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Pharmaceutical Industry review/Фармацевтична галузь, 2023, №6 (99) november

CPHI Annual Report 2023 – a brief overview of trends. What is worth to know?

The ability of the global economy to adapt and recover has been in full evidence in the last year as the war in Europe continues, and the industry has adapted to ongoing supply chain and energy shocks. Yet despite this uncertainly, overall, pharma has used the last few years to build in more resilience and, with clinical development continuing in force again, the remaining primary drag factor on future prospects is the relative weakness in early-stage funding and valuations. Inflation, the other nagging macro-economic threat, also appears to have reached the crescent of its accent.

The majority of economists predict global figures ill fall back in 2024, creating a more stable fiscal environment from which to invest and grow. In fact, the IMF’s medium-term analysis is that western interest rates will return to pre-pandemic lows once inflation subsides1.

To reflect the trends of the wider industry, this year’s survey has also pivoted away from last year’s psychedelic influenced focus to look more prescriptively at the role AI might play in the industry through the next 5 years – from manufacturing process innovations to marketing dossiers and, of course, in the development of more druggable targets. The other notable shift has been the gradual and, in some cases, sudden reduction in the value of Covid related contracts for CDMOs and CMOs. Yet, remove the market distortion caused by this once in a century event, the underlying growth for the industry looks very healthy and robust with many new targets and classes proliferating. So, even accounting for the medium term run through of potentially reduced outsourcing contracts as a result of the presently cooled funding environment, prospects on the whole look strong.

Technology has however, advanced unrelentingly with microbiome therapies, cell and gene therapies and both RNA and oligo targets continuing to generate much excitement – not least among CDMOs who have invested in increasing capacities to develop these newer product classes. To take one specific example, LNPs (lipid nanoparticles) have already been proven effective in delivery to the liver and research into their use in other tissues for advanced therapy products could deliver a breakthrough in the next 12-24 months. LNPs also come with lower manufacturing challenges and reduced toxicity – compared to adeno-associated virus (AAV) vectors – so this could be a potentially step change improvement that advances targets while bringing down costs.

Looking at the spread and make up of global pharma markets we have seen significant market ambivalence in both information and rhetoric around macro and geopolitical factors. For example, in manufacturing and chemistry services pharma news and governmental interest has often focussed on the importance of secondary supply chains, resilience and local manufacturing – yet companies in China and India (widely believed to be ‘the losers’ of the drive for near-sourced manufacturing) have on the whole performed very strongly. For example, profits at CDMOs WuXi Apptech2, Pharmaron3, Syngene4 and Asymchem5 have continued to reach record levels in the last 18-months. While this might partly be attributed to strength in their domestic markets and/or growth in newer regions outside of the West – it perhaps suggests that undoing 20-years of outsourcing is perhaps easier said than done. In fact, when digging through their respective Annual Reports it quickly becomes clear that their growth in Western Markets is no less impressive.

Another shift we have seen is in the location of global R&D centres. Biotech hubs are proliferating, and we have seen this accelerate throughout the pandemic years. While the handful of larger metro hubs in the USA are known (i.e. the Bay area, San Diego, Boston, Philadelphia, Raleigh/Durham et al6), as are the fast growth centres in China (notably
Beijing, Shanghai and Pearl River Delta areas7), European hubs in contrast have diversified quickly and have not yet received the international credit they perhaps deserve. In response, this year CPHI will introduce the European Biotech Ranking in which we will monitor the rise and fall of major research hubs across the continent. In particular for 2023, with our eponymous event being held in the city, Barcelona’s emerging biotech and manufacturing region will to be explored in much greater depth. The survey will focus on what the wider region needs to do to continue its rise and potentially become more of a globally significant driver of new therapies, technologies and life science breakthroughs.

