Among global bio/pharma companies, attitudes and strategies regarding contract manufacturing appear to be well entrenched.
Out of the 22 global biopharma companies, nine companies—including Abbott/Abbvie, Astellas, Bayer, and Novo Nordisk—outsourced
none of their new NDA approvals during the 2005–2012 period. On the positive side, four companies have outsourced 50% or more of their NDA approvals received during the past
eight years, and another four have outsourced 30% or more of their approvals. Unfortunately, six of the eight companies have
averaged less than one approval per year over the period.
The data on outsourcing of recent NDA approvals must be analyzed carefully because the majority of the contracts for these
products were signed three-to-five years ago (i.e., in 2007–2009). Given the long cycles between contract signings and product approvals, strategy changes triggered by the 2008-2009
financial crisis and the patent cliff probably are not yet reflected in the manufacturing arrangements of recently approved
Nevertheless, it does appear that outsourcing's share of dose manufacturing is stuck in the 40–45% range, and further penetration may be difficult to achieve. Global biopharmaceutical companies have been shrinking their
manufacturing networks and shrinking their product pipelines, but they are investing in captive biologics manufacturing capacity
and building new manufacturing facilities to serve the growing emerging markets. Among smaller companies, those companies
that develop new biologics may be unable to afford their own sterile manufacturing facilities, but small companies developing
solid-dose products face a much lower capital expenditure for owning captive capacity.
CMO executives like to proclaim that outsourcing is growing, and so long as the number of new product approvals continues
to rise, they will be right. But just as a rising tide lifts all boats, a receding tide can leave many of them beached. The
large number of CMOs receiving approvals again highlights the highly fragmented nature of the sector; so many CMOs have received
just a few or no approvals that one wonders how they can stay in business.
The battle for market share among CMOs is getting intense, and we sense that customers are able to drive more favorable terms,
including lower prices and other concessions. A number of major CMOs have accepted this reality by turning their efforts increasingly
to proprietary products. We continue to believe that the CMO industry is headed for a period of consolidation.
Jim Miller is president of PharmSource Information Services, Inc., and publisher of Bio/Pharmaceutical Outsourcing Report, tel. 703.383.4903, Twitter@JimPharmSource, email@example.com