CDMOs support pharmaceutical companies with additional specialized capabilities ranging from process and formulation development to drug substance characterization, analytical method development, and regulatory filings, as well as additional capacity for clinical and commercial manufacturing. Development and production of small molecule APIs and their associated OSD products are often outsourced (much more so than biologics), particularly for products reaching the end of their patent lives. Many CDMOs have developed expertise in specialized synthesis capabilities and/or drug delivery technologies that are not cost-effective for drug developers to invest in but provide competitive advantages.
According to corporate advisory firm Results Healthcare, nearly 90% of the CDMO market in 2019 comprised commercial products, and CDMOs were responsible for nearly 30% of all API manufacturing, mostly for small molecules.1 Overall, therefore, small molecule API manufacturing represents greater than 50% of the commercial CDMO market. In addition, small molecule manufacturing overall (intermediates, APIs, drug products) accounted for slightly more than 90% of the commercial contract manufacturing market in 2019 and will provide the largest share of absolute growth to 2023. It is also worth noting that generics generate a similar level of commercial revenue to small molecule originator products in that outsourcing sector.
Market penetration for small molecule drug substance and drug product manufacturing is estimated by Results Healthcare to be 34% and 22%, respectively.1 Both subsectors are predicted to expand at a compound annual growth rate (CAGR) of 6.5–7% to 2023 and increase market penetration by 2–3 percentage points during that time. Market research firm Visiongain predicts that the overall small molecule outsourcing market will be valued at $69.4 billion by 2024, with demand driven by complex molecules.2
Specifically looking at OSD outsourcing, Persistence Market Research estimates the global OSD contract manufacturing market to be valued at $21.5 billion in 2019 and to be growing at a CAGR of 5.8% through 2028.3 Tablets are the predominant OSD form, and in 2019 accounted for $11.2 billion in outsourcing business. From the end-user perspective, small and medium-sized pharma and biotech companies have (and are expected) to continue to account for the largest portion of revenue for CDMOs.
The shift in the industry away from blockbusters and toward niche, targeted therapies based on more complex APIs produced in smaller volumes has also created challenges for pharmaceutical companies with established, large-volume manufacturing systems.6
Growth in the OSD outsourcing market is predicted to remain strong due to the continued growth of the overall pharmaceutical market and the increasing interest of pharma and biotech companies in outsourcing. The rising demand for generic drugs is also a key factor, given that many generics are OSD products.3 With fewer drugs in the pharma pipeline, companies are investigating possible new indications for existing drugs, combination products to enhance ease-of-use and efficacy, reformulations targeting pediatric patients, and life cycle extension through the application of novel delivery systems.4 As a result, the number of OSD products in pharma company pipelines are increasing.5
The rising percentage of potent compounds4 and the increasing complexity of drug candidates6 are also driving demand for outsourcing support. Issues related to bioavailability, formulation, stability, manufacturability, and scalability are more frequently being addressed by CDMOs with specialized capabilities that enable them to reduce both the time and cost associated with development. While licensing and merger/acquisition activity continue apace in the pharma industry, smaller firms are increasingly seeking to develop and commercialize their products rather than sell out to big pharma. These firms need the experience and expertise offered by CDMOs.6
The shift in the industry away from blockbusters and toward niche, targeted therapies based on more complex APIs produced in smaller volumes has also created challenges for pharmaceutical companies with established, large-volume manufacturing systems.6 CDMOs with a broad set of flexible capabilities and capacities are ideally suited to support these products. Meanwhile, pharma companies with large-volume products turn to CDMOs that can help them reduce total overall costs.
All respondents to the 2019 Oral Dosage Forms survey conducted by Industry Standard Research (ISR) predicted an increase in the percentage of oral-dose manufacturing that is outsourced — from 54% to 60% for clinical trial manufacturing and from 57% to 65% for commercial manufacturing.5
Based on responses to the ISR survey, the firm expects bilayer tablets to experience the greatest increase in demand, with the number of respondents having this dosage form in their portfolios increasing from 16% to 36% over five years, leading to an increase in outsourcing for bilayer tablets from 29% to 49% during that period.5 It should be noted that bilayer tablets account for just 2% of respondents’ marketed OSD products.