Finally, looking much further into the future, we asked the market for their perspectives on: ‘when and how a cancer vaccine could potentially come to market’; ‘are microbiome therapies at a watershed with Rebyota’s approval’; ‘what technologies will be in routine use in 2026’; and, of course, ‘where might the perpetual advance of AI take us’ and is the hype justified. For example, in what year will the industry record the first fully ‘AI discovered, developed and commercialised drug therapy’ approved by the FDA and what percentage of drugs will be developed using AI by 2033.

The road ahead for CDMOs in 2024: Whether it’s an imminent supply chain reckoning or a raft of new modalities, excellent opportunities still abound for the ‘right’ CDMOs

Whether it’s an imminent supply chain reckoning, or raft of new modalities excellent opportunities still abound for the ‘right’ CDMOs The last several years have been tumultuous for the CDMO sector. Some companies benefited from a surge in demand for COVID vaccine and therapeutic manufacturing capacity, while others struggled to maintain supplies of key components and materials, and the drop in COVID-vaccine demand and therapeutic obsolescence due to virus variants have caused further disruption. The decade-plus of low interest rates gave way to inflationary pressures that impacted biopharma pipeline funding and workforce hiring and retention. Trade issues and generic market erosion have created opportunities for some while shutting out others. And the promise of new modalities has been tempered by slow regulatory reviews, manufacturing hurdles, and other obstacles. And then there’s AI.

These and other factors affect the CDMO sector just as they do the larger biopharma industry. Let’s look at some of them and see what they may portend for the next several years ahead. Please note that when it comes to predictions, there’s an awful lot that can derail them, like a pandemic, a natural disaster, or an unexpected election result (there are also surprise boons, like a potential $50 billion market for weight-loss drugs springing up virtually overnight!). Also of note: my role as President of PBOA means I spend most of my time involved in policy advocacy — both regulatory and legislative — rather than market-driver-watching; between that and my vast overlapping network of NDAs, there are some trends I can allude to without naming names, as it were.

No matter how much we act like the pandemic is behind us, COVID and Operation Warp Speed (OWS) continue to reshape the world. Lockdown and export bans created an instant stress-test of global supply chains. CDMOs had to adjust to delays in critical materials while also protecting their workforce. As the months progressed and Operation Warp Speed led to unprecedented acceleration in vaccine development and production, CDMOs who were not part of that effort had to contend with government reallocations of resources via the Defense Production Act to prioritize vaccine manufacturing. This (semi-) artificial supply chain constraint further tested production timelines at CDMOs and the viability of global manufacturing networks.

What came from this was a heightened awareness of supply chains, which will have a major impact on the CDMO sector in the years ahead. (The OWS initiative and the role of CDMOs like Catalent, Grand River Aseptic Manufacturing and Lonza in the pandemic response also created a heightened awareness of CDMOs among the public, which I generally consider a good thing.)

The desire to restructure supply chains through onshoring, nearshoring, friendshoring, etc. will only gain steam in the US and elsewhere — repeat after me: everybody has a shore — though it’s unclear how extensive those changes can be. The 2020 publication by the US Department of Health & Human Services (HHS) of a Critical Medicines list has become a jumping-off point for initiatives aimed at refashioning the US pharma supply chain.

Some parties are trying to determine which medicines are really critical, and how can their supply chains be better protected from system shocks and trade wars. This has led to the realization that, even if APIs and dosage sites are located in “friendly” nations, key starting materials and excipients are likely sourced from “not friendly” nations and can’t readily be made elsewhere.

So, even though globalization has put hard limits on it, various nations and regions are developing similar priorities for ‘domesticating’ their supply chains to a greater or lesser extent. Canada, for example, realized it had no scaleable vaccine manufacturing capacity during COVID, and has made significant investment in building it domestically, albeit without changes in some of the regulations and policies that may have led to the decline of domestic manufacturing in the first place. The EU and India both have initiatives to boost local API production. But as we’ve pointed out to legislators, regulators and other stakeholders, manufacturing on smaller, local scales can actually lead to greater fragility.

