A Changing Industry Brings New Challenges, but also Opportunities
Given the very nature of its business, the bio/pharmaceutical industry is continuously faced with challenges such as cost aspects and stricter regulations, to name but a few. Often, these challenges are met with new trends that help navigate these issues and lead to new growth opportunities. Never one to shy away from a challenge and embrace a new trend, the industry's response has been the creation of novel approaches to treat diseases, or the development of new delivery techniques to overcome obstacles and move the industry forward to the benefit of all. But what is the outlook of the industry today and where is it heading in the future?
From a macro view, globalization has resulted in growth that creates opportunities for expanding the market reach of existing drug products. A report on global spending by IMSQuintiles (now IQVIA) noted that there has been a 4-7% per year growth in financial spending on medicines (1).
In terms of new products, there are more biologics entering the clinic and eventually coming to market. Due to continuous advances in the discovery of how the human body works, many of these new biologics are quite novel, focusing on individual treatments that target smaller markets, such as the orphan drugs do. BioPlan Associates noted a 14-15% growth in the biopharmaceutical sector of the industry in its 2017 report and survey (2). This growth is expected to further increase in the future, according to EvaluatePharma, with biologics comprising 50% of the top 100 drugs by 2021, compared to current figures of approximately 20% (3).
Where the industry is headed
From an industry's perspective, the biotech sector shows great promise. A number of the companies working in the biotech space are virtually operated companies; consequently, they tend to outsource most, if not all of their development and manufacturing operations. One of the key drivers of outsourcing is the rising cost to develop and manufacture new drugs, hence, creating the demand for contract development and manufacturing organizations (CDMOs) with a wide range of capabilities. As a result, there has been a good deal of mergers and acquisitions over the past few years-the players continue to seek opportunities to expand their portfolio of offerings by merging with or acquiring service providers with different expertise. This includes pharma companies merging with smaller biotech companies, as well as service providers from different fields merging to enlarge their portfolio. Competitive service providers within the same fields are also looking to gain more market share and benefit from the synergies inherent in a partnership or merger.
The large and mid-size pharmaceutical companies, on the other hand, are constantly faced with the pressure to refill their drug pipeline. To do so, they continually rely on acquisitions or in-licensing from smaller biotech companies to gain access to new innovation in general, and more innovative drug candidates in particular. Further, due to ever-increasing costs of bringing drugs to market, larger pharma and biotech companies are constantly searching for manufacturing strategies to realize more effective development and manufacturing operations. There is an ongoing demand for increased production efficiency not only from a technological aspect, but also in terms of yield of high-value products. What this means for the industry is a greater adoption of single-use systems, for example, as well as more automation, monitoring, and tighter process control. Given the highly regulated nature of the aseptic manufacturing sector, expectations for quality continues to remain high. Today, pharma and biotech customers expect a great deal of oversight to realize the necessary and requested high quality for their valuable products.
Solutions often result in new trends
According to the 2017 CPhl annual report (4), there is a trend towards the integration of outsourcing activities. Single-source development and manufacturing providers are increasingly preferred, primarily in an effort to reduce business complexity. Sponsor companies are continuously in search of a few well-chosen strategic partners to help them accelerate their drug development and commercialization process and by doing so, decrease their time to market. A large number of pharma and biotech companies are using outsourcing as a manufacturing strategy as well as a means of adding flexibility to their capacity. Additionally, innovative pharma and biotech companies often rely on external partnerships with solution providers such as independent CDMOs. This approach reduces direct costs from their supply chain, helping them remain flexible and able to quickly react to changing situations within the development and manufacturing process.
With the many challenges occurring within the industry, outsourcing of various development and manufacturing operations to CDMOs is expected to continue, especially with the increasing number of smaller companies striving to enter the market and have their innovative products move through the development process as quickly as possible. The means by which service providers are willing to work with customers is also changing and will continue to do so well into the future. In addition to experience, state-of-the-art technology, capacity, and flexibility, the innovation and creativity that a CDMO can provide will play an important role in setting it apart from competitors.
There is little doubt that the market will continue to grow, and this growth offers promising opportunities for those solution providers that are well-orchestrated and prepared to meet the needs of their large and small pharma and biotech customers today and in the future.
1. QuintilesIMS Institute, Outlook for Global Medicines through 2021 (December 2016).
2. BioPlan Associates, 14th Annual Report and Survey of Biopharmaceutical Manufacturing (April 2017).
3. EvaluatePharma, World Preview 2016, Outlook to 2022 (September 2016).
4. UBM, CPhI Annual Report 2017 (October 2017).