Topical Drugs Contract Manufacturing Market Size, Share & Trends Analysis Report By Product Type (Semi-Solid Formulations, Solid Formulations), By Scale Of Operation (Clinical), By End-use (Pharmaceutical Companies), By Region, And Segment Forecasts, 2025 - 2030

Market Size & Trends

The global topical drugs contract manufacturing market size was valued at USD 29.25 billion in 2024 and is projected to grow at a CAGR of 11.05% from 2025 to 2030.  The market growth is driven by increased demand for new drug development, the rising prevalence of skin diseases, emerging need for dermatological treatments, and growing requirement for cost-effective outsourcing services.

In addition, the growing requirement for topical drug products across the globe has led pharmaceutical and biotechnology companies to focus on their core R&D for new product innovations, speeding up market entry. As a result, these companies are increasingly collaborating with Contract Manufacturing Organizations (CMOs) for the formulation development, clinical trial supplies, and commercial-scale manufacturing of creams, gels, ointments, patches, and various other topical products. Besides, these formulations are increasingly utilized for purposes such as wound healing, pain relief, scar reduction, and cosmetic uses. Such applications are anticipated to create new growth opportunities for CMOs topical drug formulations innovation and development within the pharmaceutical industry. Furthermore, the trend towards cost-effective topical drug solutions is expected to enhance market growth in the coming years.

Moreover, continuous advancements in technology aiming to improve drug delivery, stability, and controlled release are anticipated to boost the development of more potent and effective topical medications, thereby addressing unmet medical needs. In addition, these technological advancements support CMOs to meet a wide range of therapeutic requirements in the topical drug market. This includes treating various skin conditions, pain management, wound care, and dermatological disorders, which contribute to market growth. Such factors are expected to drive market growth.

Opportunity Analysis

The topical drugs contract manufacturing market is anticipated to witness enormous growth opportunities due to increasing demand for dermatological treatments, a rise in outsourcing from pharmaceutical companies, and the rising complexity of topical formulations. In addition, among pharmaceutical & biopharmaceutical companies, the increasing focus on advances of semi-solid and transdermal delivery systems is fueling the need for topical drug contract manufacturing services. Moreover, incidence of skin conditions, and rising urban & aging populations have fueled the demand for topical drug products in medical and skincare applications. This increases the need for CMOs specialized formulation expertise, minimizing internal operational expenses, and speed up the time-to-market.

Furthermore, increasing production of small-scale pilot batches combined with large-scale production increases the demand for CMOs with advanced manufacturing technologies, such as nano-formulation and aseptic filling, to effectively address various production needs. Moreover, developing markets like India, China, and South Korea present cost-effective manufacturing solutions, while North America and Europe remain at the forefront of innovation-driven outsourcing. Besides, companies that provide comprehensive services ranging from formulation development to clinical supply and commercial-scale manufacturing are positioned to establish long-term partnerships, thereby capitalizing on new growth opportunities in topical drug development over the coming years.

The pharmaceutical and biopharmaceutical industry is expected to witness rise in production costs due to U.S. tariffs may result in increased drug prices, especially in markets already facing pricing challenges. Most drug manufacturers operating on profit margins are likely to be most affected. Furthermore, increasing costs for drug could compel some manufacturers to cut back on production or withdraw from the market, leading to decreased competition and rise in product prices. In addition, due to U.S. tariffs most of pharmaceutical companies might explore relocating production closer to domestic markets to mitigate their exposure. However, this reshoring strategy requires substantial investments, compliance with regulations, and workforce training, making it a long-term solution. Tariff-induced cost rises and disruptions in the supply chain might worsen existing shortages of essential medications that already struggle with production issues. Development of semi-solid formulations, liquid formulations, solid formulations, and transdermal products are particularly vulnerable due to their reliance on intricate manufacturing processes that involve raw materials and intermediates sourced from various countries. However, topical medications are expected to experience a moderate impact from U.S. tariffs in the overall global market during the forecast period.

Technological Advancements

Recent advancements in the contract manufacturing of topical drugs have significantly improved the precision of formulations, scalability, and delivery efficiency. The growth of topical drug development is fueled by an increase in drug-product volume, supported by microneedle and iontophoresis improving drug absorption and release profiles. In addition, the incorporation of artificial intelligence (AI) tools in formulation development has contributed to market expansion by enhancing the versatility of applications. Innovations in nano emulsion and microencapsulation technologies have enhanced the drug stability, provided controlled release, and improved dermal penetration.

