CDMOs and CROs weigh in on today’s analytical testing outsourcing trends, including growth trends, challenges and more.
Analytical laboratory testing plays a pivotal role in every stage of drug development and manufacturing. From route design and optimization to clinical trials and ultimately the finished product, analytical testing ensures that products used to make drugs are safe and remain safe across the drug’s lifecycle.
In the pharmaceutical industry, there are three types of tests that play an integral part in ensuring the efficacy and safety of new drugs: chemical analysis, health-related evaluations, and functional assessments. Techniques used for various types of analytical testing include microscopy, spectroscopy, chromatography, spectrometry, laser diffraction, dynamic light scattering and more.
According to a recent report by Grand View Research, the global pharmaceutical analytical testing outsourcing market size was valued at $8.3 billion in 2023 and is projected to grow at a CAGR of 8.4% from 2024 to 2030.
The market is experiencing steady growth, driven by several key factors. Firstly, the increasing emphasis on safety and quality, coupled with regulatory requirements and pricing benefits of outsourcing, has made it an attractive option for pharmaceutical companies. Additionally, the rising number of end-users seeking high-quality testing services further contributes to the market’s growth.
Secondly, companies are adopting sustainability strategies, such as increasing R&D investment, to meet the growing demands of the market. Since not all companies have the necessary infrastructure for analytical testing, outsourcing these operations provides a cost-effective and time-saving solution. Companies are opting for outsourcing to address pricing concerns, competitive pressures, and the need for faster time-to-market.
The following offers perspectives from CDMOs and CROs on today’s analytical testing outsourcing trends, from stricter regulatory compliance requirements and increasingly complex products to automation, AI, and more.
The State of the Market
The consensus among industry experts is that the analytical testing market is booming and poised for continued growth.
“The market is expanding at an unprecedented pace, driven by a wave of new products— including peptides, cell and gene therapy and more—emerging channels, and innovative formulations that have never been seen before,” says Ross Caputo, president and CEO of Eagle Analytical. “With demand continuing to rise, this has become one of the fastest-growing sectors, presenting significant opportunities for business growth and market leadership.”
“As private investment fuels pharmaceutical innovation, many companies are turning to contract testing organizations to ensure regulatory compliance and expedite time-to-market through advanced methods,” observes Shailesh Vengurlekar, senior vice president of quality and regulatory affairs, LGM Pharma. “Outsourcing allows drug developers to focus internal resources on discovery and development instead of investing time and money in routine analytical capabilities.”
Sahil Shah, Biologics Operations Manager, SGS Canada, says, “In recent years, the demand for analytical testing services for complex biopharmaceuticals, biosimilars and cell and gene therapy products has significantly increased due to the influx of the development and commercialization of complex biopharmaceutical / large molecule products such as monoclonal antibodies, fusion proteins, antibody-drug conjugates, mRNA-based products, oligonucleotides, and cell-therapy products.”
Arthur D. Besteman, director, R&D analytical development, PLD Pharma Services, concurs. “The pharmaceutical analytical testing outsourcing market is experiencing substantial growth due to the increasing complexity of drug development, pressure to bring drugs to market more quickly, and the demand for specialized analytical services,” he says.
“While many pharmaceutical companies maintain in-house labs, these are often dedicated to routine quality control (QC) and release testing rather than method development or advanced analytical testing,” Besteman explains. “Advanced techniques, such as solid-state characterization (e.g., X-ray diffraction), impurity analysis via ICP mass spectrometry, and LC mass spectrometry, are increasingly required but are often beyond the capabilities of most in-house labs. As a result, outsourcing continues to grow, particularly for complex analytical requirements.”
He specifically cites regulatory stringency, “such as increasing requirements for detecting and controlling nitrosamine and elemental impurities” as a key growth driver for outsourced analytical testing demand.
Stricter regulations in response to critical safety concerns are a frequently mentioned growth driver among industry insiders.
According to Anita Michael, executive principal consultant, pharma compliance, Regulatory Compliance Associates and Shiri Hechter, senior manager, scientific and technical services, Nelson Laboratories, “Regulatory bodies are continuously updating and tightening their guidelines to ensure the safety, efficacy, and quality of pharmaceutical products. This has led to an increased need for comprehensive and compliant analytical testing, driving the increase in analytical services outsourcing demand.”
“Stricter compliance, the rise of biologics and advanced therapies, and the need for faster market approvals are pushing pharmaceutical companies to seek specialized partners,” adds Eagle Analytical’s Ross Caputo.
This is where outsourcing offers a solution for pharmaceutical companies. Caputo says, “Outsourcing offers cost savings, regulatory expertise, and access to advanced analytical technologies, ensuring compliance while accelerating product development. As regulations continue to tighten, outsourced analytical services will play a crucial role in maintaining quality, efficiency, and market readiness.”
“Regulatory agencies are setting higher expectations for impurity detection, stability testing, and method validation, particularly in areas such as detecting extremely low levels of nitrosamine and elemental impurities,” remarks PLD’s Besteman. “The shift from qualitative risk assessments to mandatory quantitative testing has increased the need for sophisticated instrumentation and has driven demand for outsourcing to labs with specialized expertise.”
Additionally, he says some product areas such as nicotine replacement therapy (NRT) and dietary supplements are receiving more regulatory scrutiny, increasing testing requirements.
According to SGS’s Sahil Shah, “In the cell and gene space, the FDA now requires Next-Generation Sequencing (NGS) for off-target effects and vector integration site analysis, pushing test providers to expand on sequencing and bioinformatics capabilities. Furthermore, there is an increased emphasis on potency and functional assays. For example, EMA’s recent guidance on CAR-T products stresses the need for mechanism-of-action-based potency assays, prompting service providers to enhance their tailor-made assay development capabilities.”
