The ability of the global economy to adapt and recover has been in full evidence in the last year as the war in Europe continues, and the industry has adapted to ongoing supply chain and energy shocks. Yet despite this uncertainty, overall, pharma has used the last few years to build in more resilience and, with clinical development continuing in force again, the remaining primary drag factor on future prospects is the relative weakness in early-stage funding and valuations. Inflation, the other nagging macro-economic threat, also appears to have reached the crescent of its accent. The majority of economists predict global figures will fall back in 2024, creating a more stable fiscal environment from which to invest and grow. In fact, the IMF’s medium-term analysis is that western interest rates will return to pre-pandemic lows once inflation subsides.¹

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Methodology
This is the seventh CPHI Annual Survey and explore the insights of over 250 industry executives from every region of the globe. The rankings evaluate all major pharmaceutical markets across key indicators including growth potential, quality of API manufacturing, competitiveness, and quality of finished product manufacturing among many others survey questions—culminating in overall scores for each country. In addition, the rankings will this year provide first ever reading on the biotech industry in Europe—with the launch of the European Biotech Rankings—as well as categories across biologics quality of bioprocessing, growth and ‘innovation. This report is published at annually and released at CPHI Barcelona 2023 (October 24-26th).

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To reflect the trends of the wider industry, this year’s survey has also pivoted away from last year’s psychedelic influenced focus to look more prescriptively at the role AI might play in the industry through the next 5 years—from manufacturing process innovations to marketing dossiers and, of course, in the development of more druggable targets. The other notable shift has been the gradual and, in some cases, sudden reduction in the value of Covid related contracts for CDMOs and CMOs. Yet, remove the market distortion caused by this once in a century event, the underlying growth for the industry looks very healthy and robust with many new targets and classes proliferating. So, even accounting for the medium term run through of potentially reduced outsourcing contracts as a result of the presently cooled funding environment, prospects on the whole look strong.

Technology has however, advanced unrelentingly with microbiome therapies, cell and gene therapies and both RNA and oligo targets continuing to generate much excitement—not least among CDMOs who have invested in increasing capacities to develop these newer product classes. To take one specific example, LNPs (lipid nanoparticles) have already been proven effective in delivery to the liver and research into their use in other tissues for advanced therapy products could deliver a breakthrough in the next 12-24 months. LNPs also come with lower manufacturing challenges and reduced toxicity—compared to adeno-associated virus (AAV) vectors—so this could be a potentially step change improvement that advances targets while bringing down costs.

Looking at the spread and make up of global pharma markets we have seen significant market ambivalence in both information and rhetoric around macro and geopolitical factors. For example, in manufacturing and chemistry services pharma news and governmental interest has often focused on the importance of secondary supply chains, resilience and local manufacturing—yet companies in China and India (widely believed to be “the losers” of the drive for near-sourced manufacturing) have on the whole performed very strongly. For example, profits at CDMOs WuXi Apptech,² Pharmaron,³ Syngene⁴ and Asymchem⁵ have continued to reach record levels in the last 18-months. While this might partly be attributed to strength in their domestic markets and/or growth in newer regions outside of the West—it perhaps suggests that undoing 20-years of outsourcing is perhaps easier said than done. In fact, when digging through their respective Annual Reports it quickly becomes clear that their growth in western markets is no less impressive.

Another shift we have seen is in the location of global R&D centers. Biotech hubs are proliferating, and we have seen this accelerate throughout the pandemic years. While the handful of larger metro hubs in the U.S. are known (i.e. the Bay area, San Diego, Boston, Philadelphia, Raleigh/Durham etc.⁶), as are the fast growth centers in China (notably Beijing, Shanghai and Pearl River Delta areas⁷), European hubs in contrast have diversified quickly and have not yet received the international credit they perhaps deserve. In response, this year CPHI will introduce the European Biotech Ranking in which we will monitor the rise and fall of major research hubs across the continent. In particular for 2023, with our eponymous event being held in the city, Barcelona’s emerging biotech and manufacturing region will to be explored in much greater depth. The survey will focus on what the wider region needs to do to continue its rise and potentially become more of a globally significant driver of new therapies, technologies, and life science breakthroughs.

Finally, looking much further into the future, we asked the market for their perspectives on: “when and how a cancer vaccine could potentially come to market”; “are microbiome therapies at a watershed with Rebyota’s approval”; “what technologies will be in routine use in 2026”; and, of course, “where might the perpetual advance of AI take us” and is the hype justified. For example, in what year will the industry record the first fully “AI discovered, developed and commercialized drug therapy” approved by the FDA and what percentage of drugs will be developed using AI by 2033.

Artificial Intelligence

In line with the buzz across other industries, executives in pharma forecast that artificial intelligence (AI) development and use in pharma will continue to increase extremely quickly.  Companies developing AI technologies for drug discovery (24.85%) were identified as the most appealing investment options for the first time. Historically, in all other years of the survey’s history “innovation led biotechs” were selected as the most promising investment option. This emphasizes a huge shift in business strategies, indicating that while historically biotech has been the chief money generating sector of the industry, AI is now becoming a serious contender and can be used far wider than previously envisaged.