Moreover, currently, 3D printing is emerging as a tool for creating personalized topical formulations, allowing for rapid prototyping and customized dosing. Furthermore, the integration of process analytical technology and continuous manufacturing systems ensures real-time quality control and scalability, thereby minimizing batch variability. In addition, CMOs are increasingly utilizing AI-driven formulation modeling to optimize excipient compatibility and improve bioavailability. Thus, the technological advancement offers cost-efficiency, regulatory adherence, and reduced time-to-market for pharmaceutical companies that outsource the production of topical drugs. The ongoing shift towards high-potency and complex formulations further emphasizes the need for such innovations within the topical contract manufacturing organization (CMOs) market.

Pricing Model Analysis

Topical drugs contract manufacturing operates under various pricing models to balance cost efficiency, quality, and regulatory compliance while enhancing manufacturers' profitability and affordability. The pricing models include milestone-based pricing, value-based pricing, fixed-fee pricing, and subscription/retainer pricing. Milestone-Based Pricing is structured around predefined stages such as formulation, stability testing, and the release of commercial batches. This approach promotes transparency and aligns financial commitments with specific deliverables. By linking payments to progress, it minimizes risk for clients and encourages timely delivery and adherence to quality standards from CMOs involved in topical drug development.  Besides, value-based pricing is based on the clinical or commercial benefits provided rather than just production costs. Factors such as improved patient adherence, enhanced bioavailability, or shortened time-to-market can influence the fees associated with this pricing model. This encourages CMOs to achieve exceptional outcomes in topical therapies, particularly when innovation or differentiation plays a key role in a product’s success and the return on investments.

The fixed-fee model encompasses the complete range of manufacturing or development services, making it ideal for standardized topical drug development. It ensures cost predictability, reduces administrative overhead, and allows clients to budget more accurately. However, CMOs need to manage the scope carefully to maintain profit margins. In addition, the subscription/retainer model involves clients paying a recurring fee for continuous access to development or manufacturing services. This model is particularly beneficial for companies with consistent topical drug pipelines or ongoing formulation updates. It cultivates strategic partnerships, guarantees resource availability, and streamlines operations, eliminating the need to renegotiate costs for each individual project or deliverable.

Market Concentration & Characteristics

The topical drugs contract manufacturing market growth stage is moderate, and growth is accelerating. The market is characterized by the degree of innovation, level of M&A activities, regulatory impact, product expansion, and regional expansion.

The topical drugs contract manufacturing market is an innovation-driven by advancements in transdermal delivery systems, nano-formulations, and tailored semi-solid bases. CMOs are adopting AI-driven formulation design, 3D printing techniques, and continuous manufacturing processes to improve the effectiveness, stability, and patient adherence of products. These advancements enable them to efficiently meet changing regulatory demands and the diverse needs of clients.

Regulatory frameworks established by organizations such as FDA and EMA, along with regional guidelines, promote investment in GMP-certified facilities, as well as instability testing and documentation. The complexities of these regulations contribute to an increase the demand for outsourcing, as sponsors turn to experienced CMOs to effectively manage the approval processes and guarantee that products are ready for market entry.

The competition among market players is due to growing activity in the topical drugs contract manufacturing to enhance capabilities in topical & transdermal pharmaceuticals and strengthen drug development capabilities. Besides, expansion of service offerings and a broader global presence are contributing factors to market growth.

The market remains moderately fragmented due to the presence of numerous CMOs specializing various services across semi-solid, liquid, and transdermal formulations. This factor is expected to encourage competitive innovation and offers pharmaceutical companies a variety of outsourcing choices to address their specific development and manufacturing requirements.

Regional expansion is increasing, with CMOs setting up topical drug development hubs in Asia-Pacific, North America to capitalize on lower costs and talent availability.

Product Type Insights

On the basis of product type segment, the market is segmented into semi-solid formulations, liquid formulations, solid formulations, and transdermal products. In addition, the semi-solid formulations include creams, ointments, gel, and others.  In 2024, the semi-solid formulations segment dominated the market, accounting for a revenue share of 65.54%. The segment growth is driven by rising requirements for semi-solid dosage forms, increased R&D initiatives, and a growing pipeline of semi-solid topical medications. These formulations are widely used due to their ease of administration and versatility across various formulations. Besides, these contain active ingredients that are either dissolved or evenly distributed within a suitable base and excipients. Thus, the demand for semi-solid formulation is emerging as they are more convenient for many patients, thus enhancing adherence to treatment. Furthermore, since these products are applied externally, they mitigate the risk of gastrointestinal issues associated with oral medications, further fueling the segment's growth.

