CPhI Worldwide has released the findings of part two of the 2016 CPhI Annual Report, which focuses on the immediate and short-term trends in pharmaceutical outsourcing.  Four experts—Gil Roth, Vivek Sharma, Minzhang Chen and Ravi Limaye—examine the implications on growth prospects and drag factors across the EU, China, India and the U.S.

The overall findings reveal that recent outsourcing trends are now accelerating, with acquisitions of not only larger contract manufacturers adding specialist technologies from smaller niche companies, but increasingly, we will see larger API-led firms trying to merge or partner with finished product specialists of similar size. In terms of product classes, ADCs, HPAPIs and biosimilars are anticipated to see rapid growth in Western markets. In China and India, biosimilars are also predicted to grow steadily, with harmonization to FDA standards also anticipated. It is also forecast Chinese biotech companies will increasingly try to partner with CDMOs based in western markets to bring future products to market.

Gil Roth, president of the Pharma and Biopharma Outsourcing Association (PBOA) argues this is a key time for the industry as many of the largest players are looking holistically at how they can bring in new services and meet future drug development challenges—with even mega-mergers likely to be attempted. Beyond acquisitions, the other major progression is in the nature of relationships with pharma, as increasingly CDMOs are viewed as strategic partners not services provides. As such, he predicts that in the near future we will see more risk-sharing approaches to development work, with contract providers taking more risks, but also, getting greater potential profits as a result.

“What we will also see is that the industry is extremely well placed to help commercialize orphan products, tropical diseases and complex generics thanks to the new wave of manufacturing technologies being implemented.”

One other major growth area particularly in Western markets is HPAPI’s, Vivek Sharma, chief executive officer at Piramal Enterprises says the industry will grow rapidly due to the pipeline of targets emerging from mid-sized pharma and biotechs, with no captive in-house resources.

“Some CDMOs consider using investment arms to take equity stakes in targets they manufacturer,” said Mr. Vivek.

For late-stage products, CDMOs will consider risk sharing in exchange for a larger cut of commercial volumes, and in early development, some will accept lower compensation upfront, in lieu of future payments tied to a fund raising event. Overall, he states that the majority of growth in HPAPIs work will be undertaken by large CDMOs, with a proximity to Europe and the U.S.—with 80% of products for oncology, and bio APIs now increasingly from there 15% market share.  

Dr. Minzhang Chen, chief executive officer, STA Pharmaceutical, a WuXi AppTec company, outlines a positive future for both CMOs and Chinese research companies, stating that in the next 2-5 years we will see patented drugs emerging from China for global patients, with a number of Chinese biotechs running late stage research programs. There is also going to be increased convergence between China FDA and FDA/EU standards over the next 5 years, with the pilot plan for Marketing Authorization Holder (MAH) opening up further opportunities.

As a result, Chinese CDMOs with facilities in both the U.S. and China will play a key role in bridging the two largest global markets. Enabling companies outside China to bring their products to China, or perhaps more significantly, Chinese biomedical research companies to bring their products to the U.S.

The report also forecasts biosimilars are going to have a much larger global significance in both Western and emerging markets. Ravi Limaye, president, marketing, Biocon antipicates rapid growth in this market, with 12 biologic exclusive licenses expiring by 2020, leading to global sales of $25-35 billion. In addition, he said that Europe remains the main market for biosimilars in development (29), but increasingly we will see the rise of biosimilars in the U.S. (19 products) and Japan with seven products under development. However, he tempered his growth predications by cautioning that still much work is needed to standardize interchangeability and naming conventions if biosimilars are to have the same impact as small molecule generics have had in the last 25-years.

“The outsourcing sector continues to grow apace globally, as evidence by our own developments and growth at ICSE,” said Chris Kilbee, group director pharma, CPhI Worldwide. “What is most significant is that they are now an integral component of the drug development and manufacturing process. Not simple service providers, but the strategic partners pharma needs to bring its products to market. We will see further outsourcing growth, specifically for newer niche technologies, and this is where CPhI will continue to play an essential role in facilitating these meetings and bringing pharm closer together.”

For a copy of the full articles in the CPhI Annual Report 2016, released at CPhI Worldwide in Barcelona (4-6th October), please visit www.cphi.com/europe/cphi-annual-report