Industry Outlook: Mixed Signals Lead to a New Outsourcing Equation - Pharmaceutical Technology

Latest Issue
PharmTech

Latest Issue
PharmTech Europe

  • Search
  • Suppliers
  • Careers

Enter a company or product name

KeywordLocation
About Search
Industry Outlook: Mixed Signals Lead to a New Outsourcing Equation
Survey results indicate a healthy market, but increasing competition.


Pharmaceutical Technology



Chad Baker, Thomas Northcut, Tom Grill/Getty Images
If the respondents to this year's PharmSource—Pharmaceutical Technology Outsourcing Survey are right, 2008 is shaping up to be another strong year for the contract services industry and another big step in the remaking of the biopharmaceutical/pharmaceutical business model. However, the coming months are likely to be more difficult for contract service providers than have the past three years.


Figure 1
Industry trends in 2008 as reported by our respondents (see sidebar, "Respondents profile") are very similar to what we found in 2007. Nearly 45% of bio/pharma company respondents expect their spending on contract services to increase by 10% or more in 2008, about the same as in 2007 (see Figure 1). More than a quarter of these buy-side respondents say their contract services spend is growing faster than total spending in their functional area, but an equal number said spending is growing at a slower rate than total spend (see Figure 2). Still, respondents indicate that more activity is being outsourced than in past years: 42% say one quarter or more of the work in their functional area is being outsourced, up from 35% in 2007 (see Figure 3). Responses indicate that the rate of growth in outsourcing spend is slower at mid-size and generic bio/pharma companies than it is at large and small bio/pharma companies.


Figure 2
Responses from contract service providers reflect the optimism inherent in the buy-side responses. More than 65% of contractor respondents say they expect their revenues to increase by 10% or more in 2008, including a big jump in the number expecting growth of 20% or better (see Figure 4). Small bio/pharma companies are the most common source of new business for service providers, with 43% of contractor respondents citing them as their fastest growing segment. All market segments are contributing to contractor growth: 19% say Big Pharma is their fastest growing segment, 13% cite specialty pharma, and 17% say all segments are growing about the same.


Figure 3
Although major pharmaceutical companies aren't the fastest growing segment for most service providers, they are critical to the financial health of nearly all of them. Among contractor respondents, 38% say half or more of their revenue comes from Big Pharma, and another quarter say Big Pharma accounts for 25–49% of their revenue.

Intensifying competition

Survey responses indicate that bio/pharma companies are more open to using new vendors than they have been in recent years. In the 2008 survey, 43% of respondents said they are consolidating their vendor base or have plans to do so in the next two years; this statistic is down sharply from 57% in the 2007 outsourcing survey. One quarter of 2008 respondents say they have no plans to increase or consolidate their vendor base.


ADVERTISEMENT

post a comment
Your email address will NOT be published.
appears with your comment
read our privacy policy
Note: does not support HTML
All comments submitted are subject to review, and may be delayed before posting. We reserve the right not to post comments.
LCGC E-mail Newsletters
Subscribe:Check the box next to each newsletter you wish to subscribe for:
| Weekly
| Monthly
| Monthly | Weekly
 Name:
 E-mail:

Survey
At this month's AAPS Annual Meeting & Exposition, several graduate students were awarded as young innovators. What are your thoughts on innovation and the next generation?
We need more young innovators and more students enrolling in pharma science programs
Our industry has just the right mix of young and old to keep innovation going
Age is irrelevant when it comes to innovation
We need more young innovators and more students enrolling in pharma science programs
25%
Our industry has just the right mix of young and old to keep innovation going
16%
Age is irrelevant when it comes to innovation
59%
View Results
Jim MillerOutsourcing OutlookJim Miller Facing Reality
Patricia Van ArnumIngredients InsiderPatricia Van Arnum Advancing Chiral Chemistry in API Synthesis
Faiz kermaniSpotlightFaiz Kermani Demographic time bomb
Rx-360 Takes on Europe, Talks to PharmTech in Podcast Series
Sanctions, Not Barcodes
Vaccines Finding Their Way in Novel Applications
Genzyme’s Friday the 13th
DTCA: Beneficial or Harmful?
FindPharma Custom Search
Source: Pharmaceutical Technology,
Click here