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Taking Stock of Biopharma’s Outsourcing Markets

By Eric S. Langer, BioPlan Associates | March 9, 2016

Outsourcing of testing services on the rise

In recent years we have witnessed an expansion of the biopharmaceutical manufacturing outsourcing market, as contract manufacturing organizations (CMOs) have begun actively scouting and integrating new technologies that position themselves as sophisticated partners willing and able to take on high-value activities. Not only are CMOs often the first place innovative technologies are tested, but some mid-tier and larger CMOs have formal programs in place to identify and cultivate new innovations that can enhance the overall services they provide.

Data from BioPlan Associates’ 13th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production this year indicates that this function as a source of innovation is boosting CMO service providers’ breadth of services as well. In fact, early responses to our study this year indicate that 22 of the 24 outsourcing activities we measured continue to see an uptick in the breadth of outsourcing. In other words, more companies are deciding to outsource a bigger range of services.

The most commonly outsourced activities were led by:
  • Analytical testing of bioassays (92% outsourcing to some degree this year, up from 86% last year1 and maintaining the top spot);
  • Fill/finish operations (80%, up from 73%);
  • Toxicity testing (75%, up from 72%); and
  • Validation services (73%, relatively flat from last year).

It’s interesting to see continued growth in the outsourcing of these common activities, suggesting that they have not yet plateaued. For example, if these figures hold, they would represent the broadest degree of outsourcing for analytical testing of bioassay services since 2011.

Outsourcing of testing services, operations activities growing
One of the notable trends to appear from this year’s preliminary data is the growing share of respondents that are outsourcing testing services. This trend is not limited to testing of bioassays as outlined above—which saw a hefty increase in its own right. In fact, other testing services are also seeing concurrent increases, including:
  • Product characterization testing (69%, up from 62.1% last year);
  • Cell line stability testing (65% outsourcing, up from 56%); and
  • Testing of host cell protein analysis (59%, up from 41%).
Beyond testing services, another noteworthy result is the degree to which some of the traditionally lesser-outsourced activities are experiencing an increase in adoption. This extends to high-value production operations and even quality by design (QbD). For example, our preliminary data indicates that:
  • Almost half (49%) of respondents reported outsourcing at least some upstream production operations, up from 42% last year and more than double the 21% from 2010;
  • 46% are now outsourcing some downstream production operations, up from 39% last year and 28% in 2010; and
  • Almost 45% are outsourcing QbD services, up from 38% last year and 19% in 2010.
Fill-finish remains most heavily outsourced activity
Fill-finish operations are the most heavily outsourced activity. To determine the percentage of an activity being outsourced, we looked at the degree to which respondents are outsourcing these various activities and estimated a percentage share based on the results.
This year our preliminary data confirm the relatively high extent to which fill-finish operations are being outsourced: we estimate that almost two-fifths (39%) of all industry fill-finish activities are being outsourced. Although a much larger percentage of facilities, by number, outsource, by volume the larger facilities still retain in-house activities.  So the 39% volume is not unexpected.  This high-value activity is undertaken at the final stages where the drug product is highest, and a failure would represent a major risk. 

Fill-finish perennially tops outsourcing lists, and they represent the highest level of fill-finish outsourcing yet. This result aligns with separate data from last year’s study, in which fill-finish manufacturers said that outsourcing of these activities to CMOs is one of the largest trends they’re seeing today in the fill-finish market.

Following distantly is analytical testing of bioassays, of which we estimate 29% being outsourced, up slightly from last year’s 27% and in line with prior years. Toxicity testing follows, with more than one-quarter (26%) of these activities being performed by contracting organizations. 

Compared to recent years, our preliminary data suggests a rebound in the degree to which some activities are being outsourced, including: host cell protein analysis testing; GMP training; early (pre-clinical) research; upstream production operations, upstream process development, and QbD services. Indeed, the latter two activities could be seeing their highest levels of outsourcing yet, although they remain at low levels.

Overall, the activities that are seeing the smallest levels of outsourcing are:
  • Downstream process development  – 7.8% of all activities;
  • QbD services – 8.2%; and
  • Design of experiments (DoE) – 8.5%.
Expect more outsourcing of API biologics manufacturing
One activity that appears to be trending up in recent years is API biologics manufacturing. This year our estimates suggest that one-fifth (20%) of this activity is being outsourced, a figure that would represent the highest in our survey’s history and a marked increase from 8% in 2010.

