competing in the global contract manufacturing market
TRANSCRIPT
Competing in the Global Contract
Manufacturing Market
What Pharmaceutical and Biotechnology Companies Want and
How to Compete for their Business
October 2013
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Source: Frost & Sullivan
Contents
Section Page
Research Objectives and Methodology 4
Executive Summary 9
An Overview of the Global Contract Manufacturing Market,
Now and in the Future 15
Impact of Attitudes and Perceptions on CMO Outsourcing 22
Preferred CMOs and Drivers of Selection 26
The Outsourcing and Manufacturing Markets: Assessing
Growth Opportunities and Threats 58
Areas of Marketing Opportunities 70
Appendices 76
The Frost & Sullivan Story 215
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Research Objectives and Methodology
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Research Objectives
Overall Objective:
To provide contract manufacturing organizations (CMOs) a sound basis for formulating an
effective strategy to compete in the market, including areas of opportunities and threats.
Specific objectives are as follows:
Objective 1: To calculate pharmaceutical and biotech companies’ current and future strategy and
capacity needs.
Objective 2: To understand pharmaceutical and biotech companies’ outsourcing priorities and trends.
Objective 3: To understand pharmaceutical and biotech companies’ perceptions/attitudes toward CMOs.
Objective 4: To determine pharmaceutical and biotech companies’ CMO selection criteria.
Objective 5: To measure pharmaceutical and biotech companies’ price perceptions toward CMOs.
Objective 6: To understand the decision-making dynamics within pharmaceutical and biotech companies.
Specifically, to identify key parties involved in outsourcing initiation, evaluation, recommendation,
approval, and CMO performance evaluation.
Objective 7: To identify pharmaceutical and biotech companies’ business models.
Objective 8: To compare pharmaceutical and biotech companies’ regional capabilities.
Objective 9: To identify preferred areas related to informational marketing of CMO services (such as
information sources, trade journals, and conferences).
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North America Region
49%, n=154
United States 49%, n=154
APAC Region
26%, n=80
Australia 2%, n=6
China 6%, n=18
India 3%, n=9
Indonesia 4%, n=12
Korea 4%, n=12
Malaysia 5%, n=15
Singapore 2%, n=6
Vietnam 1%, n=2
Europe Region
25%, n=78
France 1%, n=3 Spain 2%, n=5
Germany 11%, n=35 Switzerland 4%, n=14
Italy 1%, n=4 United Kingdom 4%, n=13
Russia 1%, n=4
Methodology
Methodology
A mixed methodology was utilized for this customer research, with the use of telephone interviews as the
primary method (n=181) and a Web-based survey as a secondary measure (n=131).
Sample
A total of 312 global decision makers of the final drug form contract manufacturing (non-API) process
within biotechnology (biotech) or pharmaceutical (pharma) companies were surveyed from November
2012 to January 2013.
Note: Due to rounding, percentages in charts and tables may not sum to 100.
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Sm
all
Mo
lec
ule
s
Dermatological formulations 21%, n=65
Inhalation therapies 19%, n=59
Injectables 41%, n=127
Liquid dosage compounds 33%, n=103
Nasal sprays 17%, n=52
Basic oral solids (i.e. tablets,
capsules) 54%, n=167
Advanced oral solids (i.e.
controlled release, fast dissolve,
softgel) 28%, n=88
Other small molecules 5%, n=16
La
rge Mammalian 24%, n=76
Microbial 24%, n=75
Other large molecules 2%, n=5
Methodology (continued)
Big biotech/pharma 31%, n=96
Small/medium biotech/pharma 55%, n=171
Virtual/emerging 14%, n=45
Company Types* Represented:
Global, 2013
Sample (continued)
The following company and product types were represented in this research.
Product Types Currently Being Outsourced:
Global, 2013
*Company types are categorized based self reported company types and
organizational revenues.
