Exchange Rates Alter CMO Competitiveness
Sharp movements in exchange rates between the US dollar and major developed country currencies could hurt the competitiveness of US-based CMO operations in coming years. At the same time, they could spur even further consolidation in the CMO industry.
Both the euro and Canadian dollar have lost 17% of their value relative to the US dollar in the past year. That means that a €1 million manufacturing or development contract with a European CDMO, which would have cost a US client $1.3 million in 2014, will now cost that US client just $1.1 million. Similarly, a CAD 1 million contract with a Canadian CDMO, which would have cost a US client $910,000 in 2014, will now cost that US client just $760,000.
For US-based CDMOs looking to court European and Canadian clients, the appreciating US dollar is becoming a major impediment. A European client considering a $1 million manufacturing or development contract will be facing a €909,000 expense in 2015 versus €750,000 just a year ago. The Canadian client is looking at spending CAD 1.3 million versus CAD 1.1 million a year ago.
Moreover, the situation could get worse for US-based CDMOs in the next year or two. This article is reprinted from the December issue of Biopharmaceutical Outsourcing Report. The full article addresses the impact the exchange rates will have on the industry. To learn more, click here.