Assessing Market Opportunities in Contract Biologics Manufacturing

Strong growth in biopharmaceuticals bodes well for contract manufacturing, but the perils and the promises of pipelines remain.
May 02, 2009
Volume 33, Issue 5

Biopharmaceuticals, although now a niche area, are a growing segment in the global pharmaceutical market. The sector is projected to experience double-digit growth in the near term. Such positive expectations portend well for contract manufacturing organizations (CMOs) specializing in biologics manufacturing, although these sanguine views have to be balanced against concerns in pharmaceutical outsourcing as a whole such as overcapacity, the weakness of drug pipelines, and the attrition of commercial candidates.

Crunching the numbers

Biopharmaceuticals account for approximately 10% of the global prescription drug market, based on a 2007 global prescription drug market of $712 billion, according to IMS Health. Global sales of prescription biotechnology drugs increased 12.5% to more than $75 billion in 2007. This rate of growth was nearly double the rate of growth of 6.4% for the overall global pharmaceutical market in 2007, and expectations remain high. Biologics are forecast to grow 11–12% in 2009, again surpassing projections for growth in the global pharmaceutical market, which is expected to increase 4.5–5.5% in 2009, according to IMS Health (1, 2).

Capacity utilization

Capacity utilization is a critical measure of supply–demand fundamentals for biologics manufacturers. "Capacity-utilization information is important for planners and investors as they determine whether capacity will be available for the production of pipeline drugs that may be reaching approvals," says Eric Langer, president and managing partner of BioPlan Associates. Capacity utilization of mammalian cell-culture systems has remained relatively flat over the past several years and is at 63%, according to the results of a recent survey of biopharmaceutical manufacturing capacity and production released by BioPlan Associates in April 2009 (3). The survey elicited data on 10 critical areas associated with biopharmaceutical production from 446 production executives at drug developers and contract manufacturing organizations in 35 countries (3).

Over the past several years, capacity for mammalian cell-culture systems has dropped significantly—from 76.4% in 2003 to 63.2% in 2008, although during the past four years, the decline in capacity utilization has moderated, according to the BioPlan survey. Since 2005, the change in capacity utilization for mammalian cell-culture systems has decreased at a compound annual growth rate (CAGR) of –2.8% (3). Capacity utilization for microbial fermentation has declined as well—from 71.0% in 2003 to 53.3% in 2008. Since 2005, however, the decrease has slowed to a CAGR of –2.9% (3).

"In 2003, the biopharmaceutical industry's utilization rates exceeded 76%," explains Langer. "This period was a capacity-crunch time that led to facility build-outs by both biotherapeutic developers and contract manufacturers. The resulting expanded capacity brought the utilization rate down so that by 2006, it appeared that a stable capacity utilization rate would be around 63%."

These results are further supported by the perception of biotherapeutic developers and CMOs as they relate to capacity constraints. In the study released in 2008, although fewer than 2% of CMOs said that they were experiencing "severe" constraints, 13.4% of drug-developer respondents and 14.6% of CMO respondents said that they were experiencing more than just "minor" capacity constraints. In the study released this year, approximately 45% of developer respondents and 43% of CMO respondents said that they were experiencing "no constraints" (3). These findings indicate "a significant relaxation in CMO capacity constraints," says Langer.

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