The liquid formulations segment is expected to grow at the fastest CAGR during the forecast period. The demand for liquid formulation drugs has increased among pharmaceutical manufacturers due to their rapid action, quick absorption, and adherence to product standards for dermatological, cosmetic, and protective applications. This growing interest of pharmaceutical & biopharmaceutical companies in contract manufacturing organizations (CMOs) for topical liquid formulations is expected to drive market growth. In addition, liquid formulation drugs intend to leave a minimal residue of the active ingredient on the skin after the dispersion medium evaporates. Such factors are anticipated to drive the segment growth.

Scale Of Operation Insights

On the basis of scale of operation segment, the market is segmented into clinical and commercial. The commercial segment accounted for the largest market share in 2024.  Commercial manufacturing involves producing drugs intended for marketing, distribution, and sale. This process is backed by comprehensive CMOs services, operational support, quality assurance, and project management to ensure effective commercial supply. The primary focus of these facilities is the formulation of a topical drug, along with the manufacturing and distribution of a topical dermal drug product that matches a predetermined placebo for a clinical study aimed at preventing skin diseases. Such factors are expected to drive market growth.

The clinical segment is expected to grow at a significant CAGR during the forecast period. The segment is driven by the rising development of topical drugs for use in clinical research. Clinical contract manufacturing focuses on discovery & development, preclinical research, clinical research, FDA review & postmarket safety monitoring. It offers comprehensive support for various regulatory pathways such as New Drug Applications (NDA), Investigational New Drugs (IND), and Abbreviated New Drug Applications (ANDA). Moreover, it provides scientific & regulatory expertise, well-equipped clinical trial manufacturing facilities, purpose-built laboratories, and compliance support for the entire topical drug product development & production process.

End-use Insights

On the basis of the end use segment, the market is segmented into pharmaceutical companies, biopharmaceutical companies, and others.  The pharmaceutical companies segment accounted for the largest market share in 2024. The segment growth is driven by rising demand for integrated CMOs, which are essential for accelerating innovation. In addition, the increasing interest among pharmaceutical companies in investing and innovating within the topical drug sector is contributing to market growth.  Moreover, most pharmaceutical companies are looking to outsource topical drug manufacturing to optimize their facilities. As these companies concentrate on research, development, manufacturing, and distribution, the reliance on CMOs to help reduce operational costs has grown. Furthermore, the significant rise in regulatory approvals for various topical products is enhancing the demand for outsourced services. The drug development encompasses multiple stages aimed at designing a high-quality product and establishing a manufacturing process to ensure consistent product performance. These factors are expected to drive the segment growth.

The biopharmaceutical companies’ segment is expected to grow at a significant CAGR during the forecast period. This segment is driven by the outsourcing of end-to-end services, especially from small, midsized, and established biopharmaceutical companies that lack expertise in topical drug development. In addition, growing number of biopharmaceutical companies are investing in developing & producing topical drugs for several skin conditions, which is fueling segment growth. These investments are driven by factors such as the potential for targeted drug delivery, reduced systemic adverse effects, and the increasing demand for skin disease treatment options. 

Regional Insights

North America is expected to grow at a CAGR of 10.37% during the forecast period, driven by factors such as the increasing incidence of skin conditions, a rise in dermatological issues, growing trends in outsourcing, and rapid advancements in technology related to transdermal and semi-solid formulations. In addition, strict regulatory requirements and the presence of established contract manufacturers are expected to drive the market over the estimated time period.

Furthermore, the presence of well-established contract manufacturing sector in the U.S., Canada, and Mexico is expected to contribute to market over the estimated time period. As a result, numerous pharmaceutical companies & biopharmaceutical companies are turning to contract-based services for topical drug manufacturing to engage with experienced partners ensuring compliance and quality. Besides, the availability of cost-effective product options, quick market entry, and specialized expertise is anticipated to further support market growth. Thus, growing need for topical drugs and the rising trend for outsourcing among topical drugs are promoting the expansion of manufacturing capabilities in North America. For instance, in January 2024, Alcami Corporation announced the acquisition of Pacific Pharmaceutical Services (PPS) as part of a strategic initiative to enhance its capabilities in pharma storage and services further catering to biotech and pharmaceutical clients across the U.S. Such developments are expected to drive market growth.

