For the first time since 2008, the number of biotherapeutic developers manufacturing 100% in-house has dropped in each production system surveyed. According to data released in BioPlan Associates’ 8th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production1 for the first time since we began measuring outsourcing, more than half of respondents using mammalian cell culture or microbial fermentation systems report that they are now outsourcing at least some of their manufacturing.1

Our annual study provides indicators of global outsourcing activities, and points to the increasing use of CMOs to control costs and manage internal staff and resources. Among many areas of coverage, this year’s survey asked respondents the percentage of production currently outsourced by manufacturing method — mammalian, microbial, yeast, plant, and insect — and compared the data to previous years. The results, which include responses from 352 global biomanufacturers, show that biologics developers recognize that, as their production capacity constraints shift, bio-CMOs can provide the necessary technical expertise and flex capacity to reduce risks associated with building internal capacity. 
 

Biopharma CMOs are expanding their manufacturing competence through the use of novel technologies, single-use/disposable bioreactors and other differentiated bioprocessing services. Expansions are resulting in increased adaptability, lower costs, faster turnaround and higher yields. For clients, this means that more CMOs are likely to meet their needs (more competition leads to more choice). In addition, the costs for using CMOs for product manufacturing are holding steady, even as service offerings improve. This year’s study shows CMO pricing to remain virtually flat, with only bulk formulating increasing around an average of 2%. Most of the other 10 CMO areas tested will remain below a 1% price increase this year. 

Outsourcing Results

This year, among respondents producing in mammalian cell culture, 45% indicated they performed all their production “in-house” (down from last year’s 57%). In addition, 17.6% of respondents outsourced less than 10% of their production, and 16.2% outsourced from 10% to 25%. Over the past few years, the percentage of biotherapeutic developers who are doing all of their mammalian cell production “in-house” shifted down slightly from 55.6% in 2006 to 57% in 2010, and to 45% today. 

For microbial fermentation, 43.8% of this year’s respondents indicated they performed all their production “in-house,” vs. 64.2% last year, while 8.3% of respondents outsourced 90-100% of their production. The percentage of biotherapeutic developers who were doing all their microbial fermentation “in-house” has increased slightly over the past five years (between 58.1% in 2005 vs. 64.2% last year, and 43.8% this year). 
 

Interestingly, in comparison with other manufacturing platforms, insect cell culture was reported to be done 65% in-house, (followed by 59.1% doing yeast culture in-house). With few insect and plant cell production platforms being used for commercial manufacture, this indicates that these systems are primarily being used for in-house manufacture of preclinical and perhaps some early clinical supplies. The overall trend toward using more outsourcing is paralleled by the fact that more “platform processes” are becoming available, a fact that supports outsourcing.

Key Findings 

• Mammalian cell systems: 45% (vs. 57% last year, and 53% the previous year) of respondents indicated that they outsourced no production.

• Microbial: 43.8% (vs. 64.2% last year, and 60% in 2009) outsourced no production.

• Yeast: 59.1% (vs. 60.7% last year, and 69% in 2009) outsourced no production.

• Plant cells: 58% outsourced no production (compared with 75% last year).

• Insect cells: 65% outsourced no production. 

Looking Ahead: Five-Year Projections For Outsourcing Activities

Respondents also estimated the overall percentage of their production that they expected to outsource by 2015. The trend our study shows towards greater outsourcing in all manufacturing platforms is supported by data concerning future projections. Indeed, this year, 63.5% of respondents projected that at least some production in mammalian cell culture will be outsourced within five years, compared with 63.1% last year (and 53.5% the previous year).
The fact that mammalian systems manufacturers have not significantly changed their five-year projection this year suggests a relatively stable production environment. For microbial fermentation, 59.6% of respondents this year indicated that at least some of their fermentation will be outsourced within five years. In comparison, 52.7% last year and 43.9% in 2009 indicated they would outsource at least some microbial production. Additionally, companies expecting to outsource at least some insect cell production expanded significantly to 44.4% this year, up from only 16.7% in 2010. Data regarding outsourcing of yeast, plant and insect cell production show greater year-on-year variability due to the relatively smaller percentage of facilities operating in these systems. 

Trends in Outsourcing Activities

Outsourcing today continues to be dominated by relatively lower value-added services, such as fill/finish and product testing. To dig deeper into outsourcing trends, and to determine where the greatest changes are likely to occur, we examined 23 current outsourcing activities and asked respondents which areas they will be outsourcing more often over the next 24 months.

We discovered that the primary outsourced activity today is product characterization testing, with over 70% of biopharmaceutical companies outsourcing at least some of this activity. Validation services (69.3%) and plant maintenance services (67.1%) follow closely. At the other end of the scale, there appears to be relatively low outsourcing activity for design of experiments, downstream and upstream process development, and QbD initiatives. 

