Q&A | October 25, 2012

The Benefits Of Contract Manufacturing

Oliver Mueller

By Oliver Mueller & Clifford Mintz, PhD

Contract manufacturing organizations (CMOs) offer a wide array of manufacturing services to the pharmaceutical and biotechnology industries. These services can range from production of small quantities of materials for R&D purposes, larger amounts for clinical study usage and ultimately full-scale production for commercial purposes. The global contract manufacturing market primarily includes solid and liquid dosage forms and injectables. The growing use of generic drugs and complex pharmaceutical products has also induced many CMOs to offer active pharmaceutical ingredient (API) manufacturing services to their clients.

In 2011, total global spending on contract manufacturing reached $31.9 billion according to a 2012 Informa report entitled "The CMO Market Outlook to 2017". The CMO industry had experienced double digit growth in the past two decades and that trend is expected to continue for the next five years.1 By 2017, the size of the global contract manufacturing market is expected to grow to about $63 billion. While, in recent years, there has been a steady growing demand for API manufacturing, solid dosage formulation remains the largest segment of the CMO industry by revenue. The solid dosage market is expected to expand over the next five years at an annual rate of 12.5% and as much as $55 billion will be spent by 2017 on CMO-based solid dosage manufacturing.

In the past, the decision to outsource manufacturing was primarily based on the need to acquire a new skill or to compensate for a lack of in-house, internal capacity. However, over the last decade or so, the decision to outsource has been strategically embraced as a way for pharmaceutical companies to: 1) reduced costs, 2) lower drug development risks, 3) adapt to shifting manufacturing requirements, 3) gain access to manufacturing expertise and, 4) reduce drug commercialization development times.

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