Eric Langer, BioPlan Associates09.05.13
Capacity constraints are still a problem in the biomanufacturing industry, and almost six in 10 biomanufacturers are today facing at least minor constraints at some stage of manufacturing, according to data released in our 10th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production1. But contract manufacturing organizations (CMOs) appear to be less afflicted by significant constraint issues than biotherapeutic developers, and it may well be that a focus on downstream innovation during the past three years is a reason why.
Fig. 1: Capacity Constraints, Biotherapeutic Developers vs. CMOs
We first look at how CMOs and biodevelopers stack up when it comes to capacity constraint issues. Data from our study, in which we surveyed 235 biopharma industry decision-makers, indicates that 57.9% of respondents are experiencing some level of constraints today. Most commonly, constraints are termed minor (24.6%) or moderate (20.2%), but about one in 8 are also feeling the effects of significant (8.3%) or severe (4.7%) constraints.
Not surprisingly, it appears that CMOs are adjusting their operations more rapidly and flexibly to avoid capacity problems. When comparing biotherapeutic developers vs. CMOs, we found that most of the significant problems are limited to developers. That is, 14.7% of developers report that they are today experiencing significant (9.2%) or severe (5.5%) constraints. The tally for CMOs is zero experiencing severe constraints, and only 2.3% faced with significant constraints.
The difference then lies almost wholly in their severity, with CMOs more likely to be seeing minor constraints and developers facing more serious problems. Because CMOs must necessarily have adequate capacity to meet the needs of their clients, this is to be expected.
The implications to CMOs in this analysis, especially when comparing results over time, is that the CMOs that are able to anticipate under-capacity at biotherapeutic developers will be better prepared to ramp up their resources to capture new capacity-constrained clients.
Capacity is a constantly moving target, and the data show a significant change from last year, when almost one in 5 CMOs said they were experiencing severe or significant constraints, versus 14.6% of biotherapeutic developers. In fact, both groups reported a similar incidence of constraints last year, but CMOs were more likely to be seeing the significant bottlenecks, while developers perceived theirs as being more moderate in nature.
What Have CMOs Been Doing?
It’s not entirely unexpected that CMOs express less overall capacity constraint concerns than product developers, as they’re simply not contracted by clients to assume tasks requiring manufacturing capacity beyond what they can deliver. Even so, last year’s data showed that CMOs can be subject to capacity constraint problems. So, what have CMOs been doing that may have alleviated their bottlenecks?
Fig. 2: Selected Areas to Address to Avoid Capacity Constraints: Biomanufacturers v. CMOsSource: 10th Annual Report and Survey of Biopharmaceutical Manufacturing, April 2013, www.bioplanassociates.com/10th
One significant factor has been improved efficiencies at the CMOs that can’t be matched as rapidly at most developers. This is seen both in upstream, and downstream operations, and is partly due to the larger number and variety of products being manufactured by CMOs. Improvements in bioprocessing generally occur first at CMOs, according to our study. And this year, we may be seeing the impact of some of these improvements, as new technologies become mainstreamed.
Michiel E. Ultee, Ph.D., CSO at Laureate Biopharmaceutical Services (Princeton, NJ), said, “One example of efficiency in upstream operations being implemented at CMOs is the wider application of single-use bioreactors. Instead of requiring three days to turn around a bioreactor, we can now do the same in one day using our 250- and 1000-liter single-use bioreactors. By eliminating time-consuming cleaning and validation we can get more runs per year. This has an immediate effect on capacity utilization.” Dr. Ultee also noted that similar efficiencies are being seen now in downstream operations, as technologies become more ‘plug-and-play,’ such as ion-exchange membrane technologies that result in time savings.
How CMOs Are Avoiding Capacity Constraints
This evolution in operational efficiencies at CMOs can be seen in the areas that CMOs prioritized last year. During the past 10 years, we have asked both CMOs and innovators what they considered to be the most important areas to address in order to avoid significant capacity constraints. Last year, we see that CMOs were most concerned with developing better downstream purification technologies, at a far greater rate than biotherapeutic developers (75% and 55%, respectively). They were also more likely to indicate that they could avoid bottlenecks by developing better-performing disposable, single-use products (60% vs. 45%) and developing more “modularized” production systems (55% vs. 33.8%). Clearly, in 2012 CMOs were disproportionately focused on innovation, with downstream purification technologies most in-demand.
In comparison, this year we see priorities have changed slightly. Part of this is due to the reduction in capacity problems overall. For example, only 13.3% of CMOs say the development of more “modularized” production systems can help avoid future constraints, a retreat from last year’s 55%. (We note that 41.1% of biotherapeutic developers are continuing to evaluate this area today.) CMOs also appear to have a less urgent need for better-performing disposable, single-use products this year, with this factor slipping to sixth place (from second place last year) as a critical capacity factor to address.
