William Downey04.30.08
Biopharma CMO Market Report
Optimism is high among bio-contract manufacturers
By William Downey
The worldwide market for biopharmaceutical contract manufacturing reached $2.4 billion in 2007, a 14% increase from prior year. HighTech Business Decisions projects the market for biopharmaceutical contract manufacturing services will continue to expand this year and during the next four years. Last year's growth compares favorably with the 3.8% increase in the U.S. prescription drug market in 2007. The biopharmaceutical contract manufacturing market will continue to grow as a result of the increased demand for biologics coupled with pharmaceutical and biotechnology companies' plans to increase the use of outside contractors. For this year, HighTech Business Decisions estimates year-to-year market growth between 14–15%, which is in-line with our earlier projections and with the biopharmaceutical contract manufacturers whom we surveyed for this article.
Background
The information for this article draws from interviews with 16 biopharmaceutical contract manufacturers and from HighTech Business Decisions latest report: Biopharmaceutical Contract Manufacturing: Quality, Capacities and Emerging Technologies. This report is based on extensive surveys with 41 directors of biomanufacturing at pharmaceutical and biotechnology companies worldwide about their companies' manufacturing strategies, product pipelines and contract manufacturing budgets. This report also includes interviews with 27 executives from contract manufacturing organizations covering their companies' plans for future production capacity and services to meet the needs of their clients.
Expectations This Year
The 16 biopharma CMOs interviewed for this article expect their revenues to continue to expand in 2008. Most CMOs project double-digit revenue growth in 2008. CMO revenue growth forecasts vary based on CMO firm size, with smaller CMOs expecting higher year-to-year revenue growth, compared with larger, more established CMOs. Those larger CMOs expect on average to grow 16.5% in 2008 -- in line with our earlier industry projections. The range of CMO revenue growth is shown in Figure A. Overall, the industry is optimistic about its near-term prospects.
Figure A: Expected Revenue Growth in 2008 source: HighTech Business Decisions |
Significant Impacts
There are many reasons for this optimistic outlook among the biopharma CMOs. The positive business environment primarily results from the continued growth in the number of biologic products at all clinical phases. Other positive industry trends include increase use of CMOs by pharmaceutical and biotechnology companies, higher-yield cell lines, and implementation of single-use technologies. A summary of the positive developments for the industry is shown in Table 1.
The increase in the number of biologics at various phases of development and commercialization is noted by Michael Frizberg, head of marketing and intelligence, custom manufacturing for Lonza AG, who told us, "The overall number of antibodies and proteins at all stages of development remains strong. We see many products moving through preclinical and clinical development as planned or expected." Mr. Frizberg also sees increased interest by large pharmaceutical companies for contract manufacturing services. "As big pharmaceutical companies look to cut costs, they have put some in-house capability and capacity expansion projects on hold, and likely they will increasingly rely on outsourcing," he concluded.
Table 1: Positive Industry Developments |
|
Positive Impacts | # of mentions |
Increase in product pipeline | 6 |
High yielding cell lines | 4 |
More outsourcing by pharmaceutical and biotechnology companies |
4 |
Single-use technologies | 3 |
High capacity resins | 2 |
New product technologies | 2 |
Weak dollar (U.S.-based CMOs) | 2 |
Collaboration between large and small CMOs |
2 |
New customers from emerging economies |
2 |
Use of new cell lines | 1 |
PAT | 1 |
TOTAL | 29 |
source: HighTech Business Decisions |
Besides increased demand for contact manufacturing services, improved cell-line yields are another positive trend in the industry, which will improve production efficiencies. For example, Sandoz GmbH recently introduced a new microbial expression system that produces typical fermentation yields of 10 grams per liter. Dr. Friedrich Nachtmann, head biotech cooperations at Sandoz GmbH, explained, "Recently, Sandoz introduced a new microbial expression technology: NAFT (NPro Autoprotease Fusion Technology). NPro autoprotease catalyzes the processing of polyprotein. It cleaves heterologous polypeptides produced in bacterial hosts. NAFT is a cost-efficient expression system (typical fermentation yields are above 10 grams per liter) for peptides and proteins resulting in an authentic N-terminus by autoproteolytic cleavage."
Improved cell lines, high capacity resins and single-use technologies are positive impacts on the industry, noted Mike Cavanaugh, vice president, sales, marketing and business development for Laureate Pharma, Inc. Mr. Cavanaugh stated, "Development of high yielding production cell lines and high capacity resins will have a positive impact on the economics for our business and our clients. Smaller bioreactors will be able to produce similar quantities of product, and higher capacity purification resins will capture and purify protein-based products more efficiently. In addition, the use of single-use technologies will increase flexibility and improve production economics going forward."
