Uptick or Sustainable Growth?

Contract manufacturers report improving business conditions, but will they continue?
Mar 02, 2010


Patricia Van Arnum
Cautiously optimistic. That is the phrase that I heard repeatedly from the attendees and exhibitors at Informex USA, the exhibition of contract manufacturers held Feb. 16–19 in San Francisco in characterizing the market for contract manufacturing of small-molecule active pharmaceutical ingredients (APIs) and intermediates. So what is causing the caution, and what is causing the optimism?

Many suppliers report seeing an uptick in business during the past several months and an improvement in booked orders for 2010. They attribute the gains in part to better financing flow into the emerging pharmaceutical sector, which was hit hard by the financial crisis and economic downturn. Tighter credit and reduced funding were problematic for small- to mid-sized drug companies and their suppliers as development projects were eliminated, put on hold, or proceeded in a more step-wise fashion. Although many suppliers see an improvement from their customers in securing funding, the crucial question is whether recent gains will be sustainable.

A recent Pharmaceutical Technology poll conducted before Informex confirms this sentiment. Only 14% of respondents regarded improved credit and financing flow to the emerging drug sector as the most significant issue for determining the health of contract API manufacturing in 2010. Instead, respondents ranked two other conditions as the most significant: the global economic recovery (the choice of 37% of respondents) and competition from contract manufacturers in emerging market (the choice of 29% of respondents).

So what is the bottom line? Market conditions are better, but for how long remains to be seen.

Patricia Van Arnum is a senior editor of Pharmaceutical Technology.