Current and Future Trends
CMOs are expecting cost savings from innovations, including expanded use of disposable equipment and increased yields from improved expression systems and cell lines. This complements trends among drug innovators, particularly larger ones, which are becoming increasingly risk- and cost-averse.
The biopharmaceuticcal industry is also outsourcing projects at an increasing rate, which contributes to the future prospects for CMOs. Despite this additional business, CMOs continue to be a competitive bunch, as they vie for projects to keep their facilities running. The ongoing credit crunch could end up slowing major expansion projects, forcing both innovator companies and CMOs to implement technological fixes to further increase capacity.
New CMOs continue to enter the market, both in developed and developing countries, with many countries offering lower costs but having limited requisite expertise, facilities, and quality programs to manufacture at FDA/EU cGMP standards. The market for CMOs will continue to expand as dozens of companies enter the biosimilars/biogeneric markets.
BioPlan’s 7th Annual Report & Survey of Biopharmaceutical Manufacturing & Capacity provides new perspectives regarding current and future capacity issues facing CMOs and the broader biopharmaceutical industry. Preliminary data from this year’s study shows continued investments in capacity expansion for manufacture of both clinical- and commercial-scale biologics. With biopharmaceuticals one of the few bright spots for expected growth in pharmaceutical industry sales and profits now and in coming years, investments in biopharmaceuticals development and manufacturing capacity simply make good economic sense.
Recent years have seen significant investments in and expansions by biopharmaceutical CMOs, paralleling capacity expansions by innovator companies. However, while investments in biopharmaceuticals increase, especially in comparison with other pharmaceuticals, most respondents indicated that their companies are also working hard to decrease operational expenses as much as possible.
When CMOs were asked in this year’s study whether they have increased prices for biopharmaceutical manufacturing services, about 75% reported no significant increases. In terms of specific areas where prices were reported to have increased, the largest proportion of responses (20%) reported price increases for clinical supply manufacture. There has been a significant increase in demand in recent years for smaller-scale manufacturing as biologics make it through the pipeline.
Future Capacity Bottlenecks
CMOs are currently experiencing relatively few problems, with little CMO capacity idle. While idle capacity can be tolerated in innovator firms, it can be disastrous for CMOs in terms of lost revenue and profits. By a slim majority, survey respondents (both CMOs and drug innovators) predicted that their manufacturing facilities would experience only minor, if any, capacity constraints in the next five years (up to 2014). This includes 53% predicting no, or minor constraints, for early-stage clinical supplies, and 55% predicting no, or minor constraints, for later-stage (Phase III) clinical supplies.
BioPlan’s survey shows that most manufacturers of monoclonal antibodies are reporting yields typically just over 2 grams/L, while yields using newer mammalian cell culture technologies are now typically 10 gram/L or more. These results indicate that many of the future CMO and innovator expansions in manufacturing capacity may well come from implementing improved processes, rather than more costly and time-consuming building and certification of new manufacturing facilities.
As one would expect, with only about one in ten pipeline products moving through each major stage in product development, most contract manufacturing projects involve drugs produced at smaller scale for clinical trials, not large-scale manufacture for commercial sales. However, the major opportunities for CMO profits, including long-term supply contracts, involve large-scale manufacture for commercial sales.
When biologic drug innovators were asked where their most significant increases in outsourcing will be in 2011, the largest proportions reported expecting increases in contracting for validation services (24%), fill and finish (24%), and testing/product characterization services (21%). In addition, 13% indicated they would increase biopharmaceutical API (bulk) manufacture, and 9% said they would increase full biopharmaceutical (including fill and finish) manufacturing services.
The CMO segment has a bright future. The biopharmaceutical industry’s demand for additional CMO capacity will grow as new products are approved and greater numbers of products make it through the pipeline. As these events transpire, CMOs’ successes in cost reductions, process improvements, and technology implementation will take on increased importance.
Now that budgets are beginning to rebound and RFPs are beginning to flow once again, CMOs must begin to meet customers needs better than they have in the past.
“The economic crunch has compelled most CMOs to redouble efforts to deliver what potential clients demand,” Darren Head, president and CEO of Cytovance, explained. “We’re now bringing on specific capacity requirements, increasing collaborative partnerships, and, most importantly, ensuring that we’re being cost effective for our clients.”
Whether this represents a “new normal” for the industry or not, it appears obvious that the CMOs still standing have evolved a more mature operational approach, and have become more cost sensitive, and competitive in their service delivery.