There continues to be a demand for contractors that offer “full service” manufacturing; however, industry expectations for such suppliers are evolving.
In recent years, many drug companies have made an effort to reduce the number of suppliers they work with, forming strategic partnerships with contractors that offer a broader range of services. The aim is to speed-up time to market, increase efficiency, and minimize oversight burden.
While this trend continues, other factors such as the increasing quality expectation from customers and authorities and demand for traceability have emerged, influencing the range of capabilities that a full-service contractor is expected to provide.
Further, pricing pressures and consolidation are changing the dynamics of the sector.
Global Pharma Growth
The global pharmaceutical market is expected to grow by 33 percent and be worth $1.5 trillion by 2021, according to IQVIA. There are three core drivers: the aging global population; industry’s increased focus on high-tech, high-value medicines; and growing demand for healthcare in emerging markets.
Catering to higher volume demand requires sufficient manufacturing capacity as well as capability to address expected quality levels at controlled costs. Similarly, developing medicines in line with increasing quality levels relies on expertise. Additionally, selling drugs in new markets requires a logistics infrastructure.
The drug industry has responded to these challenges in two ways: either the company involved invests in the development and manufacturing capacity required, or it finds a third-party contractor with the range of capabilities it needs.
The area of biologics offers a good example of these two approaches. Developing and manufacturing large molecule pharmaceuticals requires expertise, and traditionally much of this work has been kept in-house with only downstream operations being outsourced.
However, more recently some biologics developers have begun to contract more work to third parties, particularly larger CDMOs with the technical capabilities and expertise to undertake fill & finish production steps.
Full Service CDMOs
The term “full service” was first applied to CDMOs sometime in the last two decades as larger contractors expanded their offerings through investments or acquisitions.
While the term is not formally defined, in general a full-service CDMO can be thought of as a contractor with the capabilities to turn a customer’s candidate into a product. The vast majority of full-service CDMOs work in the small molecules sector—some 92 percent, according to analysis by Results Healthcare. The range of services might include drug discovery, API synthesis development, drug formulation, manufacturing, packaging, serialization, and distribution.
Demand for Full Service Driving CDMO Consolidation
The pharmaceutical industry has been outsourcing drug development and production for almost 40 years, often to CDMOs staffed by former employees.
Initially, the CDMO sector consisted of specialists offering a limited range of services with little overlap. However, over the years the sector has become increasingly competitive, which has prompted consolidation with larger CDMOs buying smaller peers to gain additional capabilities.
This consolidation trend is accelerating as a result of the evolving drug industry demands mentioned above. CDMOs that offer a wide range of services and a global footprint are well positioned to off-load complexity from their customers.
Increasingly, large drug companies favor a limited number of suppliers that can support a wide range of services associated with a wide range of products. Similarly, specialty pharma, virtual pharma companies, and generic suppliers want a full range of services, including development, production, and regulatory support.
Demand for Technical Expertise and Quality
Full-service CDMOs are also expected to have a broader range of technical expertise. Increasing demands for quality products is reflected in customer expectations, with some demanding that their contractors achieve higher quality standards than are expected by regulators.
In addition, making and supplying high-tech, high-value products requiring lyophilization, for instance, is a complex challenge. For example, such products are sometimes highly sensitive, requiring specific facilities and skills.
Again, these demands are prompting full-service contractors to further expand their capabilities in a variety of areas either through investment or acquisition of smaller specialists with specific technologies.
Demand for outsourced services is growing in areas including lyophilization and sterile liquid fill & finish operations, as each requires significant investments and expertise.
Demand for Manufacturing Capacity and Flexibility
Another key dynamic for full-service CDMOs is the growing global demand for medicines. The pharmaceutical industry is experiencing huge volume demand both as a result of the aging global population and from emerging markets.
Catering to increased demand requires additional manufacturing capacity, which is most effectively achieved by a CDMO with a wide, diverse, and established facilities network.
Likewise, helping pharmaceutical companies supply products to emerging markets requires an established and flexible manufacturing infrastructure and knowledge of the requirements of markets that are highly cost sensitive.
The evolution of the pharmaceutical industry is driving development of the CDMO sector, particularly the full-service contractors who invest to ensure services that are both comprehensive and cutting edge.
About the Author
Jean-François Hilaire is Recipharm’s Executive Vice President–Strategy and Global Integration. He is a doctor in pharmacy and is responsible for coordinating Recipharm’s strategic priorities, as well as ensuring that newly acquired businesses are effectively integrated. He has more than 25 years’ experience in leadership positions in manufacturing and commercial operations.