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Industry growth rates
Sales growth among vendors is a leading indicator of the overall performance of the bio/pharmaceutical industry because vendor sales are derived from demand for materials biologics production. If vendors are doing welll and are optimistic for the future, the bio/pharmaceutical industry is likely to follow. Supplier respondents indicated that, on average, sales growth is currently at approximately 14% annually, up from 13.0% in 2010 and 14.1% in 2007.
Biopharma's budget trends
These overall trends are in large part resulting from global shifts that continue to drive the bio/pharmaceutical industry. Below are trends we project in 2012 specifically relating to biomanufacturing.
Internationalization. The bio/pharmaceutical industry continues to expand globally, driven by the need for prudent expansion of infrastructure, presence in new markets, and cost savings through outsourcing and offshoring, including R&D, which is traditionally performed in established high-technology regional clusters.
Biomanufacturing capacity also is increasing outside established markets. Although the US and Western Europe remain the leaders in biopharmaceutical manufacturing capacity, more than 37% of bioreactor capacity is operating in other parts of the world, including nearly 10% in Japan and the Pacific Rim, 9% in China, and more than 8% in India (2). Western product developers also are joining with local companies, such as in the local manufacture of vaccines. As more biopharmaceutical manufacturing is performed worldwide, product developers are working to standardize their products and manufacturing processes, which involves simplifying their manufacturing processes, so they can be reliably performed with consistent product produced even in facilities in lesser developed counties.
Single-use manufacturing. The trend toward more global standardized manufacturing is contributing to the adoption of single-use/disposable bioprocessing equipment, which allow the same manufacturing systems to be shipped and installed at multiple facilities. Some companies, with major vaccine manufacturers among the leaders, are starting to think more in terms of selling full manufacturing and technology packages, including all needed equipment and technology transfer, not just finished end-products, to foreign countries that are seeking local manufacture of vaccines for domestic distribution. Companies, such as GE and Biologics Modular, for example, are developing fully modular, drop-in-place-type, and equipment preinstalled or simply installed single-use bioprocessing-based facilities to address the interest for prepackaged biopharmaceutical manufacturing facilities.
Single-use bioprocessing technologies: In 2011, single-use/disposable bioprocessing systems further increased their dominance for the manufacture of biopharmaceuticals for preclinical R&D and clinical testing. Single-use systems dominate noncommercial-scale biopharmaceutical manufacturing in most regions. Single-use systems are increasingly being adopted for upstream manufacturing, such as adoption of single-use bioreactors and other upstream equipment. Despite dominance within precommercialization manufacturing segments, single-use systems remain a relatively small market compared with fixed stainless-steel equipment, capturing only approximately 10% of the overall bioreactor market. Stainless steel remains the preference for commercial GMP manufacturing. In as short as 10 years (approximately about how long it takes a biopharmaceutical to reach the market), half or even more of new commercial biopharmaceutical manufacturing systems can be expected to be largely or fully single-use based.
Microbial manufacturing. Most industry attention in recent years, including blockbuster products and manufacturing technology development, has concentrated on recombinant proteins produced by mammalian cell culture. Mammalian cell-culture capacity and facilities continue to dominate worldwide biopharmaceutical manufacturing (2). Microbial manufacturing remains relatively stable with few new technologies, and few major bioprocessing equipment developers announcing novel devices. A confluence of trends, however, is contributing to increased use of microbial (i.e., bacteria, yeasts, and other fungi) host cells for recombinant-protein manufacture.
Outsourcing. Companies of all sizes worldwide continue to increase their outsourcing, particularly R&D and manufacturing. These activities include increasing the use of CROs, particularly for high-throughput screening, lead identification, toxicological studies as well as greater use of CMOs for commercial manufacturing. Based on the BioPlan annual survey that evaluates 24 outsourced activities, the primary outsourced activities include product-characterization testing, with 70% of biopharmaceutical companies outsourcing at least some of this activity. Other tasks routinely outsourced include validation services (69% of biomanufacturers cited), toxicity testing (65%), analytical testing/bioassays (61.1%), and fill–finish operations (60.0%). Relatively few companies have outsourced all of their manufacturing, but nearly one-half of surveyed manufacturers expect to increase their budgets for biopharmaceutical CMO outsourcing.
Overall bio/pharmaceutical trends
These trends are, in large part, resulting from global shifts that continue to drive the bio/pharmaceutical industry. Below are broad industry trends we project in 2012.
Biopharmaceutical markets. The worldwide market for biopharmaceuticals continues to expand and at a more rapid rate than for pharmaceuticals in general. The world market for biopharmaceuticals is approximately $140 billion, with approximately $100 billion involving recombinant proteins and antibodies (2). The market includes over 430 biopharmaceuticals, including over 300 recombinant proteins and antibodies that are approved in the US and/or Europe. The biopharmaceutical market has been and is expected to continue to grow about 15–18% annually, well above overall economic growth rates. This steady overall growth rate is driving much current investment in biopharmaceutical R&D.
Approval-related innovation and progress. The good news, particularly for patients and the healthcare system, is that 2011 FDA biopharmaceutical approvals involved genuine innovation and advances, with nearly all products being approved for either new indications for which no treatments were previously available or for indications for which the last product approval was granted well over a decade ago. A record number (i.e., eight) products were approved with orphan designation. Recombinant antibodies are a leading area for biopharmaceutical development. The large number of recombinant monoclonal antibody and recombinat monoclonal antibody-like products that many companies are relying on for future products may finally be starting to enter the market.
