Pharma Industry Sees Increasing Capital Expenditures

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Capital expenditure in new plant and equipment (capex) by the bio/pharmaceutical industry increased sharply in 2014. Total spend exceeded $21.4 billion, a 13% increase over 2013 and more than the 11% annual increase observed from 2010 through 2013.

Spending by the 25 largest global biopharma companies increased by 10.5% to $19.2 billion, while capex by the mid-size sector rose 46% to $2.2 billion in 2014.

It’s especially notable that a number of mid-size companies that had enthusiastically championed outsourcing are now building captive manufacturing capacity. For instance, Gilead, Alexion, Regeneron and Allergan more than doubled their capital expenditures in the past year, and Regeneron intends to hike spending to $650 million in 2015, up from $333 million in 2014.

PharmSource research shows that mid-size companies outsourced approximately half their products during the 2010-2014 period, and CDMOs have typically identified mid-size companies as their best customers (for more on this see our report: CMO Scorecard: Outsourcing of NDA Approvals and CMO Performance). The propensity to build capacity could be a risk factor for CDMOs. In particular, CDMOs need to respond to the needs for more flexible scheduling and operations appropriate to the niche products being developed.

This article is reprinted from the May 2015 issue of Bio/Pharmaceutical Outsourcing Report. To learn more, click here.

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Jim Miller is the founder and president of PharmSource Information Services, Inc. A preeminent expert in bio/pharmaceutical outsourcing, Jim established and presides over the industry’s principal resource for serious consumers of information on contract drug development and manufacturing, PharmSource STRATEGIC ADVANTAGE. He is editor and publisher of Bio/Pharmaceutical Outsourcing Report and Emerging Markets Outsourcing Report.

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