← Business Models: Industry Specific (Industrials & Materials) (all topics)
Contract manufacturing - pharmaceuticals (loan-licence)
What it is
A pharmaceutical company holds the marketing licence and brand while a third-party plant manufactures under its licence and quality oversight. Roughly 30-35% of Indian formulation volume is estimated to be produced this way
It lets a brand owner add capacity without capex and lets small units run at scale, but the marketing licence holder retains regulatory liability
Impact on industries
- For the host it fills capacity without investment in field force, distribution or registrations, and brings technical support from a larger partner
- For the brand owner it converts fixed manufacturing cost into variable cost and speeds launches into new dosage forms without building a plant
- Revenue concentrates in a few clients who set the conversion rate, leaving the host a processing margin with no pricing power and no brand of its own
- Displacement is structural - work ends when the client builds in-house capacity or finds a cheaper unit, and Schedule M upgrade cost sits with the host