Industry Outlook for CMO/CDMOs in 2016

Gil Roth, president of the Pharma and Biopharma Outsourcing Association provided an overview of the CMO/CDMO industry in the 2016 CPhI Annual Industry Report. In general, Roth said, the industry hasn’t changed significantly from 2015 to 2016, however, one common theme is the need for consolidation. One way the industry is doing this is through mergers and acquisitions.

“So will we see CDMO mega-mergers, combining API-heavy firms with formulation-oriented ones, or mid-tier mergers of equals, or the aforementioned big fish eating the little ones in bolt-on, accretive deals?” Roth wrote in the report. “I think there’ll be plenty of the latter, but I also think we’ll see a significant attempt at building a soup-to-nuts drug substance through drug product company in the next year or so.”

Roth cites Pfizer’s purchase of Hospira and the One 2 One CDMO and Mylan’s decision to purchase DPT/Confab, as two notable acquisitions that have taken place so far in 2016. Roth also said he expects to see “intra-CDMO mergers or sell-offs of specific sites.” Some CDMOs may purchase a pharma site for a trailing supply agreement. Some of these purchases can be good fits, however, Roth said they are still risky.

In 2016, Patheon, one of the biggest industry players, went public. Having CDMO/CMOs in the stock market, Roth said, can have upsides and downsides. “Also, I like to think we’re in a slightly more enlightened age when it comes to expectations about the CDMO sector’s revenues-that is, that they’re not a smooth curve-but as Jim Miller pointed out, the market’s not exactly well-informed about the CDMO space, and that could lead to some incorrect assessments of its health,” Roth writes.

Roth also made some quick predictions for the industry in 2016. He said he expects CDMOs will advance continuous manufacturing faster than in-house manufacturers, as long as clients are on board. CDMOs will benefit now that the US regulatory system is more clear about biosimilar regulation and CDMOs with the ability to develop complex formulations will benefit clients who are looking to develop more generic competitors as more drugs lose patent protection. Roth predicts CDMOs will help facilitate R&D into rare diseases and that FDA and EMA will advance mutual recognition of inspections. To read more of Roth’s report and other sections from the industry report, you can view it here.