Small Molecule Innovator CDMO Market

Market Overview

The global small molecule innovator CDMO market size was valued at USD 45.20 billion in 2022. It is estimated to reach USD 78.87 billion by 2031, growing at a CAGR of 6.5% during the forecast period (2023–2031).

A contract development and manufacturing organization (CDMO) is a company that manages both the discovery and invention of new pharmacological compounds as well as their outsourced manufacturing. Pharmaceutical firms no longer need to construct and staff specialized innovation and manufacturing facilities. The small molecule innovator CDMO is a pharmaceutical industry that provides contract services for developing and producing small molecule drugs.

Small molecule drugs are typically synthesized organic compounds with a molecular weight below 900 Daltons. A variety of services, including drug discovery, process development, analytical testing, and commercial manufacturing, are offered by CDMOS to pharmaceutical and biotech companies. These services are offered under contract, allowing the client companies to delegate the creation and production of their pharmaceuticals while concentrating on other facets of their operations, including research, marketing, and sales.

Highlights

• Small molecule API dominates the product segment
• Clinical dominates the stage type segment
• Pharmaceutical dominates the customer type segment
• Asia-Pacific is the highest shareholder in the global market

Market Dynamics

Global Small Molecule Innovator CDMO Market Drivers

Increasing Demand for Small Molecule Drug

Small molecules continue to play a significant role in the global development of novel therapies. Specialty medicines are increasingly driving global pharmaceutical growth, particularly in developed markets, with small molecule applications accounting for over half of specialty sales. In 2020, small molecule drugs dominated new molecular entities (NMEs) approvals. Among the 53 NMEs approved in 2020, small molecules comprised about 75% of the total. Around three-quarters of NME approvals currently involve small molecules, continuing a recent trend.

Pharm Source reports that in the first half of 2015, the revenues of publicly traded Contract Development & Manufacturing Organizations (CDMOs) and CMOs specializing in creating and producing small molecule pharmaceuticals increased by 15%, with some companies reporting revenue increases of more than 20%. Both biopharmaceutical and small molecule methods have a track record of providing patients with significant therapeutic advantages. Therefore, the increasing demand for small-molecule drugs is estimated to fuel the market expansion.

Growing Demand for Small Molecules in the Oncology Segment

The expansion of the small molecule API innovator CDMO market is driven by an increase in cancer cases and the demand for effective diagnosis and R&D for oncology procedures. The small molecule oncology pipeline is expanding rapidly, accounting for 38% of pre-clinical therapeutic candidates, 35% of clinical-stage small molecules, and one-third of recent FDA approvals. The 252 oncology drugs in the market or development in 2019 have a market value of about USD 53 billion and a volume of 920 tons, which is large compared to normal commercial API volumes of around 5 tons per molecule. In addition, small molecule targeted compounds, also known as new targeted therapy drugs, can be taken orally as tablets and do not require genes, resulting in no immune reaction. It is simple to modify to make it more suitable for clinical demands structurally and inexpensive to promote. It refers to a hotspot in tumor molecular targeted therapy research.

Global Small Molecule Innovator CDMO Market Restraint

Stringent Government Regulations

Developing a small molecule API could be risky for new and emerging pharmaceutical companies, and gathering sufficient material to support clinical requirements is the primary goal, whether in early- or late-phase development. The regulatory requirements for each phase, though, are distinct. Small molecule clinical stage APIs must be manufactured following international regulatory standards, including those set forth by the U.S. FDA. In this type of regulated industry, numerous factors need to be considered. Not all clinical-stage drug companies typically manufacture commercial products and vice versa. As a result, they are governed by several laws and regularly scheduled inspections, which hamper the market growth.

Global Small Molecule Innovator CDMO Market Opportunities

Increasing Pharmaceutical R&D Investments

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, thereby creating opportunities for market growth. For instance, the Congressional Budget Office U.S. Pharmaceutical industry alone spent USD 83 billion on pharmaceutical R&D, ten times more than in the 1980s. In addition, 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.

