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TRANSCRIPT
CMO Industry Update
Contract Pharma 2015
Jim Miller
September 17, 2015
www.pharmsource.com 1
Agenda
Presentation• Dose CMO industry
size and growth
• Growth drivers
• Mitigating factors
• Industry outlook
• Longer-term issues
Key Points• Robust recent growth in
CMO industry
• Strong tailwinds driving industry
• Headwinds will slow growth
• Outlook still positive
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Impressive growth for Dose CMO industry
3www.pharmsource.com
• Growth rate 2x
bio/pharma
revenues
• CMOs = 33% of
industry COGS
• Facility acquisitions
account for 25% of
growth
Source: PharmSource, Contract Dose
Manufacturing by The Numbers, 2015 Edition
Dose CMO consolidation continues
$500m+36%
$250-$499m
12%
$100-$249m
19%
$50-$99m14%
$25-$49m11%
<$25m8%
Dose CMO Market Shares
• 30 largest CMOs = 67%
• M&A and organic growth
drivers
• Smaller CMOs exiting
– Capacity acquired devoted
to proprietary products
– Excess capacity CMOs
withdrawing
– Outright failures
• Any big acquisitions left?
www.pharmsource.com 4
Source: PharmSource, Contract Dose
Manufacturing by The Numbers, 2015 Edition
What’s the outlook for CMOs?
Tailwinds
• Financing
• R&D spend
• IND filings
• NDA applications
• Capacity constraints
Headwinds
• Outsource propensity
• CapEx
• Units per product
• Payer acceptance
• Capacity constraints
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Tailwinds
Financing and R&D spending are strong
$-
$5
$10
$15
$20
$25
$30
$35
2008 2009-12 2013/14
$ B
illi
on
Funding to Early Stage Companies
Other Private equity
IPO Secondary offering
Venture capital Upfront license fees
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0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
R&
D S
pe
nd
CA
GR
R&D Spending Growth 2010-2014
Source: PharmSource Lead Sheet; public financial reports
Tailwinds
IND filings up sharply
0
100
200
300
400
500
600
700
800
900
2009 2010 2011 2012 2013 2014
Commercial IND Filings
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• Funding bonanza
enabling more
candidates to reach
clinical development
• But Phase 2/3 trial
registrations have
been flat
Source: PharmSource analysis of FDA data
Tailwinds
NDA applications are up
0
10
20
30
40
50
60
70
80
2013 2014 2015
Mid-Year NDA Activity
Applications Approvals
0
20
40
60
80
100
120
NDA Approvals 2006-2014
NME Chemical NME Biological
Non NME NDA
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Source: PharmSource analysis of FDA data
Tailwinds
Company results reflect early phase activity
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
H1 2015 Revenue Growth
• API driven by early
projects plus launches
• Discovery and preclinical
very strong
• Clinical CROs and dose
CMOs not yet benefitting
– Waiting for early phase
candidates to mature
– Dose CMOs benefit most at
approval
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Source: Public financial reports
What’s the outlook for CMOs?
Tailwinds
• Financing
• R&D spend
• IND filings
• NDA applications
• Capacity constraints
Headwinds
• Outsource propensity
• CapEx
• Units per product
• Payer acceptance
• Capacity constraints
www.pharmsource.com 10
Headwinds
Investment growing for captive capacity
$-
$5
$10
$15
$20
$25
2010 2011 2012 2013 2014
$ B
illi
on
CapEx by Global Bio/Pharma
$-
$100
$200
$300
$400
$500
$600
$ M
illi
on
CapEx by Mid-Size Bio/Pharma
2010-13 average 2014
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• Profits and low interest rates driving capital investment
• R&D, large molecule assets are the focus
• Mid-size bio/pharma investment is major concern
Headwinds
Unit volumes are falling
0
50
100
150
200
250
H1 2013 H1 2014 H1 2015
Orphan Drug Designations
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• Multi-year trend continues
• Orphan drug approvals growing– Higher outsource
propensity
• Targeted therapies– Drug/diagnostic
combinations
– Autologous therapies
Source: PharmSource analysis of FDA data
Headwinds
Payers less willing to pay
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• Excluded products
growing
• NICE/IQWIG
restricting coverage in
Europe
• Commodity generics
replacing branded
generics in Europe
• Tendering driving
down prices
• Likely to impact CMO
pricing
Outlook
Tailwinds
• Financing
• R&D spend
• IND filings
• NDA applications
• Capacity constraints
Headwinds
• Outsource propensity
• CapEx
• Units per product
• Payer acceptance
• Capacity constraints
www.pharmsource.com 14
• Dose CMO industry will grow at overall industry rate
• Consolidation via acquisition will slow
• Alternative business models will expand
• API + dose offering
• Drug delivery/value added services
Longer-term topics
• CDMOs adopting formalized
approaches to service
• Strengthening dollar/ Forex trends
• Continuous manufacturing as long-
term threat to CDMOs
www.pharmsource.com 15
For more in-depth analysis
This report provides an important expert quantitative analysis on the contract dose manufacturing industry. PharmSource is the most definitive, trustworthy source of strategic insight on this topic in the bio/pharmaceutical realm.
This report characterizes the contract dose manufacturing industry along a number of quantitative dimensions, including number and type of participants, market size, market shares of the top CMOs and profitability, and provides PharmSource’s expert outlook for the industry.
For more information click here.
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Dose CMOs by the Numbers – 2015 Edition: Composition, Size, Market Share, Profitability and Outlook