July 1, 2011 (Vol. 31, No. 13)
Delanie Cassell, Ph.D.
Ever-Increasing Demands from Clients Keep Contract Manufacturers on Their Toes
The biopharmaceutical contract manufacturing industry continues to show signs of recovery with new expansions and acquisitions, although even in the face of the slowdown, most CMOs stated that they would continue to invest in capacity and capabilities in order to meet their clients’ long-term needs. The CMOs interviewed for this article continue to invest in capacity and capabilities, expect moderate industry growth this year, and see both opportunities and challenges ahead.
In order to offer greater flexibility to their clients, CMOs are investing in new plants and equipment, analytical laboratories, and closer collaborations with a network of service providers.
Many CMOs are also working to provide additional service offerings to their clients. In addition, CMOs across the board are investing in single-use bioreactors, which offer lower costs and faster turn-around for the smaller batch sizes often required by their clients.
CMC Biologics is adding capacity at both its Bothell, WA, site and its Copenhagen facilities. This expansion supports additional commercial production for both mammalian cell culture and microbial fermentation production, and includes investment in single-use technologies.
According to Claes Glassell, CEO, “the expansion plans started with the construction of a multipurpose single-use facility in Bothell, which was completed in 2010, and is expected to include the build-out of a facility to house two 5,000 L commercial-ready manufacturing lines.
“In addition, CMC Biologics’ facility in Copenhagen, which offers both mammalian cell culture and microbial fermentation capabilities and is approved by the European Medicines Agency for the manufacture of commercial supply, plans to add a 2,000 L single-use bioreactor by the fall of 2011.”
Joe McMahon, president and CEO at KBI Biopharma, reports, “We recently expanded our cGMP manufacturing capacity for mammalian cell culture in the form of Xcellerex® XDR bioreactors, with capacity up to 2,000 L. This line is designed for both clinical and commercial production and utilizes single-use technology.
“The strategy behind our expansion was based on increasing demand for our services, including requests for the addition of more manufacturing capacity.”
Wacker Biotech increased its capacity recently, according to managing director Thomas Maier, Ph.D. “We re-opened our GMP facility last year after an €18 million investment for expansion and modernization. This state-of-the-art unit meets the highest cGMP regulatory requirements, and it offers increased downstream capacity.”
DSM plans expansions at its BioSolutions and Biologics businesses to support late-stage and commercial manufacturing. “Our customers will benefit from our expansion by a reduction in processing time. This will lead to further reduction of our customers’ commercial cost of goods,” states Marco Oomen, senior director, global marketing and sales at DSM BioSolutions.
In addition to expanding capacity at its current sites, DSM Biologics is building a new facility in Brisbane, Australia, in collaboration with the Australian Federal and Queensland Governments. Karen King, president of DSM Biologics, notes that this initiative will “bring a world-class mammalian cell culture CMO operation to Australia.” The new facility will be operational in 2013.
Flexibility and New Services
In addition to adding capacity, CMOs like Lonza are focusing on improving flexibility and offering additional services to their clients.
“Strengthening our capability, enhancing leading technology, and optimizing operational excellence is our future focus rather than adding new large capacity, as seen in the past three to five years. We are currently undertaking a £16 million investment in the expansion and upgrade of the Slough mammalian production facility that will give us greater flexibility in supporting clinical production,” explains Ming Jeng Chu, head of market intelligence, biopharm.
Goodwin Biotechnology (GBI) is also expanding its range of services. According to David C. Cunningham, director of business development, “We have expanded our one-stop-shop concept by leveraging collaborations with Macrocyclics, a manufacturer of customized chelating agents, and with Rafagen, a company that develops mammalian cell lines with a proprietary expression system.”
Another company working to broaden its service offerings is Cytovance Biologics. According to Bill Dull, svp of sales and business development, “We recently closed on a staged $22.5 million equity investment that will fund our equipment, personnel, and facility expansion to meet the growing global client demand for clinical trial and commercial-scale cGMP manufacturing.
