What are key trends shaping the market for bio/pharmaceutical outsourcing? DCAT Value Chain Insights takes an inside look into the market drivers, trends, and key activity shaping the CDMO/CMO sector in small-molecules, biologics, and drug products.

Some of the key trends and activity impacting the CDMO/CMO market for biologics (drug substance), drug products (sterile injectables) and small-molecule active pharmaceutical ingredients (APIs) are outlined below.  

Biologics
The global contract biologics market (biologic drug substance) was valued at over $19 billion in 2023 and is expected to grow at a compound annual growth rate (CAGR) of approximately 9% between 2023 and 2035, according to a recent report by Research And Markets, a Dublin, Ireland-based market research company.

Reflecting that strong growth are large capacity expansions by several of the large CDMOs. Samsung Biologics is proceeding with a KRW 7.5 trillion (approximately $6 billion) expansion plan to add a second biomanufacturing campus in South Korea. The plan first includes the addition of a fifth biomanufacturing plant for the company with a capacity of 180,000 liters, scheduled for completion in April 2025, contributing to a significant increase in the company’s overall biomanufacturing capacity, which will reach a total of 784,000 liters upon the plant’s completion. The full development of the company’s second biomanufacturing campus, which will entail future Plants 5-8 and an open innovation center, represents an investment of KRW 7.5 trillion (approximately $6 billion).

Fujifilm Diosynth Biotechnologies is also proceeding with a multi-billion-dollar biomanufacturing expansion. Last month (April 2024), the company announced an additional investment of $1.2 billion in its large-scale cell-culture biomanufacturing facility in Holly Springs, North Carolina, bringing the total investment in the facility to over $3.2 billion. The company is also proceeding with a $1.6-billion capital investment to expand large-scale cell-culture capacity in its Denmark facility, with the first drug-substance expansion set to come on line later this year (2024) and a second drug-substance expansion slated for online activation in 2026.

Lonza is making a large capital investment through its pending $1.2-billlion acquisition of a large-scale biologics manufacturing site in Vacaville, California, from Roche’s Genentech. Lonza plans to invest an additional CHF 500 million ($554 million) to upgrade the Vacaville facility.

Lotte Biologics, a Seoul, South Korea-based CDMO of biologics, is proceeding with a $3-billion biomanufacturing expansion plan, which involves the construction of three new biomanufacturing plants in South Korea. The first biomanufacturing plant  is set to commence construction this year (2024) with a production capacity of 120,000 liters.

Drug products (sterile injectables)
The contract sterile injectables market is also a high-growth sector, marked by several large recent moves by CDMOs. The global sterile injectable contract manufacturing market was estimated at $12.89 billion in 2022 and is projected to grow at a CAGR of 12.1% from 2023 to 2030, according to a recent analysis by Grand Review Research, a San Francisco, California-headquartered market research firm.

One of the largest moves in the CDMO/CMO market is the pending mega acquisition that will move manufacturing capacity out of the CDMO/CMO market:  the pending $16.5-billion acquisition of the CDMO, Catalent, by Novo Holdings, the parent company of Novo Nordisk, which upon closing of the acquisition will net Novo three fill–finish sites and related assets in Anagni, Italy; Bloomington, Indiana; and Brussels, Belgium. The merger is expected to close toward the end of 2024, subject to customary closing conditions, including approval by Catalent stockholders and receipt of required regulatory approvals. After closing, Novo Holdings plans to sell the three fill–finish sites to Novo Nordisk for $11 billion. The Catalent acquisition is expected to gradually increase Novo Nordisk’s filling capacity from 2026 and onwards.

Several key expansions among CDMOs, however, will add capacity to the market. For example,  Simtra BioPharma Solutions is investing $250-million-plus to expand its sterile fill-finish manufacturing campus in Bloomington, Indiana. Simtra BioPharma Solutions is the former CDMO, Baxter BioPharma Solutions, spun off from Baxter Healthcare and acquired for $4.25 billion by the private equity firm, Advent International, and growth investment firm, Warburg Pincus, last October (October 2023). The company is also proceeding with a $100-plus million investment in its Halle/Westfalen, Germany, site for the construction of a new building housing a high-speed syringe line and a vial line equipped with four lyophilizers, with GMP readiness isanticipated by the end of 2024.