On the other hand, controlled-release (CR) OSDs, which are very popular, are also predicted by respondents to the ISR survey to be a significant driver of growth for outsourced OSD manufacturing.5 CR or modified-release dosage forms are used by slightly more than half of respondents as a life cycle–extension strategy. Newer technologies combine enteric release followed by immediate release to achieve both local and systemic activity for OSD drugs.4 Outsourcing rates for softgels are expected to remain steady (based on the ISR survey results) but more companies will be including softgel products in their portfolios.5
Going forward, continued emphasis will be placed on increasing patient compliance through the development of more patient-friendly OSD forms and by reducing the number of medications patients must take.4 More targeted therapies that are designed to act at specific locations in the body for better efficacy and reduced side effects, ingestible sensors and the use of other digital technologies, and advances in personalized therapies and delivery technologies will also be dominant trends in the OSD space in the coming years.4
M&A activity has been supplemented by internal investment by CDMOs in new capacity designed to meet the increasing demand for OSD contract development and manufacturing services.
The debate continues in the pharmaceutical outsourcing sector regarding the benefits of specialization versus integration or adoption of the one-stop-shop model. Certainly, consolidation has been significant in recent years within the pharmaceutical industry, in many cases leaving sponsor firms with extensive and highly convoluted networks of contract service providers. Selecting preferred partners to establish strategic relationships with has been one approach to reducing this complexity.
Select CDMOs, particularly the largest players, have responded by broadening their capabilities across the development to commercialization cycle, geographically, and through the addition of specialized technologies.1 While some of this growth has been achieved organically, much has occurred via acquisitions.
The intent is to support clients from the earliest development stages through secondary manufacturing so they have just one supplier to manage.1 Maintaining projects within one CDMO can also reduce risk, cost, and timelines by eliminating the need to transfer projects between different companies. Some big pharma companies, however, have established procurement departments that make independent decisions, leading to the continued use of multiple suppliers for different phases of the development cycle.
This type of integrated service is also ideal for virtual and small/emerging pharma companies that lack the knowledge and resources to take a drug candidate through the development and approval process.1 It is particularly beneficial for companies that lack the ability to manage multiple supplier relationships or deal with suppliers in distant locations.
Consolidation has not only been taking place among pharma companies. It has also been rampant in the outsourcing sector, including CDMOs that offer OSD-related services. Perhaps the two biggest deals over the last five years were the acquisition of Capsugel by Lonza, and Patheon by Thermo Fisher Scientific. In addition to the desire to establish end-to-end, integrated services, there are a number of factors driving this surge in M&A activity.
Some CDMOs have pursued acquisitions or mergers to increase their financial stability, which is a key selection criterion for pharma customers.1 Increasing regulatory and technical challenges are also leading smaller CDMOs to seek larger buyers that can help manage them. Private equity, with its buy-and-build strategy, has become more involved in the pharmaceutical outsourcing sector as well.
