Biopharma Manufacturing Outsourcing Is Flexible, Not Fractured
By Louis Garguilo, Chief Editor, Outsourced Pharma
Well, I’ll be darned.
The cause of that expression of wonder is planted in the BioPlan Associates 22nd Annual review of the biomanufacturing sector.
It is abundantly titled, “Report and Survey of Biopharmaceutical Manufacturing Capacity and Production; A Study of Biotherapeutic Developers and Contract Manufacturing Organizations,” and we’ve been granted a copy (all 540 impactful pages, mind you) to extract a key element or two for Outsourced Pharma readers.
This statement of analysis appears in the report’s brief sub-section CDMO Landscape:
“Despite continued mergers and acquisitions, the CDMO market is heavily fragmented, with the top 5 CDMO companies just covering approximately 15% of the global market.”
Perhaps like me, readers might ask in reaction: Statistics aside, how much consolidation do we really need to be deemed better put together as an industry?
Because Outsourced Pharma readers tell me outsourcing development and manufacturing in practice seems to indicate we have what at the least might be deemed a mature service sector.
The report hints at a reason for some of our differing opinions on this. It lies in all the attention we heap on the few headline deals in our industry that signal consolidation.
We focus on the big, shiny news objects, as they say. The Catalents and Thermo Fishers and the likes with frontpage-worthy M&A news.
That’s certainly understandable. Yet, even if not quite specific to biopharmaceuticals as the BioPlan report is, for years now we have fielded laments of smaller sponsors over how CDMOs are undergoing what feels like over-consolidation.
We hear how opportunities have become limited to Big CDMO partners; sponsors feel overmatched by size and under leveraged when competing with Big(ger) Pharma for attention and services.
On a broader plane, the BioPlan report states that in 2024 the entire biopharma industry “still suffered from overall weak economic conditions limiting investments,” and the year “was characterized by relatively cautious transactions and overshadowed by the multi-billion-dollar acquisition of Catalent.”
The report goes on to state that “[b]eyond that extraordinary deal [related to GLP-1 production specifically] the total sum spent on M&A activities within the CDMO industry was rather modest, reflecting the still low level of investment in biotech in a broader sense.”
In 2024 “the biopharma world still suffered from overall weak economic conditions limiting investments of small and mid-size biopharma companies that are heavily dependent on outsourcing.”
Less money for biotech, less work for CDMOs ... so more CDMO consolidation?
Modality Movements
Included in the report is a monograph authored by Stefan Schmidt, CEO at Evitria AG, that says the list of overall facility expansions “is big, indicating an optimistic believe in a growing demand in many areas such as peptides, ADCs, but as well for traditional antibody drugs.”
But Schmidt also notes that since 2022, the cell and gene therapy (CGT) sector has experienced a pronounced slowdown, and “this had a direct impact on CDMOs that have tripled production capacity since 2019.”
That, of course, has created significant overcapacity, and even resulted in shutdowns.
As examples, the report mentions that in 2024 Evotec made a strategic exit of CGT, while AGC Biologics is winding down CGT operations in Longmont. This year, Rentschler Biopharma announced it is withdrawing from their CGT investment in Stevenage, UK.
Furthermore, Catalent’s new owner has not yet fully disclosed what will happen with the multiple CGT facilities that were part of the Novo Holdings deal.
Regarding Catalent assets going to Novo, the report notes that deal was primarily driven to secure drug product (DP) capacity for the GLP-1 blockbuster Wegovy and future GLP-1 programs.
Moreover, the increased industry-wide demand coming from these GLP-1 drugs (see: How A Biotech Navigates the CDMO Frenzy For GLP-1 Services) has triggered additional investments in the DP field, including those facility expansions.
Also related to capacity, optionality, and the maturity of the global CDMO industry, the report recounts “the increased attractivity” of antibody drug conjugates (ADC), “as emphasized by the $1.5 billion invested by venture capital alone in 2024.”
All these ADC drug discovery and development projects will require further and significantly extended manufacturing capabilities.
May a thousand CDMO flowers bloom?
Or should the bigger guys keep merging, acquiring, and building out? I'm sure readers have your own opinions.
Adjacent to this, the role of private equity (PE) in all kinds of M&A activity “underlines the continued attractiveness of the CDMO industry for the capital market.” (See my own editorial on this subject: As Billions Of Dollars Pour In, Do CDMO Valuations Matter?)
Not to be forgotten, the report suggests “[i]t will be interesting to see politics as a major force shaping global CDMO markets coming into play in 2025.”
Personally, most all the above reverberates like a healthy industry adjusting (in real time) to the comings and goings of customers, and external business and economic factors – not the less-than-muscular force of a highly fractured service sector.
We have a flexible, market-driven CDMO industry able to grow or contract based on the wax and wane of a very innovative and ever-evolving biopharma industry.
Still, and backed solidly by the numbers and survey data, the BioPlan analysis sticks to its original premise, and as an example notes “a shortage of manufacturing options for all kind of injectables.”
“Driven by the high demand for peptide-base obesity drugs, there is now a steep shortage of synthesis capacity.”
Certainly a concerning point, but even here, the market seems to be on the way to the rescue:
“Therefore, multiple players announced an expansion of their facilities to enable supply to the increasing number of patients. Interestingly, these activities are initiated in all parts of the world, including North America, Europe and Asia.”
In other words, a mature service sector, with a good mix of smaller and larger providers, able to react to changing needs around the globe.
Let’s call it flexible, not fractured.