Rise in biologicals boosts European CMO markets

Contract manufacturing and outsourcing (CMO) in the pharmaceutical industry is growing due to challenges such as declining r&d productivity, increasing generic penetration, spiralling development costs and pipeline woes, according to new analysis from market consultants Frost & Sullivan.

The sharp rise in the number of biologicals paralleled by the expertise and cost savings offered by contract manufacturing organisations has underlined their appeal.

European Pharma/Biotech Contract Manufacturing Markets: A Strategic Outlook finds that CMO has evolved to include services ranging from dosage form design, process optimisation and commercial stage manufacturing to packaging, logistics and marketing support.

"Heightened focus on core competencies and the increasing number of biologicals will be the key drivers in the European CMO market," says Frost & Sullivan senior research analyst Sumanth Kambhammettu. "The technical expertise and cost savings offered by CMOs will make them an attractive proposition to most pharma/biotech companies even as the demand for generics and biosimilars boosts revenue potential."

CMOs in Europe will benefit from the growing number of biologicals set to arrive in the market over the next five to six years. First-generation products, such as antibodies targeting cancers and protein therapeutics are driving current demand. In 2005 and 2006 respectively, 19 and 23 new drugs were approved.

However, rising competition from Indian and Chinese CMOs, the dearth of fully integrated CMOs and tighter regulations are some of the major challenges that market participants can expect to encounter.

"The past few years have seen the emergence of moderate competition from Indian and Chinese CMOs," Kambhammettu explains. "Indian CMOs, in particular, have been aggressively pursuing acquisitions to boost capacities. In addition, increased regulatory requirements in Europe and a shortage of CMOs offering end-to-end services are likely to restrict growth."

European CMOs must leverage low-cost contract manufacturing markets such as India and China to enhance their efficiencies. Moreover, similar to North American service providers, European CMOs should adopt a dynamic approach and provide more value-added services such as packaging, logistics and marketing support, Frost & Sullivan urges.

Since the EU presents a more diverse environment than the North American market, knowledge of local regulatory requirements and the dynamics of local pharmaceutical industries in each EU member country will be critical to success.