Achieving a good return on assets through manufacturing-capacity utilization is an ongoing challenge for biopharmaceutical companies. Pharmaceutical companies need manufacturing capacity on hand to produce commercial products and also to launch new products as they come through their drug-development pipelines. The inherent uncertainty of drug development, however, makes it difficult to balance the need for timely access to manufacturing capacity with the interest of avoiding underutilizing capacity and a resulting reduction on a return on assets. This balancing act is particularly challenging with biologics manufacturing because the capital costs for manufacturing capacity are higher than traditional small-molecule drug-substance manufacturing. A long-term manufacturing capacity-sharing arrangement by Merck & Co. and MedImmune LLC, the biologics arm of AstraZeneca, established in September 2011, demonstrates a potential solution for the capacity challenges increasingly being faced by biopharmaceutical companies.
Changing fundamentals for biologics manufacturing
The impetus for the companies' manufacturing capacity-sharing agreement reflected larger trends in biopharmaceutical manufacturing. In the 1990s, many large pharmaceutical companies began building biologics manufacturing capacity in anticipation of advancing biologic-based drug candidates. At the same time, certain CMOs began to emerge to fill capacity requirements. As these changes occurred, during the 2000s, technology gains also started to significantly improve upstream yields, explained Michael Kamarck,then president of Merck BioVentures, who spoke at the Drug, Chemical, and Associated Technologies Association (DCAT) Business Development Forum, Successfully Partnering Pharmaceutical Manufacturing Throughout Product Lifecycle, which was held in mid-March 2012 in New York. Proprietary fermentation technology, for example, improved yields at the beginning of the decade from 0.5 to 1 g/L to 1–3 g/L in 2002, to 3–5 g/L in 2004 to 10 g/L in 2007. The confluence of increased manufacturing capacity that resulted from both improved technology and recently constructed greenfield biologic-based manufacturing facilities resulted in overcapacity on an industry level."This evolution brought us to another chapter in biomanufacturing," said Kamarck, pointing to strategic collaborations as a way to manage the capacity overflow and biomanufacturing needs.
The genesis of the Merck–MedImmune collaboration
The fundamental changes in biomanufacturing trends came into play with the biologics manufacturing capacity-sharing arrangement made by Merck and MedImmune in September 2011. In 2007, AstraZeneca completed the acquisition of MedImmune, which became the biologics arm of AstraZeneca, incorporating the MedImmune assets, legacy AstraZeneca biologics assets, and Cambridge Antibody Technology, which AstraZeneca had acquired in 2006. A key manufacturing asset for MedImmune, which is headquartered in Gaithersburg, Maryland, is the company's large-scale monoclonal antibody (mAb) manufacturing facility in Frederick, Maryland. Prior to its acquisition by AstraZeneca, in 2005, MedImmune committed to support 500 kg of production per year through the addition of two 15,000-L bioreactors, which would replace an original 2 x 2500 L plant. The additional capacity was intended to meet the mid-range product demand of MedImmune through 2013. In acquiring MedImmune in 2007, AstraZeneca further authorized an additional 500 kg of capacity to include a total of four 15,000-L bioreactor trains at the new Frederick facility.
When the MedImmune product for which the initial capacity was intended did not proceed through clinical development, MedImmune realized that existing products would not fill the site. The combination of a pipeline-delivery gap and the subsequent improvement in titres or grams-per-liter yields required an alternative solution to fill capacity.
"This became the genesis of the concept for sharing capacity or selling it directly," explained Andrew D. Skibo, executive vice-president of operations at MedImmune, who also spoke at the DCAT Business Development Forum. The business case for developing an alternative approach to utilizing capacity was clear, he said.
Contrary to the original plan, the plant would not be fully utilized by MedImmune's own pipeline until at least 2022 based on a three- to five-year delay in product commercialization and dramatically improved titres. In addition to the underutilization of the facility, the associated staff at the facility would be in standby status. "The skilled and trained staff was the highest value asset of concern," said Skibo. "We wanted to retain key employees by getting them working in their area of expertise."
With the motivation of covering operating expenses of staff and depreciation for the manufacturing assets, which was estimated at $100 million per year, the business case for developing a partnership for sharing capacity was made. In evaluating a potential partner, Skibo outlined that certain criteria came into play. The ideal situation would involve one or two partners with large-volume needs specific to needing capacity for mammalian cell culture (i.e., Chinese hamster ovary). The arrangement would require joint capacity planning in a long-term deal (i.e., 10 to 15 years). In an arrangement, MedImmune capacity needs would prevail, and reciprocity with capacity in other areas, such as microbial bulk capacity, high-capacity mAb filling, and live-virus filling would also be part of any agreement. "This criteria would preclude a strictly CMO-type agreement from working," explained Skibo.
"This type of arrangement would require the right people and people 'chemistry.' It is more than a financial agreement; both parties would have 'skin in the game,'" he said.