Contract development and manufacturing organizations (CDMOs) are more critical than ever to the biopharmaceutical industry, providing essential outsourcing services to customers and helping them to focus on their core strengths.
With fewer biopharma companies performing all of their manufacturing in-house, CDMOs provide much-needed, at-scale production capacity, as well as outsourced services such as drug development and testing to reduce costs and tap outside expertise. From preclinical to Phase 3 and commercial manufacturing, contractors continue to show their value as the industry has recovered from the COVID-19 pandemic supply-chain pressures and other challenges.
While CDMOs faced headwinds in 2024, the outlook this year for the outsourcing space is cautiously optimistic based on the biopharma industry’s funding levels, product pipelines, and R&D spending.
“A significant rebound in M&A activity this year would be a welcome tailwind for sentiment around the large pharma space, particularly if these transactions help offset declining revenue from key products due to loss of exclusivity over the next few years,” according to Max Smock, equity research analyst at William Blair. Smock contends that, in addition to potentially providing larger innovators with more flexibility to spend on R&D, an uptick in M&A activity “could also help end the biotech slump that weighed on demand for pharmaceutical outsourcing and services companies in 2024.”
However, looking at 2025 and beyond, it’s no surprise that the global CDMO market is expected to grow from $136.6 billion in 2024 to $191.6 billion by the end of 2029, at a compound annual growth rate of 7% over that timeframe, according to the latest study from BCC Research.
Among the factors contributing to the growth of the CDMO market is increasing demand for advanced therapeutics such as biologics and gene therapies to treat complex diseases and improve patient outcomes, as well as services like active pharmaceutical ingredient (API) manufacturing, drug production, and regulatory support.
Pharma Manufacturing recently profiled four CDMOs with global footprints that are positioned for growth in their respective markets. One of those companies is Recipharm, with 17 facilities in 10 countries, which prides itself on having a global presence with local expertise. Recipharm’s revenue last year — nearly $1 billion — grew in high-single digits and the company signed more than 100 biologics contracts.
While this year some CDMOs will no doubt see an improving picture for their businesses, others will still feel the pinch of softness in demand for their services as they navigate a rapidly evolving landscape. The good news is there are meaningful signs of recovery in the sector and the long-term growth drivers for the industry remain strong.
