CMOs
raw materials and consumables (14.5%) growth, and is closing in on equipment and instrumentation (17%) sales growth. For its part, the other supplier segment we measured, CMO marketing, is growing at a 12.8% rate, up from last year’s 11.8%.
Vendors’ Services Prices Set to Increase
One factor in revenue growth for suppliers will be their change in pricing. And on this front, we see that along with the increase in services, suppliers plan to increase their pricing also.
Services pricing growth has remained relatively muted in recent years, however. Respondents to our survey estimate that they hiked their pricing for services by 2.4% last year, right within the 2-3% range seen between 2010 and 2015.
That 2.4% services pricing growth was higher than for instruments (1.5%), but lower than other sectors. For example, suppliers estimated that they increased their consumables and materials pricing by 3.2% last year, their disposable, single-use device pricing by 3.4%, and their CMO marketing pricing by 5%.
The story changes when looking forward, though. This year, suppliers project that they will increase their services pricing by a hefty 4.1%, outpacing pricing growth for disposable, single-use devices (3.6%), consumables and materials (3.4%), and instruments (2%). The only area eclipsing services in expected pricing increase this year is CMO services, set for an impressive increase this year.
To justify increased prices and minimize their eff ects or customers, vendors will need to clearly demonstrate the value of their products and services. Value-added components of an off ering, such as training, may help to off set price increases and close sales. Those vendors that take the time to develop strong customer relationships and that more clearly understand their customer requirements should be able to both grow market share and also better support any needed more price increases. For now, pricing increases don’t seem to have aff ected customers to a great degree: only about three in ten vendors say that customers are demanding lower prices, a fi gure that has barely budged over the past fi ve years.
Why More Services?
The vast majority of vendors aim to increase the level of services they provide – and off er new ones – and this is likely a refl ection of the direction the biopharmaceutical manufacturing market has taken in recent years: more outsourcing.
Figure 2. Vendors’ Average Pricing Changes, 2009-2016 (projected)
Indeed, the breadth of biopharmaceutical manufacturing outsourcing continues to grow across numerous activities, making outsourcing an increasingly attractive market. To quantify just how common outsourcing has become, we identifi ed 24 activities and asked respondents to indicate which – if any – they were outsourcing to at least some degree.
We found that roughly nine in ten respondents (89.7%) are outsourcing analytical testing or bioassays to at least some degree, and that at least seven in ten are outsourcing the remaining activities in the top fi ve. Other areas of opportunity include:
• Toxicity testing • Fill/finish operations • Validation services
Additionally, a majority reported outsourcing at least some activities for sixteen services, ranging from contract research to cell line development.
Of note, these fi gures have trended up in recent years for many activities, even among the lesser-outsourced activities. Some of the larger areas of growth this decade include:
• Analytical testing of bioassays; • Cell line stability testing; • Host cell protein analysis testing; • API biologics manufacturing; • Project management services; and • Upstream process development.
In other words, outsourcing - particularly of testing services - is becoming more and more common, providing a potentially lucrative area of opportunity for suppliers.
Suppliers to Benefi t
Some vendors are increasingly bundling-in bioprocessing-related reg- ulatory support and other services. For example, bulk culture media sales may include contracting for media and process optimization. And it’s worth noting that the contrary is also occurring, with various service companies previously best known as CROs, increasingly off ering biopharmaceutical CMO services; and Lonza, the largest CMO, increasingly off ering culture media, reagents and other products.
Some areas of growth for suppliers in terms of service off erings include validation, contract research, media optimization, and cell line development. The proportion of biomanufacturers engaging in at least some outsourcing of these activities has increased fairly strongly since 2010. And the outlook for some is also healthy, led by validation services.
Indeed, about one in six respondents to our survey project that they will be outsourcing validation services at “signifi cantly higher levels” in the next twenty four months. For context, that puts validation services as fourth on the list of activities set for future growth, behind only analytical testing of other bioassays, fi ll/fi nish operations, and API biologics manufacturing.
Close behind, about one in eight respondents are expecting to sig- nifi cantly increase their outsourcing of cell line development, good for the fi fth spot out of the twenty four activities measured.
Conclusion Data Source: 13th Annual Report and Survey of Biopharmaceutical Manufacturing, April 2016
Steady growth reported by vendors providing services to the bioprocessing industry attests to the integral roles and importance of these services provided to biopharmaceutical companies. The trend toward outsourcing and sales bundling has prompted many vendors
Pharmaceutical Outsourcing | 14 | July/August 2016
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