Lessons from CPHI Milan 2024: Sunny Intervals for Pharma Manufacturing?

As the 2024 CPHI conference wrapped up in Milan, we caught up with L.E.K. Consulting – a global strategy consulting firm with deep expertise in pharma manufacturing – to discuss evolving market perspectives and business outlook.  

What are some of your biggest takeaways following your discussions at CPHI Milan? 

Across CPHI participants, there was a feeling of cautious optimism following post-COVID market unwinding and a recent decline in biotech funding. Attendees were generally positive about the outlook for CDMOs and other providers, boosted by underlying demand for healthcare services and products, and sustained growth in innovation across complex modalities, formulations and delivery systems. Market participants appear to be shifting away from reactive problem-solving, focusing instead on opportunities for growth and collaboration.  

A key trend discussed at CPHI is the ongoing recovery of biotech funding. September 2024 marked the highest funding month in two years, supporting continued recovery of funding for successful start-ups. Biotechs are a key driver of innovation for the sector, and a major customer type for services, especially in the early stages of the value chain. The return of more significant biotech funding will not only translate into more immediate spend on early-stage services but also into other services in the longer term as programs develop. The resurgence of ‘mass market’ TAs like diabetes/obesity is a key opportunity for those able to capitalise on it.

With GLP-1s forecasted to reach nearly $50 billion in sales in 2024, the class of drugs was a star of the conference and the focus of many conversations: CDMOs and pharma manufacturers are actively expanding capacity to meet rising demand. The opportunity for metabolic conditions with commercial drugs also expands to MASH (metabolic dysfunction-associated steatohepatitis), an area boosted by the recent FDA approval of Madrigal’s Rezdiffra in March 2024, with more drugs in late-stage clinical development.

Additionally, the US BIOSECURE Act – another key topic of discussion among participants– has potential to reshape global pharma supply chains by encouraging ‘nearshoring’ from China into Europe, the US, and potentially India, creating new ‘onshore’ and ‘nearshore’ opportunities. Supply chain resilience remains a high priority for the pharma sector, and recent US election results are prompting further scrutiny. 

Inflationary pressures have abated, with salary and input costs starting to stabilise. Overall, the outlook for pharma manufacturing is more promising than in recent years, shifting towards one of cautious optimism. 

What are some of the key challenges facing the industry?  

Outsourcing – a previously consistent driver of growth for contract services – is stabilising among large pharma, with strategic investments in internal capacity for high-value strategic products. Recent moves include Novo Nordisk’s bid on Catalent fill-finish facilities to strengthen GLP-1 production, AstraZeneca’s plans to build an end-to-end antibody-drug conjugate (ADC) manufacturing site, and Novartis’ expansion of its radioligand facility.  

This may limit growth opportunities with large biopharma clients for CDMOs that are focused on some of these strategic areas, and will require them to pivot towards small-mid pharma and biotechs. Providers focused on complex modalities that are hard to manufacture (e.g., cell-therapy, next-generation vaccines and ADCs) will continue to be well positioned to capitalise on growth and areas of supply constraints. 

AI tools are expected to enhance productivity, but the ability to integrate these technologies remains complex. For many, maintaining competitiveness will hinge on targeted investments in advanced, specialised capabilities that address industry needs, and using these tools to drive efficiencies and differentiation. 

What about sustainability? How are pharmaceutical manufacturing supply chains responding to increased demand for sustainable practices? 

Integrating sustainability into organisational strategy is now becoming essential for CROs and CDMOs to remain competitive and drive growth, with a recent L.E.K. survey indicating that 67% of healthcare executives see increased ESG scrutiny from investors.  

Supplier energy-use and decarbonisation are priority areas for pharmacos; as of the end of 2023, 13 of the top 20 pharmacos had committed to net-zero including Scope 3 emissions, putting pressure on suppliers to report and action on their own emissions. Practically, CROs and CDMOs will also be impacted by regulations emerging in the US, UK, and Europe from 2025 onwards; these will require all companies to make disclosures and set ESG-related targets. 

For many, the main barrier is the challenge of creating value for the industry rather than simply adding costs. At CPHI, there were productive discussions on this topic, with attendees sharing insights and learnings from outside pharma to explore practical approaches to sustainable practices. Embedding sustainability into broader corporate strategy can drive commercial value and differentiation for CROs/CDMOs. This includes value-creation initiatives around product differentiation and innovation as well as cost savings.  

Strategic partnerships have been a key topic in recent years. What was the latest sentiment from attendees? 

Interest in partnerships and collaborations remains strong, with companies seeing these alliances as essential to navigating sector complexities. Despite this optimism, some participants voiced concerns about potential geopolitical disruptions that could lead to regional silos, particularly in light of the recent US election outcome and BIOSECURE Act. 

As one attendee noted, “Our discussions with customers are finally less around problem-solving and more about new collaborations and opportunities,” marking a shift towards growth-focused alliances. However, companies will need to manage these opportunities with an awareness of evolving geopolitical and regional dynamics. 

What does the future hold for pharma contract manufacturing businesses? 

For contract manufacturing organisations and other service providers, the message from CPHI was clear: navigating this complex and dynamic market requires proactive planning and careful differentiation. Success in the coming years will hinge on a targeted approach to investment, focused on high-growth areas such as GLP-1 manufacturing, complex formulations, and the ability to offer differentiated, specialised capabilities. 

Companies that are able to rapidly scale capabilities and leverage deep technical expertise in high growth segments will be better positioned to capture market share as demand recovers. At the same time, flawless commercial and operational execution is more important than ever and will be critical to winning and retaining clients. 

Final remarks 

While the post-COVID market recovery has been slower than many expected, there are ample opportunities for growth, and the industry recognises the opportunity to build positive momentum by acting strategically. 

L.E.K. Consulting’s Pharma Services practice helps CDMOs and other contract services clients to evolve and scale business models, expand their service offerings, increase ROI and execute value-creating deals, so they can better win in a challenging, global healthcare market (https://www.lek.com/industries/life-sciences-pharma/pharma-services).