By William P. Downey, president, HighTech Business Decisions

On January 18, 2011, Boehringer Ingelheim (BI) and Amgen announced that BI will buy Amgen’s development and manufacturing site in Fremont, CA (the “site”). Fremont is located in the San Francisco Bay Area— close to many major biotechnology centers. The parties expect to close this transaction in late March 2011. This acquisition expands BI’s contract mammalian cell culture capacity, and the site will be the largest mammalian cell culture contract manufacturing facility on the U.S. west coast. This is BI’s first biopharmaceutical contract manufacturing facility in the U.S.; its other biopharmaceutical contract manufacturing facilities are in Germany and Austria.

Recent Industry Trend

Over the past few years, access to capital for biotechnology firms has become more difficult, which has resulted in a slow-down of new biotechnology projects. A survey of biomanufacturing directors at pharmaceutical and biotechnology companies by HighTech Business Decisions for the report, Biopharmaceutical Contract Manufacturing: Expanding Markets, New Capacities and Improved Performance, documents the activities taken by biotechnology companies in response to the financial crisis. Our study shows that more than half the biotechnology firms have been impacted by the financial crisis, and more than two-thirds of the firms have responded to the financial crisis by either prioritizing or slowing down projects. This in turn has adversely affected the biopharmaceutical contract manufacturing market.

While biopharmaceutical contract manufacturing market growth has slowed in recent years, BI’s acquisition will have a positive impact on the overall market for contract production services. In their recent industry report, the accounting and audit firm Ernst & Young notes a “new normal” in the biotechnology industry: access to capital will remain difficult. Thus outsourcing production is an effective way for biotechnology firms to reduce their cash needs.

Boehringer Ingelheim Strategy

According to Dr. Julia Knebel, director, Marketing & Communication, Contract Manufacturing Business Biopharmaceuticals for BI, “The purchase of the Fremont facility is in line with Boehringer Ingelheim’s growth strategy in biopharmaceutical contract manufacturing.” Dr. Knebel further noted, “The technological expertise present at Fremont will complement Boehringer Ingelheim’s goal to increase its lean process development and manufacturing of new biological entities.” In addition to the added capacity and capabilities that the site will bring to BI, Dr. Knebel mentioned that the facility’s location in the San Francisco Bay area will give Boehringer Ingelheim a competitive advantage in servicing its current and future U.S. west coast clients.

Customer Proximity

Boehringer Ingelheim’s Fremont Facility places it in close proximity to many of the biotechnology centers located in Northern California. Many biomanufacturing directors see an advantage to having their CMO close by—or at least in the same time zone. In HighTech Business Decisions’ study, 83% of the biomanufacturing directors see an advantage to having their biopharmaceutical contractor in close proximity. While proximity is not a major criterion for choosing a CMO, it is an added benefit. There are more than 100 biotechnology companies located on the U.S. west coast, with almost half of those firms in northern California.

Future Plans

BI will continue to make one of Amgen’s products at the Site. As noted by Dr. Knebel, “The purchase of Amgen’s Fremont facility by Boehringer Ingelheim further builds on our successful 10-year partnership with Amgen.” In addition, BI will offer CMO services to other clients, as well as use the site to produce future BI products. Dr. Knebel remarked, “The Fremont Facility adds to Boehringer Ingelheim’s current capacity to offer process development as well as production services for clients with clinical and commercial phase products.” The facility is set up to produce multiple products from mammalian cell cultures, including monoclonal antibodies and other therapeutic proteins.

Facility Capacity and Capability

The site was originally operated by Abgenix, and it became part of Amgen when Abgenix was acquired in 2006 through a stock-merger transaction. Based on Amgen’s recent financial filings, the site is Amgen’s only manufacturing site that is 100% leased, and it does not produce any of Amgen’s major biopharmaceuticals. Based on county records, the site has an assessed real estate value of $54 million. Thus the transfer of the site to BI offers Amgen an opportunity to rationalize its facilities, and gives BI a U.S.-based contract manufacturing facility.

The site offers a full range of mammalian cell culture production capacities, with tank sizes ranging from 30 L to 12,000 L. The additional capacity from the site represents approximately 5% of the worldwide contract manufacturing capacity for mammalian cell culture. The site’s capacity doubles the amount of mammalian cell culture capacity available from CMOs located on the U.S. west coast.

The site also has capabilities for cell banking, purification and fill-and-finish, including lyophilization. The site offers CMO services for both clinical and commercial supply, and it complies with both the FDA and international biologics manufacturing regulations. BI will transfer its proprietary manufacturing and logistics technology to the site and will offer both its BI-HEX® and its ConCERT® cell lines to its clients at this site. Both cell lines are high expression CHO cell lines.

The Fremont facility will operate as a separate subsidiary of BI. In addition to having development and production functions at this site, other functions at the site include business development, project management, quality, engineering, technology and warehouse. BI has recently established a global structure in its biopharmaceutical business unit across all its sites; the Fremont Facility will be part of this organization, which is headed by Corporate Senior Vice President, Simon Sturge.

Conclusion

Boehringer Ingelheim’s new facility expands the available contract capacity for mammalian cell culture. While a portion of this capacity will continue to be used to produce an Amgen product, the new capacity on the U.S. west coast strategically places BI in close proximity to many of the top biotechnology centers in the U.S.

William P. Downey is president of HighTech Business Decisions. He can be reached at wdowney@hightechdecisions.com.