Outsourcing Trends in Small Molecule API Manufacturing

Life Science Leader, July 2014

Lately, much of the enthusiasm in drug development is centered around large molecule API / biologics. However, the vast majority of drugs on the market, and in development, have a chemical-based, small molecule active ingredient. Considering the dominance of this type of medicine on the market, it is not surprising that one-third of the CMOs included in Nice Insight offer commercial scale small molecule API and advanced intermediates manufacturing, as compared to 20 percent that offer biologic API manufacturing.

Respondents to Nice Insight’s annual survey, who will outsource commercial scale manufacturing (25 percent), reported small molecule API manufacturing at a lower frequency than large molecule API or finished dosage forms (28 percent vs. 37 percent, respectively).  However, this likely speaks to the many existing outsourcing relationships that are based on small molecule API manufacturing, as the survey inquires about new projects that will be outsourced in the next twelve to eighteen months.

To gain greater understanding of outsourcing small molecule API and advanced intermediates, Nice Insight reviewed the buying behavior and outsourcing preferences among Big Pharma, specialty / midsized pharma and emerging pharma companies.  When looking at the buying market for outsourced small molecule API, it is not surprising to see Big Pharma comprises the majority, at 58 percent.  However, when putting that figure into context, only 35 percent of Big Pharma companies that will outsource commercial scale manufacturing projects will be engaging a CMO for a new small molecule API project, which amounts to 8 percent of all Big Pharma respondents to the survey.  Emerging pharma will account for roughly one-quarter of the new small molecule API projects, and specialty pharma accounts for 18 percent of the buying market.

Companies that are looking to engage a new supplier for small molecule API are markedly more likely to consider to emerging market CMOs than the overall average (86 percent vs. 66 percent). Yet when it comes to actually offshoring API production, there is much less of a divergence. In fact, more projects are currently allocated to suppliers in Western Europe (21 percent vs. 12 percent) when compared to offshored projects overall. The percentage of small molecule API projects allocated to US & Canadian suppliers is on par with the overall average (27 vs. 26 percent). 


Small Molecule API Outsourcers Allocate More Work to Strategic Partners

Whether the CMO is local or overseas, buyers of outsourced small molecule API manufacturing services tend to outsource fewer projects to tactical service providers (27 percent vs. 31 percent) and a greater number to strategic partners than the average (36 percent vs. 32 percent). These buyers also tend to show greater interest in forming strategic partnerships with CMOs when it comes to new outsourcing relationships (59 percent vs. 48 percent). In fact, only one-in-ten respondents indicated their company was not interested in forming new strategic partnerships. The key attributes that influence strategic partner selection among this group are not the traditionally clichéd qualities. In reality, flexible payment terms and discounted pricing arrangements ranked last, while operating procedures established collaboratively, a dedicated project manager and long-term commitment were prioritized in the top three positions. 

Only one-in-ten respondents indicated their company was not interested in forming new strategic partnerships.

If your business is planning to engage a new supplier for small molecule API, identifying the right CMO make take a different approach than in the past.  Four out of five respondents indicated that the first place they turn to identify suppliers is industry research, followed by referrals from colleagues (71 percent) and consultants (65 percent).  And, a company’s affordability or a discounted pricing arrangement is no longer top of mind when establishing a shortlist.  Rather, quality and reliability — secured through collaboratively established operating procedures — lend more towards a mutually beneficial relationship between the buyer and contract manufacturer.  


Nice Insight

Nice Insight, established in 2010, is the research division of That’s Nice, A Science Agency, providing data and analysis from proprietary annual surveys, custom primary qualitative and quantitative research as well as extensive secondary research. Current annual surveys include The Nice Insight Contract Development & Manufacturing (CDMO/CMO), Survey The Nice Insight Contract Research - Preclinical and Clinical (CRO) Survey, The Nice Insight Pharmaceutical Equipment Survey, and The Nice Insight Pharmaceutical Excipients Survey.