CMOs Thrive on New Trend: Pharma Personnel Shortages

Biotechnology BCMO services, including both clinical and commercial production, were estimated at $11.9 billion in 2021. This according to the just-published Kalorama market analysis of the BCMO market. – This segment has been expanding strongly by an estimated 13% per year since 2016, with increased growth of 15.5% per year from 2021 to 2026. Biotech BCMO revenues are estimated to reach $24.4 billion in 2026.

Top 5 BCMOs: Kalorama

Pharmaceutical and biotechnology companies have long experienced intense pressure to meet the financial expectations of stakeholders. Within the broader drug development industry, certain trends continue to pressure costs, making contract manufacturing increasing attractive. These include:

• Ongoing blockbuster patent expirations and genericization, pressuring revenues of drug developers;
• Ever-rising R&D costs, making new medicines increasingly expensive to develop;
• Delays in clinical study recruitment, increasing time-to-market;
• Drug pricing pressures by managed care and other health care payers, which inhibit revenue growth;
• Excess manufacturing capacity, which further pressures bottom lines.

The U.S. was the single largest market for BCMO services in 2021, at $29.0 billion overall and $4.8 billion for biotech BCMO services. It was followed by Western Europe at $19.8 billion and $3.8 billion, respectively, with all other regions significantly smaller. Through 2026, however, growth will be greatest in India, China and the Rest of World.

Inherent in the BCMO model are several weaknesses that constrain expansion. These include:
• Customer budget reductions;
• BCMO personnel shortages.

Although biopharma industry budget reductions have spurred usage of BCMOs by reducing drug makers’ in-house resources, these cuts have also restrained greater usage of BCMOs and enhanced pricing pressure on contracts. While demand for BCMO services remains relatively strong, therefore, many sponsors are attempting to negotiate lower rates and/or are requesting additional services at low or no cost. Through the forecast period, this trend is expected to continue.

Biotechnology BCMO services, including both clinical and commercial production, were estimated at $11.9 billion in 2021.

Kalorama Information’s latest research on CMOs.

Personnel shortages also inhibit expansion since the industry’s success depends in large upon its ability to attract, develop, motivate, integrate and retain highly skilled and specialized technical and manufacturing expertise. There is significant competition from other BCMOs as well as from biopharma companies themselves for such employees. Many of these job categories represent highly industry-specific skill areas, with no clear higher education background discipline as a source of recruits.
The ongoing BCMO staff shortage means that recruitment in the industry is under considerable pressure, with more positions available than there are candidates to fill them. This leads to a very competitive market place with candidates quickly leaving the organization that invested so heavily in their training. Some even leave to found their own competing BCMOs. There can be no assurance that BCMOs will be able to attract a sufficient number of highly skilled employees in the future. The loss of a significant number of employees or the inability to hire sufficient numbers of qualified employees could have a serious adverse effect on the industry.

Although on the whole, the BCMO industry continues to expand at a brisk pace, there are several factors inhibiting greater growth. These include:
• Biopharma industry consolidation;
• heightened regulatory scrutiny of BCMOs.
As a means to more effectively address the competitive pressures, the drug industry continues to experience a wave of consolidations that include many smaller transactions in addition to some major acquisitions. These transactions have generally resulted in an overcapacity of manufacturing capability, which in turn has led to a consolidation to reduce redundancy.
Regulators in both the U.S. and EU are aware of the increased usage of BCMOs and are allocating more resources to inspection and oversight of BCMO operations as well as BCMOs relationships with sponsors. This includes verification that sponsors are effectively monitoring BCMO activities and ensuring compliance with applicable regulations. Such verification can span an examination of the legal relationship between sponsor and contractor, analytical and technological systems in place to oversee the relationship, and processes to identify and remedy problems.
Of particular interest to regulators as well as sponsors is contamination. According to an industry survey from BioPlan Associates, roughly one third of biopharma sponsors cite cross contamination prevention and handling capabilities as a very important factor in relationships. Cross contamination is a particular concern for biologic products, since these molecules tend to be highly target-specific and also extremely potent. Other concerns include substance APIs and other ingredients from abroad.
In the most problematic cases, regulatory issues with contractors can result in products’ marketing authorizations being revoked. This heightened scrutiny is causing some sponsors to be more selective in their BCMO relationships, and is also supporting greater usage of preferred vendor and other arrangements that allow closer collaboration with contractors.

Other CMO Companies Included in the Report:

WuXi AppTec
Pfizer CentreOne
Dr. Reddy’s
Charles River/Cognate
Samsung Biologics
UPM Pharmaceuticals
TCG Lifesciences
Asahi Glass

Boehringer Ingelheim
Vetter Pharma
PCI Pharma
Dr. Reddy’s
Boehringer Ingelheim
Vetter Pharma
PCI Pharma