While overall the industry expresses optimism about its near-term prospects, several respondents worry about the impact of the global credit crisis on their business. The turmoil in the financial markets may result in less funding for smaller, innovative biotechnology companies, which will delay certain projects. A secondary effect to the global credit crisis is the decline in the value of the U.S. dollar compared to the European currencies. While the weaker dollar improves the competitiveness of U.S.-based CMOs that compete with European-based CMOs, it is a challenge for European-based CMOs. Dr. Diana Morgan, chief business officer at CMC Biologics A/S, noted, "Current financial markets could impact the industry due to money simply being more difficult to obtain. Projects may be delayed or shelved due to lack of funding." In addition, Dr. Morgan mentioned, "The strength of the Euro makes winning U.S. customers to Europe challenging." So far, the credit crisis has not adversely impacted CMC Biologics A/S. In February, CMC Biologics A/S successfully completed a share capital offering, as part of its financial strategy related to its recent purchase of Seattle-based ICOS Biologics Manufacturing.
While the weaker dollar presents a challenge to European-based CMOs, it has aided U.S.-based CMOs. Joe McMahon, president and chief executive officer of KBI Biopharma, Inc., commented, "In addition to our unique biophysical characterization capabilities, the Euro-dollar exchange rate has proven to be a significant growth driver for KBI by providing strong additional incentives for EU countries to use U.S.-based service providers."
Despite the currency challenges faced by the European-based CMOs, a few respondents note that they have gained business from Asian clients by providing high quality services. Dr. Gabriele Schneider, vice president business development services at ProBioGen AG, stated, "We see an increased number of requests from Asian companies for our CMO services. It is remarkable that Asian companies rely more and more on European services. This is due in part to our very high quality and regulatory standards -- we experience significant repeat business with Asian customers."
New Projects
Reflecting the optimistic outlook for business in 2008, many of the biopharmaceutical manufacturers have announced new projects with their pharmaceutical and biotechnology clients. Below are selected projects recently announced by some of the CMOs this year.
CMC ICOS Biologics and Raven Biotechnologies recently announced an agreement under which CMC ICOS will create a production cell line for Raven's next IND candidate, RAV18. RAV18 is a humanized antibody targeting the ADAM9 protein on cells. ADAM9 is expressed on many solid tumors and may contribute to disease progression and metastasis. Many carcinoma cell lines have been shown to amplify the gene for ADAM9 and to overexpress the protein. Overexpression of ADAM9 protein has been reported in pancreatic, prostate, gastric, breast, and lung cancers. CMC will use its proprietary CHEF1® expression technology to shorten the timeline for cell line isolation and production cell line generation.
In December, ProBioGen AG announced exclusive licensing agreement for its proprietary avian cell line AGE1.CR™. The agreement was signed with an undisclosed U.S. vaccine development company and covers four indications, including different forms of influenza and three additional disease areas. ProBioGen developed AGE1.CR to replace embryonated chicken eggs and chicken embryonic fibroblasts as substrates for production of human and animal vaccines.
In January, Lonza and Sanofi Pasteur announced a strategic partnership in cell culture vaccine production. Lonza will provide Sanofi Pasteur with its expertise in mammalian cell culture. Lonza has already shown the production scale potential in cell culture vaccine production with a successful bioreactor run of 20,000 liters.
Also in January, KBI Biopharma announced an agreement with Helix BioPharma to develop a process for preparing L-DOS47 in a lyophilized vial format suitable for clinical testing. L-DOS47 combines Helix's proprietary DOS47 new drug candidate with a highly specific single domain antibody to form a potential new targeted drug product for treating adenocarcinoma of the lung -- the most common form of cancer in the world today.
In February, Althea Technologies, Inc. announced a contract with Quintessence Biosciences to produce the drug candidate QBI-139, which filed its investigational drug application with the US FDA this year. Alan Moore, executive vice president and chief business officer at Althea, said, "Althea seeks to provide a broad array of services that are of value to firms seeking clinical manufacturing support. This means that the tools and systems available to client firms must reflect the realities of the development and the clinical manufacturing stage." This includes the client's need for speed and flexibility.
In March, Laureate Pharma announced it will provide cGMP contract manufacturing services to Cytheris SA. Cytheris' lead product candidate, Interleukin-7 (IL-7), is a fully glycosylated recombinant human protein and critical growth factor for immune T-cell recovery. Laureate will make this product for use in ongoing international clinical trials currently being conducted for treatment of HIV, HCV and cancer.