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Respondent Titles: Global, 2013
Corporate management (e.g., CXO) 24%, n=76
Quality/QA/QC 21%, n=65
Business product leaders (e.g., marketing,
product development executives) 19%, n=58
Manufacturing/operations 13%, n=41
Research and development 12%, n=38
Purchasing/procurement/sourcing/outsourcing 11%, n=34
Methodology (continued)
Sample (continued)
The following titles of respondents were represented in this research.
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Executive Summary
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Executive Summary
Market dynamics and CMO selection is as follows:
• Overall satisfaction and likelihood of contract renewal are in the 40-50% range across
all product types, indicating opportunity for CMO vendors switching in the future as the
majority of respondents are dissatisfied and do not have intentions to renew.
• Of the top 15 CMOs, Baxter Biopharma Solutions, Boehringer Ingelheim, and Pfizer
CentreSource are rated as having the highest degree of premium pricing which also
correlates with these companies having the highest ranking for full service offerings or
a broader number of services available.
• Overall, pharmaceutical and biotechnology companies prefer to outsource to CMO
companies that possess operations in the same region (i.e. European biotech
companies are more likely to select European CMOs).
• Overall, 37% of respondents indicated they are likely to partner with a CMO that
functions as an external consultant, specifically for manufacturing process consulting
expertise.
• Of all parameters used in CMO agreements and selection, volume commitments,
ranks as the most important criterion, and capacity and site transfer ranks as second.
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Executive Summary (continued)
Criteria for business that is most or least likely to be outsourced to CMO companies:
• The most prevalent service capabilities being outsourced to CMO companies are
packaging, logistics, and clinical trial supply.
• The most prevalent service capability being planned for outsourcing to CMO companies
is drug delivery technology services.
• The least likely service capability to be considered for outsourcing is research and
development—likely due to concerns regarding competitive intelligence and an inability to
select and hire key staff.
• Within the next 5 years, it is expected that the largest proportion of lot sizes for pre-
clinical, clinical, and commercial phase manufacturing will remain the same. However,
43% expect that commercial phase manufacturing will get larger.
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Executive Summary (continued)
Preferred CMO marketing exposure outlets are defined as follows:
• The most preferred methods for learning about CMO services are tradeshow and
conference booths and word of mouth recommendations from colleagues.
• The top trade journal read is Pharmaceutical Outsourcing but other journals closely
behind in ranking include Pharmaceutical Manufacturing, Contract Pharma, BioPharm
International, and Pharmaceutical Technology.
• The top 2 trade shows attended or planned to be attended are BIO Annual Meeting
and AAPS Annual Meeting.
o The BIO Annual Meeting and Bio Europe ranked the highest for the virtual and
emerging category.
• The top 2 e-newsletters read worldwide are Outsourcing Pharma and Fierce Biotech.
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Executive Summary (continued)
• Baxter Biopharma Solutions and Boehringer Ingelheim are the most preferred CMO
companies, earning the largest share of preference (22%).
• No single CMO company was able to achieve the highest preference across regions:
o Baxter Biopharma Solutions is the most preferred CMO by US respondents.
o Baxter Biopharma Solutions and AAl Pharma Services are the most preferred
CMOs by European respondents.
o DSM is the most preferred CMO from APAC respondents.
CMO prevalence by company and product type:
• Abbott is the most prevalently used company for basic oral solids due to its personnel
background and expertise, indicating the high importance of a positive reputation.
• Baxter is the most prevalently used company for injectables due to their overall quality
highlighting the importance of quality assurance for injectables which have the highest
standards of quality.
• Abbott is the most prevalently used company for liquid dosage compounds, with the
core reasons related to manufacturing capacity and personnel background and
expertise.
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Executive Summary (continued)
CMO prevalence by company and product type (continued):
• Catalent is the most prevalently used company for advanced oral solids, with overall
quality being the core reason.
• No single company dominates mammalian product manufacturing, indicating
opportunity for manufacturers with interest in the space.
