Eric A. Langer12.06.11
For the first time since the 2008 economic slump, biomanufacturers’ budgets for outsourced services are up. According to our 8th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production,1 of the 352 global biomanufacturers surveyed this year, on average, budgets will increase slightly (0.8%). This compares to the prior two years’ budget decrease, of -1.8% in 2009 and -1.2% in 2010. Budgets for the 12 areas we measured this year were all up for the first time in three years, yet outsourcing budgets saw the smallest increase. This is partly the result of a relatively stable outsourcing environment, as in-house cuts, and layoffs necessitated the use of external service suppliers.
Outsourcing Budget Trends
So where exactly is this outsourcing budget being directed? We asked respondents where they would be outsourcing significantly more projects during the next 24 months. Of the 24 activities tested, three stood out as seeing substantial changes in the next two years. We found that 23% of biomanufacturers will be outsourcing significantly more ‘fill/finish operations’ compared with their current levels. Although down slightly from 2010 (25%), more outsourcing will involved more complex fill-finish operations, such as prefilled syringes, cartridge systems, and multi-use adjustable syringes.
Following fill/finish operations is ‘ Validation services’ noted by 22.1% this year as being a big gainer in the next 24 months. Validation services result from a lack of internal staff to provide the corresponding know-how for Methods Validation . Specialized providers of validation services have been active for many years and their businesses continue to prosper.
After ‘validation services’ comes ‘downstream production operations,’ which was noted by 22% of respondents (growing significantly from 14.3% in 2010). This may be due to the fact that companies would like to outsource their ‘standard, platform’ processes, and focus internally on more challenging projects. Following downstream outsourcing was an array of testing and Assay activities, as well as a number of more repetitive, less complex areas.
Geographic Outsourcing Destinations
We are seeing an expansion of CMOs and Biosimilar manufacturers (see Top 1000 Global Biopharmaceutical Manufacturing Index™ at www.top1000bio.com)2 globally due to the emergence of facilities in India, China, Korea, Malaysia, and elsewhere. These facilities are emerging both to support domestic production and to gain a foothold in the developing opportunities for biologics production. The U.S. has the largest concentration of global biomanufacturing capacity (not just number of facilities) in the world, at 37.5%. China (8.5%), India (8.1%) are growing rapidly. Together, the U.S. and Western European biopharmaceutical companies represent more than 70% of the R&D efforts of the global industry.
In this year’s study, global biomanufacturers were asked to evaluate their facilites’ current plans for international capacity expansion (not domestic). We identified 35 countries as potential outsourcing destinations. We found that Western European companies look to their own backyard first. For these European facilities, Germany was indicated by 31% of respondents as a primary destination for outsourcing, displacing the U.S. for the first time in eight years. Europeans’ preference for local destinations may reflect the presence of leading CMOs, such as Boehringer Ingelheim in Germany and Lonza in Switzerland.
U.S. respondents, on the other hand, are increasingly considering China as a strong outsourcing destination. China topped the list of ‘possible’ destinations for U.S. biomanufacturers, with 31% of respondents this year, vs. 17% in 2010. Singapore dropped to second place this year, with 28% considering outsourcing there as at least a ‘possibility’; India was hot on its heels at 26%.
Location Not a Critical Issue to Most Decision-Makers
Part of the reason for advanced off-shoring is that, contrary to anecdotal commentary from both CMOs and sponsors, the importance of location of CMOs shows up on our survey as being relatively unimportant (10.4% in 2005, and just 2.3% today indicate that factor is ‘Very important’). This is a result of globalization of this industry, the off-shoring of greater numbers of successful production projects, and the degree of outsourcing-management expertise that sponsors are acquiring. It also suggests that while the U.S. is gaining a high degree of comfort with Asian CMOs, European preference for local CMOs is less a cultural or geographic issue than one of regulatory complexity.
Conclusions
Biopharmaceuticals and their outsourcing supplier segments remain growth areas. As such, budgets for outsourcing are likely to continue to grow as the biopharma industry focuses on productivity, efficiency, getting more out of existing internal resources, and maximizing performance from their suppliers. Outsourcing helps the bio-industry use its internal resources more efficiently, as it permits companies to send activities to external vendors who may do it more efficiently, and thus, less expensively. Outsourcing enables companies to focus on their internal skill base and allows them to leverage the expertise, tools and capacity that they just don’t have or need in-house. As such, it is likely that outsourcing budgets will continue to increase over time.
References
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. He can be reached at elanger@bioplanassociates.com or 301-921-5979.
