Risk of loss of control over critical manufacturing functions can hamper the global healthcare CMO market growth. When companies outsource their manufacturing operations to contract manufacturing organizations, these lose direct control over certain important processes. This loss of control can potentially compromise the quality, consistency and security of supply of products. Manufacturing drugs, medical devices and other healthcare products requires maintaining stringent quality standards and regulatory compliance as even minor issues can risk patient health and safety. Outsourcing to a third party reduces the oversight and management that companies have over their own in-house facilities. Some CMOs may not have the same emphasis on quality management systems or track record of the client company itself. This can introduce the risk of quality deviations, non-compliance issues or other operational disruptions outside the control of product sponsors. Outsourcing manufacturing to a CMO locations the operations overseas in some cases. This geographic separation further reduces the hands-on management and monitoring capabilities of companies. It also increases dependencies on international trade flows and shipping networks. Any delays, disruptions or politico-economic issues in these areas could negatively impact just-in-time manufacturing and supplies. The COVID-19 pandemic highlighted this risk as international transport was significantly impacted during the initial outbreak in 2020. According to the UNCTAD (United Nations Conference on Trade and Development), the pandemic caused a 30-40% decline in volumes of goods traded globally. Many businesses faced severe shortages of components and logistical difficulties. These supply chain issues increased concerns around overly relying on globally distributed manufacturing networks with reduced oversight.
Market Opportunities: Growth of biologics and biosimilars market
The rise of biologics and biosimilars can drive the global healthcare CMO market growth. Biologics are large, complex molecules produced using biotechnology, and have revolutionized the treatment of various diseases. However, the development and manufacturing of biologics is an intricate process which requires specialized expertise and facilities. This complexity has driven significant demand for outsourcing to contract manufacturing organizations (CMOs) that have the specialized capabilities and infrastructure to support biologics development and production. As biologics go off-patent in the coming years, the market for biosimilars - which are biologics that are highly similar to an existing FDA-approved biologic - is also expected to grow substantially. In 2020, the World Health Organization estimated that biosimilars could help achieve considerable cost savings for both patients and healthcare systems. As more biosimilars enter the market, these will boost demand for CMO services to facilitate their development and manufacturing at commercial scale. Both small biotech companies developing biosimilars as well as large biopharma firms expanding into this area will rely heavily on CMOs to assume part or all of the manufacturing responsibilities. The heightened reliance on CMOs is evidenced in recent facility expansions and partnerships. For example, in 2022, the U.S. FDA approved a new biologics manufacturing plant in Ireland that will serve as a dedicated vaccine production facility for a major pharmaceutical company. Top 10 global CMO announced plans in 2021 to double its biomanufacturing capacity in Europe to meet burgeoning client demands in both biologics and vaccines. These significant investments reflect the optimism of both CMOs and their biopharma partners regarding the promise of the biosimilars segment and its potential to spur increased outsourcing activities.
Healthcare Cmo Market Report Snapshots
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