The biopharmaceutical contract manufacturing industry continues to see an improved market environment in 2012 and 2013. The improvements in the market environment for contract manufacturing services results in part from new drug approvals, greater funding of biotechnology companies, and demand for new services. The information presented in this article draws from recent interviews with seven biopharmaceutical contract manufacturing organizations and from HighTech Business Decisions’ (HTBD) study, Biopharmaceutical Contract Manufacturing: New Participants, Expanded Services and Emerging Markets, and HTBD’s report, Biotechnology Weekly Funding Events. From our analysis, HighTech Business Decisions projects the biopharma contract manufacturing market to reach $2.5 billion this year, a slight increase from prior year, and on track with our earlier medium-term growth projection of 7% per year. This article reviews some of the factors for the improved business conditions in the biopharma contract manufacturing industry and highlights industry opportunities and initiatives.

Improving Conditions
In 2012, the U.S. FDA approved 39 new drugs, a 16-year high. Of the new drugs approved last year, eight of the 39 approvals (21%) were for large-molecule drugs produced through recombinant processes. The number of large-molecule drugs approved in 2012 is slightly higher than prior year, when 6 large-molecule drugs were approved by the FDA. The expanding market for biotechnology drugs is a key driver to the growth in demand for contract manufacturing services.

In addition to the increase in new drug approvals, funding for new biotechnology projects also has a positive impact on the biopharma contract manufacturing industry. Funding for large-molecule biotechnology companies increased dramatically last year. The number of biotech companies funded in 2012 more than doubled from 2011 levels. In 2012, 195 biotech companies, producing or developing large-molecule recombinant vaccines or therapeutics, received funding from 230 funding events. By comparison, 93 biotech companies raised funds in 2011. For this analysis, funding includes debt, equity and grants from either public or private sources such as commercial, non-profit or government organizations. Most companies that sought funding for large-molecule projects in 2012 are developing recombinant proteins or peptides. A few companies are developing vaccines, while others are developing other novel therapeutics using recombinant processes.

In 2012, 74% of the funding for biotechnology projects occurred in North America, while 19% occurred in Europe and the balance (7%) occurred in rest of world (ROW) (see Figure A). The majority of projects in the ROW region were companies based in Israel. While all regions grew in 2012, funding for European-based biotech companies grew at a slower than average rate. In 2011, European companies had accounted for 25% of all funding activities.

Analysis of the 230 funding events shows that the average amount raised was $70 million in 2012, compared to $13 million in 2011. The higher average funding level in 2012 is skewed by a few companies that raised large amounts of funds (see Figure B). A Pareto analysis of funding in 2012 shows that 80% of the funds raised went to 18 companies. Still, funding was greater in 2012, even when the large funding events that skewed the distribution are excluded. Average funding excluding the 18 outlier companies in 2012 was $15 million, a 15% increase from the 2011 average. Similarly, the median of all funding activities was $8 million in 2012, compared to $6.5 million in 2011—a 23% year-over-year increase.


The majority of the funding events last year were for biotechnology companies with products in clinical studies (see Figure C). Of the 230 funded projects last year, 64% were for companies with products in clinical trials, while 22% of the funded projects last year were for companies with preclinical products. Only 14% of the funded projects last year were for companies that had commercial products in their pipeline.

Industry Growth
The CMOs interviewed for this article noted that capacity utilization rates continued to improve in 2012. In 2012, industry capacity utilization was 71%, which is 5 percentage points better than three years ago. Overall, capacity utilization rates are expected to remain steady in 2013, with most of our respondents expecting slight increases from prior year. A few respondents expressed some caution for this year, noting unforeseen volatility in demand for contract manufacturing services as a result of delays in regulatory approvals of drugs in their customers’ product pipeline.

In conjunction with higher funding rates and improvements in capacity utilization, the majority of CMOs expect to increase their hiring this year. Most CMOs will increase employment in manufacturing and engineering. Other functional areas where CMOs expect to expand employment include process development and quality (see Figure D). Both Lonza’s Pharma and Biotech Division and Fujifilm Diosynth Biotechnologies gave examples of new hiring to support expanded capabilities and capacities.

“We intend to add new employees in areas where market demand and the number of projects increase, for example in process and analytical development for large molecules,” said Dr. Stephan Kutzer, chief operating officer, Lonza Pharma and Biotech Market Segment. “Specifically in the area of quality assurance,
we will continue to support our customers with the
service excellence they expect. In addition, following the projection for capacity expansion in the area of ADCs (antibody-drug conjugates), we have added employees across all functions for ADC Development and Manufacturing Services.” Dr. Kutzer also noted a potential for employee growth in Singapore, where mammalian manufacturing and development services are continuing to grow.

“We are currently recruiting approximately 15 people for our new mammalian cell facility in Billingham, UK which is due to come on line in Q3 2013,” said Dr. Stephen Taylor, senior vice president Commercial at Fujifilm Diosynth Biotechnologies. “These will be manufacturing technicians and support roles, such as engineering. There is ongoing growth in process development staff in both UK and U.S. operations.”

Market Opportunities
Most of the CMOs we interviewed see opportunities in providing ADCs, protein fragments and biosimilars. As noted by Hiroko Tsukamoto, director of Business Development, Biomanufacturing Services at AGC Chemicals America, “There is almost no doubt that bi-specific antibodies and antibody biosimilars produced in mammalian cells will increase their presence in the biotech market. As a microbial CMO, AGC growth is focused on fragment antibodies, fusion proteins and biosimilars.”

