/* Localize integration script */

The importance of Contract Manufacturing Organizations

by Reuben Malz

The pharmaceutical marketplace has changed dramatically over the last few years as pharmaceutical companies are moving from centralized, internal production to single-source providers or Contract Manufacturing Organizations (CMO). The principal reason behind this evolution in the landscape is simple, to cut costs, increase capacity and reduce time-to-market. Beyond these obvious criteria, there are numerous other reasons why pharmaceutical companies are relying heavily on the growing CMO market. Whereas CMOs once produced primary packaging they now offer a multitude of services from design and discovery to final packaging. Outsourcing to a CMO allows the pharmaceutical company to add technical resources without increasing its overhead costs. The result of this is that the pharmaceutical company does not need to invest in expanding its staff and manufacturing facilities, to add new varieties of medicines into its product lines. Pharmaceutical companies can now concentrate on core products regarding R&D and production and leave its secondary and tertiary products to the CMO.

CMOs of Increasing Importance to Pharmaceutical Companies 

What is a CMO?

The term CMO can refer to a multitude of different companies including Contract Packaging Organization, Contract Pharmaceutical Manufacturer. However, in recent years CMOs have been more or less classified into two types of organizations:

API Contract Manufacturer (Active Pharmaceutical Ingredient)

These are companies that manufacture a substance(s) that are used as a component of a finished drug.

FDF Contract Manufacturer (Finished Dosage Form)

These are companies that provide a drug product for administration to a patient without the need for substantial further manufacturing and often in its final packaged form. The CMO market is currently divided almost equally between API manufacturers and FDF manufacturers. Within FDF contract manufacturing, solid dose compounds currently dominate the market. However, future growth is likely to be driven by injectables dose manufacturing primarily due to increased focus on complex disease areas and the growing trend of self-administration.

Tweet: “In recent years CMOs have been more or less classified into two types of organizations: API Contract Manufacturer (Active Pharmaceutical Ingredient) + FDF Contract Manufacturer (Finished Dosage Form) #GVBlog”

A Growing Market

Regarding market growth and potential future growth, the CMO channel is a force to reckon with.  For North America, Europe, and Japan in the last three years, the CMO market grew at close to three times the rate of the pharmaceutical market: 8% versus 3%. (It is important to note that the 3% growth is for the pharmaceutical market as a whole, top Pharmaceutical companies have grown significantly faster at a rate on average of over 11%. It is also important to note that most large pharmaceutical companies have divisions operating as CMOs) Over the next five years, the CMO market is expected to continue to grow at an annual rate of 6% to 9%, with annual revenues currently valued at between 25-30 billion dollars. This growth will be further fueled by new opportunities within the generic drug market.

Tweet: “For the last three years, the CMO market grew at close to three times the rate of the #pharmaceutical market: 8% versus 3% #GVBlog” Tweet: For the last three years, the CMO market grew at close to three times the rate of the #pharmaceutical market: 8% versus 3% #GVBlog

Challenges for the CMO

Although the CMO seems to be poised to become a major player in the pharmaceutical marketplace several challenges await.

Acquisitions

The trend is already apparent as 2015 saw a glut of companies and manufacturing facilities being bought and sold.

Current Clients

Smaller pharmaceutical companies use the services of CMOs significantly more than large pharmaceutical companies.  The challenge lies in that the growth opportunities are a lot smaller.

Low Capital Costs

With lower capital costs many pharmaceutical companies are rethinking the CMO route for moving back to traditional centralized production.

The Future of CMOs

As with any part of the pharmaceutical landscape, the role of the CMO will follow a predictable route. Larger ones will absorb the smaller CMOs, and the large CMOs will come forward to be the only players to be able to support the large Pharmaceutical and Biopharmaceutical companies. New channels will open within the generic pharmaceutical marketplace fostering further growth for the large CMO.

Tweet: “New channels will open within the generic #pharmaceutical marketplace fostering further growth for the large CMO #GVBlog” Tweet: New channels will open within the generic #pharmaceutical marketplace fostering further growth for the large CMO #GVBlog


GlobalVision is the leading developer of proofreading technologies for the FDF Contract Manufacturer market. All our quality control solutions meet FDA 21 CFR Part 11 / EMA Annex 11 requirements. For more information on GlobalVision and the Quality Control Platform for CMOs, please visit: www.globalvisioninc.com or email: [email protected]


Want to see GlobalVision in action?

Register for one of our weekly webinars

The website uses cookies to improve your experience. By using our website, you agree to the use of cookies as described in our Privacy Policy.
Accept
Privacy Policy