like people, animals, or microorganisms and can be made using bioengineering and other cutting-edge methods.
By company size, the global market is segmented into small and mid-sized companies and large companies.
The small and mid-sized companies segment is the highest contributor to the market and is anticipated to grow at a CAGR of 10.22% over the forecast period. Pharma and biotechnology are more important in drug development as pharmaceuticals and the processes used to make them more complex, and contract research providers are conducting more and more research. In 2019, emerging therapeutic companies (ETC) were responsible for 73% of global "industrial" pharmaceutical projects at all clinical stages, either alone or in collaboration with partners, with the rest being carried out by large companies.
The BioMed Tracker database investigated the clinical development success rate of 4,451 investigational drugs owned by 835 companies in the US, with 5,820 phase transitions between 2003 and 2011. Detailing the makeup of the drug developers reveals that major pharmaceutical or biotechnology companies develop 47% of these investigational drugs, while small and medium-sized businesses create 16% of these drugs. CROs help large pharmaceutical companies focus on the higher parts of the value chain. CROs can be compared to another value proposition for small biotechnology companies for large biotechnology companies with already sophisticated manufacturing and regulatory functions.
By therapy area, the global market is segmented into oncology, cardiovascular diseases, infectious diseases, musculoskeletal disorders, central nervous system disorders, gastrointestinal disorders, and others.
The oncology segment owns the highest market share and is anticipated to grow at a CAGR of 9.35% over the forecast period. Cancer is the leading cause of death in every region of the world. The high prices of novel anticancer medicines drive much of this growth. The direct and indirect expenses of oncological treatments severely affect patients' treatment success and financial well-being worldwide. Oncology is one of the most studied therapeutic areas in the company and non-industry clinical trials. The increased cancer prevalence has significantly contributed to clinical trials in the oncology therapeutic domain.
The global frequency of cardiovascular diseases is continuously increasing, driving the need for effective treatments. CVDs are the leading cause of death worldwide. CVD is a group of heart and vascular diseases, including coronary heart disease, cerebrovascular disease, rheumatic heart disease, and other diseases. CVD prevalence is quickly increasing in low- and middle-income nations. Clinical research is needed to address cardiovascular illnesses' rising prevalence and impact. CVD clinical trials have many participants, and the recruiting process is handled through clinical trial outsourcing, accelerating the expansion of CVD problems.
By region, the global pharmaceutical R&D outsourcing market is divided into North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa.
North America Dominates the Global Market
North America is the most signiicant shareholder in the global pharmaceutical R&D outsourcing market and is anticipated to grow at a CAGR of 9.20% during the forecast period. The pharmaceutical research and development outsourcing industry are well-established in North America, with significant contract research organizations (CROs) and biopharmaceutical manufacturing companies. The rise in drug development has dramatically increased the demand for pharmaceutical R&D outsourcing in this region. Significant investments by companies in R&D to strengthen the pipeline for chronic diseases are projected to boost the launch of novel therapeutics in North America. In addition, North America is witnessing prominent start-up CROs working in the pharmaceutical R&D outsourcing market. Due to many regenerative medicine manufacturers, North America is a significant market for cell and gene therapies and personalized medicine.
Europe is expected to grow at a CAGR of 9.71% over the forecast period. Increasing populations, the emergence of infections, the high demand for cell and gene therapy, vaccines, improved biopharmaceutical facilities, and COVID-19 are significant factors boosting the demand for pharmaceutical R&D outsourcing in this region. Major revenue-contributing countries in this region for the pharmaceutical R&D outsourcing market include Germany, France, the UK, Italy, and Spain. Clinical trials and outsourcing have undergone significant changes in recent years in Europe. Due to the lower cost of clinical trials compared to the US, most prominent pharmaceutical companies are looking to outsource their services to the region.
Asia-Pacific is the fastest-growing region for pharmaceutical R&D outsourcing, where emerging countries such as China and Japan are the major players due to low labor costs and increased outsourcing of biologics manufacturing. This is mainly due to the involvement of CROs in developing vaccines and monoclonal antibodies. Several contract research organizations (CROs) have established offices in Asia to provide research supervision, project management, data management, safety reporting, drug distribution, and central laboratory services. Many leading Western multinationals have already outsourced their R&D activities to Asian countries, such as GlaxoSmithKline, Pfizer, and Novartis. China, Japan, South Korea, India, and Australia are major revenue contributors in this region.
Latin America and the Middle East and Africa accounted for minor shares in the global pharmaceutical R&D outsourcing market. These regions will likely witness slow growth in the coming years with the emergence of pharmaceutical R&D outsourcing, rising demand for novel biologics, growing demand for biological vaccines, and other factors.
The key players in the global pharmaceutical R&D outsourcing market are
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