CMOs in Asia Gain Market Share, Slowly

Biopharmaceutical manufacturing clusters continue to emerge outside of the traditional hubs of North America and Western Europe. Contract manufacturing organizations (CMOs) in developing markets, however, are unlikely to threaten the powerhouse CMOs in the United States and Europe, according to preliminary data from BioPlan Associates’ 12th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production (1).

As part of the survey, biotherapeutic developers are asked to estimate the percentage of operations at their facilities likely to be outsourced internationally in the next five years. A solid majority of biologics developers indicated in the 2015 study that they will not offshore any of their process development for biomanufacturing over that period, a result that is consistent with years past.  Essentially, the technical dominance of North American and European CMOs appears to remain unmolested, at least for the time being.

Larger biologics developers often prefer to keep process development capabilities in-house, even as they avoid investing in manufacturing facilities. This strategy enables them to save on up-front facility costs while still evaluating processes to the point where they can tech-transfer a process to a CMO.

Recent years have seen more enthusiasm for offshoring biomanufacturing operations and clinical trials/operations. Data from the 2015 survey shows expected levels of biomanufacturing operations offshoring that are steady with 2014, with a greater proportion of respondents (close to two-thirds) envisioning offshoring of clinical trials and operations in their future.

Separate data confirm that the geographic location of a CMO has little influence on the selection process. For example, in the 2014 study, a CMO being “local to me” was the least important of 19 CMO attributes that were measured.

Top outsourcing destinations

Offshoring for biologics has been generally equated with emerging hubs in Asia, especially Singapore, China, India, or Korea. This trend is changing, as domestic CMOs focus on being able to meet full US and EU cGMP standards and be allowed to manufacture commercial products for those markets.

Michael Yu, president and CEO of Innovent Biologics (Suzhou, China), a biopharmaceutical company that produces affordable biologics by manufacturing products locally, reportedly, to international quality standards, says, “We want to be the leading biopharmaceutical company in China … Our primary concern is to ensure the quality of the products we develop meet international standards, not only in China, but also for the highly regulated markets outside of China. To date, no Chinese biologic product has been approved for marketing in highly-regulated markets such as the US.”

Despite these emerging facilities, biotherapeutic developers are most comfortable off-shoring to established markets-the US and Europe. In terms of the outsourcing destinations that are most-cited as at least a possibility for outsourcing during the next five years, the leading markets are:

• USA (78% are at least considering)

• Germany (76%)

• Singapore (74%)

• United Kingdom (73%).

The US and Germany remain the leaders, even when the data are narrowed to more positive intent, with each considered by roughly 3 in 10 respondents to have a “strong likelihood” or “likelihood” of being an international outsourcing destination in the next five years.

It’s worth noting that the BioPlan study is international in scope, and in years past there have been significant geographic differences in potential destinations. In the 2014 study, for example, European companies considered China and the US as likely destinations, whereas US companies preferred Singapore and Germany.

Preliminary data show that China is again the most attractive of the emerging destinations. In fact, many see it as a likely outsourcing destination during the next five years, most likely due to perceived cost advantages, and expectations for developing quality initiatives. Among the BRIC countries (Brazil, Russia, India, and China), China continues to lead the pack, followed by India.

In the short term, however, quality problems and perceptions continue to stunt India’s appeal. In 2014, Mumbai-based Glenmark announced a new manufacturing facility based in the US. Sujay Shetty, leader-pharma, PwC India, commented, “Due to quality issues, more domestic companies are trying to de-risk strategy by … setting up facilities close to US soil, in Canada and Mexico. With technological advances and government incentives, the cost of manufacturing in the US, particularly injectables, has also reduced, which is a big draw” (2).

Quality concerns tend to gain broad exposure, and the perception of quality problems can play a factor in outsourcing considerations. In the 2014 study, “being local” was the least important consideration, yet “complying with a company’s quality standards” was the second-most critical attribute that a CMO could demonstrate.  In prior years, it has been the most important attribute.

Nevertheless, the future looks brighter for CMOs in emerging markets, as they continue to develop regional manufacturing clusters. China (8.6%) and India (8.1%) together account for approximately one-sixth of global biomanufacturing capacity (3). Biocon’s Bangalore Plant is one of the highest-ranked facilities on BioPlan’s list of the top 1000 biopharma facilities. As quality systems improve, these emerging regions will take on an increasingly important role on the global biopharma stage.

Recent headlines are testament to growth in China. For example, GE Healthcare Life Sciences built two facilities in China for CMO JHL Biotech, including a KUBio modular biopharma factory in Wuhan that will house 2000-L single-use bioreactors (4). Pall Corp. opened its Life Sciences Centre of Excellence in Shanghai, which offers biopharma process solutions (CMO work), technical, and validation support as well as training (5).

Beyond China and India, Latin America (6.6% share of global manufacturing) and Russia and Eastern Europe (2.9%) are also emerging: all of these regions combined now comprise more than one-quarter of global biomanufacturing.

Conclusion

CMOs and contract research organizations based in emerging markets will continue to capture market share, albeit slowly. These CMOs continue to face domestic regulatory and legal hurdles, and are far from obtaining approvals for US and EU markets. Perceived cost-effectiveness offered by CMOs in these markets may be eroding as other supply chain costs are figured in, and whatever advantages could be gained from cost-competitiveness also appear to be declining, judging by BioPlan’s recent survey results that suggest cost-effectiveness is waning as a selection attribute.

Nevertheless, the internationalization of biomanufacturing outsourcing markets can be expected to grow. BRIC and other developing countries have yet to pose a significant threat to US and European dominance. However, simply based on the weight of their emerging populations, their growing economic power, and demand for better, cheaper domestic biologics, it is likely that their growing bioprocessing competence will result in cGMP production and export of biologics to US and EU markets in the future.

References
1. BioPlan Associates, 12th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production  (Rockville, MD, April 2014), www.bioplanassociates.com.
2. R. Mukherjee, “Glenmark Joins Pharma Companies Setting Up US Plants,” Times of India, July 15, 2014.
3. BioPlan Associates, Top 1000 Global Biopharmaceutical Facilities Index, www.top1000bio.com.
4. JHL Biotech, “JHL Biotech Partners with GE Healthcare Life Sciences to Build Monoclonal Antibody Manufacturing Plant,” Press Release, Mar. 13, 2013.
5. Pall Corporation, “Pall Opens New Life Sciences Centre of Excellence in Shanghai(China),” Press Release, Oct. 15, 2013. 

Article DetailsPharmaceutical Technology
Vol. 39, No. 5
Pages: 60-61
Citation: When referring to this article, please cite it as E. Langer, “Biomanufacturing Outsourcing Globalization Continues,” Pharmaceutical Technology39 (5) 2015.