Decline In The Pharmaceutical Contract Development And Manufacturing Organization (CMO) Market Due To Covid-19
18 May, 2020
The global pharmaceutical contract development and manufacturing market is expected to decline from $99.8 billion in 2019 to $93 billion in 2020 at a compound annual growth rate (CAGR) of -7%. The decline is mainly due to the focus on the Covid-19 outbreak and its treatment across the globe, and disruption in the supply chain owing to geographical trade barriers affecting the supply of APIs and raw materials for drug manufacturing. Sponsors contracting CMOs are pausing drug development activities due to the coronavirus, or are restructuring the current drug development plans. The market is then expected to recover and reach $128.4 billion in 2023 at a CAGR of 6.5%.
The pharmaceutical contract development and manufacturing market consists of sales of pharmaceutical contract development and manufacturing products and related services. Some pharmaceutical companies outsource the manufacturing of products on contracts to focus on the research and development (R&D), marketing and branding of their products. The pharmaceutical contract development and manufacturing market consists of manufacturing firms who manufacture drugs and other pharmaceutical products for other pharmaceutical companies on contractual basis.
The growth of the global pharmaceutical contract development and manufacturing organization (CMO) market is driven by the increase in demand for medicines across the globe. The high prevalence of diseases and the need for a longer lifespan increases the demand for medicines, thus pushing pharmaceutical companies to increase the production of existing drugs and increase the investment in their R&D to promote the development of new drugs. This impels pharmaceutical companies to collaborate with contract manufacturing organizations (CMOs) as a way to lower operational costs, thus, increasing demand in the pharmaceutical contract development and manufacturing market. For instance, as reported by PutmanMedia, a USA based online media firm, in 2018, 51% of the total New Molecular Entities (NMEs) approved by the US Food and Drug Administration were outsourced to contract manufacturers, whereas a total amount of $86 billion was given to the contracted services for R&D. The rising need for medicines is thereby boosting the growth of the pharmaceutical contract development and manufacturing market.
Pharmaceutical contract development and manufacturing companies are following the trend of merger and acquisition in order to expand their global market reach to meet the client needs, to increase their production capabilities while maintaining cost efficiencies, and to get access to latest technology and new services. The high level of merger and acquisition activities are resulting in consolidation of the contract service providers. For instance, according to Zymewire, a Canada based digital sales research assistant, the number of total acquisitions of pharmaceutical contract development and manufacturing companies was 130 from 2015-2017, where 70% of the companies acquiring were operating companies and remaining 30% of company acquisitions were by public equity firms.