At the same time, one can’t reimagine a supply chain without understanding that supply chain. In the US, we saw the Congress empower FDA in 2020 to require all API and Finished Dosage Form (FDF) facilities to report the amounts of product they make annually. As I write this, more FDA reporting authorities are being debated in the House and Senate, potentially requiring dosage facilities (including CDMOs) to report the source of each API they use and the amount of each drug product manufactured from that particular API. This has been framed as a means to battle drug shortages, but it’s no stretch to see this as a mechanism to better understand dependence on certain countries for API supply. With trade tensions high between the US and China, a clearer idea of “what comes from where” will create a map of what’s at stake. (Again, don’t sleep on excipients and KSMs.)

When it comes to China, CDMOs, and the larger pharma sector, my Magic 8-Ball is murky. The most recent US rhetoric has moved away from talk of ‘decoupling’, but there are still trade barriers that both countries are exercising. Combined with China’s recent economic slowdown and corruption crackdowns on some business sectors, it’s unclear if the CDMO market in China will primarily be for in-China drugs and biologics, rather than global supply.

As mentioned, pharma-neighbor India is trying to jump-start its domestic API market — again, everybody has a shore — to reduce its reliance on China. Other high-tech industries are expanding investment in India as a hedge, so it’s possible the Indian pharma industry — and especially CDMOs — will shift toward high-value biopharma manufacturing, while managing its reputation as the hub of low-cost generic drugs.

Those aforementioned FDA reporting regulations contain confidentiality rules so that the public will not have access to sensitive manufacturing information, but they will still require CDMOs to report out customer data in new ways. In some cases, this may require mass rewrites of quality agreements, and likely will also require added staffing at CDMOs to handle these new reporting duties. Some CDMOs may have to alter or install IT systems to better manage manufacturing data; with increased technology and workforce investment comes increased operating costs. Areas that are extremely cost-sensitive — such as commodity generic oral solid doses — could face new price pressures as these reporting requirements proliferate.

All of which is to say: Supply chain issues — whether they involve onshoring, transparency requirements, rated orders and export controls, or rerouting production due to drug shortages — will be critically important to the CDMO sector and its customers in the years ahead. For our part, the PBOA and its members have engaged with stakeholders to find ways to streamline the process of moving products to new sites or lines in order to mitigate against supply disruptions, and to incentivize investment in Another aspect of COVID-hangover has been the impact on R&D. The lockdowns and uncertainty in 2020 led to slowdowns and shutdowns in clinical trials in many regions. The immediate result was a reduction in demand for development services but, cascading from that, this will result in “lost” commercial projects that were scuttled due to clinical delays from 2020-21.

This phenomenon may also occur as a result of the US Congress’ 2022 Inflation Reduction Act (IRA), which permitted drug price negotiations by Medicare for the first time. Pharma companies large and small have made statements about canceling pipeline projects out of fear that, if successful, those drugs will be caught up in “price controls” and fail to recoup their R&D investment.

In theory, such cancellations will trickle down to CDMOs losing out on associated projects, and even the loss of generics of such products years down the line. (I’ll note that some drug companies cited the IRA as the reason for pipeline-culls within days of its being signed into law, long before there was much clarity on how negotiations would be handled, which makes one (me) think those announcements were less a response to IRA and more an excuse to cancel projects while blaming outside forces.)

Related to this, the PBOA member companies I surveyed agree that the top CDMO business challenge is the slowdown in biotech funding, largely a result of higher interest rates that make investment less appealing than, say, buying a CD at 5%. Hesitation and yet more pipeline-trimming by virtual, emerging and small biopharmas can translate very quickly into reduced opportunities for CDMOs. No one has hazarded a guess as to when the finance-floodgates may reopen, but this has cast a pall over many CDMOs, both public and private.