The data indicates that the companies engaging in outsourcing of this activity are doing so to a considerable degree. For example, some 59% of respondents report outsourcing at least some API biologics manufacturing activities, and an equal percentage say they’re outsourcing at least some GMP training. However while more than one-fifth of API biologics manufacturing is outsourced, less than one-eighth (11.5%) of GMP training is being outsourced (the fact that nearly 90% of training is being done ad hoc, in-house is a subject of future articles).

The increase in API biologics manufacturing suggests that respondents are keeping to the projections. In recent years this area has been one of the top areas tabbed for future increases in outsourcing. For example, two years ago roughly 1 in 5 (20.8%) of respondents said that they would be outsourcing API biologics manufacturing at “significantly higher levels” in the following 24 months. Since then, outsourcing has grown from an estimated 15% of total API biologics manufacturing activity to an estimated 20.2% this year. 

That makes this year’s preliminary results all the more telling. Once again, API biologics manufacturing is near the top of the list in projected outsourcing increases. This time, about one-quarter (24.5%) of respondents expect to significantly increase their outsourcing of this activity over the next 24 months, which would represent the most bullish forecast so far this decade. We note that API outsourcing can be a major step and one that involves strategically shifting how facilities plan their biologics manufacturing pipeline, so change in this area is likely to occur slowly, if steadily.

This result is also impressive when considering that few activities this year are being tabbed for greater increases than last year, and several could see their growth rates flattening. For example, the leading activity for future increases—analytical testing of bioassays—has been cited by 33% of respondents to-date, down from 41% last year. Other activities such as cell line development (8% forecasting increases, down from 15% last year).

In addition to API biologics manufacturing, lot release testing is also prediction a considerable rise in future outsourcing projections, with about 1 in 7 (14%) this year forecasting a significant rise over the coming 24 months, compared to about 1 in 10 (11%) last year.

Growth forecasts remain strong yet tempered
Aside from analyzing specific outsourcing activities, our annual study also looks at the overall picture in terms of manufacturing systems. This provides an alternate view of the current and future health of outsourcing.

Among respondents producing in mammalian cell culture, our preliminary data indicates that roughly 4 in 10 (41%) are currently performing all of their production in-house. In other words, about 4 in 10 are not engaging in any outsourcing, a slight step up from last year’s results (35%).

Similarly, roughly 4 in 10 (42%) respondents to-date producing in microbial fermentation say they are keeping all their production in-house, compared with 39% last year.

Fast-forward 5 years, though, and those figures are expected to change quite dramatically, particularly for microbial fermentation. In 5 years, just 19% of respondents expect to be performing all their microbial fermentation production in-house, less than half the proportion doing so this year.

For mammalian cell culture, almost three-quarters (74%) of respondents so far expect to be outsourcing at least some of their production by 2021, up from 59% currently doing so.

In both cases, the 5-year projection for outsourcing in these systems is a little lower than last year. This aligns with the afore-mentioned data showing that growth projections for specific outsourcing activities are mostly flat or even on the decline this year. That may simply be a reflection of outsourcing heading towards a plateau given its growth in recent years.

Conclusion
Preliminary results from our 13th annual study of the biopharmaceutical industry indicate that outsourcing continues to be a widespread and growing activity among the biomanufacturing community. Interestingly, while traditionally outsourced activities such as fill-finish operations and bioassay testing are seeing growth and nearing market saturation, more high-value activities including production operations and process development are also gaining steam.

This year’s data suggests that biomanufacturers are increasingly turning to outsourcing partners for testing services, whether those be bioassay testing, product characterization testing, or cell line stability testing. Outsourcing of API biologics manufacturing also appears to be on an upswing, as the degree to which this activity is being outsourced has seen growth in recent years—with further increases forecast.

At the same time, there are obvious limits to outsourcing’s growth. With outsourcing of activities such as bioassay testing services already performed by upwards of 80% of companies, there’s not much room for continued growth. Outsourcing expansion may instead come in areas such as QbD services, process development and production operations, as these are overwhelmingly performed in-house today. Even so, projections for significant increases over the next 24 months are rather muted in these areas, suggesting that companies —as one might expect—will tread cautiously when they approach outsourcing of high-value activities.

Nevertheless, given historical data from our studies—and preliminary results from our latest research—it seems reasonable to suggest that somewhere around two-thirds—if not more—of companies involved in mammalian cell culture and microbial fermentation production will outsource at least some of these activities by the end of this decade. 


References
  1. 12th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production, BioPlan Associates, Inc. Rockville, MD., April 2015. www.bioplanassociates.com/12th


Eric S. Langer
BioPlan Associates

Eric S. Langer is president and managing partner at BioPlan Associates, Inc., 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 many other industry reports. elanger@bioplanassociates.com; 301-921-5979; www.bioplanassociates.com

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