Rising Demand for Pharmaceutical Contract Manufacturing Services of Small Molecules

Small molecule drugs are organic compounds with defined chemical structures and molecular weights typically ranging from 500 to 900 Daltons. Unlike biologics, these compounds can easily diffuse across cell membranes to reach intracellular sites and are designed to modulate a specific target that controls the biological processes associated with a specific disease.

Increased investments in discovery and early development phases are leading to robust pipelines and creating greater demand for preclinical, clinical and commercial-scale manufacturing capacity. The small molecules manufacturing is a complex process requiring huge capital and sound technical expertise. Even though pharmaceutical companies have in-house capabilities, these companies are increasingly turning to outsourcing partners, particularly for the manufacturing of Active Pharmaceutical Ingredient (API) and Finished Dosage Forms (FDF) that require expertise. By outsourcing manufacturing activities, pharmaceutical companies can increase their focus on research and development and other core competences.

In the last few years, though there has been an increase in the growth of the biologics market, small molecules continue to dominate the global therapeutics market. In 2018, the FDA approved 59 drugs, of that 42 were small molecules and only 17 were biologics. Many small molecules are going off-patent, paving way for launching of generics through Abbreviated New Drug Application (ANDA) approval, 23 drugs received ANDA approval in 2018, creating a favorable opportunity for the Pharmaceutical contract manufacturers. During the period 2017-2018 475 companies filed type II DMFs (Drug Master Files) and these filings indicate that majority of the companies are focusing in therapeutic areas like metabolic disorders (Type 2 diabetes), Musculoskeletal disorders (Psoriatic arthritis), Cancer (breast cancer), CNS (Major depressive disorder) and multiple fibrosis.

Small molecules still dominate the early and late stage pipeline development. In order to tap the opportunity, several CMOs (Contract manufacturing organizations) are investing in expansion. For instance, in September 2018, Evonik Industries AG invested €36 million ($42 million) to expand its CMO capability in API manufacturing in the U.S. and Europe. The company is enhancing the advanced technologies like high-potency API (HPAPI), and continuous processing at multiple manufacturing sites. CMOs with advanced manufacturing technologies like, continuous flow manufacturing, cryogenic process, high containment facility and capabilities to produce controlled substances and HPAPI drugs will attract the pharmaceutical companies to outsource API and FDF manufacturing. For instance, in August 2018, Nemus Bioscience, Inc. signed an agreement with AMRI for the development and manufacturing of Nemus’ proprietary cannabinoid-based active pharmaceutical ingredients (API) which is a controlled substance.

Many pharmaceutical companies lacking in-house manufacturing capabilities to manufacture API and FDF, virtual pharmaceuticals and CROs tend to outsource manufacturing to CMOs. Clinical manufacturing contracts are increasing as 55-60%of the pipeline drugs are synthetic API based, clinical phase 2 and 3 projects require cGMP facilities and clinical manufacturing plays a significant role in securing client relationships that can lead to commercial scale manufacturing contracts, also increase in outsourcing by innovator pharma companies due to low-cost commercial manufacturing and shorter timelines.

A major proportion (around 25%) of the new drugs is highly toxic and contains high-potency active pharmaceutical ingredients (HPAPIs). The cytotoxicity of HPAPIs presents handling challenges and need high safety measures. It is extremely difficult to have safety procedures in place and train all employees who are dealing with the handling, storage, and contaminations of highly potent compounds, especially with categories 3 and 4 compounds. As HPAPI manufacturing demands advanced capabilities and skills, mid-size and smaller pharmaceutical companies lacking in-house capabilities are outsourcing to CMOs providing HPAPI manufacturing services.

In pharma contract manufacturing market CMOs are strategically enhancing their service capabilities by acquisition, investment, an expansion for providing access to new API and FDF manufacturing capacity and technologies. For instance, in January 2019, Cambrex Corporation has acquired Avista Pharma, a contract development, manufacturing, and testing organization (CDMO) for about $252 million, the facility adds pre-formulation, formulation, process development. Some of the contract manufacturing organizations (CMOs) are transforming into Contract development and manufacturing organization (CDMO) by offering end to end services, ranging from development activities including clinical trials to commercial scale production and regulatory filings. The pharmaceutical CMO’s estimated capacity is close to 50% of total pharmaceutical manufacturing volume. The capacity utilization of total CMO manufacturing volume during 2018 was estimated to be more than half and expected to grow at a mid-single digit CAGR from 2018 to 2025 to reach 3/4th capacity utilization by 2025.

The Pharmaceutical Contract Manufacturing Global Market is expected to grow at a high single-digit CAGR to reach $96 billion by 2025. The major factors driving the market include patent expiration of small molecule drugs, increasing number of small molecules in clinical trials, increasing outsourcing by the pharmaceutical companies, CMOs investments to expand manufacturing facilities, rise in incidence of chronic and age-related diseases, rapid growth in oncology market, technological advancement like cryogenic and continuous flow manufacturing. However, contamination during manufacturing, side effects associated with small molecules, increasing shift towards biologics, price pressure and stringent regulations are hindering the growth of the Pharmaceutical Contract Manufacturing market.

Geographically, the North American region held the largest market share in 2018 wherein, the United States accounted for the highest revenue. Asia Pacific is the fastest growing region, due to the increase in the number of generic API production companies, rising affordability, enhanced life expectancy, improved standard of living and increase in population are driving the market. China and India are the low-cost hubs for pharmaceutical contract manufacturing due to lower labor costs and capital expenditures. India has established itself as a significant player, especially in solid dosage form manufacturing for the large-scale production of generics for global markets. Availability of skilled workforce and lower labor cost are some of the factors propelling the rapid growth of the Asia-Pacific market

Major players in the Pharmaceutical Contact Manufacturing global market include Aenova Holding GMBH (Germany), Cambrex Corporation (U.S.), Abbvie Contract Manufacturing (U.S.), Patheon N.V. (Thermo Fisher Scientific) (Netherlands), Albany Molecular Research Inc. (U.S.), Famar S. A. (Greece), Lonza Group Ltd. (Switzerland), GlaxoSmithKline (U.K.), Pfizer CentreOne (U.S.), Wuxi STA pharmaceutical Co., Ltd. (China), Almac (U.K.) and Recipharm AB (Sweden).

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