“We are also relocating our laboratories to the once occupied Genzyme Glycobiology Research Institute located in Oklahoma City. This new lab space comes equipped with state-of-the-art analytical and bioprocessing equipment that will allow Cytovance to greatly expand its analytical capabilities such as carbohydrate analysis and protein characterization to better serve the needs of our clients.”
Meridian Life Sciences will be completing facilities expansion and renovation this year as well. Daniel Shelly, director business development, reports that the expansion includes research, manufacturing, warehouse, and office space expansions.
Many CMOs are expanding their use of single-use technologies. According to Ralph Lamalot, Ph.D., divisional vp, biologics development and manufacturing at Abbott, “Single-use technology provides for faster and lower cost early-phase production.”
Abbott is positioning itself to meet increased demands for early-stage production. “Abbott recently upgraded a production suite to use entirely single-use cell culture and purification equipment,” Dr. Lamalot explains. Combined with the company’s existing fixed and portable production equipment, the firm says it can now effectively serve its clients from preclinical through commercial manufacturing.
Also noting the advantages of single-use production systems was Wieland W. Wolf, Ph.D., CEO at ProBioGen. “We are considering larger scale (1,000 L to 2,000 L) single-use bioreactors to support our clients who have commercial products.
“Having single-use bioreactors (SUB) for commercial projects reduces project timelines and eliminates technology-transfer efforts for our clients. On our side, a SUB-based facility requires less start-up time compared with a conventional stainless steel facility. In addition, once the SUB-based facility is operating, we avoid costly cleaning validation associated with changeover.”
Boehringer Ingelheim and Fujifilm each made major biopharmaceutical contract manufacturing acquisitions during the first quarter of this year.
In March 2011, Boehringer Ingelheim purchased Amgen’s development and manufacturing site in Fremont, CA. The acquisition expands Boehringer’s mammalian cell culture capacity. It is Boehringer Ingelheim’s first biopharmaceutical contract manufacturing facility in the U.S.—its other biopharmaceutical contract manufacturing facilities are in Germany and Austria.
Also in March, Fujifilm bought all of the equity interests in the Merck BioManufacturing Network. The new biopharmaceutical contract manufacturing organization is known as Fujifilm Diosynth Biotechnologies. The formation of Fujifilm Diosynth Biotechnologies is part of Fujifilm’s strategy to enter the life science market.
Most CMOs see signs of recovery in the biotechnology industry; however, there is concern about industry consolidations and the general pharmaceutical market environment. Overall, CMOs are sanguine about the future. Some of this optimism results from an increase in the number of requests for proposals from virtual and early-stage biotechnology companies as well as customers returning for second and third projects.
Bansi Bhan, interim CEO of GBI, says that “the recent decline in the financial markets and economic contraction has certainly adversely impacted the biopharmaceutical contract manufacturing market. The financial meltdown resulted in a lot of companies reducing the demand for CMO services. In addition, the lack of venture capital funding in small to medium companies resulted in project cancellations and delayed commitments. Despite the market downturn, we feel that the long-term outlook remains positive.”
CMC Biologics is also confident about the industry’s future. “CMC Biologics is optimistic that the biologics CMO market will rebound and grow over the next several years, largely as a result of an increasing proportion of biologicals in the pharmaceutical pipeline and an expected increase in the biosimilars market,” Glassell reports.
Overall, CMOs expect the industry to grow 10% from the prior year. In addition, two-thirds of CMOs expect double-digit industry growth this year. “Considering the CMO segment of the biopharmaceutical industry, we expect continuing double-digit growth in the area of product development, while revenue from the production of marketed products will grow at a reduced pace,” Dr. Wolf says.
