The outcomes of that crisis have been relatively strong for the industry. While some biomanufacturers continue to see capacity constraints on the horizon, these tend to be transient — not systemic — issues. Even so, the biomanufacturing community continues to expand capacity, with contract manufacturing organizations (CMOs) leading the charge. However, the pendulum may have swung so far that the industry could be looking at an excess capacity crisis, which could adversely affect the CMO market.
Industry’s Planned Capacity Increases
As part of our 10th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production1, we looked at how CMOs and biotherapeutic developers measured up in terms of planned future capacity expansions across traditional and newer platforms: mammalian cell culture, microbial fermentation, yeast; plant cells, and insect cells.
The results reveal that in all areas but plant cells, both groups are planning significant capacity expansions, with CMOs projecting more rapid growth than developers. This is particularly true for mammalian cell culture, where CMOs projected an average capacity increase of 59.4% by 2018, versus 40.9% for biotherapeutic developers. It’s interesting to see that this pattern has been the case for a few years now; and although both groups project significant expansions, more capacity is coming on-line among CMOs. With respect to mammalian cell culture capacity, our prior year (2012) study found CMOs projecting a 70.7% increase in capacity during the coming five years, compared to 46.5% for biotherapeutic developers; in 2010, they were 59% and 48%, respectively. CMOs apparently are riding a long-term wave as they plan for more future mammalian capacity. Although the five-year expansions expressed by developers are lower, relative to CMOs, this is not unexpected, because in-house production requires a more cautious strategy. This is mirrored in trends seen elsewhere in our study, in terms of current and expected capacity constraints, such as situations where developers are reporting more capacity constraints than CMOs.
In microbial production we found similar trends. For the past three years CMOs with these capabilities have planned for significantly higher expansions of their microbial fermentation compared to biotherapeutic developers: 47.1% vs. 26.3% in 2013.
We saw a similar spread in 2011, where the average for CMOs’ future expansion plans called for a 54.6% increase, compared to a 28.4% increase for developers.
The more significant increase in CMO forecasts for expansion of mammalian production might also be driven by the direct participation or partnering of some CMO companies in the development of biosimilar monoclonal antibodies that have now initiated clinical development. On a total industry capacity basis, one would expect a surge in overall production volume as biosimilars are developed and launched in coming years, concurrent with peak manufacturing of their licensed proprietary biologics.
Who are the Major Players?
Capacity share estimates for leading mammalian cell culture CMO capacity holders haven’t changed much during recent years. Among CMOs, Lonza now has the largest capacity (based on cumulative bioreactor volumes), estimated at 33% share. Lonza is followed by Boehringer Ingelheim and Celltrion, with shares of 27% and 16%, respectively.
This compares with CMO bioreactor capacity in 2006 where Boehringer led with 34% share of worldwide capacity, followed by Lonza with 31%. By 2010, Boehringer’s share had dropped to 23% while Lonza’s had remained fairly steady at 32%, as capacity from other CMOs came online. Human Genome Sciences, which held an estimated 7% of capacity in 2010, has since been reclassified as a product manufacturer, given Benlysta approval and later acquisition by GSK. Overall, there have been relatively few recent major changes in capacity among leading CMOs in the recent past, other than most every CMO likely adding new capacity.
Note that these data show only mammalian culture capacity, nearly all of which involves fixed stainless steel equipment used for commercial product manufacture — particularly major-selling monoclonal antibody products — and do not address CMO microbial systems. There are relatively few CMOs with major, commercial-scale, microbial manufacturing capacity. The leading microbial CMOs, in terms of capacity, are Sandoz (the CMO and generic pharma subsidiary of Novartis), Lonza, Boehringer Ingelheim, DSM and CMC Biologics. Most of these companies and facilities are based in Europe, with the U.S. having much less larger-scale microbial CMO capacity.
The microbial CMO manufacturing market is estimated at around $2 billion per year, with the microbial CMOs’ market estimated at ~$700 million; this later estimate is largely based on BioPlan studies showing that nearly one-third of marketed microbial-manufactured products involve manufacture by CMOs.
