October 1, 2005 (Vol. 25, No. 17)
Company Spending on Outsourced Biopharmaceutical Production Escalates
Auxilium Pharmaceuticals (www.auxilium.com) and Cobra Biomanufacturing (www.cobrabio.com) recently signed an agreement for the scale up and GMP manufacture of Phase II/III clinical supplies of Auxilium’s AA4500, a novel protein drug and potential treatment of Peyronie’s disease and Dupuytren’s disease. The value of the agreement, which includes process development and clinical lot production through 2006, is $3.3M.
Most of the pharmaceutical and biotechnology companies already outsourcing some of their biopharmaceutical manufacturing are planning to increase their spending in the next two years.
Contractors are seeing a jump in spending from their existing customers, as well as a host of new customers with biopharmaceuticals entering the pipeline. The size of the worldwide biopharmaceutical contract manufacturing market, $1.7B in 2004, is expected to grow to $2.5B by 2006, and competition among biopharmaceutical contract manufacturers is heating up.
Estimates of outsourced spending in 2004, compared to expectations for 2006, were provided by biomanufacturing directors at pharmaceutical and biotechnology companies worldwide for the report “Biopharmaceutical Contract Manufacturing 2005: Improved Processes and New Capacity for Pipeline to Commercial Production.”
Overall, 89% say they expect their outsourcing budget to increase by 2006. This is shown in the Figure. Median spending in 2004 was $3M to $4M per client company per year, which study respondents expect, on average, to more than double by 2006.
Spending on outsourced bioproduction is expected to escalate on average by all three respondent groups in the study (those from companies with no biomanufacturing site, those with one site, and those with multiple sites).
For Cobra Biomanufacturing, the new Auxilium Pharmaceuticals agreement is an expansion of an existing contract. Dave Thatcher, chief executive at Cobra, says, “We have not only expanded our contracts with Auxilium Pharmaceuticals and Oncolytics Biotech, but we have recently begun work with new clients at Hawaii Biotech, Introgen Therapeutics, Ludwig Institute, and Advaxis.”
Dr. Thatcher attributes the new business to growth in the biotechnology industry in North America as well as Cobra’s expertise. “Most of our revenues come from the manufacture of genetically engineered viruses and protein products derived from genetically engineered bacteria. We have expertise in plasmid DNA, virus, and cell vaccines,” says Dr. Thatcher.
Cobra is currently making two HIV/AIDS vaccines. The company provides cell line development in microbial, mammalian, and insect host cells.
Dr. Thatcher notes that customers are becoming more savvy as costs, project management, and quality-assurance requirements become critical. “Because the European clinical trials directive now requires proactive formal GMP inspections routinely, customers have increased their quality assurance requirements.”
Uptick in Business
Contractors around the globe are experiencing this uptick in business. Medipolis GMP (www.medipolisgmp.com) recently signed a manufacturing agreement with Evolutec (www.evolutec.co.uk). Pirkko Suhonen, CEO, says, “We know the industry is picking up by the increase in inquiries we are getting. We focus on small-scale microbial production. Our customers tend to be small biotech drug development companies, companies that are finding it easier to raise funds due to the improved financial market.”
In August, Agenix (www .agenix.com) signed a contract with Diosynth Biotechnology (www.diosynthbiotechnology.com) to manufacture ThromboView, a diagnostic product that uses radiolabelled antibodies to locate blood clots in the body.
ThromboView is currently in Phase II clinical trials in the U.S. and Canada. Diosynth will provide technology transfer and process development services for this product in 2005 and cGMP material for Phase III clinical trials in 2006.
Diosynth Biotechnology is Organon’s third-party contract manufacturing services unit for biopharmaceuticals, and Organon is the human healthcare unit of Akzo Nobel.
Richard Basile, vp marketing and sales at Diosynth, says, “Revenues from our CMO business unit are on the increase, and we are expecting an even more robust 2006/2007. As part of Akzo Nobel and Organon, we have a proven track record in process development and the commercial manufacture of biopharmaceuticals.”
Diosynth Biotechnology manufactures commercial products such as Pfizer’s Somavert, Organon’s recombinant FSH Puregon, and Protein Design Labs’ Retavase, as a third-party CMO.
“We have added fill-and-finish services for clinical, and subsequently commercial-stage, products. We are expanding our cell line development and testing services,” Basile explains.
“Our manufacturing capabilities already include specialty services for inclusion body processes, expression of baculovirus in insect cell lines, cell-based testing, PEGylation, and perfusion cell culture in addition to the standard biomanufacturing processes.”
“Those CMOs with the broadest capability and service offerings, coupled with demonstrated cGMP compliance worldwide and flexible alliances with customers, will be the long-time winners in this industry,” Basile continues.
DOR BioPharma (www.dorbiopharma.com) recently entered into a joint development agreement with DowpharmaSM (www.pharma.dow.com) contract manufacturing services for a proprietary oral botulinum vaccine. Dowpharma will provide process development services leading to cGMP production of this vaccine using the Pfenex Expression Technology, a Pseudomonas-based technology.
Dowpharma launched the Pfenex Expression Technology in 2004 for the production of recombinant proteins. DOR BioPharma expects this technology to expedite the production of multiple botulinum toxin serotype antigens from the laboratory to cGMP production. Dowpharma also recently signed agreements with Pfizer and Iomai for use of this expression technology.
