Market Trends of Pharmaceutical CMO Industry
Growing Investment in R&D is Expected to Drive the Market
- The United States is one of the largest pharmaceutical markets, accounting for about half of the R&D spending in the pharmaceutical and biotech markets. CMOs play a vital role in this market, investing in new facilities and technology to serve various outsourcing entities. Also, companies are not only reaping the benefits of their Asian footprint through in-house investments but also looking to research-based partnerships to acquire high-end sourcing expertise, build drug discovery, and invest in Asia.
- The Chinese professional manufacturer of drugs for dermatology and anti-tuberculosis, Huapont, is one of the fastest-growing pharmaceutical manufacturers in China, mainly dependent on R&D and market expansion. CMOs can leverage their expertise, owing to their R&D and complex manufacturing capabilities, to fill the needs of large generic pharmaceutical and biotech companies.
- The gradual change in the working principles of the companies in the market led to the shift in pattern from cost-control to re-emphasis on value-added services. They also allowed their integration into the value chain of companies. The highly fragmented nature of the US pharmaceutical contract manufacturing market, with more than 150 CMOs, results in competition (in terms of price) and drives impact on the revenue of CMOs.
- R&D investments and capacity expansions are expected in the injectable and sterile liquid dose formulations segment. Small biotech firms get access to specialized knowledge and resources, which help them expedite their R&D activities. Greater technological complexity in drug development and greater specificity in targets helped in the average R&D costs, as firms identify drugs with molecular characteristics instead of using trial-and-error methods to find compounds that work in the desired way.
- In addition, market vendors are expanding their research services to cater to the dynamic requirements of pharmaceutical companies, leading to a boost in the given market. According to Evaluate Pharma, in 2026, Swiss-based Roche is projected to spend USD 14 billion on pharmaceutical research and development (R&D). Other companies with high projected R&D expenditures are Merck, Pfizer, and Johnson & Johnson.
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North America to Hold Significant Market Share
- The United States contract manufacturing organizations (CMOs) have evolved from an initial offering of essential manufacturing services to a wide range of services to meet market and outsourcer demand. Steady growth in the U.S. pharmaceutical industry and increasing outsourcing by major pharmaceutical companies focusing on their core competencies to improve profit margins drive the country's market.
- Stricter domestic regulations ensure superior manufacturing quality and final products that CMOs adhere to. For instance, manufacturing an autologous or allogeneic therapy is complex, and the manufacturing facility must obtain its GMP certification.
- The country has emerged as one of the largest drug markets, accounting for almost half of the R&D spending in pharmaceutical and biotechnology markets. Hence, CMOs play a critical role in this market and have invested in new facilities and technologies to cater to various outsourcers. The country is experiencing a shortage in manufacturing capability for specific sectors, like cell, peptide, and gene therapy. The CMOs have increased their manufacturing bases over the past two years.
- Canada's pharmaceutical industry is one of the most innovative in terms of products. Pharmaceuticals, a key sector of the Canadian economy, is supported by the Canadian government, which provides a business-friendly environment for pharmaceutical companies and can leverage assets for short- and long-term business strategies.
- In the wake of the patent cliffs, pharmaceutical companies in the country are reorganizing and looking for new business models built on third-party partnerships and external networks. This business model mainly relies on outsourcing most operations, including manufacturing, providing good growth opportunities for CMOs in this region.
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