Formulation Development Outsourcing Market Size, Share | 2031

Report Description

Formulation Development Outsourcing Market Outlook 2031

The global formulation development outsourcing market size was USD 34.92 Bn in 2022 and is likely to reach USD 64.2 Bn by 2031, expanding at a CAGR of 7% during 2023–2031. The market growth is attributed to the rising demand for patent protection and increasing demand for medication for chronic diseases.

Increasing complexity of drug formulations is anticipated to significantly boost the market. Rising research and development costs for in-house formulation including investment in equipment, personnel, and facilities drive pharmaceutical companies to swiftly pursue cost-effective outsourcing solutions.

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Outsourcing formulation development significantly reduces costs associated with maintaining in-house facilities and specialized personnel. Manufacturers leverage the cost advantage of outsourcing to access high-quality services at a fraction of the expense compared to establishing and maintaining internal capabilities. Additionally, patent expirations open the door for generic versions of previously patented drugs, leading to a surge in demand for formulation development services for generic equivalents. The growing need for drug formulation and innovation has boosted the demand for outsourcing agencies that can manage active contract formulation activities. For instance,

• As per the recent data published in March 2023, Merk and Co. increased R&D expenses during 2020-2022, which were approximately USD 13.5 billion.

The market report finds that the COVID-19 pandemic affected the formulation development outsourcing market. The pandemic disrupted global supply chains, which affected the availability of raw materials and ingredients needed for formulation development. This led to the delay in projects and increased costs. Additionally, the pharmaceutical and biotechnology industries faced increased demand for drug development and manufacturing, particularly for COVID-19-related treatments and vaccines. This surge in demand has increased the need for formulation development outsourcing services.

• In 2020, the FDA’s Center for Drug Evaluation and Research (CDER) approved the first COVID-19 treatment for hospitalized adults and adolescents. Additionally, the FDA approved the first drug in a new class for adults with HIV-1 who have unsuccessfully tried multiple medications due to resistance, intolerance, or safety concerns.

Impact of Artificial Intelligence (AI) on the Formulation Development Outsourcing Market

Artificial Intelligence (AI) is expected to boost the revenue of the market players present in the formulation development outsourcing market. This technology analyzes vast amounts of data to identify patterns and correlations that are challenging for traditional methods. In formulation development, AI assists in analyzing data related to different formulations while predicting the effective combinations of ingredients, dosage forms, and manufacturing processes.

• In 2023, the FDA granted its inaugural Orphan Drug Designation to a medication developed and formulated through artificial intelligence by Insilico Medicine. The company is set to initiate a worldwide Phase II trial for the drug later this year.

Formulation Development Outsourcing Market Dynamics

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Major Drivers

Growing chronic diseases and rising infectious diseases drive the market. Chronic conditions often require complex and targeted drug formulations due to the long-term nature of treatment. Diseases such as diabetes, cardiovascular disorders, and autoimmune diseases necessitate formulations that ensure sustained release, improved bioavailability, and enhanced patient compliance. Developing such formulations requires specialized expertise, thus driving companies seek external assistance through outsourcing.

• According to the World Health Organization report published in September 2023, reveals that cardiovascular diseases are the leading cause of noncommunicable disease (NCD) deaths, claiming 17.9 million lives annually. This is followed by cancers which reached 9.3 million, chronic respiratory diseases around 4.1 million, and diabetes nearly 2.0 million, including deaths from kidney disease related to diabetes.

Existing Restraints

Increased scrutiny results in more stringent regulatory requirements that hamper the market. Adverse effects of drugs hamper the market. Adverse drug reactions lead to increased regulatory inspection. Regulatory authorities require additional safety assessments, data, or modifications to formulations to address potential risks. This increased inquiry results in stringent regulatory requirements, which impacts the outsourcing process.

Emerging Opportunities

Advanced drug delivery technologies create lucrative opportunities in the market. Advanced drug delivery technologies such as nanoparticle formulations, liposomal delivery systems, and microneedle patches, requiring specialized expertise. Outsourcing partners with a focus on these technologies offer their knowledge and capabilities to pharmaceutical companies who seek to develop formulations with enhanced therapeutic profiles.

Scope of the Formulation Development Outsourcing Market Report

The market report includes an assessment of the market trends, segments, and regional markets. Overview and dynamics have also been included in the report.

Market Segment Insights

Service Segment Analysis

Based on service, the formulation development outsourcing market is divided into formulation optimization and pre-formulation. The pre-formulation segment is expected to hold a dominant share of the market during the projection period, as it reduces the risk associated with formulation.

Pre-formulation is a crucial initial stage in the drug development process where the physical and chemical properties of a drug candidate are assessed before moving into formulation. Identifying and addressing issues related to drug candidate properties early in the development process helps in mitigating risks associated with formulation. This proactive approach prevents costly setbacks and failures in the later stages of development, making pre-formulation services essential for pharmaceutical companies.

