CMO pharma biz set to boom thanks to uptick in Asian activities

The analysts note that, currently, the majority of the global CMO (contract manufacturing organisation) market share is held by providers in the US and Europe.

But with “drastic changes” ​in Government and regulatory policies in emerging countries to favor pharmaceutical outsourcing, there has already been a boom in activities for Asia in recent years.

Now with the pharma industry teetering on the generics cliff – hundreds of drugs are set to come off patent for top pharma firms – GBI said companies looking to cut costs will make up the next growth spurt for the area.

“Manufacturing costs constitute approximately 16-20 per cent of the revenues of a pharmaceutical company which largely produces patented drugs, and for a generic manufacturer the percentage of manufacturing costs in the revenues of the company is much higher,” ​said the authors. “Taking these factors into consideration, overall manufacturing costs for the entire market come close to $140-150bn.”​

The report said “low-cost”​ Asia will mop up both firms pulling out of pricey developed market production contracts for branded drugs in search of cheaper options, as well as tenders from generics firms looking to save on manufacturing for their lists of newly off-patent meds.

“Asia has a moderate share but is the fastest growing market and is forecast to outpace Europe by 2015,”​ the analysts added.

Go East for better IPR​

However, the report – titled ‘Contract Manufacturing Organizations to 2018 - Cost Advantages and Improving Quality Standards Build Confidence and Encourage Foreign Investment in Asian CMOs’ – said that when it comes to IPR protection (intellectual property right) Asia is still lagging behind.

Instead, it touted Eastern Europe as a hot CMO destination because of its “superior IPR” ​laws.

“The Eastern European nations have strong intellectual property protection and enforcement frameworks and witness fewer instances of IPR violation, unlike their Asian counterparts which lack a proper IPR protection and enforcement framework and witness more instances of IPR violation,”​ the authors said.