CPhI announces findings from its review of the US pharma manufacturing market

CPhI has announced the findings from a comprehensive review of the US pharmaceutical manufacturing market live at InformEx 2016 in New Orleans.

The original report compiles the findings of research conducted amongst nearly 70 of the United States most influential companies and organisations.

Overall, the US pharma industry and domestic manufacturers are showing increased confidence of renewed growth and even the returning of some lower cost manufacturing work that has, in previous years, been outsourced overseas. This turnaround in the US market’s revenue potential is being driven by concerns of quality in some Asian markets and a marked shift in the drug development pipeline towards difficult to formulate drugs and biosimilars.

For generics manufacturers, we are seeing a trend towards API sourcing within the US and near-field manufacturing sites for companies based outside the country – e.g. Mexico and Canada. The primary reason behind these domestic and near-field sites is an increased regulatory confidence in the standards of manufacturing, due to the proximity of FDA inspectors.

The TTIP (Transatlantic Trade and Investment Partnership), TPP (Trans-Pacific Partnership) and TPA (Trade Promotion Authority) are surprisingly welcomed by generic manufacturers – despite the potential patent extensions to biosimilars – as the belief is that these partnerships are making domestic generic manufacturers more competitive with their overseas rivals. However, smaller generic firms are likely to be acquired or cease production due to the GDUFA (Generic Drug User Fee Amendment) fees, which companies have to pay at a standard flat rate (irrespective of volumes or role in the supply chain).

US contract manufacturing market ‘hot’

For contract manufacturing, the US market is now as hot as it has been at any other time in the last 10-years, with a scramble occurring across international players to get a domestic manufacturing foothold in the market. Moreover, these acquisitions are being driven by the need to acquire specialist technical capabilities and perhaps more significantly, sterile and biologic capabilities. International companies with the dual benefits of development capabilities in the US and generic facilities in lower cost regions look extremely well placed for sizeable future growth.

The future for domestic companies should see them both grow organically due to the favourable conditions, with consolidations occurring among smaller players. But for international companies supplying into the US, CPhI says we are now at a crucial tipping point, whereby they need to urgently enter the USA market with domestic assets or risk getting left behind. 

Manufacturers are also opening new divisions across diagnostics and biomarkers, with the licensing of these tests representing significant new revenue opportunities. Accelerating the US market’s manufacturing dominance is a drug pipeline that will see future patented candidates and higher margin generics shifting towards biologics and biosimilars. Regulatory approvals for biologics are by their nature more complicated, so there is also a trend to license biosimilars to existing manufacturing partners. In fact, it is predicted we will see many CDMOs that undertook the development work, maintaining contract services agreements into commercialisation, and even, once a product goes generic. The report highlights that small molecules are not dead as profit generators, and that, the ‘areas in between’ such as ADCs and conjugation, particularly for oncology products, are providing new business opportunities with high margins.

US market well placed to be a leader in biologics

The shift in big pharma’s R&D pipeline is having a knock-on effect for both manufacturers and contract service providers, who are looking to quickly revaluate their assets and reinvest in smaller more flexible capabilities, with European and US manufacturers now hoovering-up smaller technical and biologics assets.

The collective view of the respondents is that the US CMO market, already worth over $10 billion, is predicted to expand significantly faster than the overall pharmaceutical industry, and will be boosted by the outsourcing of non-core businesses, and an increasing amount of specialty and biotechnology companies without in-house capabilities.

The major threat to growth both for manufacturers and contract services providers comes in the form of the impending serialisation deadline. Whilst some companies have began to install compliant capabilities, the general consensus among US manufacturers is that we are still some way behind and the industry needs to quickly begin implementation if it is to stand any chance of being ready in time.

“The reported return of API manufacturing to the USA is a massive positive for the regional industry – with costs rising in Asia, the move towards high-value drugs and the risk/cost analysis strongly favouring future US growth. The American market is also now well placed to be a leader in biologics, and with the growth in personalised medicine, biomarkers and combination drugs the domestic manufacturing base seems well suited to capitalise. With this as a background, it is important that international companies without regional facilities, look to secure a foothold in the American market or invest in a prescriptive new business strategy. This is why CPhI and InformEx are so vital to future growth, as they afford both domestic and overseas companies the opportunity to make contacts and establish new working relationships in what is by far the biggest pharma market in the world,” said Rutger Oudejans, Brand Director Pharma at UBM EMEA.