Dowpharma, a business unit of The Dow Chemical Company, provides contract manufacturing services to both pharmaceutical and biopharmaceutical companies. “Our revenues are growing due to early adopters moving from feasibility studies into process development. We have also seen a growth in new clients wanting to assess the Pfenex Expression Technology for the current production of their recombinant protein, peptide, and single chain fragments or Fabs. Both large and small companies recognize that investing in advanced process technologies will directly impact their bottom line,” says Patrick Lucy, business leader.
The Pfenex system increases the cellular expression of recombinant proteins and peptides while maintaining solubility and activity characteristics, Lucy explains.
“This expression technology enables our clients to achieve higher volumetric and specific expression, while our solvent extraction technology enables us to efficiently separate the target proteins from host cell contaminants. Combined, these technologies provide lower cost of goods and faster process development.”
At Cambrex Biopharmaceuticals (www.cambrex.com/biopharma), growth in the business is coming from new clients such as Evolutec, ZymeQuest, and DOR BioPharma, while existing clients such as Tercica, GTC Biotherapeutics, and Nabi Biopharmaceuticals are coming back for repeat business.
Cambex recently completed the first milestone of fermentation and downstream process development for the manufacturing of DOR BioPharma’s ricin toxin vaccine, RiVax. The agreement with DOR was signed in January.
Ryan Scanlon, manager, marketing and business development at Cambrex, says, “A robust and diverse number of biopharmaceuticals are slowly, but surely, progressing through the clinic. Late-phase and commercial contract opportunities are still outnumbered by early-phase projects, but the late-phase projects are becoming more plentiful.”
Niche Capabilities
Because the biopharmaceutical contract manufacturing market is technologically fragmented, niche technologies and capabilities are crucial to differentiation.
“Antibody drug conjugates are a small, unproven, but emerging product segment, which Cambrex is well positioned to serve,” Scanlon claims. “By leveraging the synergies across our technology platforms in cell culture manufacturing, high potency small molecule synthesis, cross-linking chemistries, cytotoxicity bioassays, formulation, lyophilization, and fill/finish, we are able to offer a full-service solution for innovators developing almost any antibody drug conjugate.”
Building long-term relationships for commercial products is necessary for any large CMO to sustain long-term growth. Scanlon says, “Overall, I believe innovators are becoming more knowledgeable about manufacturing, which helps CMOs work together with clients more effectively to manage expectations and risk. The ability to work closely with clients, as needs and project risks change, is crucial to enduring profitable relationships.”
For later-stage products, Cambrex is considering partnerships, which could include some investment in the product.
Nuvelo (www.nuvelo.com) recently entered into an agreement with Avecia Biologics (www.avecia.com/biotech) for the development and validation of a commercial-scale manufacturing process for Nuvelo’s lead drug candidate Alfimeprase, a blood clot dissolver.
“A number of other early-phase contracts have also recently been secured. We have seen stronger revenue flows in 2005, fueled by a mix of expanding business from existing customers and new customer relationships,” says Kevin Cox, vp biotechnology at Avecia.
Avecia is recognized for several niche capabilities, including the p-POP expression system with the ability to characterize the genetic stability of the constructs used in manufacture. “However, our integrated approach to process development across a wide range of product types has been largely responsible for a number of our key client relationships,” Cox explains.
To meet the enlarged pipeline of projects, Avecia has expanded its manufacturing capacity in the last few years, and its number of employees has more than doubled.
But the trend toward lower volumes and more complex biologics will eventually require higher shared risks for product owners and manufacturers.
“As biotechnology companies move toward orphan drug indications as a faster route to marketing approval, back-pressures in the manufacturing pipeline will be created. This is a fundamental challenge to the traditional, transaction-based’ business model in contracting manufacturing relationships. A more journey-based’ collaborative approach, characterized by much greater openness and flexibility, will be needed in the industry,” explains Cox.
Future Growth
For the first half of 2005, Lonza Custom Manufacturing (www. lonza.com) has seen a 32.8% increase in sales, compared to the same period in 2004. A large portion of this growth is being driven by the significantly improved utilization of the Portsmouth, NH facility, including the three 20,000L trains as well as the existing mammalian suites.
“We believe that future growth will be driven by the expansion of customer projects and by our entry into new market segments such as cGMP microbial biomanufacturing of recombinant proteins and vaccines. Increasingly, both pharmaceutical and biotechnology companies are relying on CMOs, such as Lonza, as an integral part of their overall manufacturing strategy,” reports Stefan Borgas, CEO Lonza Group.
In May 2005, Lonza and UCB (www.ucb-group.com) signed a long-term supply agreement requiring significant expansion of the cGMP microbial biopharmaceutical manufacturing capacity in Visp, Switzerland. This facility will contain two production trains, each with a fermentation capacity of 15,000 L.
In addition, Lonza will be adding a fourth 20,000-L bioreactor into the existing mammalian cell culture facility in Portsmouth, NH, and a 500-L bioreactor in Lonza’s R&D site in Slough, U.K.
“We just signed a Joint Venture Terms Sheet with Bio*One Capital to establish a commercial-scale contract manufacturing organization in Singapore,” Borgas adds.
“The building of the plant will include four 20,000-L mammalian bioreactor trains, further strengthening Lonza’s position as a global custom manufacturer of biopharmaceuticals. This Singapore expansion ideally positions Lonza as a participant in the fast-growing Asian market.”
Even though the pipeline of biopharmaceuticals to be developed and manufactured is increasing, and the market is growing, competition for client contracts is intense.
As the contract manufacturing market matures, CMOs have become more competitive, striving to provide a global presence, expert one-stop shops, high-level niche capabilities, and options for collaborations and alliances.
