Pharmaceutical companies are increasingly outsourcing "non-core" activities, in particular manufacturing. By doing so, they can cut costs and focus their resources on more value added activities of research and marketing and sales. This has created significant growth opportunities for contract manufacturing organizations (CMOs) around the world, with the volume of outsourcing almost doubling since 2006.

Despite abundant growth opportunities, the route to success for CMOs can be challenging. They are exposed to a range of unknown factors including changing government reimbursement policies, branded drugs becoming generics and new product launches.

In order to mitigate the impact of these potential risks, CMOs need to identify and position themselves in segments where underlying drivers are attractive, growth prospects are strong and barriers to entry are high.

In this Executive Insights, L.E.K. Consulting's Arnaud SergentSerge Hovsepian and Ben Faircloth examine the opportunities and risks in the outsourced manufacturing market, and identify four specialization strategies that CMOs can adopt in order to build a differentiated and successful business in this buoyant but complex market.

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