Pharma industry on expansion course

Decision-makers in the biopharmaceutical industry expect the CRO and CDMO sectors to grow significantly over the next two years. According to the annual CPHI survey, revenues of the CRO sector will increase by 7.2 %, while those of the CDMO market will grow by 8.5 % by 2024. Venture capital (VC) and private equity (PE) liquidity reserves in particular will support this expansion. The overhang of private equity in the US is $749bn, and that of venture capital is another $300m. Inflation and energy prices, especially for parts of Europe’s generic and active pharmaceutical ingredient manufacturers, are the biggest challenges, triggered by the COVID-19 pandemic and recent geopolitical issues.

Nevertheless, the CPHI Pharma Index recorded an increase of more than 8%, the largest annual increase in the six-year history of the survey. In addition, record levels were recorded in the areas of growth, innovation and production quality in the pharmaceutical industry. Geographically, India saw the most significant change in score with a 15% improvement in 2021, bringing the Asian country on par with the leading Western countries. In terms of active ingredient quality, India and China made the most progress, China with 25% in 2022.

The report’s authors found that nearly 36% of biopharma companies will increase their spending on outsourced R&D or biomanufacturing in the next 12 months. All 12 major pharma economies improved their growth potential scores. The US consolidated its leading position with the highest score (8.5%) in the survey’s history, followed by Germany at 8.1% and the UK (7.8%). 1 billion in capital suggests an upswing for the German contract manufacturing industry.

Changes in outsourcing

The CDMO market continued the trend to offer time-saving one-shop-stop solutions. The demand for pharma services increased sharply in the wake of COVID-19. According to the survey, the global CRO market is predicted to grow from $58bn in 2021 to $76bn by 2025 due to increased R&D spending and outsourcing. Similarly, the CDMO market is forecasted to expand from $177.2bn to $246bn over the same period of time. For biotechs, deeper partnerships in outsourcing strategies are expected than for Big Pharma companies.

A key finding of the report is that a significant shift is underway in global outsourcing strategies, with innovators now mapping a product’s full life-cycle development as early as pre-clinical. A key finding is that innovators across the industry are planning ‘pharma-ready’ synthetic routes much earlier in the development process, with ‘phase appropriate development’ increasingly seen as outdated – and particularly inappropriate for accelerated pathways. The report’s predictions suggest innovators will need to choose either a single end-to-end provider or take a multi-provider model. CDMOs will need to rethink their approach both to development as well as to how they market their services to innovators and biotechs.

The type of outsourcing strategy presented by CDMOs helps customers identify their most suitable potential partners. As a result, most CDMOs will focus on marketing to specific types of customers rather than the entire market. This shift reflects the different risk tolerance and collaborative capabilities of biotechs, small pharma or large pharma organisations. “Over the next few years, we anticipate many more biotechs will use CPHI to map out their potential partners long before IND,” commented Orhan Caglayan, Brand Director at CPHI Frankfurt.

According to the report, innovators are now looking for an outsourcing approach that gets them rapidly through IND to reach Phase IIb and beyond as fast as possible. The impact of this trend isn’t only on development timelines, but also on investors: pharma process readiness will have a fundamental impact on when and how investors can exit.

At Phase II sale, a biotech with a clear plan and ready-to-scale manufacturing strategy will deliver a better validation than a promising target in need of fine-tuning (see report 12). The CPHI experts predict that early-stage investors will increasingly use CMC consultants and process specialist CRO/CDMOs to help ensure a smooth scale up process.

The CPHI experts warned innovators against adopting an exclusive phase-appropriate approach, saying they risked building in severe delays to later stages of the development process.

Saving time to market

The Covid-19 pandemic taught the industry to speed up development. This in turn compressed timelines. The demand for vaccines will stay high. Additionally, the report predicts an increased demand for self-administered injectables. A new approach for partnering strategies includes a process development partner for chemistry and improvements. Such partners offer acumen in chemistry development and documentation. Interesting for investors might be start-ups, which have a development plan from basic until commercialisation. Investors can estimate, if products can fail and they are able to map out the route to success.

Pandemic impact

The pandemic pushed drug and vaccine development along with (RNA and vector-based) delivery platforms. No surprise, that a record number of new drugs entered development, especially in 2020. A more detailed look forecasts a growth for medium-sized CDMOs driven by the huge number of new compounds entering development.

The best growth outlook is seen for smaller CROs and CDMOs. Smaller CROs provide specialised expertise, speed, and high-touch relationships, which accompany well with the innovative nature of emerging companies. Smaller pharma services providers tend to match up well with bigger players in the early phases of development, whereas the larger integrated CROs/CDMOs dominate in mid- and later stages. Due to the pandemic, the biggest challenge is to obtain excipients timely and deliver them to the drug product manufacturer. The study authors expect that these supply chain disruptions will remain in the future.

Specialisation in therapies

According to Alliance for Regenerative Medicine, the demand on access to production capacity has raised due to the rapid expansion of cell and gene therapies. In 2019, 1,052 clinical trials have been run on ATMPs, a 67% increase in this field driven by gene and cell therapy progress. In a ranking of biotechnological compounds, mRNA is the leading therapeutic class for early-stage investments, followed by cell and gene therapies. Experts forecast that biologics will account for 55% of all drug sales in 2028, whereas small molecules yet dominate approvals and sales at the moment. Monoclonal antibodies as a key class of biologicals will drive this development with 46% of total sales. The USA, Germany and India reported the highest scores in growth for biologics manufacturing.

Outlook for development

What else was important?  The “hybrid Asian strategy” evolved in recent years especially by CDMOs with headquarters in India and Asia allowing the manufacturing of API components in Asia but full product finishing in Europe. Big Pharma use this strategy to save resources and increasing hit success.

The trend to make use of environmentally questionable single-use systems (disposable bioprocessing, particularly in early phase upstream processing) rose to 62,9% in 2021. However, the report diagnoses a big shift towards greener manufacturing that will affect supply chain partners, CDMOs, ingredient and excipient manufacturers. “Environmental credentials are now integral to all supply chain decisions. 95% of industry executives suggest it is either important or extremely important (52%) to have visibility on supply chain partners.”