Also worth noting: among the largest microbial capacity holders, most — Sandoz/Novartis, Boehringer Ingelheim, and DSM — are product manufacturers themselves, although DSM is much more involved with fermentation-derived drugs and other chemicals, while Lonza and CMC are biopharma-dedicated CMOs.
Taking Stock of Current Capacity
The major CMO service providers have been working in this field for decades, and are well recognized. As part of our study, we estimated the mammalian cell culture and microbial fermentation capacity offered by the industry. More CMOs are beginning to offer single-use options and technologies for production at increasing scales. This makes estimates of capacity somewhat of an inexact science. So our tallies should be treated as estimates that provide instructive trends information.
For mammalian cell culture, we estimate that worldwide CMO capacity was roughly 700,000 liters in 2012 (installed bioreactor volume), with that figure representing a 5% increase from a year earlier (670,000L). Our estimate also marks a 47% increase from 2008 (474,000L). This is fairly consistent with the industry’s own five-year projection made in our annual study that year.
We estimate total worldwide product company capacity to have been ~2,800,000 liters in 2012, which would represent a ~35% increase from 2008 (2,062,000). So by our count, mammalian cell culture capacity has been expanding more rapidly for CMOs than for product companies, though from a smaller base and with both groups growing quite quickly. This type of growth has interesting — and potentially adverse — implications for CMOs in particular.
Will Product Manufacturers Compete with CMOs?
Concerns about over-capacity today continue to come from the ongoing improvements in productivity and titer, with some fearing that these improvements will lead to more legacy, super-sized stainless steel facilities likely being idled, mothballed or becoming the property of CMOs. The increased use of disposables is also reducing the need for fixed capacity.
As the industry matures, and improvements in manufacturing technology continue, major biopharma companies with substantial mammalian cell culture capacity of their own — Amgen, Genentech, Pfizer — are likely to operate at less than industry-average capacity, despite having large production requirements. Continuing from previous years, both large and mid-tier contract manufacturers, including Lonza (Basel, Switzerland), Boehringer Ingelheim (Biberach, Germany), Celltrion (Incheon, South Korea), Sandoz/Novartis (Vienna, Austria) and many others, if not already, will likely start to experience capacity surplus, with this primarily involving these and other CMOs’ excess increasingly becoming legacy, dated-technology 10,000 L bioreactors and related facilities.
With fewer blockbusters expected and future biopharma markets likely to be more fragmented — with more manufacturers and products, including many biosimilars — there could well be less need for such concentrated massive capacity. Some CMOs have reported experiencing price competition at larger scales, possibly as a result of the current economic situation and/or new major top-end capacity-holding entrants starting to take business.
The real issue for CMOs may not be internal competition, but rather an influx of capacity from companies previously working only as product manufacturers. The current industry leaders in terms of having established world-class bioprocessing capacity are generally facilities with banks of multiple 10,000 L or larger stainless steel bioreactors mostly used for monoclonal antibody manufacture. These facilities are increasingly facing problems of excess capacity. There are numerous factors that could cause current developer/manufacturer companies to lose significant sales of their long-established legacy products and otherwise experience reductions in the scale of their manufacturing. These include:
- Newer products being scaled-up at much higher yields and increasingly using single-use systems;
- Many established products in coming years going off-patent and becoming susceptible to biosimilar competition; and
- Other products getting old and replaced by newer competing products.
What Will Companies Do With Unused Capacity?
Biologics developers are continuing the trend of exploring options to become CMOs, including offering commercial manufacturing services. This may add considerable capacity and competition to the existing CMO market, particularly for commercial-scale manufacture. As has already been done with a few facilities, some will simply be mothballed or decommissioned, while some will be sold at discounts. For example, in Feb. 2013, GenMab sold its Brooklyn Park, MN, monoclonal antibody manufacturing facility to Baxter for only $10 million, with the facility anchored by 2 X 10,000 L and 2 X 1,000 L bioreactors (22,000 L) terminal bioreactor capacity (i.e., feeder and other smaller on-site bioreactors not included). This 215,000-sq.-ft. facility had been purchased by GenMab from PDL Biopharma in 2008 for $240 million; Baxter paid less than 5% of that cost.