One could argue that this slowdown is also tied into COVID, as inflation and interest rates were affected by government spending to keep economies afloat amid mass lockdowns/shutdowns. One could also argue that it’s a bill-come-due function of artificially low interest rates following the 2008 financial crash. There are a multitude of other factors/stories to tell, but I’m no economist so I can’t gauge the validity of them beyond my own confirmation bias. The upshot is that as funding becomes tighter, companies and investors have to make tough decisions about pipelines, and that trickles down (or floods) the CDMO sector, which must make capital-allocation decisions of its own.

Which brings us to another aspect of the “post- ”COVID environment for CDMOs: the rationalizing of manufacturing capacity. CDMOs did a phenomenal job of keeping up with COVID vaccine and therapeutic manufacturing demands, helping save the world in the process. As a thank-you, once the demand shrank/fell off a cliff, some were left to their own devices to fill their expanded capacity.

In the early 2021 days of the vaccine rollout, I took part in a forum about vaccine production & future-pandemic preparedness where several participants noted that, without significant government investment, long-term contracts, and infrastructure/workforce commitments, the manufacturing capacity that was collectively marshaled to respond to COVID was not sustainable going forward, neither for CDMOs nor in-house pharma. The non-pharma industry participants declared that we were in a new world where many governments now had political will to support and sustain such capacity through public-private partnerships. I was skeptical at the time, and my predictions were accurate: governments have gone back to bickering over healthcare spending and pay lip service to “preparing for the next pandemic”, while pharma manufacturing overall has been compelled to rationalize capacity.

That’s not to say that the CDMO sector is shrinking. There’s been plenty of non-COVID growth in the sector, and the various forms of -shoring have created opportunities for companies with capacity in strategic geographies. In addition, there’s the promise of new/growing modalities: CGT, CAR-T, DCs, mRNA (duh) and more. Of course, these new areas are not without risk. FDA is still racing to keep up with reviewing these new modalities, hiring staff and developing guidance to better treat CGT applications. Meanwhile, reimbursement for some of these drugs has proven difficult for insurers and national health systems. But CDMOs are positioning themselves in these areas, with some spending billions to build out capacity. As the agency staffs up and fulfills some of the commitments it made to innovator companies under the newest iteration of the Prescription Drug User Fee Act, we could see significant growth in new areas of drug manufacturing for CDMOs. But the lack of progress has some companies to pare back expectations in this space.

All of that said, there are realities of the CDMO sector that predate COVID and remain in place. It’s still largely a world governed by private equity investment, notwithstanding several notable publicly-held CDMOs. PE funds have limited lifespans and that results in sales of CDMOs to other funds or mergers with other CDMOs or larger healthcare concerns. In the years leading up to the pandemic, we saw large valuations of CDMO assets, seemingly driven by the notion that CDMOs would provide some of the steady revenue of pharma with little of the R&D pipeline risk (a Ph. II/ III failure that leads to a startup shutting down). Those acquisitions continued into the COVID era, although they’ve slowed in the last two years, again due to this new world of real interest rates.

The industry saw a major and fascinating development when Thermo Fisher, which had acquired Patheon in 2017 to add CDMO offerings, bought PPD, a major Contract Research Organization. As someone who’s seen a variety of combinations over a near-quarter-century in this field, I’m quite interested to see how they integrate CRO offerings into their CDMO portfolio and their larger healthcare services and equipment arsenal. Even in a challenging economic environment, the CDMO sector will continue to play a vital role in supplying their customers with new and longstanding treatments for patients around the world. A supply chain reckoning may be coming, but there are limits to the changes that can be made and the very notion opens doors to CDMOs who are in the right place with the right capabilities.

Governments will continue to explore ways to bolster manufacturing infrastructure, and at some point that aforementioned political will may come to bear in a way that makes manufacturing more sustainable and enables this sector along with larger pharma to be prepared for what comes next.


Gil Roth is the President of the Pharma & Biopharma Outsourcing Association (PBOA), a trade association advocating for the regulatory, legislative and general business interests of the CMO/CDMO sector.


