Evaluating Supply and Demand Patterns for Contract Biologics Manufacturing

The authors analyze the supply–demand trends for contract biologics manufacturing and the strategies of pharmaceutical and biotechnology companies and their suppliers in the value chain.
Jul 31, 2007

The market for contract-manufacturing services for biopharmaceuticals continues to expand, mirroring the growth of biopharmaceuticals. As in the recent past, biopharmaceutical products are expected to provide most of the future growth for the large pharmaceutical companies (1). In 2007, worldwide revenues for biopharmaceutical products are projected to exceed $65 billion, and the proportion of pharmaceutical revenues from biotechnology drugs is expected to surpass 10% of the total market (1). This increasing growth in biologics continues to stimulate the contract-manufacturing services industry.

A recent study by HighTech Business Decisions, Biopharmaceutical Contract Manufacturing 2007: Quality, Capacities and Emerging Technologies, analyzed the trends in the biopharmaceutical contract-manufacturing industry based on a worldwide survey of 41 biomanufacturing directors at pharmaceutical and biotechnology companies and 27 biopharmaceutical contract manufacturers (1).

Supply of contract-manufacturing capacity has fluctuated from shortages to oversupply during the past five years. Currently, the supply of outsourced-manufacturing capacity has overtaken demand. Most respondents in the study stated that supply is available. During the last five years, biopharmaceutical contract manufacturers and pharmaceutical companies have made major investments in biopharmaceutical production capacity to meet growing demand for biologics. In addition to increases in physical capacity, new technologies and improved process technologies have increased production efficiencies and further contributed to more available capacity.

Demand for biopharmaceutical outsourcing services

To meet the expected growth in demand, biopharmaceutical contract manufacturers have been aggressively installing capacity during the last several years and continue to plan for more new capacity. During 2004–2008, worldwide contract-manufacturing capacity for biopharmaceuticals is expected to grow by approximately 40% (1).

In macro terms, measuring capacity in tank liters under the two broad categories of microbial fermentation and mammalian cell culture, the study shows that biopharmaceutical contract manufacturers' installed capacity for microbial fermentation will reach 300,000 tank liters by 2008, an increase of 15% from two years ago. Biopharmaceutical contract manufacturers also plan additional follow-on capacity expansions throughout the next five years. (This estimate includes capacity for biopharmaceutical production only; microbial capacity that is used for microbially produced small molecules or products such as antibiotics is not included.)

The expansion plans of biopharmaceutical contract manufacturers for mammalian cell-culture capacity are even more aggressive. Worldwide outsourced mammalian cell-culture capacity is expected to reach 670,000 tank liters by 2008, a 21% increase from two years ago. As with microbial-fermentation capacity, the biopharmaceutical contract manufacturers plan follow-on capacity expansions during the next five years.

Biopharmaceutical contract-manufacturing expansions have kept up with demand. Most of the biomanufacturing directors at pharmaceutical and biotechnology companies that participated in the study stated that they had no problems finding capacity for their projects in 2006. As one biomanufacturing director noted: "For the last couple of years, it has been easy to find the capacity for microbial fermentation at all scales. This was not true four years ago."

Although capacity has been readily available in the recent past, capacity utilization rates are currently beginning to increase as demand catches up with earlier expansions. Biopharmaceutical contract manufacturers reported average capacity-utilization rates of 72–87% for microbial fermentation production capacity. Average capacity utilization rates for mammalian cell-culture production capacity vary from 65% to more than 90%. In both instances, capacity utilization rates are expected to increase during the next two years and then drop slightly as current and planned capacity expansions come on line. An interesting point from the study is that smaller biopharmaceutical contract manufacturers report higher utilization rates compared with larger biopharmaceutical contract manufacturers (1).

Spending on biopharmaceutical contract production, and therefore revenues earned by biopharmaceutical contractors, was estimated to be $2.1 billion worldwide in 2006. This global market estimate and forecast, shown in Figure 1, is based on outsourcing expenditures for the production of biopharmaceuticals, as reported in the survey by pharmaceutical and biotechnology companies, and on revenues recognized and capacity expansions by contract biomanufacturers, as reported in the survey. The growth in the biopharmaceutical contract-manufacturing market results from both higher levels of product production and expanded service offerings by biopharmaceutical contract manufacturers.