Contract manufacturing has been gaining traction over the past few years. A lot of companies in the world are opting for contract manufacturing to capitalize on its advantages. Contract manufacturing is a go-to option for companies across industries, such as aerospace & defence, automobile, energy, food processing, packaging, pharma, FMCG, etc. While almost every industry embraces the contract manufacturing process, the role of contract manufacturing in the pharmaceutical sector requires special mention due to its popularity in the sector. Contract manufacturing is opening up a lot of business opportunities for enterprises in the pharmaceutical industry.
But before exploring the opportunities in pharmaceutical contract manufacturing, let us first understand what contract manufacturing is and what are the advantages of contract manufacturing?
What is Contract Manufacturing?
Contract manufacturing, also known as third-party manufacturing, refers to a process in which a company outsources certain manufacturing activates to a third-party firm called contract manufacturer. In contract manufacturing, the two companies enter into a contract wherein a company manufacturers products of other company under the latter’s brand name. The outsourcing company sells the products manufactured by the contract manufacturer.
A company can outsource either entire manufacturing process or a single part of the process to one or more contract manufacturing firms. In contract manufacturing, the design and innovation part of the product is primarily taken care by the main company and not the contract manufacturer.
What Are the Advantages of Contract Manufacturing?
Contract manufacturing allows companies to reduce the cost of manufacturing. It helps them focus more on the design and quality of the product. Contract manufacturing provides enough time to companies for R&D, branding, marketing and selling of the products. It enables companies to easily get the manufacturing of their products done without investing much on the required infrastructure. Contract manufacturing eliminates the need to hire a large number of labour for the manufacturing of the products. Outsourcing manufacturing activities to third-party firms that are highly skilled with expertise in manufacturing helps companies to get better quality products.
Different companies go for contract manufacturing for different reasons depending on their business requirements. For instance, a large and well-established company can go for contract manufacturing to minimize the burden of handling all the manufacturing activities, to reduce the time-to-market of the product, to focus more on innovation, etc. A small company with limited financial resources can outsource its manufacturing activates to a third-party firm so that it can reduce the costs of setting up the entire infrastructure and hiring human resources required for manufacturing.
While there exist a lot of advantages with contract manufacturing, some of them include better quality products, reduced manufacturing costs, faster time-to-market, less capital investment, etc.
What Are the Opportunities for Contract Manufacturing in Pharma Industry?
We have already stated that contract manufacturing is quite popular in the pharmaceutical sector. One of the main reasons for the popularity of contract manufacturing in the pharma sector is, huge investments required to setup pharma manufacturing plant. Another reason why a lot of companies in the pharmaceutical sector go for contract manufacturing is, it is not quite easy to get all the required licences from government authorities to start the pharma manufacturing business.
Now let us explore the potential opportunities for contract manufacturing in the pharmaceutical sector. The global pharmaceutical contract manufacturing market was USD 109.67 billion in 2019 will become USD 162.1 billion by 2025, growing at a CAGR of 6%, according to ReportLinker. As per the study by ReportLinker, the APAC region accounts for the major share of the growth, with India and China leading from the front.
Also Read: Opportunities in API Manufacturing in India
In line with the global pharmaceutical contract manufacturing scenario, the pharmaceutical contract manufacturing market is also registering steady growth. According to a report by Mordor Intelligence, the Indian contract manufacturing market (CMO market) which was valued at USD 10.51 billion in 2020 is expected to cross USD 27.80 billion mark by 2026, growing at a CAGR of 17.6% between the year 2020 and 2026. The growing demand for injectable drugs which offer higher ROI, particularly in cancer research will drive forward the domestic pharmaceutical contract manufacturing market. Easy availability of skilled workforce at cost-effective prices will help India have an edge over its western counterparts in the pharmaceutical contract manufacturing segment. The rapid growth in the presence of global pharmaceutical companies in India which outsource manufacturing to small third-party firms is helping the domestic contract manufacturing.
The pharmaceutical sector offers a great opportunity for new entrepreneurs planning to start contract manufacturing in India. Are you a new entrepreneur foraying into the pharmaceutical contract manufacturing? Are you an existing pharma industry looking for a contract manufacturer to outsource your manufacturing activities? If yes, then kindly register with SolutionBuggy.
We help pharma businesses connect with contract manufacturers. We also assist new entrepreneurs who are planning to start a contract manufacturing industry. By undertaking the complete execution of the project, right from plant setup to production, we assist new entrepreneurs.
An entrepreneur based out of Lucknow was planning to setup a pharma manufacturing plant to manufacture APIs. His budget for the project was around INR 5 Cr., excluding the land cost. As a new entrepreneur, he had no knowledge about the opportunities in the industry and how to go forward. He was looking for a pharma consultant who can help him finalize the API to be manufactured. He was looking for various parameters like demand and supply ratio, availability of raw materials, competition in the industry, etc. SolutionBuggy provided him with a detailed market research report with insights about the demand for various APIs in the market, their supply, raw material costs and availability, and various other factors. He has recently finalized the API and is in the process of setting up the manufacturing plant.
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