Changing Fortunes for CMOs

Contract manufacturers of APIs and intermediates are cautiously optimistic.
Mar 02, 2008


Patricia Van Arnum
The tide may be turning for contract manufacturing organizations (CMOs) of active pharmaceutical ingredients (APIs) and intermediates. In gauging opinion at Informex, the trade show of custom and batch manufactures, held in New Orleans Jan. 29–Feb. 1, 2008, many CMOs, armed with improved profitability and investment plans, were fairly upbeat following more subdued views from recent years.

Signs of optimism were apparent in the results of a business survey released at Informex by the Synthetic Organic Chemical Manufacturers Association (SOCMA). SOMCAis the US-based trade association of custom and batch manufacturers, and 92% of survey respondents characterized current business conditions as "excellent/very good" (54%) or "good" (38%). This outlook is better than in 2006, when only 82% rated business conditions as "excellent/very good" (53%) or "good" (29%).

In speaking with several CMOs, most concur with this sanguine view and see their growth largely being driven by emerging pharmaceutical companies. Their optimism, however, is tempered by the "R" word—recession—and the attendant macroeconomic factors that could affect the financing flow into these smaller companies. "Tighter lending practices and reduced private and equity investment could potentially hamper the liquidity of small bio and pharma companies, and this would be a concern for us," said one CMO.

As to Big Pharma, many CMOs say they have yet to see any uptick from recent manufacturing rationalization and intentions to increase outsourcing."Big Pharma has enough internal capacity. Whether companies will increase outsourcing remains to be seen," said one CMO.

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Patricia Van Arnum is a senior editor with Pharmaceutical Technology,