The formulation optimization segment is expected to expand at a significant pace in the coming years, as it refines the efficacy and safety of products. Formulation optimization is crucial for enhancing the efficacy and safety of pharmaceutical products. Pharmaceutical companies aim to develop formulations that deliver the right dose of active pharmaceutical ingredient (API) in a manner to maximizes therapeutic effects while minimizing side effects. Thus, optimization helps to achieve their desired balance.

• As per the Congressional Budget Office in April 2021, the process of developing new drugs is both expensive and fraught with uncertainty, this report revealed that approximately 12% of drugs that enter clinical trials ultimately receive approval for introduction by the FDA. Recent studies provide varying estimates of the average research and development (R&D) cost per new drug, ranging from slightly below USD 1 billion to well over USD 2 billion per drug.

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Formulation Segment Analysis

On the basis of formulation, the global market is segregated into injectable, inhaled, oral, topical, and others. The oral segment is projected to register a high CAGR during the forecast period due to increasing demand for oral dosage forms and growing technological advancements.

Rising demand for oral medications or supplements encourages companies to specialize in the development of oral formulations. This is driven by factors such as patient preferences, ease of administration, and the prevalence of oral dosage forms in pharmaceuticals. The adoption of advanced technologies and innovative approaches in oral formulation development leads to improved drug delivery systems, enhanced bioavailability, and other formulation innovations. For instance,

• In January 2023, WuXi STA unveiled a new oral solid continuous manufacturing line at its formulation development and manufacturing site. This line is equipped with direct compression machinery, incorporating unit processes for dispensing, blending, lubricating, compressing tablets, and coating.

Therapeutic Area Segment Analysis

Based on therapeutic area, the formulation development outsourcing market is segmented into oncology, respiratory, genetic disorders, infectious disease, neurology, cardiovascular, and others. The oncology segment is anticipated to register a robust growth during the forecast period due to the increasing incidences of cancer and growing advancements in cancer research.

Rising prevalence of cancer across the globe increases the demand for novel and effective oncology treatments. Growing cases of cancers encourage pharmaceutical companies to invest in outsourcing formulation development services to accelerate the development of new therapies. Furthermore, ongoing advancements in cancer research including the identification of new targets and the development of innovative treatment modalities boost the segment.

The infectious disease segment is anticipated to gain significant revenue share owing to the growing demand for research and testing. The complexity of infectious diseases necessitates extensive research and testing for the development of effective therapies and vaccines. Formulation development outsourcing providers play a crucial role in supporting pharmaceutical companies by offering specialized services that accelerate the research and testing phases. Furthermore, the growing prevalence of infectious diseases drives the development of new drugs, which affects market growth.

• As per the recent data published in 2023, approximately 10.6 million individuals around the world developed tuberculosis and approximately 369,581 cases of mumps in 2022.

End-user Segment Analysis

Based on end-user, the formulation development outsourcing market is divided into government, pharmaceutical & biopharmaceutical, and research & academic institutes. The research & academic institutes segment is expected to generate a major revenue share of the market, as they have access to cutting-edge technologies and diverse research facilities.

Academic and research institutions are often at the forefront of technological advancements. Pharmaceutical companies choose to outsource formulation development to these institutes to leverage cutting-edge technologies and innovative approaches in drug development. Additionally, research institutions often have diverse and well-equipped research facilities. This infrastructure is crucial for conducting experiments, trials, and analyses related to formulation development.

The pharmaceutical & biopharmaceutical segment is projected to expand at a considerable pace during the projection period due to the presence of specialized expertise. Pharmaceutical and biopharmaceutical firms often require specialized expertise in formulation development, especially for complex drug modalities such as biologics. Outsourcing to providers with specific knowledge and experience in these areas is more cost-effective than maintaining such capabilities in-house.

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Regional Outlook

In terms of region, the global formulation development outsourcing market is classified as Asia Pacific, North America, Latin America, Europe, and Middle East & Africa. Asia Pacific is expected to dominate the market during the projection period due to the growing number of pharmaceutical companies and high demand for cost-effective services.

Asia Pacific is home to a significant number of contract research organizations (CROs) that offer cost-effective formulation development services. The competitive pricing of these services attracts pharmaceutical companies looking to optimize their R&D budgets without compromising on quality. Furthermore, Asia Pacific has experienced substantial growth in its pharmaceutical industry with a rise in research and development activities, contributing to a boost of Asia Pacific in the formulation development outsourcing market.

The market in North America is projected to grow rapidly during the forecast period due to the presence of advanced biopharmaceutical industry. North America, particularly the US, is home to a robust and advanced biopharmaceutical industry. The region leads to the development of biologics, biosimilars, and other complex drug formulations, which drives the demand for formulation development outsourcing services.

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