Report
Dominic Rose ...
  • Naresh Chouhan
EUR 4799.50 For Business Accounts Only

Global CDMOs - Overcapacity is Coming (Thematic Research)

We have calculated the significant supply about to enter the biologics manufacturing space & analysed demand growth. Whilst the market assumes an improvement in utilisation from 2024, we forecast there will be significant overcapacity in the coming years resulting in even lower utilisation at an industry level. Our detailed bottom-up analysis shows that total mammalian cell supply is set to grow by 11% p.a. 2023-26 but demand is set to grow just 8% p.a. over the same period. However, much more concerningly, CDMO supply is expected to grow ~20% CAGR 2023-26. In our view, this will have dramatic consequences for utilisation, price, & therefore sales growth and profitability, driving significant market disruption. Consensus margin growth expectations of 440bps over 2023-26 for Lonza/Wuxi/Samsung look far too optimistic to us.

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Underlyings
Agilent Technologies Inc.

Agilent Technologies is engaged in life sciences, diagnostics and applied chemical markets. The company's segments are: Life Sciences and Applied Markets Business, which provides instruments and software that enable customers to identify, quantify and analyze the physical and biological properties of substances and products; Diagnostics and Genomics Business, which includes the genomics, nucleic acid contract manufacturing and research and development, pathology, companion diagnostics, reagent partnership and biomolecular analysis businesses; and Agilent CrossLab Business, which spans the entire lab with its consumables and services portfolio to improve customer outcomes.

Avantor Inc.

Avantor is a global provider of mission critical products and services to customers in the biopharma, healthcare, education and government, and advanced technologies and applied materials industries. The company's comprehensive offerings, which include materials & consumables, equipment & instrumentation and services and specialty procurement, are relied upon by its customers, often on a recurring basis, because they are frequently specified into their research, development and production processes. The company operates in more than 30 countries and deliver an extensive portfolio of mission critical products, services and solutions.

Bachem Holding AG Class B

Bachem Holding is a technology-based company specializing in the development of manufacturing processes for the production of biochemical and pharmaceutical compounds for the pharma and biotech industries, as well as the development of manufacturing processes. Co. specializes in process development and manufacturing of peptides and complex organic active pharmaceutical ingredients and biochemicals for research purposes. In the field of generics, Co. offers both peptides used for the manufacture of pharmaceuticals as well as organic active ingredients that have run out of patent. Co.'s range of research ingredients covers the catalog business as well as custom synthesis.

Catalent Inc

Catalent is a holding company. Through its subsidiaries, the company is a provider of delivery technologies and development solutions for drugs, biologics and consumer health products. The company operates in four segments: Softgel Technologies, which provides formulation, development and manufacturing services for soft capsules; Biologics and Specialty Drug Delivery, which provides drug substance development and manufacturing; Oral Drug Delivery, which provides various formulation development and manufacturing technologies; and Clinical Supply Services, which provides manufacturing, packaging, storage, distribution, project management, and inventory management for drugs and biologics in clinical trials.

Charles River Laboratories International Inc.

Charles River Laboratories International is a contract research organization. The company has a laboratory animal medicine and science to develop a portfolio of discovery and safety assessment services. The company's segments are: Research Models and Services, which supplies research models to the drug development industry; Discovery and Safety Assessment (DSA), which provides DSA services, including in vitro and in vivo studies, laboratory support services, and strategic non-clinical consulting and program management to support product development; and Manufacturing Support, which ensures the production and release of products manufactured by the company's clients.

DANAHER CORPORATION

Danaher designs, manufactures and markets medical, industrial and commercial products and services. The company's segments include: Life Sciences, which provides research tools to study genes, proteins, metabolites and cells, in order to understand the causes of disease, identify therapies and test drugs and vaccines; Diagnostics, which provides analytical instruments, reagents, consumables, software and services that hospitals, physicians' offices, reference laboratories and other critical care settings use to diagnose disease and make treatment decisions; and Environmental and Applied Solutions, which provides products and services to protect resources and global food and water supplies.

Lonza Group AG

Lonza supplies services and products that range from active pharmaceutical ingredients and stem-cell therapies to drinking water sanitizers, from vitamin B compounds and organic personal care ingredients to agricultural products, and from industrial preservatives to microbial control solutions. Co. operates in two segments: Lonza Pharma & Biotech, which clusters all of Co.'s offerings for pharmaceutical markets, focuses on providing custom development, custom manufacturing, cell therapy, viral therapeutics and bioscience solutions; and Lonza Specialty Ingredients, which includes offerings in its consumer care, agro ingredients, industrial solutions, wood protection and water treatment.

Merck KGaA

Merck is a global science and technology company based in Germany. Co. diversifies its activities into four business divisions: Merck Serono, Consumer Health, Performance Materials and Merck Millipore. The Merck Serono develops, manufactures and markets prescription drugs to treat cancer, multiple sclerosis, infertility, growth disorders, and selected cardiovascular and metabolic diseases. The Consumer Health manufactures and markets over-the-counter drugs addressing health themes such as mobility, women's and children's health, cough and cold. Performance Materials is a specialty chemicals business. The Merck Millipore is the supplier of products and services for the life science industry.

SAMSUNG BIOLOGICS Co. Ltd.

Samsung Biologics is engaged in the manufacture of biological products. Co. provides CMO (Contract Manufacturing Organization) services that serve other domestic and international pharmaceutical companies on a contract basis to produce high-tech biomedicine as of the date when the business report is submitted. Co.is also engages in the research & development and commercialization of biosimilar products.

Sartorius AG Pref

Sartorius Stedim Biotech SA

Sartorius Stedim Biotech is a provider of equipment and services for the development, quality assurance and production processes of the biopharmaceutical industry. Co.'s solutions cover fermentation, filtration, purification, fluid management and lab technologies and membrane chromatography, including various conventional lab products to biopharmaceutical laboratories. Co.'s technologies, products and services are used to develop and manufacture medications and vaccines using biological methods. Co.'s products covers all upstream and downstream steps in the production of active pharmaceutical ingredients. It specializes in single-use products and offers technical consulting and services.

Siegfried Holding AG

Siegfried Holding is a worldwide pharmaceutical supplier with production sites in Switzerland, Malta, and in the United States. Co. develops manufacturing processes for active pharmaceutical ingredients and their intermediates and manufactures these (Drug Substances). Co. also produces finished pharmaceutical products (Drug Products).

Thermo Fisher Scientific Inc.

Thermo Fisher Scientific is engaged in serving science. The company's segments include: Life Sciences Solutions, which provides reagents, instruments and consumables used in biological and medical research, discovery and production of new drugs and vaccines as well as diagnosis of disease; Analytical Instruments, which provides instruments, consumables, software and services that are used for a range of applications in the laboratory, on the production line and in the field; and Specialty Diagnostics, which provides diagnostic test kits, reagents, culture media, instruments and associated products for customers in healthcare, clinical, pharmaceutical, industrial, and food safety laboratories.

WUXI BIOLOGICS CAYMAN INC

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Analysts
Dominic Rose

Naresh Chouhan

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