Significantly, AI drug discovery was identified by some 60% of executives as a technology that will be “used routinely in 2026,” with 42% forecasting that the first “FDA-approved drug discovered by AI” will be seen in the next 2-5 years, but this may well happen even sooner. Pharma companies seem to agree, and we have seen a who’s who of big pharma partnership with tech companies from Sanofi, Merck, Pfizer and GSK to Bayer, BMS, Lilly, AZ Jansen and Novartis.⁸ While Moderna has described itself as “laser focused on AI,” Morgan Stanley is predicting industry spending on AI will top $50 billion per year within the decade.⁹

“The tools we have today to evaluate genetic material and protein structures are tremendous. As we gather data, the models we use for evaluation within AI will improve and our criteria and insight will become more refined, allowing us to design and direct evaluation models more efficiently,” said Bikash Chatterjee, president and chief science officer, Pharmatech Associates, a USP Company. “I would agree that we are very near to seeing AI discovered molecules getting approved today—within the next two to five years. In the next decade it is likely most drug therapies will be identified by some element of AI.”


Similarly, while machine learning may not be considered true AI, it is still a significant technology that rarely requires direct human input and will help accelerate many processing activities—particularly those that require ongoing monitoring. Additionally, executives also suggest that AI has the potential to help build base regulatory submission materials and this will be a frequently used approach as the technology matures.

If we take a step back, we also see that AI is heavily involved in all four of the top technologies predicted to be used routinely in 2026, illustrating that the majority of executives now think AI will a major force evolving the pharma landscape during the next 5-years.


Already we have seen several promising programs and the much-promised rapid development. For example, it was reported earlier this year that an experimental psoriasis drug delivered a compound that was discovered by in just six months and has already progressed to the final stages of clinical trials.¹⁰ Ordinarily, the process would have many taken years to advance to this stage. If it succeeds, this would be one of the first therapies discovered by AI.

AI is not only beneficial for areas in pharma like drug discovery and development but can also support the global economy. Chatterjee added, “A recent study estimated that global GDP could be up 14% higher in 2030 as a result of AI—the equivalent of an additional $15.7 trillion—making it the biggest commercial opportunity in today’s economy.”

Additionally, AI attracts nearly $3 billion in venture capital investments. Despite the promise AI holds, it still faces challenges, specifically related to scale, growth, diversity, and uncertainty of data AI uses. Later in this report, Chatterjee will cover how AI will impact drug development and pharmaceutical manufacturing more in depth.

Sheila Mikhail, co-founder and former CEO of AskBio, a company currently using AI to design capsids and screen targets/options more efficiently, envisions AI being used to streamline gene therapy processes and clinical trials. She states, “I think AI is even going to be used for clinical trials to help us accelerate the process in terms of patient selection and possibly even simulations. I think we’ll be able to have much more predictive capability. AI is therefore an essential component for the future of gene therapy.”

Global executives agree with Mikhail, predicting boldly that in as little as 10-years’ time, “over 50% of new drugs will have used AI in some part of its discovery, development or manufacturing.”

Related automation is also accelerating and a report from VisionGain highlights that 75% of pharmaceutical organizations aim to implement automated solutions, particularly for injectable drug delivery, to address challenges like customized dosages and prefilled syringes.¹¹

References
1. https://www.imf.org/en/Blogs/Articles/2023/04/10/interest-rates-likely-to-return-towards-pre-pandemic-levels-when-inflation-is-tamed
2. https://www.wuxiapptec.com/news/wuxi-news/5248
3. https://ir.pharmaron.com/media/1152/e22ar.pdf
4. https://annualreport.syngeneintl.com/ Ω
5. https://asymchem.com/february-newsletter-2/#:~:text=January%2030%2D%20Asymchem%20released%20its,company%20is%20approximately%20%24485M.
6. https://www.fiercebiotech.com/special-reports/top-biotech-hubs
7. https://www.cambridgenetwork.co.uk/news/overview-chinas-biopharma clusters#:~:text=Biopharma%20Clusters%20in%20China&text=For%20instance%2C%20Shanghai%20is%20the,to%20Tianjin%2C%20Dalian%20and%20Qingdao.
8. https://www.pharmaceuticalprocessingworld.com/ai-pharma-drug-development-billion-opportunity/#:~:text=Merck%20partnered%20with%20BenchSci%2C%20Atomwise,drug%20design%2C%20and%20lead%20generation.
9. https://www.economist.com/business/2023/07/13/big-pharma-is-warming-to-the-potential-of-ai
10. https://news.bloomberglaw.com/health-law-and-business/ai-drug-discovery-is-a-50-billion-opportunity-for-big-pharma
11. https://www.globenewswire.com/en/news-release/2023/03/21/2631524/0/en/Automation-in-Biopharma-Industry-Market-is-Projected-to-Grow-at-a-CAGR-of-5-7-by-2033-Visiongain-Reports-Ltd.html