Survey Methodology: The 2011 eighth Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production 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) in 31 countries. The methodology also encompassed an additional 186 direct suppliers of materials, services and equipment to this industry. This year’s survey 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.
Want to submit an Expert Opinion of your own? Write us at gil@rodpub.com!
Outsourcing Budget Trends
So where exactly is this outsourcing budget being directed? We asked respondents where they would be outsourcing significantly more projects during the next 24 months. Of the 24 activities tested, three stood out as seeing substantial changes in the next two years. We found that 23% of biomanufacturers will be outsourcing significantly more ‘fill/finish operations’ compared with their current levels. Although down slightly from 2010 (25%), more outsourcing will involved more complex fill-finish operations, such as prefilled syringes, cartridge systems, and multi-use adjustable syringes.
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Following fill/finish operations is ‘ Validation services’ noted by 22.1% this year as being a big gainer in the next 24 months. Validation services result from a lack of internal staff to provide the corresponding know-how for Methods Validation . Specialized providers of validation services have been active for many years and their businesses continue to prosper.
After ‘validation services’ comes ‘downstream production operations,’ which was noted by 22% of respondents (growing significantly from 14.3% in 2010). This may be due to the fact that companies would like to outsource their ‘standard, platform’ processes, and focus internally on more challenging projects. Following downstream outsourcing was an array of testing and Assay activities, as well as a number of more repetitive, less complex areas.
Geographic Outsourcing Destinations
We are seeing an expansion of CMOs and Biosimilar manufacturers (see Top 1000 Global Biopharmaceutical Manufacturing Index™ at www.top1000bio.com)2 globally due to the emergence of facilities in India, China, Korea, Malaysia, and elsewhere. These facilities are emerging both to support domestic production and to gain a foothold in the developing opportunities for biologics production. The U.S. has the largest concentration of global biomanufacturing capacity (not just number of facilities) in the world, at 37.5%. China (8.5%), India (8.1%) are growing rapidly. Together, the U.S. and Western European biopharmaceutical companies represent more than 70% of the R&D efforts of the global industry.
In this year’s study, global biomanufacturers were asked to evaluate their facilites’ current plans for international capacity expansion (not domestic). We identified 35 countries as potential outsourcing destinations. We found that Western European companies look to their own backyard first. For these European facilities, Germany was indicated by 31% of respondents as a primary destination for outsourcing, displacing the U.S. for the first time in eight years. Europeans’ preference for local destinations may reflect the presence of leading CMOs, such as Boehringer Ingelheim in Germany and Lonza in Switzerland.
U.S. respondents, on the other hand, are increasingly considering China as a strong outsourcing destination. China topped the list of ‘possible’ destinations for U.S. biomanufacturers, with 31% of respondents this year, vs. 17% in 2010. Singapore dropped to second place this year, with 28% considering outsourcing there as at least a ‘possibility’; India was hot on its heels at 26%.
Location Not a Critical Issue to Most Decision-Makers
Part of the reason for advanced off-shoring is that, contrary to anecdotal commentary from both CMOs and sponsors, the importance of location of CMOs shows up on our survey as being relatively unimportant (10.4% in 2005, and just 2.3% today indicate that factor is ‘Very important’). This is a result of globalization of this industry, the off-shoring of greater numbers of successful production projects, and the degree of outsourcing-management expertise that sponsors are acquiring. It also suggests that while the U.S. is gaining a high degree of comfort with Asian CMOs, European preference for local CMOs is less a cultural or geographic issue than one of regulatory complexity.
Conclusions
Biopharmaceuticals and their outsourcing supplier segments remain growth areas. As such, budgets for outsourcing are likely to continue to grow as the biopharma industry focuses on productivity, efficiency, getting more out of existing internal resources, and maximizing performance from their suppliers. Outsourcing helps the bio-industry use its internal resources more efficiently, as it permits companies to send activities to external vendors who may do it more efficiently, and thus, less expensively. Outsourcing enables companies to focus on their internal skill base and allows them to leverage the expertise, tools and capacity that they just don’t have or need in-house. As such, it is likely that outsourcing budgets will continue to increase over time.
References
- 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.
- See BioPlan’s Top 1000 Global Biopharmaceutical Facilities Index™, www.top1000bio.com accessed December 5, 2011
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. He can be reached at elanger@bioplanassociates.com or 301-921-5979.
Survey Methodology: The 2011 eighth Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production 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) in 31 countries. The methodology also encompassed an additional 186 direct suppliers of materials, services and equipment to this industry. This year’s survey 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.
Want to submit an Expert Opinion of your own? Write us at gil@rodpub.com!
