Now that the FDA has just approved its first product under biosimilar regulations—Zarxio—containing filgrastim (G-CSF), a biosimilar version of Neupogen from Amgen, we can expect some more rapid shifts in the market. Factors like how this new class of biopharmaceuticals will be marketed, priced, reimbursed, defined, and even manufactured will eventually resolve. But, as with small molecule generics, efficiency in manufacturing will be critical. And how these complex, costly biologics will be produced is still not entirely obvious.

In fact, our 12th Annual Report on Biopharmaceutical Manufacturing¹ indicates that, even when innovators produce a new biologic, manufacturing efficiency and productivity are the most critical factors in manufacturing strategy, as noted by 17% of global industry respondents.  And when we consider all cost- or efficiency-related factors, fully 28% of the industry believes this is a top priority for all biologics manufacturers; biosimilars are certain to be even more efficiency-centric.

It is reasonable, then, to expect that strategic manufacturing decisions for biosimilars will be based on cost efficiency, whether that be in-house, by captive CMO, subsidiary, or traditional CMO outsourcing.

Biosimilars Pipeline: Many Products and Players
There are nearly 700 cGMP-level, major-market biosimilars in various stages of development; and over 500 companies already involved globally, whether as developer, partner and/or marketer². There are over 150 recombinant reference products for biosimilars to emulate, including about 40 with sales in the blockbuster (>$1 billion/year) revenue range³. Even just 10% of a $1 billion market, $100 million/year, could be enough for biosimilars to be profitable. In this context, with biosimilars essentially being market opportunities, and not critical high-profit innovative products, it increasingly makes sense for companies to outsource their biosimilars development and production, if it can be demonstrated cost effective.

With biosimilars only able to enter the market after expiration of relevant patents held by others, the marketability dates for biosimilar versions of reference products can be projected. Figure 2 shows the distribution of current biopharmaceutical reference product patent expirations in the U.S. Note that the first wave of U.S. biosimilars is expected starting this year and another wave at the end of the decade, with this including an ever larger number of current blockbuster products. In just 5-10 years, there will likely be 5-10 or even more biosimilar versions, ignoring biobetters, of most eligible reference products in the U.S. market, with the total number of marketed biopharmaceuticals likely tripling by then.  The biopharmaceutical industry will look more like the overall pharmaceutical industry, with the majority of products being follow-ons.

The majority of biosimilar developers are either Big Pharma, large generic drug, or small biotechs. And the largest and smallest companies are major users of CMOs, including for commercial manufacture. Small companies lack resources and use of CMOs is their only option.

Typically, about 30% of marketed biopharmaceuticals are manufactured by CMOs, at some stage. This may also be expected with biosimilars. Once biosimilars become more routine, we can expect an even higher proportion to be outsourced for development and manufacturing. Now with the first U.S. biosimilars approvals, the next few years are likely to put CMOs in a good position to increase the percentage of products they develop and commercially manufacture as new biosimilar approval opportunities—patent expirations—approach.

Biosimilars Relationship with CMOs
Biosimilars are already having an impact on biopharmaceutical-specialist CMOs including more projects, revenue and new clients. We project an estimated 15% increase in CMO projects and revenue that will be attributed to biosimilars, mostly from biosimilar candidate development and initial bioprocess design and scale-up. This can be expected to further increase in following years as the biosimilars now in development graduate to larger scales, and as biosimilar success stories, including the first U.S. approvals, draw more players into biosimilars development.

Although there appears to be ample capacity at all scales among CMOs to handle biosimilar manufacturing, a critical competitive issue is whether CMOs can produce biologics more efficiently than the reference products. CMOs do have an advantage in that they have exposure to multiple technologies and processes, and can access the most modern equipment and manufacturing strategies. This may improve efficiencies, especially considering that biosimilar manufacturing may be done primarily using single-use systems, and most CMOs have been adding capacity, especially single-use, in recent years⁴.  With single-use systems being more cost-effective and flexible, most new and, particularly, biosimilars-related capacity among CMOs involve single-use systems.
The capacity, e.g., bioreactor size, required for biosimilar commercial manufacturing is generally on the order of a magnitude (10x) less than that of its reference product, e.g., a few 100 kg/year vs. 1000s of kg for a mAb reference product, with this facilitating use of CMOs. The majority of CMO pre-commercial manufacturing is already using single-use systems, so a similar majority of biosimilars coming to market will be commercially manufactured using single-use systems. The continuing trend for increased upstream bioprocessing titers further facilitates commercial manufacturing at smaller scales and use of single-use systems. 

One potential trend to watch for is current reference/innovator product manufacturers using their increasingly idle bioprocessing capacity, including from growth in titers, e.g., >10,000 L mAb bioreactors now only being partially filled and/or used less frequently, to manufacture biosimilar and other products on a CMO basis. This could disrupt mainstream CMO business.