Lonza is investing CHF 500 million ($547 million) in a large-scale, commercial drug-product fill–finish facility in Stein, Switzerland. The new facility follows the company’s previous investment in formulation and clinical drug-product manufacturing and will be completed in 2026.

Vetter, a CDMO of aseptic filling and packaging, is investing EUR 230 million ($252 million) in a new production building, which is currently under construction at its global corporate headquarters site in Ravensburg, Germany.

Small-molecule drugs
A key issue potentially impacting fine chemical producers and CDMOs in the Europe Union (EU) relates to policy moves to increase manufacturing in the EU and reduce dependence on other countries for active pharmaceutical ingredients (APIs) and related inputs for critical medicines. Last month (April 2024), the European Commission launched the Critical Medicines Alliance. First announced by the European Commission in October 2023, the Alliance will focus on industrial policy and complements the reform of the EU’s pharmaceutical legislation as proposed by the European Commission. Set up as a consultative mechanism to policy-makers, the Alliance seeks to work to enhance security of supply, strengthen availability of medicines, and reduce EU supply-chain dependencies. The recommendations made by the Alliance will serve as a basis for a multi-year strategic plan containing milestones and corresponding deadlines for their implementation.

Key factors being analyzed include an over-dependency on a limited number of external suppliers, limited diversification possibilities, and limited production capacities. This will build on the European Commission’s vulnerability analysis of supply-chain bottlenecks of critical medicines on the Union list of critical medicines. The Union list of critical medicines, which was published by the European Medicines Agency last December (December 2023), refers to a list of critical medicines for the EU/European Economic Area, which contains more than 200 active substances of medicines considered critical for healthcare systems across the EU/European Economic Area, for which continuity of supply is a priority and for which shortages should be avoided. The list contains active substances of innovator and generic drugs covering a wide range of therapeutic areas and includes vaccines and medicines for rare diseases. It reflects the outcome of a review of 600 active substances taken from six national lists of critical medicines. The goal is update that list on an annual basis.

The European Commission carried out an analysis of supply-chain vulnerabilities for a first tranche of 11 critical medicines on the Union list, set to be published last month (April 2024). The outcome of this work will inform the scope of the mandate of the Critical Medicines Alliance. In addition, the European Commission will proceed with evaluating the remaining medicines in the Union list. It will then recommend priority actions for the near future and propose new tools to address the challenges it has identified. In particular, the recommendations will focus on mitigating structural risks, reinforcing supply by making demand more predictable, encouraging diversification, and boosting manufacturing in the EU.

Those efforts will also be part of discussions in the Alliance, which will help the European Commission to identify what it terms as “pipeline investment projects,” which could benefit from EU and national funding to strengthen manufacturing in the EU. The Alliance will also look at how market incentives, such as capacity reservation contracts and joint procurement, can be used to enhance security of supply of critical medicines. In addition, the Alliance is taking a holistic view of the supply chain, and its members will seek to identify new synergies to work with each other more effectively, including creating new partnerships. Given the global nature of the supply chain, these new partnerships could bring the diversification of the supply chain of critical medicines.

The European Chemical Industry Council (Cefic), which represents EU chemical manufacturers, is a member of the Critical Medicines Alliances, and through its sector group, the European Fine Chemicals Group (EFCG), supports potential policy moves to advance fine chemical manufacturing in the EU.

“The more dependent Europe is on other regions, the more vulnerable its people are on products as fundamental as medicines,” said Maggie Saykali, Director, Specialty Chemicals, Cefic, in an April 24, 2024, statement in commenting on the launch of the Critical Medicines Alliance. “Through our Sector Group, we represent around 350 API and fine chemical sites in Europe, and we can provide important insights on the key value chain players, capacities in Europe, technologies involved in the manufacturing process, among others. Our goal is to strengthen Europe’s strategic autonomy and re-establish Europe as a major player in API manufacturing.”

Cefic’s EFCG issued a set of recommendations last November (November 2023), which included fostering supportive legislative policies for EU API manufacturers that emphasized sustainable growth and reshoring initiatives while investing in innovation and shifting procurement focus on supply security and social-environmental standards. In making those recommendations, EFCG pointed to the continued decline of European-based API production with respect to the supply of critical medicines. From a global production share of 53% in 2000, the EU’s share of API production in 2020 fell to 25% due to increased competition from lower-cost countries and EU pricing and procurement policies not favorable to EU-based domestic manufacturing, according to information from EFCG.