According to a survey, Contract Development and Manufacturing organizations (CDMOs) are expected to grow at a CAGR of 6.9 percent from 2-18 to 2025. The worth of CDMO pharmaceuticals was estimated at 99 billion dollars in 2018 and is expected to increase to 158 billion dollars by 2025 – a huge difference. The opportunity for the CDMOs to flourish has come about due to the lack of in-house equipment for several steps of drug development in large and small companies, forcing them to outsource the work for cost-effectiveness.
The Rise of the Outsourcing Market– Important Factors:
The big pharmaceutical niches like cell and gene therapy feel the requirement of outsourcing the manufacturing of cell lines and other products to cell therapy contract manufacturing for efficiency. The factors that played an essential role in the growth of the market are as follows:
- Rising global population.
- Better coverage of insurance in developing companies.
- Aging people require more medications.
- The rise in chronic illnesses.
- Increased interest by pharmaceutical companies to outsource manufacturing.
Demography:
If we consider demographics, the CDMO market in the Asia Pacific region that includes India and China is growing at a much more rapid rate than the developed areas of North America and Europe. The reason is that the development and operational costs in the Asia Pacific region are comparatively lower.
The United States remains the top market for pharmaceutical outsourcing due to innumerable research institutions and opportunities available in the States. Developing countries are less attractive places to invest because of the doubts about logistics, quality regulation, and intellectual property disputes. So, if you are considering investing in the CDMO, consider the best demographics.
Mergers and Aquisitions (M&As):
Although the outsourcing market was considered to be characterized by fragmentation, in recent years many CDMO M&As have taken place. Merging enables companies to increase their technology advancement, equipment, and knowledge. It pays off by providing more and better products to the market.
Although merging provides an expansion opportunity for the CDMOs but careful deliberation is necessary before any decision because if it fails, an already established business can be destroyed.
Investing into another CDMO requires a huge capital which is generally not present in a CDMO itself. If external funding is taken for the merger, it can turn an independent company into a dependent one.
Opportunities for Investors:
The growth of CDMO provides opportunities for investors to put down their investments in this field and reap the crop later. The factors that provide growth opportunities in the CDMO market are as follows.
- The increased reliance of large pharmaceutical companies on outsourcing.
- Co-investments.
- Advancements and innovations in technology.
- Better operational techniques than before.
- Increase in the number of small and medium pharmaceutical companies with heavier reliance on outsourcing.
- High company values.
- Gaining high profits in a consolidated and growing market.
Concluding Thoughts:
There is no doubt that the CDMO market is showing a positive growth rate and it is expected to increase in the coming years. Investing in this market now will surely create more profits and can be a consolidated investment. But, investments should be made after careful pondering and gathering all the necessary information.