Also commenting on the trend toward the development of antibody conjugates, Dr. Julia Knebel, director Marketing & Communication, Boehringer Ingelheim Biopharmaceuticals GmbH noted, “In addition to conventional monoclonal antibodies, we observe a trend that considerable attention has turned to enhancing antibody activity by appending cytotoxic drugs to generate antibody drug conjugates capable of site-selective drug delivery. The recent success of products in late clinical development raised great enthusiasm within the industry.”

In response to the increased interest in ADCs, Fujifilm Diosynth has formed an alliance with Piramal Healthcare. “We anticipate growth in antibody-drug conjugates, and to this end we have formed an alliance with Piramal Healthcare to provide a ‘one-stop-shop’ for their development and manufacture,” Dr. Taylor said.

Lonza is also making investments in response to the increasing interest in ADCs. “In development pipelines, there is continued and noticeable shift towards targeted cancer therapies such as ADCs, cytotoxics and overall high-potency-type therapeutic candidates,” said Dr. Kutzer. “These focused therapeutics require a cGMP manufacturing infrastructure, which complies with strict containment regulations. Lonza is committed to meet current and future demands of its clients in this area, and therefore recently announced an investment at its site in Visp, Switzerland, which will create the world’s largest manufacturing capacity for antibody drug conjugates as well as the supporting cytotoxic capacity for the associated toxins.”

Wacker Biotech GmbH sees increased interest in antibody fragments for use in both the diagnostic and therapeutic segments of the biotechnology industry. “Fabs have better tissue penetration than monoclonal antibodies and yet still retain high target affinity,” said Thomas Maier, Ph.D., managing director at Wacker Biotech, GmbH. Dr. Maier also noted that antibody fragments can be cost-effectively produced using Wacker’s microbial ESETEC® platform. “We have recently recorded a fivefold increase in the number of antibody fragment programs. Moreover, we see growing interest in biosimilars and biobetters.”

In addition to the opportunities in the development of ADCs and antibody fragments, the development of biosimilars is also providing new opportunities for CMOs. “We are seeing a significant request for services to support biosimilars in all geographies. Typically these are at a smaller scale than tradition mAb production 1,000 L- to 5,000 L-scale. ADCs are showing some growth, we see an opportunity for more efficient processes in this area,” said Richard Pearce, director of Strategy and Business Development, BioPharmaceutical Process Solutions, EMD Millipore.

New Services
In addition to offering new services and expanding capacity, CMOs are offering services to improve and streamline the drug development process for their customers. Examples of these new programs include Boehringer Ingelheim’s Smart-to-Launch™, EMD Millipores’ Provantage BioDevelopment services, and Lonza’s Epibase™ and Lightpath™ services. Detailed comments by the CMOs interviewed for this article regarding their service offerings are shown below.

“Smart-to-Launch is Boehringer Ingelheim BioXcellence™’s defined, streamlined and fast transfer procedure for the transfer of Phase III and early commercial processes. In this Smart-to-Launch offer we are able to deliver drug substance as soon as eight months after kickoff and drug product after nine months. Additionally, validation runs and CMC packages for drug substance will be completed after 15 months and for drug product after 17 months, respectively. This new model of parallel process transfer saves time and reduces timelines of our customers. The work packages and schedule have already been proven with several customer projects and customers have been very satisfied,” said Dr. Knebel.

“In 2012, EMD Millipore launched our Provantage BioDevelopment services,” said Mr. Pearce. “These services use the latest technology in both process development and single-use manufacturing to help clients reduce the time to clinic. Our ClinicReady single-use process template enables clients to easily tech transfer and duplicate the process at their own facility or the facility of a traditional commercial CMO.”

In order to help its clients mitigate some of the risks of late-stage clinical failures, Lonza offers its customers new services that help assess their new drug candidates at the early development phase. “We currently offer our clients a series of both in silico (IS) and in vitro (IV) Immunogenicity Assessment Services which allow customers to select candidates with a higher probability of success,” Dr. Kutzer said. “Our Epibase™ IS and IV Services, in conjunction with our Light Path™ Material Supply Service launched in 2011, allow customers to take advantage of a complete yet streamlined process for early risk assessment and candidate development.” Lonza’s Light Path™ helps its small biotech customer base to move quickly to first-in-human studies by providing customers access to small amounts of non-GMP and/or GMP material for early development or in vitro assessment.

The biopharma contract manufacturing market trends are improving. The favorable trends include an increasing number of new biologic drugs on the market, greater funding for biotechnology companies, and expanding service offerings by CMOs. As the demand for biopharma contract manufacturing services continues to grow, there has been an associated increase in capacity utilization rates and employment. CMOs see opportunities with new drug substances such as antibody drug conjugates and antibody fragments. CMOs are also offering new services to their clients that reduce drug development risks and timelines.

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William Downey is the president and Jennifer Hartigan is senior scientific director at HighTech Business Decisions, a market research and consulting company that has been publishing reports on the biopharmaceutical contract manufacturing market since 1997. For more information, visit www.hightechdecisions.com or call 408-978-1035.