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Pharma Tech Outlook | Friday, August 19, 2022
Contract development and manufacturing organizations (CDMOs) are using M&A to invest in technology and capabilities.
FREMONT, CA: In their capacity as adaptable third-party service providers, CDMOs assist pharmaceutical firms at all stages of the creation of medications, including research and development, manufacturing, and formulation and finishing procedures. Consolidation and mergers and acquisitions (M&A) have been the main growth drivers for CDMOs during the past ten years.
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Over the past couple of years, 244 publicly announced M&A transactions involved CDMO companies. They analysed these transactions, and also reviewed 92 publicly announced internal investments of 15 selected global CDMO companies, to create an integrated perspective on the CDMO M&A landscape. The latest assessments reveal ongoing consolidation in the market. However, new developments are likely to continually change the position of CDMOs.
In the past, CDMOs functioned under a business model that mostly concentrated on acting as outside contractors for the production of established medications. This concept includes the expansion of capacity through the purchase of pharmaceutical businesses' manufacturing facilities. However, CDMOs are progressively taking the lead in innovation and are now involved in more aspects of the pharmaceutical industry than just production. They are also introducing new sources of income. CDMOs can scale up the expansion of their capabilities quickly through acquisitions.
This shift in focus has been accompanied by a shift in the market's M&A landscape. For instance, the development of novel therapeutic modalities such as cell therapies, gene therapies, mRNA therapies, and cutting-edge vaccines over the past ten years has necessitated a sizable investment in new manufacturing facilities for nucleic acids, and lipid-based formulations, viral vectors, and cell manipulation. The growing demand for smaller, more varied projects has allowed well-positioned CDMOs to adapt their production processes to accommodate them. The emergence of new collaborations has further empowered CDMO players to drive the industry's rapid expansion of capacities and capabilities, assisting it in scaling up in sectors like vaccine production.
To maintain a competitive capability advantage in producing innovative goods, they must provide specific technical knowledge in addition to being dependable partners for established pharmaceuticals. This is particularly accurate in light of innovative modalities. One-third of the 244 M&A involved innovative modalities like cell and gene treatments and novel nucleic acid therapeutics.
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