In biopharma, budgets are returning and manufacturers are emphasizing innovation, productivity, and cost control.
By Eric S. Langer, President, BioPlan Associates, Inc.
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|Survey Methodology: This eighth in the series of annual evaluations by BioPlan Associates, Inc. yields a composite view and trend analysis from 352 responsible individuals at biopharmaceutical manufacturers and contract manufacturing organizations (CMOs) from 31 countries. The methodology also encompassed an additional 186 direct suppliers (vendors) of materials, services and equipment to this industry. This year's survey covers such issues as: current capacity, future capacity constraints, expansions, use of disposables, trends and budgets in disposables, trends in downstream purification, quality management and control, hiring issues, employment and training. The quantitative trend analysis provides details and comparisons by both biotherapeutic developers and CMOs. It also evaluates trends over time, and assesses differences in the world's major markets in the U.S. and Europe.
Biopharmaceutical manufacturers are now defying many of the overall trends seen in the pharmaceutical and other mature industries. Namely, they are already showing strong signs of recovery from recent worldwide economic problems. As it matures, the industry continues its shift toward improved productivity and quality, all the while controlling costs.
These trends are documented in our 8th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production . This year we find that company budgets are clearly recovering from recent economic belt tightening. However, manufacturers are maintaining their conservative approach to production, and keeping their focus on cost reduction and quality improvements. In this year’s study (see Figure 1), the shift in the focus to production quality was particularly apparent. Here, we saw an 11 percentage point increase, to 57.1%, of global respondents indicating they are seeing operational changes toward production quality.
This trend is affecting company budgets linked to these factors. The largest budget increases this year were in areas associated with productivity and quality. This was a change from previous years when most budgets had simply been slashed. Responses indicate that companies are expanding budgets, but are doing so cautiously, with expenditures being critically evaluated. Overall, spending in virtually all budget areas is up in 2011, between 1% and 6%.
This year, “New technologies to improve efficiencies/costs for downstream production” leads the pack with a 6.4% average spending increase. This budget increase comes on top of last year’s budget-leading 4+% increase. This is a result of funding for activities that reduce capacity constraints due to bottlenecks from downstream operations. Funding of new technology in upstream processing is nearly as substantial as downstream funding. Integrating “New technologies to improve efficiencies/costs for upstream” saw budget increases of 6.2% (Figure 2). Upstream manufacturing’s greatly increased yields in recent years keep it competitive from both productivity and performance standpoints.
In this year’s study, responses from 352 global biomanufacturers/CMOs in 31 countries, and 186 vendors to the industry, show that the top spending projections are going toward internal investments into new technology (upstream and downstream) and personnel and process development and optimization.
Companies are focusing on productivity by “retooling” and training existing staff resources. In fact, “Operations staff training to improve efficiency” ranked 4th this year, which suggests that funding for on-going process improvements is likely to continue. Similarly, the survey shows respondents attributing “Better process development” and “Overall better control of process” as the number 1 and number 3 factors, respectively, in creating “ ‘Significant’ or ‘Some’ Improvement in Biomanufacturing Performance.”
Across all departments, budget trends are a leading indicator of how constraints have loosened, especially for expenditures that improve process performance. The annual survey documents how this industry, despite recent worldwide economic difficulties, has maintained steady growth, and continues to mature.
Outsourcing is Up
Survey data indicate that biopharmaceutical companies are increasing their outsourcing, but are doing so in areas that may reduce costs, or improve productivity. Recent increases in company budgets are often not being directed toward rebuilding in-house staff that had been reduced, or eliminated in recent years. Outsourcing of certain key tasks, such as manufacturing, is growing at a steady pace. Overall, the prospects for outsourcing by biopharmaceutical companies, including contract testing and manufacturing companies, appears promising with healthy growth expected, particularly for the more sophisticated and broadly-capable contractors.
This year’s survey included evaluation of 23 key areas of biopharmaceutical outsourcing. As shown in Figure 3, when asked where costs had been successfully reduced last year through outsourcing (in addition to any prior years’ cutbacks and outsourcing), the highest percentage, 13.2%, reported outsourcing of jobs in process development, and 9% outsourcing R&D, and 11.8% manufacturing, including 5.7% off-shoring manufacturing to foreign contract manufacturers (CMOs).