One activity that showed a significant increase in outsourcing from last year was API biologics manufacturing, which jumped to 44.3% of respondents who are now outsourcing at least some of this activity (compared to 29.3% in 2010). This increase is reflected in the growth of companies such as Albany Molecular Research, Inc. (AMRI), whose president and chief executive officer, Thomas E. D’Ambra, attributed its strong second quarter results to “continued strength in development and large scale API manufacturing operations as both biotech and pharmaceutical companies maintain focus on their late-stage portfolios.”2

API outsourcing for biologics has been around for decades, with Lonza in the UK and Boehringer Ingelheim leading in mammalian and microbial systems, respectively. Today, we are seeing an expansion of CMOs and biosimilar manufacturers (see www.top1000bio.com) globally due to the emergence of facilities in India, China, Korea, Malaysia and elsewhere. These facilities are emerging to support both domestic production, and to gain a foothold in the developing opportunities for biologics production. In addition, despite the current stable capacity worldwide for biological manufacturing, drug innovator companies continue to offer their excess or idle capacity as CMO operations. 

Outsourcing Growth Trends

We evaluated outsourcing trends by asking respondents where they believed they would be outsourcing significantly more projects over the next 24 months. Of the 24 activities tested, three stood out as areas where substantial changes will occur during the next two years. We found that 23% of biomanufacturers will be outsourcing significantly more ‘Fill/finish operations’ compared with their current levels. Although this figure is slightly down from 2010 (25%), there appears to be a trend towards more outsourcing of this activity in the future, as more and more “high-end” fill/finish operations are used, such as prefilled syringes, cartridge systems and multi-use adjustable syringes. 
 

Following fill/finish operations is ‘validation services,’ noted by 22.1% as being a big gainer over the next 24 months. Validation services result from a lack of internal staff with the ‘brain-power’ and ‘hands-on’ capacity to provide the corresponding know-how when it comes to late stage process / methods validation in a company that wants to rapidly move from early-stage clinic into late stage and commercial. Highly specialized providers of validation services have been active for many years and their businesses continue to prosper. 

Following ‘validation services’ as a future outsourcing activity was ‘downstream production operations,’ which was noted by 22.0% of respondents this year (compared to 14.3% in 2010). According to Dr. Wolfgang Noe, senior consultant at BioProcess Technology Consultants, this may be due to the fact that “more companies tend to outsource the ‘standard, platform’ processes, while focusing internally around the more challenging molecules.”1

While the world economy continues to take a battering, biopharmaceuticals and related industry segments remain growth areas. Even so, the biopharma industry is becoming rapidly globalized — according to our recently released Top 1000 Global Biopharmaceutical Manufacturing Index™,3 although the U.S. has the largest concentration of global biomanufacturing capacity (not just number of facilities), at 37.5%, China (8.5%), India (8.0%), and Japan & other Asian countries (9.2%) are growing rapidly. 

Given this increasingly competitive global environment, the biopharma industry continues to focus on productivity, efficiency, getting more out of existing internal resources, and maximizing performance from provider relationships. Outsourcing plays a role in this equation as companies recognize the strategic necessity of using internal resources more efficiently, while outsourcing activities outside their core competencies. This outsourcing of processes, while enabling a focus on a company’s skill base, also yields economic benefits. Even so, as CMOs offer expertise, tools and capacity that biopharma companies don’t have in-house — or that they elect to outsource as part of their strategic planning — it will increasingly become less about direct cost savings, and more about doing things better and more competitively.

Although outsourcing can improve overall efficiency and reduce costs, the management of relationships continues to be challenging, and necessitates flexibility to meet clients’ shifting needs. The rise of outsourcing has resulted in many companies establishing centralized contracting groups to handle the complex and time-consuming business of selecting and managing partners. Our study indicates that this growth is also resulting in ongoing and, in many cases, unresolved problems associated with managing relationships, partners and projects. These problems are likely to continue to expand along with current outsourcing trends. As the use of outsourcing partners becomes more embedded into company strategy, effective management, including the establishment and maintenance of strong working relationships will become more critical. Addressing these managerial, communications, and partnering problems may become a bottleneck that determines just how quickly and successfully the outsourcing industry grows. 

References

1 8th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production: A Survey of Biotherapeutic Developers and Contract Manufacturing Organizations, BioPlan Associates, April 2011, 490 pages.

2 AMRI Announces Second Quarter Results. 8 August, 2011. http://www.marketwatch.com/story/amri-announces-second-quarter-2011-results-2011-08-08?reflink=MW_news_stmp

3 BioPlan’s Top 1000 Global Biopharmaceutical Facilities Index™, www.top1000bio.com, accessed August 25, 2011

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 elanger@bioplanassociates.com or 301-921-5979.