The Congressional Budget Office of the U.S. 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 are opting to outsource their R&D activities, be it the production of novel monoclonal antibodies, small molecules, or protein products for rapid commercialization in the market. These R&D investments are driving advancements in biopharmaceutical companies to discover new treatments.

Regional Analysis

Asia-Pacific Dominates the Global Market

The global small molecule innovator CDMO market is bifurcated based on region into North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa. 

Asia-Pacific is the most significant global small molecule innovator CDMO market shareholder and is anticipated to exhibit a CAGR of 7.61% during the forecast period. Asia-Pacific's healthcare sector is continuously evolving and growing due to technological advancements and low services cost. The availability of a skilled workforce at a lower cost than in developed economies, such as the U.S., is anticipated to propel the regional market. In addition, China holds the largest share in Asia-Pacific, primarily due to high pharmaceutical R&D investment. One of the major aspects anticipated to propel the market is an increasing regulatory focus on quality control for production. Furthermore, Asia-Pacific is home to several regulatory organizations, including the Pharmaceuticals and Medical Devices Agency (PMDA) in Japan, the Therapeutic Goods Administration (TGA) in Australia, the Ministry of Food and Drug Safety (MFDS) in South Korea, and the Singapore Health Sciences Authority (HSA) in Singapore. The strong influence over the market is expected to offer lucrative growth opportunities in the region.

North America is estimated to exhibit a CAGR of 6.2% over the forecast period. North America is among the prominent contributors to the growth of the small molecule innovator Contract Development & Manufacturing Organization (CDMO) market. Several established pharmaceutical, biotechnology, and medical device companies characterize it. In addition, it is projected that rising R&D expenditures by pharmaceutical and life sciences firms will boost demand for contract manufacturing in the area. The growing prevalence of diseases, such as cancer, diabetes, and cardiovascular disorders, in the region, is likely to increase the uptake of CDMO services to develop drugs or medicines. Furthermore, stringent product development, manufacturing, and quality control regulations are anticipated to create growth opportunities for domestic contract manufacturing services.

Europe is one of the leading regions with advanced technologies and well-established infrastructure, resulting in improved healthcare sector and patient care facilities. The market is expected to grow lucratively in this region due to stringent regulatory policies. The regulatory framework in the region is also expected to be subjected to major changes, which may affect market access or entry. In addition, the region consists of several CDMO market players that provide outsourcing services worldwide. Players seeking entry into the European market require extensive knowledge of regulatory procedures and services in various member states. Further, small and mid-sized companies without a regulatory affairs department usually hire a regulatory consultant or a legal representative to assist them through the various stages of regulatory approval processes needed for commercializing their products in Europe. The growing demand for small molecule APIs in the region due to the increasing awareness about their benefits will likely boost Europe's CDMO service market in this field.

Latin America's healthcare system still requires improvement due to the region's high poverty rate and overpopulation, despite the region's increasing access to healthcare. In Latin America, the regional average for healthcare expenditure is 3.7% of GDP, significantly below the average of other regions. The presence of supportive regulatory frameworks and an increase in foreign collaborations are anticipated to drive the market over the coming years. In addition, the region is expected to show lucrative growth owing to the cost-effective solutions offered by local CDMOs and the number of new regional players venturing into pharmaceutical and biotechnology markets. An increase in contract research and manufacturing organizations venturing into this region is also anticipated to drive the market over the forecast period.

The Middle East and Africa (MEA) is predicted to be driven by complex treatment strategies and an increasing incidence of chronic diseases. Improvements in government initiatives and regulations for the production of APIs and changes in geopolitical developments are predicted to aid the regional market growth in the coming years. In addition, increasing awareness about biopharmaceuticals in the region is expected to impact the market over the forecast period.

Segmental Analysis

The global small molecule innovator CDMO market is segmented by product, stage type, customer type, and therapeutic area.

