A new report from Frost & Sullivan has forecast that the utilization rates of pharmaceutical manufacturing plants will decrease by half in upcoming years, triggering an increase in outsourcing.

According to the report, European Pharmaceutical and Biotech Contract Manufacturing Markets, the European pharmaceutical contract manufacturing market could earn revenues of up to $20.75 billion in 2018, almost double that of 2011’s revenue when the market earned $10.02 billion. Over the same period, the European market for biotechnology outsourcing is forecast to grow from $1.21 billion to $2.67 billion.

The trends towards reduced facility utilization and increased outsourcing are partly being driven by the expiration of blockbuster drugs. Another Frost & Sullivan report has forecast that drugs worth $150 billion will go off patent between 2010 and 2017. Currently, large pharmaceutical companies contribute to around 10–25% of the total revenues for contract manufacturing organizations in Europe, but this could rise to 40% by 2013 and to 50% by 2018.

“As pharmaceutical and biotech companies strive to enhance their internal core competencies, outsourcing is likely to become increasingly entrenched as a strategic manufacturing option,” said Frost & Sullivan research analyst Aiswariya Chidambaram in a statement. “The impact of the economic crisis, coupled with the poor performance of the venture capital industry in Europe, has underlined the popularity of contract manufacturing as it has become synonymous with cost-cutting and the timely entry of products into the market.”

Frost & Sullivan expects the market prospects for contract manufacturers to be “buoyant” with a compound annual growth rate of 10.9% from 2011–2018. Biotechnology will also experience high growth—12.1% over the same period. However, contract manufacturers will have to be careful not to end up with over capacity. Aiswariya said, “Although the demand for manufacturing capacity is rising, a careful weighing of benefits and risks is required by CMOs while planning capacity expansions lest they be hit by over capacity, which, in turn, could lead to the acquisition of smaller CMOs by larger ones.”

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