Big Pharma Capex Continues to Grow, but Rate Slows
Spending by global bio/pharmaceutical companies on new plant and equipment grew by an average of 2.7% in 2016, compared to sales growth of 4.4% (see Figure 1, below). This is the first year in recent times that revenue growth has outpaced capex growth. Moreover, the increase in capital expenditure represented a significant decline from the average figure of 6% per year from 2010-2015 (see the recent PharmSource Trend Report: Bio/Pharma Capex Trends 2016).
Total spending for the 17 largest companies rose to $19.3 billion. Eight companies increased expenditure, while nine reduced their spending, although the data disclosed significant variation on a company by company basis.
Collectively Bristol-Myers Squibb, Merck, Novo Nordisk and Pfizer recorded an additional $1.4 billion in capex, while the pharmaceutical segments of Novartis and Roche reduced spending by more than $1 billion. However, these figures need to be put into perspective; the two Swiss companies still recorded aggregate spending of about $3.5 billion in 2016.
While the rate of growth may have slowed the scale of capex spending by global bio/pharma companies indicates that most of them continue to favor in-house development and manufacture over outsourcing to CDMOs. The global bio/pharma sector’s outsourcing propensity has declined sharply in the past 10 years as the 25 largest companies have built up internal capacity, especially for biologics and advanced therapies; the share of global bio/pharma NMEs that are contract-manufactured has fallen from nearly 50% 10 years ago to only 20% in 2015/16.
This article is reprinted from the May issue of Bio/Pharmaceutical Outsourcing Report. The full article addresses the continued growth in capex and it’s effect on the global bio/pharma sector. To learn more, click here.