By contrast, CMOs are more interested this year in regulatory issues such as streamlining the FDA regulatory process (60% this year versus 35% last year) and standardizing international regulatory processes.
Despite all of that, there’s one area that stands out as constant from last year: the development of better downstream purification technologies. That was once again the top potential solution for CMOs. It was also, again, a bigger priority for CMOs than biodevelopers.
Taken in combination, the data from the most recent studies suggest that CMOs are placing their bets on downstream innovation as the way to solve their future capacity constraint issues. While it’s somewhat of a stretch to suggest that this focus on innovation has led to an easing of bottlenecks, CMOs can act as a crucial lead indicator of the importance of various areas for biomanufacturing performance, and their continued focus on innovation — as other areas have become less prioritized — is a significant point of note.
Five-Year Projections
In this year’s study, none of the CMOs we surveyed believe their organization will experience “severe” constraints in five years’ time. As noted above, that may be due to the nature of CMOs that they do not assume tasks beyond their capacity and thus rarely encounter constraints of that severity. Or, if they did have any “severe” future concerns, these would be addressed with capacity expansion, which is increasingly easier to accomplish with single-use systems.
Still, 15.6% of CMOs expect to see “significant” capacity constraints in 2018, a larger proportion than the 2.3% experiencing them today. And yet again, CMOs feel that they’re less likely to be feeling the pinch than biomanufacturers, 72.3% of whom expect to have bottlenecks in 2018, including almost 1 in 5 (18.8%) who believe those bottlenecks will be “severe” or “significant.”
Future capacity constraints may be foreseen due to companies now expanding their R&D, companies’ product pipelines seeing success and progressing to larger-scale, and/or respondents presuming that some current equipment will be obsolete five years from now. Concerns about production constraints likely encourage higher facilities utilization, increased competition for access to CMOs and support higher CMO prices and profits.
However, should serious CMO production constraints actually develop, this will obviously not be good for the industry and client companies currently using or planning to use CMOs. Luckily, higher yields and increasing use and increasing capacity of single-use/disposable bioreactor-based bioprocessing systems can be expected to limit major shortfalls in CMO and overall industry capacity, particularly for pre-commercial manufacture and as these graduate to assuming more commercial product manufacture.
Factors Causing Future Capacity Constraints
We also asked respondents to identify the major factors expected to constrain their organizations’ production capacity over the next five years. This year, the most frequently indicated factors (by both CMOs and biomanufacturers combined) were:
We do note that the two groups — biotherapeutic manufacturers and CMOs — differed significantly in most areas considered as potentially creating future capacity constraints. For example, CMOs have fewer concerns than developers in areas including:
“Facility Constraints,” “Inability to hire new, experienced scientific staff,” and “Physical capacity of downstream purification equipment.”
While initially it seems surprising that CMOs would have fewer concerns over the physical capacity of downstream purification equipment, it may be that they are more confident that those equipment issues will be taken care of in the next five years, particularly given their intense focus on innovation in this exact area.
Meanwhile, CMOs have higher levels of concerns over those of developers in only a few areas, including: “Inability to retain experienced technical and professional staff.” CMOs are apparently having more problems retaining than hiring staff and “Costs associated with downstream production.”
That last concern may be related to the enthusiasm with which CMOs have adopted disposable technology. With regard to cost, biomanufacturers and CMOs accepted the vision of disposables as lowering capital investment compared with stainless steel. However the reality of this decision has begun to go against many biomanufacturers, with high single-use production costs that are not competitive compared with operations in already-depreciated facilities using stainless steel. We expect that in time, the costs of disposable technologies will decline, allowing cheaper solutions even compared with depreciated legacy stainless steel systems.
The data reflects a number of core differences between CMO and biomanufacturer focus. CMOs are critically focused around managing cost and, and successfully implementing efficiency solutions for their products, in order to maximize their profits.
Biomanufacturers typically take a longer view of the process, being more likely to develop platform-based approaches that can be used for a number of their candidate molecules. CMOs have fewer concerns about analytics, drug product release and capacity since they rely on the client (the biomanufacturer) for developing and transferring appropriate methods and specifications and because CMOs typically pass on capacity and purification costs.
We continue to see CMOs being an important lead indicator for concerns because of this tight focus on operations. The increased focus on capacity and purification was seen in CMOs in 2012 data, as well as 2011 data, indicating they may see these issues earlier than biotherapeutic innovators, which are typically focused on a much wider range of issues but less focused on operational considerations. CMOs are also seeing that the overall system needs optimization, rather than just a focus on particular unit operations and processes. Such a trend is expected to become more important as biogenerics and biosimilars become increasingly prevalent in the industry.
References
Eric S. Langer is president and managing partner at BioPlan Associates, Inc. (www.bioplanassociates.com), 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 and 301-921-5979.
