The CDMO business model includes the entire supply chain system from pre-clinical research, clinical trials to commercial production stage research and development, procurement, production, etc., providing pharmaceutical companies with innovative process research and development and large-scale production services, with high value-added technology Output replaces pure capacity output.
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CDMO Has Become the Optimal Solution For R&D and Production of Pharmaceutical Companies
There is a difference between CDMO and traditional CMO platforms. Traditional CMO is based on the "production technology transfer and customized production" model, combined with large-scale, production-oriented methods to provide low-cost mass production for demanding companies, with flexible production lines and skilled craftsmanship specialty. The CDMO is a "customized research and development + customized production" model, which can help more research and development enterprises to carry out actual technology transformation, shorten the time to market, and promote commercialization.
As the difficulty of new drug research and development increases and the rate of return on investment declines, CDMO has gradually become the optimal solution for pharmaceutical companies' R&D and production, which is mainly reflected in three advantages. Firstly, in terms of research and development, CDMO companies can quickly complete the improvement of production processes by relying on professional production processes and technology accumulation, thereby increasing the speed of drug research and development and promoting drug listing; secondly, in terms of production, CDMO companies can optimize production processes and reduce drugs; thirdly, in terms of production, outsourcing of pharmaceutical production links can reduce repeated construction of production capacity and reduce investment in fixed assets.
From the perspective of the industrial chain, CDMO is the key link between drug development and commercial sales. Its upstream is the pre-clinical R&D CRO link, and the downstream is the continuous CMO production link after the drug is marketed. Due to the continuous development of the field of innovative drugs and high R&D costs and risks, more and more downstream pharmaceutical manufacturing companies will choose CDMO services in order to save costs, control risks, and improve R&D efficiency for pharmaceutical companies. It is foreseeable that the CDMO market will continue to scale expand.
Current Status of the Global CDMO Market
The data shows that the global CDMO market in 2019 is nearly 80 billion U.S. dollars, of which the small molecule CDMO business services are mainly used, and the market size is 58.3 billion U.S. dollars. The annual growth rate of the global CDMO industry in 2012-19 was 11.95%, much higher than the 4.9% annual growth rate of the global pharmaceutical market during the same period; the global CDMO industry will maintain double-digit growth, significantly faster than the growth rate of pharmaceutical sales. The estimated annual growth rate from 2020 to 2022 is 13.3%, which is also higher than the global expected growth rate of 5.7%.
The CDMO model was first applied to the European and American markets. Under the first-mover advantage, the European and American CDMO industry occupies a very important global market share. According to Informa's statistics, in 2017, the US CDMO market accounted for 41.4% of the world, while the European CDMO market accounted for 21.2% of the world, and the two combined exceeded 60%. China's CDMO market was 6.9 billion US dollars in 2018, accounting for 9.7%.
Due to the relatively higher technical barriers for the production of biological agents, the industry concentration is still low. The market share of the top five leading companies in 2018 was only 29%. However, with the expansion of the production capacity of leading enterprises and the establishment of higher barriers to technological accumulation, industry concentration is expected to continue to increase.
Although the CDMO industry in Europe and the United States occupies a very important global market share, in recent years, restricted by cost pressure factors such as environmental protection and R&D, the pharmaceutical outsourcing service industry in Europe and the United States is gradually shifting to emerging markets with engineer dividends and greater market potential. Taking into account the multiple advantages of talents, costs, and policies, China has become an important target country for undertaking industrial transfer.
The CDMO Business in Europe And the United States Has Shifted to the Asia-Pacific Region, And China Has Benefited Significantly
According to data, in 2011, CDMO business in Europe and the United States accounted for 77% of the global market share, while the total fell to 70% in 2017. The declining market share in Europe and the United States was mainly undertaken by the Asia-Pacific region and Latin America, with China benefiting most. According to Roots Analysis, the CDMO market share in the Asia-Pacific region will reach 34% in 2028, close to North America. In the future, the trend of China to undertake CDMO business in Europe and the United States will be further strengthened.
Chinese Policies Boost the Explosive Growth Potential of CDMO Business
In December 2019, the "Drug Administration Law" was implemented, which marked the formal establishment of the MAH system that allows the separation of drug marketing authorization and production authorization, opening up the market for CDMO companies that has insufficient funds for R&D institutions, scientific researchers, and small pharmaceutical companies. When competing for orders from MAH holders, CDMO has obvious advantages in specialization and scale, which can help small pharmaceutical companies and R&D personnel focus on the core aspects of R&D and improve R&D efficiency.
Many domestic policies, including MAH, have given domestic CDMO companies a breakthrough in the domestic market from 0 to 1 and further potential for explosive growth. In August 2019, the State Food and Drug Administration issued the "Notice on Expanding the Pilot Work of the Medical Device Registrant System", expanding the scope of the pilot to 21 provinces and cities. The medical device registrant system is a medical device management system commonly adopted by the international community. The implementation of the system has realized the unbinding of production and R&D, which is conducive to promoting the cooperation between medical device companies, R&D units, and CDMO institutions. The medical device CDMO industry will usher in Major development opportunities.
With the increasing difficulty of drug research and development, the extension of the research and development cycle, and the decline of the return on investment, CDMO has gradually become the optimal solution for the research and development of pharmaceutical companies. Driven by cost, efficiency, innovation, and intensified globalization, emerging markets with obvious supply chain and engineer advantages are rising rapidly.
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