Approval-related problems. Largely due to the limited markets for these orphan and other approved products, 2011 US approvals will not have as much industry economic impact as is likely needed in the long-term. Only two of the twelve approvals are expected to eventually reach blockbuster sales levels of $1 billion or more per year.
Company and country approval trends: Illustrating the trend towards internationalization of manufacturing, a record number of four, or 33%, of newly-approved US biopharmaceuticals are manufactured outside the US—in the United Kingdom. Germany, Mexico, and Italy. These products include the first product manufactured in Latin America that received FDA approval—a scorpion venom antitoxin (equine immunoglobulin F(ab) fragments), Anascorp, manufactured by a Mexican company.
Biosimilars (biobetters / biogenerics). With patents expiring for most established, successful, biopharmaceutical products, development of biosimilars is accelerating worldwide and will change the industry landscape. This emergence of biosimilars will likely involve the entrance of many new manufacturers. Most of this activity is targeted to introducing these products in the US and European markets, but many products are being developed by foreign companies, if only initially, for marketing in lesser-regulated domestic and international markets. There will likely be multiple biosimilars (as well as biobetters and biogenerics) for each currently successful biopharmaceutical. As a result, the number of biopharmaceuticals in the market and the number of biopharmaceutical manufacturing facilities will rapidly increase, perhaps doubling in the next five years.
Many biosimilar/biobetter/biogeneric developers are adopting state-of-the-art expression systems and other manufacturing platforms. Biosimilars are competing with products being manufactured using 20-year-old technology. Although biosimilar manufacturers will have technical advantages with newer technology, drug innovators of the the now biosimilars will have long off paid off manufacturing facilities. As a result, biosimilar/biobetter/biogeneric developers will have to compete on the basis of price and adopt aggressive cost-cutting technologies to effectively compete with the original biologic and other biosimilar manufacturers. Although over a dozen biosimilars have received European Union (EU) approval, no biologics have yet been approved as biosimilars by FDA. BioPlan analysis shows that biosimilar/biobetter companies are present in virtually every biotechnology-capable region, including Latin America, Korea, and other areas that have yet to be significantly involved in major Western biopharmaceutical markets (2). For example, of the nearly 400 organizations involved in biosimilars/biobetters development, more than 30 companies are based in India and 14 in China.
The economy. The worldwide economic downturn in recent years continues to affect the biopharmaceutical industry. Yet, with continuing growth in its underlying sales revenue, the industry has managed to remain largely insulated from severe economic problems. Financial issues continue to affect most companies, including the major international (i.e., Big Pharma) companies that are the source for most biopharmaceutical R&D, with many having to deal with their most profitable products coming off patent. Spurred, however, by their interest in new, profitable products, biopharmaceutical R&D continues to increase. R&D invesment includes a record amount of more than $70 billion being invested by the pharmaceutical industry in R&D, about 90% sponsored by the largest international companies, with an increasing number and percentage of pharmaceuticals in the development pipeline being biopharmaceuticals versus chemically manufactured drugs). Biopharmaceuticals provide more exclusivity, market monopolization, and are increasingly attractive to the Big Pharma-type companies.
One important trend, however, is the internationalization of R&D. Large international (i.e., Big Pharma) companies continue their expansion and/or off-shoring of R&D. Several companies have announced major, multimillion, investments in new R&D centers in China, such as Merck Serono's $225 million, four-year commitment in Beijing.
Mergers and acquisitions. The trend for industry mergers, acquisitions, and other corporate consolidation at all scales continued in 2011. This is particularly evident among large international companies that continue merging and purging (i.e., acquiring or merging companies and then downsizing the merged company). Some companies, such as Merck & Co., are moving from mergers/acquisitions in favor of more in-house and company-sponsored R&D. The continuing trend of pharmaceutical mergers, combined with off-shoring of certain jobs and facilities, has resulted in relatively high bio/pharmaceutical industry unemployment rates in the US.
Patent litigation. Patent-infringement suits can be expected to increase, particularly as a large number of biosimilars (and biobetters and biogenerics) approach filing in the US and other major markets. Major test cases, such as Classen Immunotherapies versus Biogen Idec, involve whether business methods patents include coverage of methods for determining the optimal dose of a therapeutic. Biopharmaceutical companies may soon need to consider yet another type of patent, in addition to those for composition-of-matter (e.g., sequences), formulations, uses, bioprocessing, and reference standards.
The bio/pharmaceutical industry is emerging from the current global economic situation into 2012 with a positive outlook. The industry is spending more, becoming more efficient, and, perhaps most importantly, expressing great optimism. With sales growth of between 14 and 18% this year, we will likely continue to see additional spending in new technology, capital equipment, and hiring.
Eric Langer is president of BioPlan Associates, tel. 301.921.5979, email@example.com
1. BioPlan Associates, 8th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production: A Survey of Biotherapeutic Developers and Contract Manufacturing Organizations (Rockville, MD), April 2011.
2. BioPlan Associates, Top 1000 Global Biopharmaceutical Facilities Index, www.top1000bio.com/index.asp, accessed June 20, 2011.
3. R.A Rader, Biopharmaceutical Products in the US and European Markets (database), BioPlan Associates, www.bioplanassociates.com/publications/pub_bpuseu.htm, accessed Jan. 16, 2012.
4. R. Rader, FDA Biopharmaceutical Product Approvals and Trends, Biotechnology Information Institute, www.biopharma.com/approvals_2011.html, accessed Jan. 16, 2012.