U.S. Topical Drugs Contract Manufacturing Market Trends

The Topical Drugs Contract Manufacturing market in the U.S. accounted for the highest share of the North America market due to the presence of well-established companies and a rising demand for complex drug formulations. Many pharmaceutical and biopharmaceutical companies in the U.S. choose to outsource their research and development activities related to topical drug production to sharpen their core strengths. In addition, these manufacturers offer a variety of topical medications and related products, which help address numerous skin conditions. According to the American Academy of Dermatology, acne affects approximately 50 million Americans yearly. Furthermore, atopic dermatitis impacts 1 in 10 individuals at some point in their lives, while around 7.5 million people in the U.S. are diagnosed with psoriasis. These factors have led major companies to invest in research and development to create new topical medicines, including the necessary technical specifications for production, packaging, and distribution. Besides, scenarios for U.S. tariffs for product exports are expected to enhance the country’s revenue in the market over the estimated period.

The topical drugs contract manufacturing market in Canada is driven by increasing demand for dermatological treatments and a growing consumer skincare awareness. Besides, the availability of a range of topical drugs, suspensions, and solutions is expected to drive the market.  In addition, advancements in drug delivery technologies and continuous innovation in topical drug formulations and therapies contribute to market growth. Furthermore, the increasing willingness to outsource topical drug manufacturing to streamline time to market and decrease costs, further improving efficiency and leveraging specialized expertise, is expected to drive market growth in the country. Besides, it allows companies to focus on their core competencies, such as research and development (R&D), marketing, and distribution. Moreover, contract manufacturing offers a range of services, including formulation development, scale-up processes, clinical trial manufacturing, and support for commercialization, which is anticipated to drive the market over the estimated period.

Europe Topical Drugs Contract Manufacturing Market Trends

Europe topical drugs contract manufacturing market is driven by a favorable regulatory environment in the European countries, growing investment, and a strong focus on dermatology and transdermal innovations. Besides the growing focus on innovations, cost-effective manufacturing to capitalize strong focus on innovations, cost-effective manufacturing to capitalize on vast opportunities within this market is expected to boost the market over the estimated period. Moreover, countries like the UK, Germany, and France have a well-established contract manufacturing presence that offers specialized semi-solid and liquid formulation capabilities. Moreover, growing aging populations and increased prevalence of chronic skin conditions have increased the focus on product quality and safety, further fueling market growth. In addition, rising market competitiveness has led to increased focus on topical drug contract manufacturing services. Such factors are expected to drive the market over the estimated period.

The topical drugs contract manufacturing market in Germany held the highest share in 2024. This growth can be attributed to the increasing prevalence of chronic skin disorders, a strict regulatory framework, and a rising demand for non-invasive drug delivery methods, including creams, gels, and transdermal patches. Besides, multinational pharmaceutical companies seeking to increase partnerships are anticipated to drive R&D and advanced technologies such as nano-formulations and 3D printing, further strengthening the country's competitive edge. Furthermore, the combination of regulatory compliance with innovation continues to attract domestic and international clients seeking high-quality, scalable topical drug solutions within the EU market.

The UK's topical drugs contract manufacturing market is anticipated to grow significantly over the forecast period. The country's growth is driven by advanced knowledge, innovative technologies, and the growing availability of cost-effective research services. Besides, increasing demand for efficient drug delivery systems that help clients achieve the optimal dosage form for faster commercialization will propel market growth. For instance, in January 2025, Upperton Pharma Solutions mentioned completing a new sterile manufacturing facility in the UK. The new 7,000 sq. ft. facility is addition to their 50,000 sq. ft. site and is designed to comply with the revised EU GMP Annex-1 regulations. The new facility will facilitate the production of aseptic and sterilized small-volume liquids & powders for nasal, parenteral, and pulmonary delivery. It will also enhance capabilities in formulation development. Such innovations are expected to drive the market over the estimated time period.

Asia Pacific Topical Drugs Contract Manufacturing Market Trends

In 2024, Asia Pacific held the largest market shareof 38.23%. The region’s growth is driven by various factors, including increasing pharmaceutical spending, growing need for novel innovation, rising emphasis on advanced drug delivery technologies, and increasing prevalence of diseases. Besides, low manufacturing costs attract numerous pharmaceutical companies from developed nations to outsource their manufacturing to the Asia Pacific, contributing to market growth. Moreover, expanding R&D activities and the presence of both local and established contract manufacturers enhancing their global capabilities are expected to drive the market. Besides, the regional market offers a range of advantages in producing semi-solid, liquid, and transdermal formulations, making it attractive for global pharmaceutical companies searching for scalable manufacturing solutions. Furthermore, rising healthcare spending and investments in GMP-compliant facilities are some of the factors driving the market. Such factors are expected to boost the market over the estimated period.