Fig. 1: Capacity Constraints, Biotherapeutic Developers vs. CMOs
We first look at how CMOs and biodevelopers stack up when it comes to capacity constraint issues. Data from our study, in which we surveyed 235 biopharma industry decision-makers, indicates that 57.9% of respondents are experiencing some level of constraints today. Most commonly, constraints are termed minor (24.6%) or moderate (20.2%), but about one in 8 are also feeling the effects of significant (8.3%) or severe (4.7%) constraints.
Not surprisingly, it appears that CMOs are adjusting their operations more rapidly and flexibly to avoid capacity problems. When comparing biotherapeutic developers vs. CMOs, we found that most of the significant problems are limited to developers. That is, 14.7% of developers report that they are today experiencing significant (9.2%) or severe (5.5%) constraints. The tally for CMOs is zero experiencing severe constraints, and only 2.3% faced with significant constraints.
The difference then lies almost wholly in their severity, with CMOs more likely to be seeing minor constraints and developers facing more serious problems. Because CMOs must necessarily have adequate capacity to meet the needs of their clients, this is to be expected.
The implications to CMOs in this analysis, especially when comparing results over time, is that the CMOs that are able to anticipate under-capacity at biotherapeutic developers will be better prepared to ramp up their resources to capture new capacity-constrained clients.
Capacity is a constantly moving target, and the data show a significant change from last year, when almost one in 5 CMOs said they were experiencing severe or significant constraints, versus 14.6% of biotherapeutic developers. In fact, both groups reported a similar incidence of constraints last year, but CMOs were more likely to be seeing the significant bottlenecks, while developers perceived theirs as being more moderate in nature.
What Have CMOs Been Doing?
It’s not entirely unexpected that CMOs express less overall capacity constraint concerns than product developers, as they’re simply not contracted by clients to assume tasks requiring manufacturing capacity beyond what they can deliver. Even so, last year’s data showed that CMOs can be subject to capacity constraint problems. So, what have CMOs been doing that may have alleviated their bottlenecks?
Fig. 2: Selected Areas to Address to Avoid Capacity Constraints: Biomanufacturers v. CMOsSource: 10th Annual Report and Survey of Biopharmaceutical Manufacturing, April 2013, www.bioplanassociates.com/10th
One significant factor has been improved efficiencies at the CMOs that can’t be matched as rapidly at most developers. This is seen both in upstream, and downstream operations, and is partly due to the larger number and variety of products being manufactured by CMOs. Improvements in bioprocessing generally occur first at CMOs, according to our study. And this year, we may be seeing the impact of some of these improvements, as new technologies become mainstreamed.
Michiel E. Ultee, Ph.D., CSO at Laureate Biopharmaceutical Services (Princeton, NJ), said, “One example of efficiency in upstream operations being implemented at CMOs is the wider application of single-use bioreactors. Instead of requiring three days to turn around a bioreactor, we can now do the same in one day using our 250- and 1000-liter single-use bioreactors. By eliminating time-consuming cleaning and validation we can get more runs per year. This has an immediate effect on capacity utilization.” Dr. Ultee also noted that similar efficiencies are being seen now in downstream operations, as technologies become more ‘plug-and-play,’ such as ion-exchange membrane technologies that result in time savings.
How CMOs Are Avoiding Capacity Constraints
This evolution in operational efficiencies at CMOs can be seen in the areas that CMOs prioritized last year. During the past 10 years, we have asked both CMOs and innovators what they considered to be the most important areas to address in order to avoid significant capacity constraints. Last year, we see that CMOs were most concerned with developing better downstream purification technologies, at a far greater rate than biotherapeutic developers (75% and 55%, respectively). They were also more likely to indicate that they could avoid bottlenecks by developing better-performing disposable, single-use products (60% vs. 45%) and developing more “modularized” production systems (55% vs. 33.8%). Clearly, in 2012 CMOs were disproportionately focused on innovation, with downstream purification technologies most in-demand.
In comparison, this year we see priorities have changed slightly. Part of this is due to the reduction in capacity problems overall. For example, only 13.3% of CMOs say the development of more “modularized” production systems can help avoid future constraints, a retreat from last year’s 55%. (We note that 41.1% of biotherapeutic developers are continuing to evaluate this area today.) CMOs also appear to have a less urgent need for better-performing disposable, single-use products this year, with this factor slipping to sixth place (from second place last year) as a critical capacity factor to address.
By contrast, CMOs are more interested this year in regulatory issues such as streamlining the FDA regulatory process (60% this year versus 35% last year) and standardizing international regulatory processes.
Despite all of that, there’s one area that stands out as constant from last year: the development of better downstream purification technologies. That was once again the top potential solution for CMOs. It was also, again, a bigger priority for CMOs than biodevelopers.
