Healthcare CMO Market Will Grow at Highest Pace owing to Surging Demand for Generic Drugs

The healthcare contract manufacturing organization (CMO) market has been gaining major traction over the past few years. CMOs play a vital role in drug development, manufacturing, packaging, and other related services on behalf of pharmaceutical and biotechnology companies. They help reduce operational costs and improve productivity for pharmaceutical companies. The healthcare CMO industry is highly fragmented, with the presence of several large players that offer end-to-end developmental and manufacturing services for small molecules as well as biologics. Globally, a major portion of pharmaceutical manufacturing is being outsourced to CMOs due to growing pipeline of generic drugs and biosimilars.

The global healthcare CMO market size is estimated to be valued at US$ 507.46 million in 2024 and is expected to exhibit a CAGR of 5.4% over the forecast period of 2024 to 2031.

Key Takeaways

Key takeaways- Key players operating in the Healthcare CMO Market Size include FMC Corporation, BASF SE, Bayer AG, Sumitomo Chemical Co., Ltd., Syngenta AG, Adama Agricultural Solutions Ltd., UPL Limited (previously United Phosphorus Limited), Nufarm Limited, Tagros Chemicals India Ltd., and Heranba Industries Limited. The surging demand for generic drugs across major markets such as the U.S., Europe, and Asia is a major factor driving the growth of CMOs. Technological advancements in pharmaceutical manufacturing, including digital technologies, robotics, and process automation, are also boosting the market growth.

Key players- Key players operating in the healthcare CMO market include FMC Corporation, BASF SE, Bayer AG, Sumitomo Chemical Co., Ltd. These players collectively account for over 30% of the overall market share. FMC Corporation specializes in pharmaceutical and nutraceutical contract manufacturing.

Growing demand- The COVID-19 pandemic has significantly increased the demand for generic drugs and vaccines worldwide. This surge in demand is anticipated to boost outsourcing activities to CMOs over the forecast period. According to estimates, the global generic drug market size was valued at over US$ 300 billion in 2020.

Technological advancements- Major CMOs are increasingly adopting technologies like artificial intelligence, 3D printing, auto-sampling systems to enhance manufacturing operations. This improves production efficiency, reduces costs, and helps meet stringent regulatory standards. Furthermore, digital technologies aid in data-driven decision making and supply chain management.

Market Trends

Increased outsourcing of biologics manufacturing- With rising prevalence of chronic diseases, demand for biosimilars and biologics is growing exponentially. However, their production requires large capital investments and specialized capabilities. This has prompted pharmaceutical companies to outsource biologics development and manufacturing activities to well-equipped CMOs.

Cell and gene therapy contract services- Cell and gene therapy is one of the fastest growing segments in the pharmaceutical industry. CMOs play an important role in the development and manufacturing of cell and gene therapy products across various application areas such as oncology and neurology. They help sponsors navigate complex regulatory requirements and reduce costs.

Market Opportunities

Emerging markets- Countries like India, China, Brazil, and Mexico offer lucrative opportunities for healthcare CMOs. This is attributed to the increasing healthcare expenditure, rising prevalence of lifestyle diseases, and growing generic drug markets in these nations. CMOs can tap into the potential offered by emerging pharmaceutical hubs across Asia Pacific and Latin America.

Partnerships and collaborations- Strategic collaborations between pharmaceutical companies and CMOs can help fast-track drug development and manufacturing processes. It allows partners to leverage their respective expertise and infrastructure. There is an increased scope for contract service agreements involving preclinical, clinical and commercial-phase activities.

Impact of COVID-19 on Healthcare CMO Market
The COVID-19 pandemic has impacted the growth of the healthcare CMO market. Initially during the lockdowns imposed across various countries, the market witnessed slowed growth as supply chains were disrupted and production witnessed shutdowns. However, the demand for healthcare services increased manifold during this time as focus shifted to treating COVID patients and developing vaccines and therapeutics against the virus. This led contract manufacturing organizations to ramp up their production capacities to meet the surge in demand. Various CMOs collaborated with pharmaceutical companies to manufacture COVID testing kits, ventilators, personal protective equipment and scale up production of vaccines such as those developed by Pfizer/BioNTech and Moderna. However, the overall growth rate has slowed down due to disruptions caused during the initial months of the pandemic. Even now, supply chain issues persist due to shut down of plants periodically to control spread of infection amongst workers. In future, pandemic preparedness is expected to be a key focus area and strategic importance of CMOs has increased which will drive higher investments in this area.

The North American region accounts for the largest market share in terms of value for healthcare CMO market currently. This can be attributed to presence of large pharmaceutical companies and medical device manufacturers who outsource their manufacturing requirements. Additionally, North America has highly developed healthcare infrastructure, rising healthcare expenditure and presence of major CMO service providers. The Asia Pacific region is poised to be the fastest growing region during the forecast period on account of rising generic drugs market, low cost of operations and presence of emerging economies like India and China with growing pharmaceutical industries. Various large pharmaceutical companies have also started establishing manufacturing facilities in these regions to take advantage of low cost of production.