• Lonza is the most prevalently used company for microbials, with overall quality being
the core reason.
• Abbott is the prevalently used company for dermatological formulations, with the core
reason related to overall quality.
• GlaxoSmithKline is the most prevalently used company for inhalation therapies, with
overall quality and personnel background/expertise being the core reasons.
• GlaxoSmithKline and Sanofi are the most prevalently used for nasal sprays.
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Overview of the Global Contract Manufacturing Market
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Regional Comparisons of Company Types Represented
Among Respondents
United States 55%
Europe 11%
APAC 33%
Big bio/pharma
United States 37%
Europe 37%
APAC 26%
Small/med bio/pharma
United States 82%
Europe 9%
APAC 9%
Virtual/emerging
Regional Comparisons of Company Types Represented Among Respondents: Global, 2013
Base: All respondents (n=312).
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Following the Money
Averages
Total Sample
(%)
United States
(%) Europe (%) APAC Big bio/pharma
Small/med
bio/pharma
Virtual/
emerging
Organization revenues $1,054,006,410 $1,306,331,169 $269,230,769 $1,333,437,500 $3,117,187,500 $95,175,438 $369,444,444
Product manufacturing budget* $35,000,000 $35,000,000 $10,000,000 $35,000,000 $375,000,000 $10,000,000 $10,000,000
Proportion of org revenues for
product manufacturing budget 3% 3% 4% 3% 12% 11% 3%
Proportion of product manufacturing
budget to CMO expenditures 35% 39% 34% 28% 34% 31% 52%
Product manufacturing budget
dedicated to CMO expenditures $12,312,820 $13,811,363 $3,383,333 $9,887,500 $129,218,750 $3,108,479 $5,227,778
Amount of organization revenues for
CMO expenditures 1% 1% 1% 1% 4% 3% 1%
Number of CMOs used 6 6 7 6 8 6 5
Budget allocated per CMO $1,959,999 $2,201,811 $498,865 $1,701,075 $15,662,879 $564,878 $1,036,344
Future expectations (next 3 years)
Estimated future CMO expeditures $13,829,186 $15,381,057 $3,904,401 $10,500,947 $143,362,889 $3,502,679 $6,325,391
Estimated percent increase of future
CMO expenditures 11% 10% 13% 6% 10% 11% 17%
CMO expenditure budget toward specific areas
Development services $2,644,494 $3,216,971 $576,034 $2,207,384 $29,437,646 $591,156 $1,466,101
Analytical/clinical supply $2,769,595 $3,552,390 $608,132 $2,045,477 $29,491,488 $674,413 $1,297,651
Final form drug manufacturing $5,222,688 $6,356,815 $1,384,998 $3,649,723 $55,510,221 $1,327,375 $2,100,405
Other areas $1,676,043 $685,187 $814,169 $1,984,916 $14,779,395 $515,535 $363,621
The CMO Budget Picture: Global, 2013
*Medians rather than means are used to control for outliers.
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Following the Money Summary
• Overall, companies serviced by CMOs globally earn on average of $1 billion in annual
organization revenues. Notably, those in Europe have significantly reduced
organization revenues compared to regional counterparts.
• Of these annual, global revenues, roughly 3% is allocated toward product
manufacturing, led by big bio/pharma companies—allocating 12%.
• Further reduced is the amount left toward CMO expenditures, which is 1% globally of
annual organization revenues ($12.3 million). Notably, big bio/pharma companies
allocate 4% of annual organization revenues toward CMO expenditures ($129 million).
• Globally, companies partner with 6 CMOs, on average—providing an estimated $2
million per CMO. Those in Europe use 7 CMOs on average, estimating less per CMO
($500,000). Conversely, big bio/pharma use 8 CMOs on average, estimating $15.6
million per CMO.
• Overall, within the next 3 years, increased spend toward CMOs is expected at a rate of
11%—with the greatest growth expected in Europe (13%) and virtual/emerging
companies (17%).
