Increased confidence of growth in US market, finds CPhI report

The US pharma industry and domestic manufacturers are showing increased confidence of renewed growth and even the return of some lower-cost manufacturing work that has, in previous years, been outsourced overseas, finds a report from CPhI Worldwide on the US market.

The CPhI Pharma Insights USA Market Report 2016, distributed at InformEx 2016 in New Orleans, compiled the findings of research conducted among nearly 70 of the most influential pharma companies and organisations in the US.

The report says the turnaround in the US market’s revenue potential is being driven by concerns about quality in some Asian markets and by a shift in the drug development pipeline towards difficult-to-formulate drugs and biosimilars.

For generics manufacturers, there is a trend towards API sourcing within the US and near-field manufacturing sites for companies based outside the US – e.g. Mexico and Canada. The primary reason behind this is an increased regulatory confidence in the standards of manufacturing, due to the proximity of FDA inspectors, finds the report.

Turnaround in the US market’s revenue potential is being driven by concerns about quality in some Asian markets

The TTIP (Transatlantic Trade and Investment Partnership), TPP (Trans-Pacific Partnership) and TPA (Trade Promotion Authority) are surprisingly welcomed by generic manufacturers – in spite of the potential patent extensions to biosimilars – as they believe that these partnerships are making domestic generic manufacturers more competitive with their overseas rivals. But smaller generic firms are likely to be acquired or cease production due to the GDUFA (Generic Drug User Fee Amendment) fees, which companies have to pay at a standard flat rate (irrespective of volumes or role in the supply chain).

For contract manufacturing, the US market is now as attractive as it has been at any other time in the last 10 years, with international players scrambling to get a domestic manufacturing foothold in the market. Moreover, these acquisitions are being driven by the need to acquire both specialist technical capabilities and sterile and biologic capabilities. International companies with the dual benefits of development capabilities in the US and generic facilities in lower cost regions look well placed for sizeable future growth, the report predicts.

Going forward, domestic companies should see organic growth due to the favourable conditions, with consolidations occurring among smaller players. But international companies supplying into the US need to urgently enter the US market with domestic assets or risk getting left behind.

Accelerating the US market’s manufacturing dominance is a drug pipeline that will see future patented candidates and higher margin generics shifting towards biologics and biosimilars. Regulatory approvals for biologics are by their nature more complicated, so there is also a trend to license biosimilars to existing manufacturing partners. In fact, the report predicts that many CDMOs which undertook the development work, will maintain contract services agreements into commercialisation, and even after a product goes generic.

Small molecules are not dead as profit generators

The report highlights that small molecules are not dead as profit generators, and that, the ‘areas in between’ such as ADCs and conjugation, particularly for oncology products, are providing new business opportunities with high margins.

The shift in big pharma’s R&D pipeline is having a knock-on effect for both manufacturers and contract service providers, who are looking to quickly revaluate their assets and reinvest in smaller more flexible capabilities. With European and US manufacturers now snapping up smaller technical and biologics assets.

The report predicts that the US CMO market, already worth more than US$10bn, will expand significantly faster than the overall pharmaceutical industry, and will be boosted by the outsourcing of non-core businesses, and an increasing number of speciality and biotechnology companies without in-house capabilities.