The topical drugs contract manufacturing market in China is driven by rising prevalence of skin conditions such as acne, psoriasis, eczema, and skin cancer, along with a growing demand for cost-effective topical treatments. In addition, ongoing investments in the development of topical medications highlight the importance of topical drugs within the country's healthcare sector, further fueling the market growth. Moreover, the availability of patient-friendly topical treatment options offering faster relief and minimizing side effects is expected to drive the growth of the market.

The topical drugs contract manufacturing market in Japan is driven by access to advanced technologies that enable high-quality and innovative manufacturing practices. In addition, an increase in partnerships and development of cost-effective drug innovations is expected to contribute to market growth in the forthcoming years. Furthermore, Japan’s manufacturing landscape benefits from lower production costs, shorter development timelines, and establishment of manufacturing process, the provision of high-quality and stable products, and formulations using new technologies.

India's topical drug contract manufacturing market is driven by the rising incidence of skin-related disorders, an increasing focus on personal care and skin care products, and the presence of key players offering outsourcing services for the development of effective topical medications. Furthermore, the growing focus on formulation development, cost-effective manufacturing, and specialized expertise will drive market growth. Thus, such factors are expected to increase demand for various outsourcing services to produce topical drugs, which helps meet global quality standards and attract international collaborations.

Key Topical Drugs Contract Manufacturing Company Insights

The key players operating across the market are adopting in-organic strategic initiatives such as partnerships, mergers, acquisitions, service launches, partnerships & agreements, and expansions to gain a competitive edge in the market. For instance, in June 2024, Aterian Investment Partners acquired of Contract Pharmaceuticals Limited, a CDMO that focuses on non-sterile liquid and semi-solid dosage forms. This acquisition enhanced the company's ability to serve its clients and strengthened its reputation as a dependable collaborator for pharmaceutical companies globally.

Recent Developments

• In March 2025, LGM Pharma mentioned the investment of over USD 6 million to expand its manufacturing facility in Texas as part of its Phase I CDMO growth strategy. This expansion enhanced the production capacity for semi-solid, liquid, suspension, and suppository drug products, further addressing to the growing need for reliable U.S. production.

• In July 2024, MedPharm and Tergus Pharma announced the merger to create a new CDMO that focuses on the end-to-end comprehensive development and commercialization of topical and transepithelial pharmaceuticals. The new facility operates under the MedPharm brand and focused on scientific & clinical trial manufacturing, along with commercial production for the broader pharmaceutical industry.

• In November 2023, SOHM, Inc. announced the establishment of a new manufacturing facility in Carlsbad. The new facility aims to manufacture SOHMbrand Rx topical and OTC products.  In addition, 2,500 square feet have been allocated to store finished products.  

Topical Drugs Contract Manufacturing Market Report Scope

Global Topical Drugs Contract Manufacturing Market Report Segmentation

This report forecasts revenue growth at global, regional, and country levels and provides an analysis of the latest industry trends in each of the sub-segments from 2018 to 2030. For this study, Grand View Research has segmented the global topical drugs contract manufacturing market report based on product type, end-use, and region:

• Product Type Outlook (Revenue, USD Million; 2018 - 2030)

  • Semi-Solid Formulations​​​​​​​

    • Creams

    • Ointments

    • Gel

    • Others

  • Liquid Formulations

  • Solid Formulations

  • Transdermal Products

• Scale of Operation Outlook (Revenue, USD Million; 2018 - 2030)

  • Clinical

  • Commercial

• End-use Outlook (Revenue, USD Million; 2018 - 2030)

  • Pharmaceutical Companies

  • Biopharmaceutical Companies

  • Others

• Regional Outlook (Revenue, USD Million; 2018 - 2030)

  • North America

    • U.S.

    • Canada

    • Mexico

  • Europe

    • UK

    • Germany

    • France

    • Italy 

    • Spain

    • Sweden

    • Denmark

    • Norway

  • Asia Pacific

    • Japan

    • China

    • India

    • Thailand 

    • South Korea

    • Australia

  • Latin America

    • Brazil

    • Argentina

  • Middle East & Africa

    • Brazil

    • Argentina

    • UAE

    • Kuwait