In July 2013, CMC Biologics purchased the Xoma facility in Berkeley CA, to support demand for cGMP clinical and commercial production. The 31,000-sq.-ft. facility included three 2750 L stainless steel bioreactors and two purification suites. Other large facilities could similarly be spun off.
Potentially, new CMO entrants could adopt business plans and pricing strategies disruptive for established smaller CMOs. This could include large innovator companies adding CMO divisions and making cost-recovery a priority. When this is considered in the context of the increased number and excess capacity of new CMO entrants, it can be predicted that some disruptions will occur.
Disruptions could include excess capacity (competition) leading to prices being reduced to levels that could affect upgrades and expansions. This could result in consolidation, such as has been seen where excess capacity in the animal toxicology testing industry resulted in the closing of many smaller facilities as well as industry consolidation and mothballing of some of the largest facilities. On the other hand, increasing excess capacity and facilities could also provide opportunities — as with the Baxter purchase, for example — for innovator companies and CMOs to acquire used equipment and facilities at incredible bargain prices.
A healthy, vital bio-CMO industry is needed, and some of the potential outcomes of the current capacity situation could damage that industry in the near-term. The entry of new, major world-class players, with large manufacturing capabilities, large staffs, decades of experience with commercial cGMP manufacture, world-class in-house regulatory and other support staff — as well as other advantages beyond that of most current CMOs — can result in consolidations of smaller CMOs with less infrastructure.
Fears of capacity shortages that were prevalent a decade ago, as multiple blockbuster monoclonal antibodies neared approval, have subsided with increased production yields and access to more rapidly-deployable single-use systems. Single-use and modular systems that are quickly installable and replaceable reduce the potential damage of capacity crunches, making them increasingly unlikely in the future. In fact, with single-use systems, simply estimating current and projected industry capacity has become more difficult, subjective and possibly irrelevant.
Although single-use system technologies will advance and continue to proliferate, with more technologies and products becoming available, in terms of capacity (cumulative bioreactor volume), most of the current largest facilities, e.g., multiple ≥10,000 L bioreactor, are likely to remain in use. New capacity will be added at lower scale, with most new large facilities still specifying stainless steel. As such, stainless steel will continue to dominate bioprocessing in terms of capacity and number of large-scale and commercial facilities3.
The Tenth Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production yields a composite view and trend analysis from 238 responsible individuals at biopharmaceutical manufacturers and contract manufacturing organizations (CMOs) in 30 countries. The methodology also included over 158 direct suppliers of materials, services and equipment to this industry. This year’s study covers such issues as: new product needs, facility budget changes, current capacity, future capacity constraints, expansions, use of disposables, trends and budgets in disposables, trends in downstream purification, quality management and control, hiring issues, and employment. The quantitative trend analysis provides details and comparisons of production by 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.
- 10th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production: A Survey of Biotherapeutic Developers and Contract Manufacturing Organizations, BioPlan Associates, April 2013.
- Rader, R.A., Langer, E.S., “Upstream Single-Use Bioprocessing Systems: Future Market Trends and Growth Assessment,” BioProcess International, p. 12-16, Feb. 2012
- Top 1000 Global Biopharmaceutical Facilities Index, BioPlan Associates, online database at www.top1000bio.com.
Eric A. Langer
Eric S. Langer is president and managing partner at BioPlan Associates, Inc. (bioplanassociates.com), a biotechnology and life sciences marketing research and publishing firm established in Rockville, MD in 1989. He is editor of numerous studies, including “Biopharmaceutical Technology in China,” “Advances in Large-scale Biopharmaceutical Manufacturing,” and other industry reports. He can be reached at email@example.com and 301-921-5979.