Essentially every biopharmaceutical company now outsources to some extent, whether for manufacture of clinical supplies, process development, R&D, assay services, validation testing, fill-finish or a wide variety of other outsourced activities. Survey results show a significant increase in the percentage of biopharmaceutical companies planning outsourcing of upstream and downstream bioprocessing within the next 24 months.
This year, 22.1% of respondents expected to significantly increase outsourcing of downstream manufacturing (e.g., purification) operations, a jump to 2nd from 6th place (14.3%) last year. Similarly, 22.1% expected to significantly increase outsourcing of upstream (active agent production) manufacturing operations, a dramatic increase from 8.6% last year. A majority (≥60%) of respondents projected at least some outsourcing of manufacturing by 2015. This included 63.5% of those currently using mammalian systems reporting they expect to outsource at least some of this by 2015.
Companies are more aggressively incorporating outsourcing as part of their overall manufacturing strategies. Outsourcing is no long perceived as simply a convenient method of adding needed capacity or as a means to eliminate jobs and overhead costs. Companies have developed confidence in their ability to model and assess the value delivered by outsourcing, and are increasingly demanding more value from their outsourcing partners, including CMOs. As a result, companies are establishing more complex and deeper relationships and dependencies on their outsourcing partners. Outsourcing is increasingly more about doing things better and more competitively and less just about cost savings.
Overall and as expected (as with most industries), as shown in Figure 4, biopharmaceutical industry outsourcing today remains largely preoccupied with lower value-added tasks, particularly testing services. When asked about areas with any current outsourcing, the highest response, 70.0%, was for product characterization—e.g., pre-release testing. This was followed by validation testing services (69.3%), plant maintenance (67.1%), toxicity testing (65%), and analytical testing and bioassays (60.7%).
In terms of manufacturing, fill and finishing had the higher percentage (60.7%). The areas with the least outsourcing were Design of Experiments (DOE), only 20.7% and downstream (22.1%) and upstream (23.6%) process development. However, more companies are considering these more critical tasks, and may be ready to trust higher value activities to others. This increased sophistication means companies are now evaluating factors including speed-to-market, increased flexibility of operations, and placing remaining employees in higher-value positions to build more strategic corporate infrastructure.
Current trends in biopharmaceutical outsourcing indicate the future will increasingly include manufacture of commercial products, not just R&D and trial supplies. CMOs with the most established, broad and sophisticated services, including having the infrastructure and in-house expertise to prepare product applications and perform commercial cGMP manufacture, will be the biggest winners in terms of gaining new commercial manufacturing business. The Rise of Single-use Bioprocessing
Single-use bioprocessing equipment, generally composed of plastics rather than stainless steel, is providing the biopharmaceutical industry with cost-effectiveness and flexibility. Single-use bioreactors and other equipment are ultimately cheaper than stainless steel and provide greater flexibility, including the ability to purchase, ship, store and install complete manufacturing systems as needed. Combine this flexibility with reduction in the cost of manufacturing infrastructure (no need for steam/clean/sterilize equipment for reuse), and the use of single-use bioprocessing equipment is increasingly a necessity to remain competitive, especially as biosimilars continue their push onto the global markets.
Our survey this year shows that the average company is currently spending about $1 million/year for purchase of single-use systems, with 68.1% of survey respondents reporting current in-house use of single-use bioreactors. However, no mainstream biopharmaceutical product is yet manufactured using a single-use bioreactor-based system. This is primarily due to the relative newness of single-use bioreactors. Single-use (particularly upstream) bioprocessing systems now dominate R&D and clinical supplies (pre-market) manufacturing worldwide.
Regulatory uncertainties, however, remain regarding cGMP commercial manufacturing using plastic vs. stainless steel equipment. Once a few companies pioneer FDA and other highly-regulated approvals of products manufactured using single-use systems, these devices will likely compete aggressively in commercial manufacturing against fixed, expensive, stainless steel systems.
Single-use equipment may ultimately place cost pressures on contract manufacturers. As bioprocessing becomes simpler and less expensive, more will consider in-house manufacturing. But single-use bioprocessing also make production simpler and cheaper for CMOs as well. Currently, CMOs appear to be winning, with single-use equipment tending to make their services more attractive, particularly as they develop increased expertise from repeated use of single-use systems.
The biopharmaceutical industry is well aware that, in general, bioprocessing systems and bioreactors have changed little over many decades. Our survey shows that the industry is actively seeking innovations and improvements in bioprocessing systems, particularly single-use systems which offer the most savings and advantages. Improvements in bioreactors, particularly single-use, ranked along with purification equipment as the areas where bioprocessing innovations were reported as most needed, with 29.2% of respondents citing bioreactors. Bioreactors also continued as the area taking up the largest portion of companies’ bioprocessing budgets.