CDMOs are also expanding through the acquisition of facilities and other assets divested by big pharma firms as they purse internal consolidation to increase efficiency, productivity, and cost performance.3 Approximately 10–15 big asset divestments have taken place each year over the past five years, and a strong level of activity is expected going forward as pharma companies continue to reduce their internal manufacturing footprints and increase their reliance on outsourcing partners.1
Recent examples include the acquisition by Piramal Enterprises Limited’s (PEL) Pharma Solutions of a solid oral dosage drug product manufacturing facility in Sellersville, Pennsylvania from G&W Laboratories Inc.;7 the purchase by Catalent of Bristol-Myers Squibb’s biologics, sterile, and OSD product manufacturing and packaging facility in Anagni, Italy;8 and the acquisition by Thermo Fisher Scientific of GSK’s API manufacturing facility in Cork, Ireland.9
M&A activity has been supplemented by internal investment by CDMOs in new capacity designed to meet the increasing demand for OSD contract development and manufacturing services. Bioduro broke ground in April 2020 on a 300,000-ft2 facility in Jiangsu, China that will provide fully integrated drug discovery, development, and manufacturing capabilities, including solid dose.10
Cambrex, meanwhile, is increasing flexible small molecule drug substance manufacturing capacity at its Karlskoga, Sweden facility.11 One year ago, the company announced that it was doubling the size of its solid-form screening and crystallization process development facility in Edinburgh, Scotland.12 Earlier in 2019, Cambrex completed the construction of a $24 million highly potent API (HPAPI) manufacturing facility at its site in Charles City, Iowa.13
Also in 2019, CPI announced it was collaborating with GSK and AstraZeneca to establish a bespoke, continuous wet granulation manufacturing facility for small-scale development of OSD pharmaceuticals.14 That same year, CoreRx opened an International Center of Excellence for Pharmaceutical Development at its Clearwater, Florida site.15 Shortly after completing its acquisition of gene therapy company Paragon Bioservices, Catalent announced in 2019 that it was investing $40 million to expand formulation and controlled-release tablet and capsule manufacturing at its facility in Winchester, Kentucky.16
In April 2018, Metrics Contract Services opened a new $80 million OSD commercial manufacturing facility in Greenville, North Carolina17 and announced an expansion of the facility in June 2020.18 Meanwhile, in July 2017, Patheon announced investments in spray drying capacity at its Florence, South Carolina and Bend, Oregon locations.19 Likewise, Hovione continues to expand, adding a range of capabilities from chemical and analytical development through spray drying to formulation during a five-year investment plan announced in 2018.20 Also in 2018, Recro Gainesville added a new facility that included highly potent product processing for OSD applications.21
Out of all geographic regions — including North America, Europe, Latin America, Asia-Pacific, the Middle East, and Africa, the OSD contract manufacturing market is dominated by North America, which is also predicted to register the highest revenue growth through 2027. However, the Asia-Pacific region is predicted to experience the highest CAGR.22 According to Persistence Market research, the value of the North American OSD outsourcing market was slightly more than $7.2 billion in 2017.23
Despite the heightened level of consolidation with the OSD contracting market, the CDMO sector remains highly fragmented, as is the case for the overall CDMO market, in which two-thirds of companies generate less than $50 million in annual revenues and the top 10 companies hold less than 20% market share.1 Some of this fragmentation is due to the ease, particularly in the OSD market, with which undifferentiated CDMOs can enter the market. Many one-site CDMOs have also been formed via the acquisition of divested pharma assets.
In the OSD contract manufacturing market specifically, tier 1 players, such as Patheon (Thermo Fisher Scientific), AbbVie Contract Manufacturing, Catalent Inc., Piramal Enterprises, Capsugel (Lonza), NextPharma, Recipharma AB, Siegfried AG, Piramal Pharma Solutions, CordenPharma, and Aurobindo Pharma Limited (AuroSource), account for nearly 63% of the market, while tier 2 and tier 3 players represent approximately 12% and 25% of the total market share, respectively.3,22 Notably, of the 280 largest CDMOs, only 12.5% operate on a global level with manufacturing and business development activities covering multiple geographical regions. The majority of medium to small CDMOs are focused on serving their immediate markets.
Furthermore, approximately 64% of OSD contract manufacturing firms pursue contract manufacturing as their primary business.3 The remaining 36% offer contract manufacturing in production facilities where they manufacture their own products.
* This article is an excerpt from Nice Insight’s 2020 OSD Market Growth & CDMO Report with Pricing Study, available for pre-order at www.PharmasAlmanac.com.
