Overview:

In-depth interviews were conducted with various primary respondents, including key industry participants, subject-matter experts (SMEs), C-level executives of key market players, and industry consultants, to obtain and verify critical qualitative and quantitative information and assess growth prospects of the market. The global market size estimated through secondary research was then triangulated with inputs from primary research to arrive at the final market size.

DRIVER: Growing R&D expenditure in the Pharma and Biopharma companies

Most pharmaceutical, biopharmaceutical, and medical device companies invest heavily in developing novel drugs and devices. The pharmaceutical industry is R&D-intensive. Pharmaceutical companies invest in R&D to deliver high-quality and innovative products to the market. Trends suggest that the top pharma companies are increasing their R&D efficiencies through heavy R&D investments to see returns in the longer term and through collaborative R&D efforts.

According to the EvaluatePharma report, worldwide pharmaceutical R&D spending was valued at USD 137 billion in 2012; this increased to USD 198 billion in 2020. As a result of the COVID-19 outbreak, the global pharma R&D growth rate dropped to 0.1% in 2020. According to the report, this R&D spend is expected to grow steadily between 2020 and 2026 at a CAGR of 4.2% to reach USD 254.0 billion, slower than the historical CAGR of 4.7% between 2012 and 2020.

RESTRAINT: Stringent regulations governing drug discovery and animal usage

Securing safety and efficacy is the prime focus of regulatory authorities during drug approval. Although these approaches help ensure the quality of the products launched in the market, they substantially increase the cost of drug development and the final product. In price-sensitive emerging markets, this factor can significantly impact the uptake of a particular drug. Apart from this, various legislations that ensure the quality of the product (such as GMP) often increase manufacturing costs.

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Stringent guidelines govern the usage of animals in drug discovery. Mice, rats, fish, amphibians, and reptiles are the commonly used animals in any research. Concerns regarding the ethical use of animals in research have driven governments to introduce legislation for animal safety and use, which presents several challenges to the smooth functioning of drug discovery research. This has forced companies to implement other techniques to minimize animal use. For example, Novo Nordisk uses biosimulation, which involves using computer models to simulate human biology. However, this has not been fully adopted across the industry.

OPPORTUNITY: Growth in drugs and biologics market despite Covid-19 Pandemic

Despite the ongoing COVID-19 pandemic, 2020 has been the second-best year for the pharmaceutical industry regarding the number of drugs approved by the US FDA. This year witnessed the authorization of 53 drugs—a number surpassed only in 2018 with 59 pharmaceutical agents. The 53 approvals in 2020 comprised 40 new chemical entities and 13 biologics (of which ten were monoclonal antibodies, two were antibody-drug conjugates, three were peptides, and two, oligonucleotides). The FDA authorized 160 drugs in the last three years (2018–2020), compared to the approval of only 21 drugs in 2010.

This growth in the number of approved products worldwide is attributed to the rising investments by biopharmaceutical companies to develop biologics and biosimilars. More than half of the drug candidates in the discovery stage are biologics, such as proteins, peptides, and monoclonal antibodies. Biologics are expected to contribute around half of the revenue generated by the top 100 pharmaceutical product sales in 2022.

The Hit-to-lead identification segment accounted for the largest share of the process segment in the drug discovery services market in 2020.

Based on process, the drug discovery services market is broadly classified into target selection, target validation, hit-to-lead identification, lead optimization, and candidate validation. Hit-to-lead identification segment accounted for the largest share of the drug discovery services market in 2020. Due to its vital role in drug discovery, hit-to-lead identification is the most revenue-generating process, and currently, many CROs are offering these services to pharmaceutical companies.

Geographical Growth Dynamics:

The Asia Pacific region is the fastest-growing region of the drug discovery services market in 2020.

Based on the region, the drug discovery market is segmented into five major regions: North America, Europe, Asia Pacific, Latin America, and the Middle East & Africa. The Asia Pacific market is estimated to register the highest growth during the forecast period primarily due to expanding pharmaceutical and biopharmaceutical industry, rising number of CROs, implementation of favorable government policies, increasing number of newly established R&D and manufacturing facilities, and the presence of less-stringent regulations for drug discovery processes (especially in terms of using animals for research) in several APAC countries.

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