• Universally, more of CMO budgets are allocated toward final form drug manufacturing
(42% on average, an estimated $5.2 million), compared to development services,
analytical/clinical supply, and other areas.
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46%
49%
39%
38%
42%
37%
40%
39%
37%
49%
51%
43%
44%
47%
42%
41%
45%
42%
Basic oral solids
Injectables
Liquid dosage compounds
Advanced oral solids
Mammalian
Microbial
Dermatological formulations
Inhalation therapies
Nasal sprays
Percent of Outsourcing by Product Types—Current and Future: Global, 2013
Currentlyoutsourced
Futureoutsourcing(within next 3years)
Outsourcing by Product Types—Current and Future
Generally, all product types are expected to have increased outsourcing in the short term (an average
5% increase). The most prevalent product—basic oral solids—is currently outsourced by 46%, with the
expectation that this will increase to 49% within the next 3 years. Notable other areas of potential
outsourcing growth are advanced oral solids and inhalation therapies (both expecting 6% increases).
Base: All respondents (n=312).
Q1a. What percent of product manufacturing do you currently outsource to contract manufacturing organizations (CMOs) by product type?
Q1b. What percent will you most likely outsource within the next 3 years?
In o
rder
of
pro
du
ct
typ
e
pre
vale
nce
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Past Behavior is a Good Predictor of Future Behavior
Likely to
delay
project in
future
Total sample
Delayed past
projects
Cancelled
past projects
Likely to
cancel
project in
future
Total sample
Delayed past
projects
Cancelled
past projects
14% 25% 29% 8% 15% 31%
Yes 37%
No 50%
Don't know 13%
Delayed Outsourcing CMO Projects Yes 14%
No 73%
Don't know 13%
Cancelled Outsourcing CMO Projects
Base: All respondents (n=312).
Q5. Within the past 12 months, has your organization delayed or cancelled outsourcing CMO related projects?
Q6. Within the next 12 months, what is the likelihood that your organization will delay or cancel any outsourcing CMO related projects?
Impact of Outsourcing CMO Project Delays and Cancellations: Global, 2013
Overall, in the past year, more outsourcing CMO projects were delayed, rather than cancelled (37%
versus 14%). Within the next year, delays or cancellations are expected but at a lower proportion than
the past year. However, those who reported delays or cancellations in the past have a higher likelihood
of delaying or cancelling future projects. Notably, those who cancelled in the past are significantly more
likely to cancel future projects (31%).
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Outsourcing—Role in Commercial Products End
Revenue Result
Outsourcing’s Role in Commercial Products End Revenue Result: Global, 2013
Base: All respondents (n=312).
Q8. What percent of your total annual outsourcing spend is allocated to commercial products with the following revenue potential?
Q9. What percent of commercial product manufacturing do you outsource for products in the following categories?
Averages
Total sample
(%)
United
States
(%)
Europe
(%)
APAC
(%)
Big bio/
Pharma
(%)
Small/med
bio/pharma
(%)
Virtual/
Emerging
(%)
Annual outsourcing spend allocated to commercial products with following revenue potential
Less than $200 million 54 51 59 53 32 66 53
$200–$499.9 million 21 25 15 18 30 16 19
$500–$999.9 million 13 12 12 15 22 8 10
More than $1 billion 13 12 14 14 16 10 19
Commercial product manufacturing annually outsourced within the following categories
Less than 100,000
units/year 45 42 55 40 23 54 57
100,000–500,000
units/year 26 30 20 25 31 24 23
500,000–2 million
units/year 17 16 15 18 27 13 8
More than 2 million
units/year 12 11 10 16 19 9 11
Approximately half of outsourcing contributes to product development that earns companies less than $200
million in revenues and less than 100,000 units annually—primarily with significant differences between big
bio/pharma and small/medium bio/pharma.
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