Biosimilars will also change the structure of the biopharmaceutical CMO industry, allowing a number of CMOs to graduate to commercial cGMP product manufacturers. Biosimilars manufacturing will enable current mid-tier CMOs, e.g., $25-$125 million/year revenue, to graduate into the multi-$100 million annual revenue top tier. Currently, only a few of the largest CMOs have such revenue, e.g., Lonza and Boehringer Ingelheim, primarily from commercial product manufacturing. Commercial manufacturing is more continuous (vs. only as needed with preclinical and clinical supplies), is done at an order of magnitude larger scale, and involves comparably higher revenue and profits for CMOs compared to their usual pre-commercial work.

In terms of geographic distribution, most biosimilar development is being done by Western/major market companies, including use of Western CMOs. These countries are the primary market for biosimilars. Biosimilar developers in developing countries are primarily involved with non-GMP biogenerics for marketing in domestic and international lesser- or non-regulated markets. Few Western-based biosimilar developers are using CMOs in developing countries, such as India and China, with some significant exceptions, e.g., Korea and Singapore. But there will be an increasing trend for developing countries to demand biopharmaceutical, including biosimilars, suppliers manufacture domestically. So, some genuine biosimilars will be manufactured, redundantly, in developing countries. 

Biosimilars Driving Cost Efficiency
Biosimilars are promoting adoption of newer bioprocessing technologies. Biosimilars development can be more challenging than innovative products. The requirement for products to have much the same structures, biological activities and clinical efficacy—biosimilarity—adds complexity. Analytical and bioprocessing tasks with biosimilars require trying to attain a number of preselected targets that will satisfy regulators in terms of seeing biosimilarity.  Between biosimilars being new and their having to compete against established reference and other biosimilar products, their costs and flexibility of manufacturing are critical. Thus, most biosimilars bioprocessing will likely require use of modern high-titer expression systems and manufacturing platforms, with commercial mammalian manufacturing now averaging titer of about 2.5 g/L, based on BioPlan research. 

Improved processes for biosimilars can also bring intellectual property concerns to client-CMO relationships. For example, if a CMO has worked on a similar biosimilar for a different client, can the CMO share knowledge with the prospective client regarding how to modify its approach? Yes, CMOs are obligated to compartmentalize project knowledge; however, because CMOs are hired for their depth of experience, litigation in this area seems a possibility. 

The CMO Biosimilars Relationship Will Change
Biosimilars appear to be ideal products for development by CMOs capable of cost-effective production. CMOs have the process development and optimization experience, and this can also make commercial manufacturing by CMOs more attractive for clients. Developing biosimilars, in general, is likely quicker, simpler and cheaper for CMOs compared to less experienced product developers because CMOs routinely perform similar tasks. Most biopharmaceutical CMOs already have the needed and integrated bioprocessing, API and product testing, product formulation, and fill-finish capabilities. CMOs may be able to offer a quicker and more cost-effective route to biosimilars development vs. doing it fully in-house. 

One thing that may be different between innovator and biosimilar products manufacture is that biosimilars will tend to be manufactured at a single facility, while most major innovator products are now manufactured at multiple sites or, at least, there is a backup manufacturing site. So biosimilars will have more delicate supply chains, and be more susceptible to disruptions. 

It is also possible that some CMOs will, themselves, develop, manufacture and license-out biosimilar active agents/APIs or even finished products. Already, larger CMOs work on multiple biosimilars for different clients targeting the same reference product. The next logical step may be for CMOs to develop biosimilars themselves and offer fully-vetted APIs for licensing. This would follow the current worldwide model in generic drug APIs.

So far, the traditional pattern of hiring different CMOs for more specialized tasks has dominated CMO involvement in biosimilars. But essentially all of the largest CMOs are already working with multiple biosimilars for clients, including biosimilars from different clients targeting the same reference product. In the future, the outsourcing of biosimilar development and production will likely go to CMOs that demonstrate lowest risk, lower costs, and greatest efficiencies. This may create a new benchmark for production efficiency for all biologics. 

References

1. 12th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production, BioPlan Associates, Inc. Rockville, MD., April 2015, Preliminary Data,
2. Rader, R.A., BIOPHARMA :  Biosimilars/Biobetters Pipeline Database, at www.biosimilarspipeline.com.
3. Rader, R.A., BIOPHARMA:  Biopharmaceutical Products in the U.S. and European Markets, database at www.bioplanassociates.com/publications/pub_bpuseu.htm.
4. Langer, E.S., Rader, R.A., “Top 1000 Global Biopharmaceutical Facilities Index,” at www.top1000bio.com.

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Eric S. Langer
BioPlan Associates

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.  elanger@bioplanassociates.com; 301-921-5979  www.bioplanassociates.com

Ronald A. Rader
BioPlan Associates, Inc.

Ronald A. Rader is Senior Research Director, BioPlan Associates, Inc.  He is author of BIOPHARMA:  Biopharmaceutical Products in the U.S. and European Markets; and a biosimilars/biobettter pipeline-tracking database.