Medical device contract manufacturing demand is surging during the pandemic

Source: GlobalData Healthcare

Medical device contract manufacturing is the outsourced production of a medical device. Despite the disruption caused by the Covid-19 pandemic, the contract manufacturing market has rebounded with strong demand from customers. This is reflected by the strong uptick of merger and acquisition (M&A) activities among outsourcing providers. According to GlobalData’s Medical Devices Deals Database, the total value of the deals in this field reached a record high of $1.6bn this year.

The advancement of new technologies and processes, as well as the growing ageing population, have driven the rapid growth of the medical device market, leading to intense competition among manufacturers. The global medical device industry has been under pressure to control costs without affecting product quality. By outsourcing some tasks, original equipment manufacturers (OEMs) can reduce operating costs, avoid regulatory breaches, shorten time to market and increase return on investment. A key component of medical device contract manufacturing includes offering regulatory services. Regulatory constraints in different countries have led many smaller players and certain established players to outsource a significant amount of their manufacturing operations to capable contract manufacturing organisations (CMOs).

Although medical device contract manufacturing has faced challenges due to the pandemic, the underlying demand remains strong. The medical device industry was heavily affected by the pandemic as elective surgical procedures were abruptly halted worldwide. Medical device contract manufacturing experienced similar trends due to the lower predictability of demand. Supply chain disruptions also challenged CMOs at the pandemic’s onset.

As the pandemic continues, direct labour constraints and regional variability in the recovery of elective procedures have negatively impacted market growth. The contract manufacturing market will experience a strong uptick with the normalisation of the device market in line with long-term goals. The contract manufacturing market is recovering with strong organic growth, and consolidation in the market continues at a fast pace. Outsourced manufacturing capacity is expected to be saturated with orders due to the backlog of demand from end-users. CMOs that focus on pre-clinical research and development (R&D) will enjoy revenue growth with the restarting of early-stage device programmes.

Source: GlobalData Healthcare