SUBSCRIBE

Breaking News on Contract Research, Manufacturing & Clinical Trials

Regulatory pressures could help end CMO slump; analyst

By Nick Taylor , 25-Jun-2012

Regulatory pressures on drugmakers are pushing contract manufacturing out of a prolonged slump, an analyst said.

While clinical trial outsourcing penetration has accelerated in the wake of the financial crisis, leading contract manufacturing organisations (CMOs), such as Patheon and DSM, have struggled to grow. In the last quarter Patheon beat expectations though and there is optimism the market is improving.  

The contract manufacturing industry is slowly coming out of a prolonged slump,” Tim Evans, equity analyst at Wells Fargo, wrote. A return to growth is, as Evans sees it, underpinned by two factors.

Firstly, major biopharma companies are increasingly outsourcing any activities which they consider non-core. For most pharma firms manufacturing falls into this category but a shift to an outsourced model is hindered by excess in-house capacity at many leading pharmaceutical companies.

At the Wells Fargo Securities Healthcare Conference last week, James Mullen, CEO of Patheon, said it is a “miracle” CMOs win business when they are competing for work against clients’ in-house assets.

Leading pharmaceutical firms have cut back in-house manufacturing capabilities but for capacity use   and outsourcing penetration to accelerate someone must take more out of the system. The second of the growth drivers identified by Evans could encourage drugmakers to cut capacity faster.

Regulatory pressures [will] force a rethinking of how drugs are manufactured,” Evans wrote. Mullen touched on this in his presentation when he spoke of how warning letters to major biopharma firms are creating an opportunity for Patheon.

In the short-term a US Food and Drug Administration (FDA) warning letter forces a company to find alternative suppliers. Over the longer-term, if the cost of complying with manufacturing standards continues to increase, it may prompt drugmakers to accelerate the shift to an outsourced model.

As the example of Ben Venue Laboratories shows, outsourcing can still lead to regulatory problems, but, in theory, there are benefits to using a company whose sole focus is pharmaceutical production. 

Key Industry Events

 

Access all events listing

Our events, Events from partners...