“Outsourced Pharmaceutical manufacturing 2020 Current trends & future prospects,” Results Healthcare. Nov. 2019. Web.
Pharmaceutical Contract Manufacturing Market 2019-2029. Rep. Visiongain. 19 Aug. 2019. Web.
Oral Solid Dosage Contract Manufacturing Market is Estimated to Grow at a High CAGR of 5.8 Percent by 2017-2028 - Persistence Market Research. Persistence Market Research. 13 Dec. 2018. Web.
“Trends and Challenges In Outsourced Oral Solid Dosage Forms.” Bioprocess Online. n.d. Web.
Hammeke, Kate. “Areas Of Growth For Oral-Dose Outsourcing.” Life Science Leader. 1 Oct. 2019. Web.
Haeffler, Erik. “Manufacturing of Solid Dosage Forms: Why outsourcing may represent the most viable pathway for innovators.” Contract Pharma. 5 May 2020. Web.
“Piramal acquires solid oral dosage drug product facility in US from G&W.” Pharmaceutical Business Review. 22 Jun. 2020. Web.
Catalent Completes Purchase of Biologics Fill-Finish and Oral Solid Dose Facility in Anagni, Italy. Catalent. 7 Jan. 2020. Web.
Thermo Fisher Scientific Completes Acquisition of GSK Manufacturing Site. Thermo Fisher Scientific. 1 Oct. 2019. Web.
BioDuro Breaks Ground on 300,000 sq ft Facility in Jiangsu China. Bioduro. Apr. 2020. Web.
Cambrex Increases Flexible Manufacturing Capacity at Karlskoga, Sweden Facility. Cambrex. 1 Jul. 2020. Web.
Cambrex to Double Size of Edinburgh Solid Form Screening Facility. Cambrex. 30 Jul. 2019. Web.
Cambrex Completes Highly Potent API Manufacturing Facility at Charles City, IA. Cambrex. 10 Apr. 2019. Web.
CPI Works with GSK and AstraZeneca on Pharma Manufacturing. CPI. 8 Apr. 2019. Web.
CoreRx, Inc. Adds Product Development Center of Excellence Increasing Product Development Capacity. CoreRx. 28 Oct. 2019. Web.
Catalent Plans $40-Million Expansion for Solid Dosage Facility. Catalent. 2 May 2019. Web.
Mayne Pharma Opens New $80-Million Oral Solid-Dose Commercial Manufacturing Facility in Greenville, North Carolina. Metrics Contract Services. 17 Apr. 2018. Web.
Mayne Pharma Announces Expansion of U.S. Production Space. Metrics Contract Services. 24 Jun. 2020. Web.
Marriott, Niamh. “Patheon to invest $45 million in spray drying & manufacturing solutions.” European Pharmaceutical Review. 5 Jul. 2017. Web.
Hovione reports on recent capacity expansion and future plans to support growth. Hovione. 19 Mar. 2018. Web.
Recro Gainesville Adds New Facility, Broadens Capabilities With High-Potent Processing on Deck. Recro Gainesville. 15 Nov. 2018. Web.
Oral Solid Dosage Contract Manufacturing Market - Global Industry Analysis, Size, Share, Growth, Trends, and Forecast 2019 – 2027. Rep. Transparency Market Research. 2019. Web.
Global Market Study on Oral Solid Dosage Contract Manufacturing: Tablets Dosage Form to Register Significant Revenue Growth Through 2028. Rep. Persistence Market Research. Highlights. Dec. 2018. Web.
Mr. Walker is the founder and managing director of That’s Nice LLC, a research-driven marketing agency with 20 years dedicated to life sciences. Nigel harnesses the strategic capabilities of Nice Insight, the research arm of That’s Nice, to help companies communicate science-based visions to grow their businesses. Mr. Walker earned a bachelor’s degree in graphic design with honors from London College of Communication, University of the Arts London, England.