CMOs chalk up the growth in the biopharmaceutical contract manufacturing market to a number of factors. Many CMOs mention that biologics are the fastest growing segment of the pharmaceutical market, and that biopharmaceutical companies continue to outsource more of their production as they divest themselves of manufacturing facilities and concentrate more on R&D.
Other biotechnology trends that support the growth of biopharmaceutical contract manufacturing services include the expanding market for biosimilars and biobetters, increasing interest in personalized medicine, and increasing globalization of biotechnology demand.
Lonza reflects the optimism in the industry. “We remain optimistic as the outsourcing option seems more viable than ever in helping companies to manage risks,” Chu says. “We have observed evidence that many big pharmaceutical companies have divested manufacturing facilities and adopted outsourcing as one of their key corporate strategies.”
The increased focus on biologics in the pharmaceutical companies’ pipeline is also a reason for optimism. “Customers are more cautious and focus their investments on advancing their biologics lead candidates rather than expanding the pipeline (in particular, small to medium-sized biotechnology companies). As a result, there will be new products reaching the market that will feed the CMO lines,” Dr. Maier comments.
Another reason for optimism in the CMO industry is the emerging biosimilar and biobetter market. An increase in globalization is also being observed by CMOs. “Where, traditionally, the requests for larger scale CMO services came from the U.S., West-EU, and Japan, we now see more and more requests coming from other Asian countries, East-EU, BRIC, and Pacific countries,” Oomen reports. “We expect in the coming years that this globalization trend will accelerate further. As a result of further globalization, the CMO companies need to prepare accordingly and act more globally as well.”
Opportunities and Challenges
There are a number of challenges before the biopharmaceutical contract manufacturing industry, the major ones include price and cost pressures, the clients’ need for flexibility, the emergence of biosimilars, and the regulatory environment.
The level of investment and costs associated with the manufacture of biopharmaceuticals makes price and cost pressures especially challenging. “Mammalian cell culture continues to be a relatively expensive and capital-intensive production methodology,” remarks King.
Flexibility is important to clients and poses a challenge to CMOs. Several CMOs note that they are trying to improve flexibility to meet their clients’ needs. “One of the biggest challenges is to be flexible enough for the rapidly changing world and increasingly intense competition, and to manage portfolio risks at the same time,” Chu says.
The emergence of biosimilars and their regulatory difficulties are beginning to pose a challenge to CMOs as more pharmaceutical companies enter this market.
While the majority of respondents interviewed are enhancing or expanding their operations, concerns are building about possible excess capacity due to the emergence of CMOs in Europe and Asia. As mentioned by Cunningham, “Competition and the perspective of excess capacity is also an issue as a number of biological CMOs are surfacing in Europe and Asia.”
Continued financing, especially for early-stage clients, is both a challenge and an opportunity. According to Dull, “One of the challenges in the CMO space lies with virtual or start-up clients needing aggressive funding from venture capital groups to finance their projects.” With biotechnology funding as both a challenge and opportunity, Lonza has developed strategic manufacturing alliances to minimize some of the up-front investments and risks.”
“The traditional, pay-per-use model of a CMO may prove to be challenging in a time when product developers are seeking to maximize risk-sharing. This has spawned some opportunities in partnership establishment where CMOs are being integrated as part of the capacity planning value chain,” Chu explains.
Analysis & Insight: CMOs Seek Growth Beyond Traditional Contract Manufacturing
For more information on and examples of how providers are seeking out strategic partnerships and developing niche expertise, check out this story here.
Another method CMOs are using to address some of the challenges is to develop proprietary platforms or focus on specialized services to offer competitive pricing, quality, and flexibility.
Most CMOs are optimistic about the growth in the biopharmaceutical contract manufacturing market this year, with most firms expecting double-digit growth. Many CMOs will continue to expand their capacity and capabilities to meet anticipated growth in the coming years.
William Downey is president, Delanie Cassell, Ph.D., is senior scientific director, and Dawn Miles is senior market analyst of HighTech Business Decisions.