The biopharmaceutical contract manufacturing industry continues to show year-over-year growth as market conditions for outsourced services improve. Based on HighTech Business Decisions’ latest research, we expect the market for biopharmaceutical contract manufacturing services to reach $3 billion this year. The growth in demand for contract manufacturing services results in part from new drug commercialization, higher funding rates of biotechnology companies, and expanding service offerings by biopharmaceutical contract manufacturing organizations (CMOs). The CMO executives interviewed for this article are seeing greater demand and interest in outsourced services. Furthermore, these CMOs are either investing in new plant and equipment or acquiring capacity to meet future industry needs.

Background
The information presented in this article draws from recent interviews with six executives at biopharmaceutical contract manufacturing organizations, and from HighTech Business Decisions’ latest report, Biopharmaceutical Contract Manufacturing 2015: Improving Markets, Services, and Technologies. This report is based on primary research from senior-level executives and scientists at pharmaceutical and biotechnology companies, and contract manufacturing organizations. For purposes of our article, HighTech Business Decisions defines biopharmaceuticals as complex molecular structures created through the genetic manipulation of living cells or organisms used for therapeutics, diagnostics, or vaccines. The biopharmaceutical contract manufacturing market consists of services offered by contract manufacturing organizations producing biopharmaceutical drug substances using mammalian cell culture or microbial fermentation production technologies.

Current Demand

All CMOs interviewed for this article are experiencing a higher level of interest for their production services. The CMOs are receiving more request-for-proposals (RFPs) this year compared to last year, with one CMO respondent noting a year-over-year increase greater than 10%. The CMO respondents noted several reasons for the increase in the rate of request-for-proposals. One CMO respondent sees more RFP’s because of the industry trend to engage with a good commercial partner in earlier project phases. This avoids future technical transfer delays to a second/new commercial CMO partner; thereby, improving the clients’ time to market. While other CMO respondents note that they are getting more inquiries for preclinical and process development projects, especially for mAb-related projects. Another reason for the increasing number of RFPs was noted by another CMO who sees a trend towards their clients sending out RFPs for limited-scope projects instead of large integrated projects. Lastly, there also continues to be strong demand for projects involving biosimilar development.

Capacity Investments
With the increase demand for biopharmaceutical contract manufacturing services, many CMOs are now adding or plan to add capacity. Over the past several years, the industry has been cautious about adding new capacity, given the lower capacity utilization rates experienced earlier in this decade. From our study, HighTech Business Decisions expects the industry to increase its capacity by 14% for mammalian cell culture production and 16% for microbial fermentation production over this year and next year (Figure A). While much of the capacity increases have  been through internal capacity expansions, we are also seeing CMOs adding to their capacity through acquisitions.

For example, Patheon Biologics is adding capacity at two of its sites. “We have started expansions for enlarged USP and DSP capacity around our 2000 L suite in St Louis. We have started expansion by an extra USP suite for 1000 L and 2000 L in Groningen in the Netherlands,” said Marc Geomans, vice president, business development, Patheon Biologics. Patheon Biologics, through its parent DPx Holdings, B.V. acquired Gallus BioPharmaceuticals last year. Previously, Gallus BioPharmaceuticals had acquired Laureate BioPharmaceuticals in 2013, and acquired Johnson & Johnson’s Centocor division in 2011.

Also adding biopharmaceutical capacity in both Asia and North America, AbbVie, Inc. is building new capacity in both Singapore and Puerto Rico. “AbbVie has announced two biologics capacity expansion projects that are under construction in Singapore and Puerto Rico. These expansions will help to serve both AbbVie’s pipeline and CMO client needs,” said Michelle Calhoun, director-CMO sales and marketing for AbbVie. The investment in Singapore establishes Abbvie’s first manufacturing presence in Asia. The Singapore site will manufacture both small-molecule API and biopharmaceuticals. AbbVie’s estimated investment in Singapore is $320 million. Earlier this year, AbbVie announced that it will expand its Barceloneta, Puerto Rico site. AbbVie will spend $30 million for this expansion.

Another example of capacity expansion through both acquisition and new investment is KBI Biopharma, which continues to expand its capacity and capabilities for mammalian and microbial API production. “In our mammalian manufacturing areas, we are enhancing our single-use process technologies with an additional manufacturing suite, including both 200 L and 2000 L bioreactors, as well as kSep 400 single-use centrifuge systems. The kSep technology greatly improves harvest and clarification operations in single-use workflows as compared to depth filtration alone,” said Tim Kelly, vice president, biopharmaceutical development, KBI Biopharma, Inc. Dr. Kelly also noted that KBI continues to make substantial investments in process development and laboratory automation technologies to enhance its process and product development capabilities. KBI also added microbial fermentation capacity through its acquisition of Merck & Co. Inc.’s microbial process development and manufacturing operations in Boulder, CO, last year. The Boulder facility is fully on line, according to Dr. Kelly, who also said that this facility has extensive refolding capacity for E. coli inclusion body production processes and comprehensive process development, analytical development, and protein characterization capabilities. Earlier this year, JSR Corporation, along with CMIC Holdings Co. Ltd. and Innovation Network Corporation of Japan, acquired KBI Biopharma.

On a smaller scale, Biotechpharma UAB recently installed an additional 200 L single-use bioreactor in its non-GMP process development department. “Because we have the same type of bioreactor also in our GMP-plant, we can horizontally transfer the process later to GMP, or directly up-scale to 1000 L in our GMP-plant,” said Andre Markmann, vice president, business development, Biotechpharma UAB. “We have expanded our production area by adding a new building including clean rooms and we will increase our microbial GMP-production capabilities, offering our clients increased production volumes.” Dr. Markmann, also noted they have inaugurated a new stem cell-research facility to support customer requirements.

Also adding capacity through both acquisitions and internal investment is Fujifilm Diosynth Biotechnologies. In December 2014, Fujifilm Diosynth Biotechnologies acquired Kalon Biotherapeutics based in Texas. “We are excited about the potential opportunities in the area of viral vaccines and the facility in Texas provided us with a great opportunity to quickly expand in the vaccine area,” said Steve Bagshaw, chief executive officer, Fujifilm Diosynth Biotechnologies. “We have very significant investments underway there, which will be coming online in 2016 and so adding to our continually increasing capabilities for all the major forms of biopharmaceuticals, API, process development, analytical development and manufacturing, covering mammalian, microbial and viral.” Fujifilm Diosynth Biotechnologies recently added 2000 L single-use bioreactors at both their North Carolina, U.S., and Billingham, UK sites. Fujifilm Diosynth Biotechnology is also expanding its process and analytical development capability. This expansion includes a brand new state-of-the-art technology center at its North Carolina site.

Conclusion
The biopharmaceutical contract manufacturing market continues to expand, and it appears that this growth will continue over the next few years. CMOs are seeing higher levels of request for proposals from their pharmaceutical and biotechnology clients. In response to this growth, we are seeing CMOs expand their capacity through either internal capital programs or acquisitions. Over the next five years, HighTech Business Decisions expects the biopharmaceutical contract manufacturing market to grow at a compound annual rate of 8%. 

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William Downey is the president of HighTech Business Decisions, a market research and consulting company that has been publishing reports on the biopharmaceutical contract manufacturing market since 1997.  For more information, visit www.hightechdecisions.com or call (408) 978-1035.