Strong growth predicted for pharma contract services
pharmafile | January 5, 2010 | News story | Manufacturing and Production, Research and Development | contract research, industry, manufacturing and production
The market for contract services in the pharmaceutical sector has been pegged back since the end of 2008, but looks set to bounce back in the next five years with gains for contract manufacturing, research and packaging over the next five years.
A new report from BCC Research predicts that the global market for contract pharmaceutical services will be worth an estimated $177 billion in 2009 and should increase by a healthy 11.1% a year over the next five years to reach $299 billion.
The lion’s share of the market is taken up by contract manufacture of over-the-counter medicines and nutraceuticals such as dietary supplements, which accounted for $103 billion of the total market this year and are tipped to grow at a rate of 11.4% to reach $177 billion in 2014.
Contract manufacture of bulk- and dosage-form drugs, the second-largest segment, is estimated to be worth nearly $44 billion in 2009, and is projected to increase at a compound annual growth rate of 10.8% to reach $73.1 billion over the same period.
Contract manufacturers have been experiencing a lot of volatility in the market of late, as their clients adjust manufacturing capacity in the wake of the recent spate of consolidation, although this could present opportunities in the coming quarters.
Big pharma is also wrestling with excess capacity at the moment, although that looks set to be offset by an uptick in new drug approvals compared to 2008.
“With the increasing demand to reduce capital expenditures and protect their margins, pharmaceutical companies are outsourcing their non-core activities, such as active pharmaceutical ingredients (API) and intermediates manufacturing, to low-cost destinations like India and China,” comments the report.
The third-largest segment, contract research, is expected to reach $40.6 billion in 2014, equivalent to a five-year CAGR of 10.7% over its present value of $24.4 billion.
That comes against a decline in overall R&D spending for the industry as a whole, with smaller, research-stage companies affected by a drop in investment funding and a decline in the value of licensing deals with larger drugmakers.
The smallest segment, contract packaging, is projected to perform the worst with a CAGR of 8%, increasing from $5.5 billion in 2009 to $8.1 billion in 2014.
“Pharmaceutical and biopharmaceutical companies are dependent on the contracting companies due to increased generic competition, declining R&D productivity, rising drug development costs, constricting patent life, and fewer drug discoveries,” according to BCC.
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