With respect to excipients, Dr. Nigel Langley, global technical director, life sciences at Gaylord Chemical, says, “The FDA and EMA have increased their focus on diethylene glycol (DEG) and ethylene glycol (EG) impurities, both to identify deliberately adulterated excipient products and drug products and by the imposed requirement to test to tighter DEG and EG limits in certain excipients e.g. liquid polyethylene glycols, PEGs.”
Langley claims that this focus has resulted in an increased need for excipient and drug manufacturers to undertake considerably more analytical testing. As a result, contract analytical laboratories have seen an increase in requests for DEG and EG testing.
Other Challenges
The rise of biologics and cell/gene therapies has also impacted the demand for and complexity of analytical testing outsourcing.
Nelson Laboratories’ Anita Michael and Shiri Hechter cite “keeping up with the demand from industry which has a high likelihood of continual growth in the next five years to support the global supply chain” as a large challenge.
SGS’ Sahil Shah explains, “The diverse, intricate and inherently heterogenous nature of biologics and cell and gene therapy products, demands for advanced and specialized tools and methods, scientific expertise and capacity present challenges for CDMO companies.”
Furthermore, he says traditional analytical methods may no longer be sufficient to meet the need for high resolution, sensitivity, specificity and accuracy needed to analyze such heterogeneous molecules.
“This presents numerous challenges to service providers ranging from technological requirements to scalability,” Shah adds. “For example, viral-vector-based gene therapy products would require testing for genome integrity, empty/full/partial capsid ratio using a battery of tests employing NGS, ddPCR, and svAUC under GxP with highly trained staff.”
Daniel Galbraith, Chief Scientific Officer of Solvias, says, “We have seen the breadth of drug modalities expand considerably over the past few years. Cell and gene therapy now has several commercial products and an acceptance that these products have a place in treatments. Alongside this is the diversification of antibody-related products. ADCs, bispecifics, and nanobodies have all seen expansion.”
According to Galbraith, the challenge for CROs in the testing of these diverse drugs is to have sufficient platform technologies that can cope with the products.
“Some products also present some unique challenges,” he adds. For instance, some cell therapies have a very short shelf life, rendering the conventional testing protocols inadequate to deliver timely results. Consequently, we must explore alternative solutions that are “robust, compliant, and cost-effective.”
But the biggest challenge according to Galbraith is the number of drugs that are targeting orphan or rare diseases that require small batches of drugs.
“Although the regulators provide some mechanisms to reduce the challenges for these types of products, the CRO/CDMO requirements are still significant. Full GMP compliance and validation of all methods is the same regardless of the number of patient batches,” he explains.
Eagle’s Ross Caputo says, “Understanding which new technologies to implement, the necessary qualifications, and having the foresight to adapt to evolving market demands are critical for staying competitive.”
The solution? “CDMOs and analytical labs are actively investing in advanced technologies or strategically acquiring businesses that already possess these capabilities to enhance their service offerings,” Caputo remarks. “This approach not only strengthens their ability to meet regulatory expectations, and industry needs but also ensures they remain at the forefront of innovation in a fast-moving market.”
The Role of Advanced Technology
We asked the experts what role advanced technology, including automation, AI and digitalization is playing in improving efficiency and data integrity in outsourced analytical testing.
Nelson Laboratories’ Anita Michael and Shiri Hechter say, “Automation and digitalization reduce human error, increase throughput, and ensure consistent and reliable results. For example, automated chromatography systems can handle large volumes of samples with minimal manual intervention, improving both speed and accuracy.”
PLD’s Arthur Besteman says, “While AI and digitalization are still in early adoption phases within analytical testing, automation is gaining traction, particularly in terms of data processing and analysis, streamlining literature reviews, and optimizing analytical workflows.”
“Automation has become part of our day-to-day laboratory,” says Solvias’ Daniel Galbraith. “Many of the methods we use are not possible without automation, due to the very small sample volumes and the challenge of randomization of samples needed in some assays.”
Furthermore, he says that the digitalization of the laboratory is becoming more relevant in today’s process. “Electronic laboratory notebooks, LIMS, and electronic reporting of data are starting to become the norm in high-throughput labs,” he claims. “This supports customers’ demands for rapid and managed reporting and aids in the scalability and management of samples.”
As for AI, Galbraith says it’s still in its infancy regarding laboratory analytical testing. “In the future, the ability to trend data would be a likely first step to the introduction of AI,” he says.
Staying Ahead of the Curve
The demand for outsourced analytical testing is only forecasted to grow in the next five years, leading to increased competition among service providers.
“To stay ahead, labs must scale their operations effectively to handle rising demands while maintaining high standards of quality and compliance,” says Eagle Analytical’s Ross Caputo. “This requires investing in new technologies, expanding service offerings, and improving turnaround times to meet industry expectations. Those who can adapt, innovate, and optimize efficiency will be best positioned to thrive.”
LGM Pharma’s Shailesh Vengurlekar says that to stay competitive, service providers will need to invest in cutting-edge technologies such as rapid testing platforms, high-throughput capabilities, and advanced instrumentation like ICP-MS for elemental analysis.
“Companies that effectively evaluate and implement new technologies, including automation and AI-driven data analysis, will stand out among competitors,” he argues. “Expertise in a wide range of testing services, including method development, stability testing, and microbiology, will be essential for meeting the evolving needs of drug developers.”