Among the 186 vendors and suppliers we surveyed, single-use bioreactors were the area where the largest portion, 40.5%, reported working, at least in some way, on new technologies and products. Thus, improvements and innovations can be expected in coming years.
A trend in bioprocessing technology to watch is the development and adoption of perfusion bioreactors, which appear on track to revolutionize biopharmaceutical manufacturing. Perfusion bioreactors involve cells growing at up to 1,000 times higher concentration than batch-fed bioreactors; they require less space and offer related cost savings. Perfusion is not new, with a number of companies offering these bioreactors back in the 1970s and 1980s, mostly for hybridoma (monoclonal antibody) culture, but these were abandoned when recombinant manufacturing became dominant in the 1980s and 1990s.
Biosimilars: More Products, More Companies
Perhaps the most disruptive emerging trend involves the introduction of biosimilar products (including biogenerics and biobetters). As these are introduced, they may significantly increase the number of drug products and companies in coming years. Last year, the U.S. joined other major market countries in establishing a biosimilar approval mechanism, although it will take FDA a few more years to fully implement. Already, over a dozen biosimilars have been approved in the European Union.
Compared to generic drugs, biosimilars are likely to be much less of a threat to established manufacturers. Unlike generic drugs, few true biogenerics (i.e., products presumed to be the same, with automatic substitution for their reference products allowed) will be approved in the U.S. and other major markets in coming years. Most highly-regulated countries expect to have difficulties with approvals of biosimilars, which are not presumed to be identical for prescription purposes. And price discounts by biosimilars will be much smaller, because biologics tend to be more expensive to manufacture than generic small-molecule drugs. Thus, biosimilars will not dramatically disrupt established biopharmaceutical markets the way generic small molecule drugs have done.
Despite this, biosimilars will result in a significant expansion of the number of biopharmaceutical products and companies. For every successful product coming off-patent, there will likely be multiple biosimilars in the marketplace. This will result in an increase in biopharmaceutical manufacturers and marketers worldwide, and a higher demand for experienced staff, equipment, and management. Further, biosimilars are seen by many companies, including generic drug and foreign companies, as a relatively easy way to enter the U.S. and other major markets. This includes a number of companies in India and China likely to seek approval of biosimilars in the U.S. and other major markets.
However, getting biosimilars to the market will not be an easy task. With few precedents, regulatory approvals are not assured. Other threats to biosimilars could include older reference products being withdrawn from the market, or replaced, as biosimilar competition approaches. This may make comparative testing difficult, resulting in the need for clinical trials for biosimilar approval. As a result, the biosimilar version may require a full approval, involving higher expenses. Other problems for biosimilars include there simply being too many competing products. With companies seeing biosimilars as a way to enter major markets, competitive pressures may disrupt markets and reduce profitability.
Trends in biologics today point toward increased growth and profitability, in contrast with some mainstream small-molecule-oriented pharmaceutical industry segments. Major trends affecting the biopharmaceutical industry include increasing company budgets; the adoption of single-use/disposable equipment and other bioprocessing advances that improve cost-savings, quality, productivity, and flexibility in manufacturing; and the advent of biosimilars increasing in the number of biopharmaceutical products and companies present in the market in coming years.
There are currently about 425 biopharmaceuticals in the major U.S. and European Union markets. And there are around 60 product applications either pending or expected to soon be filed with FDA . With ever-increasing knowledge, technological advances, successful products and companies, and improving manufacturing economics, biopharmaceuticals are a bright spot within the pharmaceutical industry. Biopharmaceuticals currently provide around 15% of pharmaceutical industry revenue. This will increase rapidly in coming years, with an estimated 40% of pharmaceuticals currently in development being biopharmaceuticals.
About the Author
Eric S. Langer is president and managing partner at BioPlan Associates, Inc., a Rockville, MD-based biotechnology and life sciences marketing research and publishing firm established in 1989. He can be reached at email@example.com or 301-921-5979.
1. Langer, E., 8th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production: BioPlan Associates, April 2011, 490 pages, www.bioplanassociates.com.
2. Rader, R.A., BIOPHARMA: Biopharmaceutical Products in the U.S. and European Markets, online database, www.bioplanassociates.com/biopharma.
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