Based on product, the global market is bifurcated into small molecule API and small molecule drug product. 

The small molecule API segment is the most significant contributor to the market share and is anticipated to exhibit a CAGR of 7.0% over the forecast period. The growth in the small molecule API segment can primarily be attributed to the surging demand for small molecule innovators. Manufacturer investments, as well as developments in manufacturing and technology, are further factors supporting segment growth. Over the last three decades, small-molecule drug development has advanced dramatically.

Based on stage type, the global market is divided into pre-clinical, clinical, and commercial. 

The clinical segment dominates the global market and is projected to exhibit a CAGR of 6.5% over the forecast period. Clinical lots are much more valuable to the organization than commercial lots because they are where the organization's future lies. Mistakes here could mean that products do not get to the clinic or that clinical programs are delayed, not to mention the impact on patients. Pharmaceutical and biotechnology firms experiment during the research phase. Initially, firms might have two individuals handling everything, working on development lots with a transitional procedure. Firms might scale that model to service ten people or support a single process equipment train as they advance through pre-clinical testing and early clinical studies.

Even though adhering to GMPs when producing goods for the market may be challenging, doing so when producing items for clinical trials may be more difficult. Unlike commercial operations, where operations are well-defined and methods are proven, clinical manufacturing procedures are in constant flux. In addition, Contract Manufacturing Organizations (CDMOs) can offer specialized expertise and save time for APIs at the clinical stage, thereby boosting demand. The clinical phase segment is further sub-segmented into Phase-I, Phase-II, and Phase-III segments.

Based on customer type, the global market is bifurcated into pharmaceutical and biotechnology. 

The pharmaceutical segment is the most significant contributor to the market share and is anticipated to exhibit a CAGR of 6.81% over the forecast period. For nearly a century, small-molecule drugs have formed the core of the pharmaceutical industry. Small molecule drugs, defined as any organic substance with a low molecular weight, have several specific therapeutic advantages; most of them are taken orally and pass-through cell membranes to reach intracellular targets. Additionally, the rapid development of biopharmaceutical research and technology creates new opportunities for developing novel, creative small-molecule drugs. Recent developments in prediction, structure-based design, imaging, automation, artificial intelligence, and machine learning have significantly increased small molecule-driven optimization's speed and success rates. The pharmaceutical segment is further bifurcated into small, medium, and large pharmaceutical companies.

Based on therapeutic area, the global market is segmented into cardiovascular disease, oncology, respiratory disorders, neurology, metabolic disorders, infectious disease, and others. 

The oncology segment owns the highest market share and is projected to exhibit a CAGR of 7.5% during the forecast period. Increased cancer cases and demand for effective diagnosis and R&D for oncology procedures drive the growth of the market. Similarly, the industry is being boosted by increased government reimbursement policies and financing for developing small-molecule oncology therapies. In 2018, 42 NCEs were approved, and 38 in 2019 — a significant rise over the recent average of 25-35 NCE approvals per year. Consumption statistics for all small molecule prescription drugs in seven main markets (US, UK, France, Germany, Spain, Italy, and Japan) show a total volume of 3,500 metric tonnes, with an annual growth of roughly 100-200 metric tonnes of API. This comprises the large, 100-ton-plus, high-prevalence-disease sector and the 10-20 tonne range, representing more-targeted medicines, such as orphan pharmaceuticals.

Recent Developments

• May 2023- GHO Capital Partners LLP and Partners Group invested in GHO portfolio company Sterling Pharma Solutions. Sterling offers a comprehensive array of CDMO services throughout the entire lifecycle of new, high-value active pharmaceutical ingredients (APIs) and is a leader in the early-stage development of antibody-drug conjugates (ADCs), a rapidly expanding class of cancer treatments.
• January 2023- Lonza completed the expansion of its small molecules production facility in Bend, Oregon, as part of the Swiss contract development and manufacturing organization's (CDMO) intentions to enhance its solid form services.