What can CDMOs/CMOs expect in 2024? DCAT Value Chain Insights examines key trends, fundamentals, and the variables influencing the sector’s performance.

Crunching the numbers
The overall CDMO market is expected to grow at an annualized rate of 7.29% to 2028, with biotech’s expansion set to boost this further, according to an October 2023 analysis from the business intelligence firm, Evaluate. A recent (January 2024) and separate analysis by the market research firm, BBC Research, projects that the biologics CDMO sector will be a larger contributor to this growth and is expected to increase from $15.1 billion in 2023 to $27.0 billion by the end of 2028, representing a compound annual growth rate (CAGR) of 12.3% during the forecast period 2023-2028.

A key driver of growth in the biologics CDMO market is the cell- and gene-therapy segment, which is projected to grow at an annualized rate of over 20% in the forecast period of 2023–2028, according to the recent Evaluate analysis. Although still a niche area in the overall global bio/pharmaceutical industry, the global cell- and gene-therapy market on a product basis is projected to reach $80 billion by 2029, according to a December 2023 analysis by GlobalData, a data and analytics firm. Oncology is expected to continue its lead as the indication and area of major development for cell and gene therapies, accounting for 44% of the cell- and gene-therapy market by 2029.

The approximate 7% rate of growth for the overall CDMO market outpaces overall growth in the bio/pharmaceutical industry. The global medicines market—using invoice price levels—is expected to grow at a CAGR of 3–6% through 2027 to about $1.9 trillion, according to at a multi-year forecast (through 2027) by the IQVIA Institute for Human Data Science released in January 2023. Growth, however, in the US, the largest national market representing approximately 40% of the global bio/pharma industry, on a net price basis, is forecast to adjust to -1 to 2% CAGR through 2027, down from 4% CAGR in the most recent five-year period (2018-2022).

Overall industry product trends
Overall industry trends in new product development and commercialization are an important barometer for the CDMO sector, and 2023 saw an uptick in new drug approvals after a decline in 2022. The US Food and Drug Administration’s Center for Drug Evaluation and Research (CDER) approved 55 new molecular entities (NMEs) and new biologics therapeutics in 2023, a 49% increase in the number of new drug approvals compared to 2022, when 37 new drugs were approved. The 55 new drugs approved in 2023 by FDA’s CDER is in line with recent years. In 2021, 50 NMEs and new therapeutic biologics were approved by FDA’s CDER and 53 in 2020. The 55 new drugs approved in 2023 represented the second highest level of approvals in the past decade, except for 2018 when 59 new drugs were approved.

On a product basis, specialty medicines continue to increase market share. Specialty medicines, as defined by the IQVIA Institute for Human Data Science, as those medicines that treat chronic, complex, or rare diseases and possess additional distribution, care delivery, and/or cost characteristics, which require special management by stakeholders, are expected to see continued strong growth. Specialty medicines will represent about 43% of global spending in 2027 and 56% of total spending in developed markets, according to the January 2023 analysis by the IQVIA Institute for Human Data Science.

Inflationary pressures ease but still remain
The CDMO sector, like any industry segment, is impacted by overall macroeconomic and monetary factors that influence operating costs and the cost of capital.  On a macroeconomic level, the good news is an easing of the inflationary pressures seen in 2023, Inflationary pressures represented the number one issue in 2022, but inflation abated in 2023 although the global economy as a whole is expected to see slowing growth. Global growth is set to remain modest, with the impact of the necessary monetary policy tightening, weak trade, and lower business and consumer confidence being increasingly felt, according to the Organization for Economic Cooperation and Development’s (OECD) latest Economic Outlook issued in November (November 2023). The OECD projects global growth in gross domestic product (GDP) of 2.9% in 2023, followed by a mild slowdown to 2.7% in 2024 and a slight improvement to 3.0% in 2025. Inflation (as measured by consumer prices) is expected to continue to ease gradually back toward central bank targets in most economies by 2025, as cost pressures moderate. Consumer price inflation in OECD countries is expected to decline from 7.0% in 2023 to 5.2% in 2024 and to 3.8% in 2025.  

GDP growth in the US is projected at 2.4% in 2023, before slowing to 1.5% in 2024, and then picking up slightly to 1.7% in 2025 as monetary policy is expected to ease. In the euro area, which had been relatively hard hit by the war in Ukraine and the energy price shock, GDP growth is projected at 0.6% in 2023, before rising to 0.9% in 2024 and to 1.5% in 2025. China is expected to grow at a 5.2% rate in 2023, before growth drops to 4.7% in 2024 and 4.2% in 2025.

Capital flow into Emerging Pharma
An important sign to watch for in 2024 will be the capital flow into the bio/pharma industry, in particular Emerging Pharma companies, an important customer base for CDMOs. The number and amount of biotechnology financings fell in 2023, with venture firms investing 25% fewer dollars in companies compared to the year prior, according to new quarterly data released from Pitchbook, a venture capital research company, and the US-based National Venture Capital Association asreported by an industry publication, BioPharma Dive (1). Venture capital firms are increasingly investing in later-stage drug companies, which accounted for about 40% of deals in 2023.

Reference
1. G. Wu, “Venture funding, dealmaking slowed in biotech last year: Pitchbook,” BioPharma Dive, January 11, 2024.