The global pharmaceutical sector stands at an intriguing crossroads. As we peer into the next five years, there’s a mosaic of technological advancements, strategic shifts, and regional metamorphoses that paints a largely positive future for drug discovery, manufacturing, and distribution.

One cannot underscore the looming prominence of Artificial Intelligence (AI) in reshaping this landscape. Within the forthcoming decade, AI’s function in the pharma arena will be influence everything from drug discovery and manufacturing processes, through to clinical trials and postmarket surveillance. We also are witnessing an evolving narrative for Contract Development and Manufacturing Organizations (CDMOs), especially those from the Asia-Pacific realm, with the spotlight resting this year on India. The country is transitioning from being mainly a generics powerhouse to a hub for high-value drugs. This shift is further amplified by the west’s inflationary climate and marginal pressures, alongside dwindling enthusiasm for building new facilities.

AI’s ascendancy also brings forth another captivating prospect. While AI technologies largely emanate from the US and China, India’s stellar IT prowess positions it as a potential leader in AIdriven pharma innovations. With the world’s most extensive ‘naive patient’ base for clinical trials, the confluence of India’s pharmaceutical and IT sectors could make it a global epicentre for secondary data analysis using AI.

Looking further into a three-year horizon, the landscape is rife with promise and potential challenges. Biotech investments will noticeably pivot towards mRNA technologies. The pharmaceutical industry’s anticipation of an FDA-approved cancer mRNA vaccine by 2025 exemplifies the hopes pinned on this technology. In tandem with this, the “golden triangle” — London, Cambridge, and Oxford — is poised to further carve out its position as a dominant hub for biotech investments. Perhaps in a European duopoly alongside Barcelona where growth has been tremendous in recent years.

However, not all is smooth sailing. The US Inflation Reduction Act (IRA) of 2022 casts a long shadow on the global pharmaceutical canvas. By enforcing price negotiations for top-spending Medicare drugs, the IRA has the potential to restrict the revenue streams for innovators, potentially stifling R&D reinvestments. Such legislative shifts could engender seismic changes in CDMO strategies and outsourcing dynamics worldwide. As we stretch our gaze to 5 years or more, the narrative becomes richer with regional dynamics playing a critical role. Spain, with Barcelona leading the charge, also projects an enticing image. Climbing the CPHI pharma rankings and showing potential to tap into the anticipated growth of the global CDMO market, Spain could become a focal point for biotech and pharmaceutical innovations. The nation’s evolution in the pharmaceutical domain underscores the need for a holistic ecosystem, one that thrives on political leadership, regulatory clarity, and environment that can help nurture scientific advancement. Yet, it would be remiss not to mention the emerging narratives from other regions. Saudi Arabia, with its clear ambitions in advanced manufacturing, is gearing up for a transformative phase. The Kingdom’s strategy, accentuated by talent acquisition drives and collaboration initiatives, indicates its vision to establish a stronghold in pharma manufacturing in the Middle East and Central Asia.

And, while it has had its coattails metaphorically clipped in the last two years, China is very much here to stay as a global power horse and we anticipate that its resurgence will gather pace again in 2024. Once any one of these factors eases the dragon’s fire could be lit again: global growth rates return, domestic debts pressures ease [not least those held it’s property sector which are impacting wider finances] or the reshoring political narratives fade replaced by the continued speed and cost benefits of a globalised supply chain. Essentially, what we have seen in the last year, is simply a return to the pre-pandemic underlying growth drivers for the industry – just with India, at least in the short term, representing a higher growth arena than China. AI, mRNA, the Middle East and microbiome breakthroughs are the new additions  to the story of rapidly growing pipeline as well as the gradual rise of outsourcing as a key driver.

Finally, while sentiments industry-wide are down on the record scores of 2022, all data points now suggest the market has bottomed-out and we expect growth to gather pace very quickly in the first half of 2024. In fact, our experts predict 2024 will be a surprisingly strong year for both growth and innovation.



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