March also saw an announcement from Goodwin Biotechnology, Inc. that the company has begun process development and will manufacture a monoclonal antibody used by Q Therapeutics, Inc. for purifying its cell therapy product, Q-Cells™. Hamilton Lenox, director of business development at Goodwin Biotechnology, added, "They have asked us to purify an IgM antibody that recognizes a sugar on the cell surface of the stem cell of interest, which allows the isolation of those cells from a population of cells."
CMO Strategies and Services
The expanding market for biopharmaceutical contract manufacturing services allows CMOs to pursue marketing strategies focused on meeting the unique needs of various pharmaceutical and biotechnology clients. By focusing on these different market segments, CMOs bring a unique set of services and expertise to their clients. This allows their clients to take advantage of improved timelines, expertise in scaleup, and potentially lower overall costs. The strategies pursued by the CMOs range from focusing on manufacturing products for early clinical phase evaluation to providing a full range of services, including large-scale commercial production. Dr. Manfred Papaspyrou, vice president global sales and marketing at Rentschler Biotechnolgie (www.rentschler.de), noted that his clients value the "high expression cell-line systems combined with high performance processes for antibody production." Rentschler recently added new 500 liter and 2,500 liter bioreactor capabilities.
Dr. Joanne McCudden, director of sales and marketing at SynCo Bio Partners, B.V., remarked, "SynCo is distinct from most other CMOs in that we are one of only nine CMOs that produce licensed biopharmaceutical products." In addition, she noted, "We also differentiate our process development services through our philosophy. Whereas most CMOs develop production processes to make products for early phase clinical trials and then attempt to scale up in the future, we aim to understand the long-term production requirements for the product -- from early phase clinical trials all the way past commercial launch -- and then develop a 'scaled-down' process to meet early clinical phase requirements."
She concluded, "SynCo is one of the very few CMOs able to offer filling or lyophilization of live microbial-based products."
Dr. Roger Lias, president of Eden Biodesign, Inc. commented, "Eden is expert in development of biologics and offers a comprehensive range of process development and cGMP production services supporting mammalian, microbial and viral products. Through our consulting business, we offer an unusually broad and deep understanding of the ‘big picture' issues facing companies moving products into and through clinical development. We help our customers with much more than just process development and manufacturing." He noted that Eden Biodesign is moving into the North American marketplace and has set up a wholly-owned subsidiary in Research Triangle Park, NC. "This operation will offer cell line and strain development and associated early process development services in support of our cGMP production operations," he remarked.
Boehringer Ingelheim, GmbH has a business model that includes collaboration with smaller CMOs to provide a full range of services to their clients. Through this business model, the client has access to both a local CMO and access to BI's expression platform technologies and preferred access to BI's large-scale commercial manufacturing facilities. This provides clients with a production path through its product life cycle, which allows for smooth transition from early clinical stage production through commercialization. "We built a network with around 10 globally located small and midsized CMOs," noted Dr. Julia Knebel, business development manager for the Industrial Customer Business at BI.
"The idea is to provide greatest flexibility and efficiency to our clients," added Hans-Peter Grau, production alliance manager at BI.
Dr. Nachtmann noted that Sandoz is focused on recombinant microbial proteins and peptides: "We offer a full set of services by an experienced team at our main location in Kundl, Austria from development to GMP manufacture of bulk drug substances at scales from 1,300 liters to 40,000 liters, as well as finished dosage forms." Sandoz offers full CMO services from technology transfer of processes and analytical procedures through GMP manufacture in FDA and EU approved facilities. Finally Dr. Nachtmann mentioned, "We offer bulk lyophilization, formulation and liquid filling (vials, cartridges), as well as preparation of CMC documents for international health authorities."
The biopharmaceutical contract manufacturing market grew at a robust rate in 2007, and will continue to show robust growth in 2008. Overall most biopharmaceutical contract manufacturers expect double-digit growth in 2008. The growth in the biopharmaceutical contract manufacturing market results from several favorable trends including more products in the pipeline, greater use of CMOs by pharmaceutical and biotechnology companies, and adoption of new technologies. The biggest market risk faced by CMOs is the global credit crisis, which may impact funding of biotechnology companies, resulting in fewer new products or delays in planned projects. A secondary impact of the credit crisis is the declining value of the U.S. dollar, which presents a short-term competitive cost advantage to U.S.-based CMOs compared to Europe-based ones. Currently new project announcements along with additional and unique services offered by various biopharmaceutical contract manufacturers provide pharmaceutical and biotechnology companies with new levels of service and expertise.
Reference
1 IMS Health, Press Release, March 12, 2008