Taken in combination, the data from the most recent studies suggest that CMOs are placing their bets on downstream innovation as the way to solve their future capacity constraint issues. While it’s somewhat of a stretch to suggest that this focus on innovation has led to an easing of bottlenecks, CMOs can act as a crucial lead indicator of the importance of various areas for biomanufacturing performance, and their continued focus on innovation — as other areas have become less prioritized — is a significant point of note.
Five-Year Projections
In this year’s study, none of the CMOs we surveyed believe their organization will experience “severe” constraints in five years’ time. As noted above, that may be due to the nature of CMOs that they do not assume tasks beyond their capacity and thus rarely encounter constraints of that severity. Or, if they did have any “severe” future concerns, these would be addressed with capacity expansion, which is increasingly easier to accomplish with single-use systems.
Still, 15.6% of CMOs expect to see “significant” capacity constraints in 2018, a larger proportion than the 2.3% experiencing them today. And yet again, CMOs feel that they’re less likely to be feeling the pinch than biomanufacturers, 72.3% of whom expect to have bottlenecks in 2018, including almost 1 in 5 (18.8%) who believe those bottlenecks will be “severe” or “significant.”
Future capacity constraints may be foreseen due to companies now expanding their R&D, companies’ product pipelines seeing success and progressing to larger-scale, and/or respondents presuming that some current equipment will be obsolete five years from now. Concerns about production constraints likely encourage higher facilities utilization, increased competition for access to CMOs and support higher CMO prices and profits.
However, should serious CMO production constraints actually develop, this will obviously not be good for the industry and client companies currently using or planning to use CMOs. Luckily, higher yields and increasing use and increasing capacity of single-use/disposable bioreactor-based bioprocessing systems can be expected to limit major shortfalls in CMO and overall industry capacity, particularly for pre-commercial manufacture and as these graduate to assuming more commercial product manufacture.
Factors Causing Future Capacity Constraints
We also asked respondents to identify the major factors expected to constrain their organizations’ production capacity over the next five years. This year, the most frequently indicated factors (by both CMOs and biomanufacturers combined) were:
- “Facility constraints” (52.4%, relatively unchanged from 52.9% last year)
- “Inability to hire new, experienced technical and production staff”
- “Inability to hire new, experienced scientific staff”
- “Physical capacity of downstream purification equipment”
- “Inability to retain experienced technical and production staff”
We do note that the two groups — biotherapeutic manufacturers and CMOs — differed significantly in most areas considered as potentially creating future capacity constraints. For example, CMOs have fewer concerns than developers in areas including:
“Facility Constraints,” “Inability to hire new, experienced scientific staff,” and “Physical capacity of downstream purification equipment.”
While initially it seems surprising that CMOs would have fewer concerns over the physical capacity of downstream purification equipment, it may be that they are more confident that those equipment issues will be taken care of in the next five years, particularly given their intense focus on innovation in this exact area.
Meanwhile, CMOs have higher levels of concerns over those of developers in only a few areas, including: “Inability to retain experienced technical and professional staff.” CMOs are apparently having more problems retaining than hiring staff and “Costs associated with downstream production.”
That last concern may be related to the enthusiasm with which CMOs have adopted disposable technology. With regard to cost, biomanufacturers and CMOs accepted the vision of disposables as lowering capital investment compared with stainless steel. However the reality of this decision has begun to go against many biomanufacturers, with high single-use production costs that are not competitive compared with operations in already-depreciated facilities using stainless steel. We expect that in time, the costs of disposable technologies will decline, allowing cheaper solutions even compared with depreciated legacy stainless steel systems.
The data reflects a number of core differences between CMO and biomanufacturer focus. CMOs are critically focused around managing cost and, and successfully implementing efficiency solutions for their products, in order to maximize their profits.
Biomanufacturers typically take a longer view of the process, being more likely to develop platform-based approaches that can be used for a number of their candidate molecules. CMOs have fewer concerns about analytics, drug product release and capacity since they rely on the client (the biomanufacturer) for developing and transferring appropriate methods and specifications and because CMOs typically pass on capacity and purification costs.
We continue to see CMOs being an important lead indicator for concerns because of this tight focus on operations. The increased focus on capacity and purification was seen in CMOs in 2012 data, as well as 2011 data, indicating they may see these issues earlier than biotherapeutic innovators, which are typically focused on a much wider range of issues but less focused on operational considerations. CMOs are also seeing that the overall system needs optimization, rather than just a focus on particular unit operations and processes. Such a trend is expected to become more important as biogenerics and biosimilars become increasingly prevalent in the industry.
References
- 10th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production: A Survey of Biotherapeutic Developers and Contract Manufacturing Organizations, BioPlan Associates, April 2013.
Eric S. Langer is president and managing partner at BioPlan Associates, Inc. (www.bioplanassociates.com), 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 and 301-921-5979.
