Can pharmaceutical CMO business really be profitable?

Can pharmaceutical CMO business really be profitable?
 
CMO business is a new favorite in the pharmaceutical industry in recent years, and thanks to the boom in the field of new drug development brought about by the implementation of the MAH pilot system from 2016 onwards, the pharmacy CMO business has also been booming and flourishing.

The development of China's MAH system has stimulated domestic pharmaceutical companies to carry out CMO business, which is now blossoming everywhere in China and has formed a trend of involution.
 
So people want to ask, so is it really profitable to be in the CMO business now?
 
First of all, many pharmaceutical companies who want to carry out CMO should be clear about the status quo, that is, formulation CMO and API CMO are different business areas.
 
First of all, API CMO, domestic development can be described as a good form
 
All of the domestic CMO and CDMO business introductions, whether in the news or advertising, are all about APIs, without exception. According to the data, the largest business of China’s domestic head CMO/CDMO companies is from API business, not formulation. For many head pharmaceutical companies an overseas API orders business can easily reach hundreds of millions of dollars, and in contrast, the preparation of the same period may only be a few million profits, this is still the status of the entire formulation category, is the overall profitability of the mainstream formulation business, including large molecules, biologic, biosynthetic drugs, clinical CRO, etc., apportioned to the small molecule formulations can be imagined how much.

The head of the domestic API CDMO business is mainly dependent on overseas business to make money, for example, last year, Asymchem and Porton Pharma’s several billion large orders, all from the API orders with Pfizer.
 
The biggest advantage of API to do CMO is the implementation of environmental policies in recent years, the construction of API plants are very demanding, many R & D innovative pharmaceutical companies are not good at, so they can only entrust API manufacturers to produce. And because domestic pharmaceutical regulations provide that API are not MAH system, so once the API plant is built it is difficult to change hands, all factors have caused the exclusivity and monopoly of API.

On the contrary, the preparation CMO, the advantages of API mentioned above, the preparation does not, and even in China, most pharmaceutical companies do not make money in the preparation CMO business.
 
Since there is no shortage of production capacity, there is only competition for price, and individual enterprises can make the price of individual preparations quite low.

Let’s take an example, at present, the most and most abundant oral solid production line of common drugs in China, the conventional processing cost at the commercialization stage is 4-5 cents a piece. This means that even if a single project commercialization is entrusted to produce 100 million tables a year, it can only obtain 4-5 million revenue, which also includes various costs such as labor, power, depreciation, materials, etc. How much net profit left? Where are the profits of CMO companies?
 
But there are also some domestic pharmaceutical companies in China CMO business is doing well, profits are also very substantial. These companies have a common feature, that is, their CMO customers are large international pharmaceutical companies.

One thing we need to know is that the domestic production offer is not higher than that of developed countries in Europe and the United States. For large international pharmaceutical companies, price is never an issue. For them, a reliable supplier who has passed the GMP production conditions of the European and American quality management systems is what matters.
 
Therefore, it is recommended that Chinese domestic pharmaceutical companies that want to do the CMO of formulations, the focus is shifted to export qualifications and regulatory registration, in the price competition in the infinitive volume is not a correct way out.