CMOs Plan for Capacity Expansions

BioPlan Associates’ annual studies have shown that biopharmaceutical outsourcing has been growing steadily at 12–18%, along with the overall biopharma industry over the past five years. But recently their clients are allocating a greater percentage of their budgets for contracting out activities previously considered core business. It’s not surprising, then, to see that capacity expansions are being planned by various contract manufacturing organizations (CMOs). Smaller CMOs such as Cytovance Biologics (1) and Rentschler (2), for example, in 2014 announced investments in capacity expansions.  CMC Biologics (Copenhagen and Bothell, WA) purchased substantial facility capacity in Berkeley, CA to prepare for accelerating growth, while Lonza, the market leader in size, is sharpening its focus on biotechnology (3) given the upswing in the outsourcing market.  

These trends are reflected in the data from BioPlan’s 11th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production (4). Based on BioPlan’s estimates, CMOs’ mammalian cell culture capacity-measured by installed bioreactor volume-grew from 474,000 L in 2008 to 790,000 L in 2013. Estimated microbial fermentation capacity (in terms of installed bioreactor volume) grew more slowly during that period, but nevertheless increased from 354,000 L to 400,000 L.

These capacity expansions are in response to a general trend toward greater outsourcing by biopharmaceutical manufacturers. In the 2014 study, 50% of companies were outsourcing at least some mammalian cell culture production, up from 43% in 2006, with 58% outsourcing at least some microbial fermentation production, up from 42% in 2006. Furthermore, just 3 in 10 respondents expected to keep all of their mammalian cell culture (30%) and microbial fermentation (31%) production in-house by 2019.

In keeping with future increases in outsourcing, CMOs also reported planned capacity expansions. Respondents estimated that their facilities would increase total mammalian cell-culture production capacity by 39% during the 2014-2019 period, with overall microbial fermentation capacity also set for an increase, though a more muted one (19%).

Interestingly, those projections were down from a year earlier, when CMOs expected significantly larger capacity expansions for mammalian cell culture and microbial fermentation. One reason may be that CMOs reported more idle capacity in 2014’s survey: on average, they estimated operating at 58% of their mammalian cell-culture production capacity and 54% of microbial fermentation capacity.  

Hiring talent is going to be a problem
Despite operating at lower levels of total capacity in 2014 (of course, 100% capacity usage is neither ideal nor likely attainable), CMOs continued to forecast capacity expansions. Concerns about a future glut of outsourcing capacity may not be warranted. And even though some biomanufacturers themselves are seeking to offer some of their excess in-house capacity as contract manufacturers, this increased supply does not seem to be affecting CMOs’ intentions to expand their own capacity. Rather, the big emerging struggle among CMOs appears to be the need to contend with staffing bottlenecks.

Capacity expansions will, of course, require staff expansions, too-and skilled, experienced staff, at all levels, are simply becoming increasingly hard to find. That’s particularly the case for process development staff, who are likely to be among the most in-demand in years to come.

BioPlan’s 2014 study asked industry respondents (both biotherapeutic developers and CMOs) in what areas they will be hiring new biopharmaceutical production during the next five years.  While process development and R&D emerged as big areas of growth (21% share of new hires), the top segment was in production operations, where 31% of the industry’s new staff in biomanufacturing will be hired.

This demand for process development staff is going to create challenges. Indeed, more than 4 in 10 (42.3%) of respondents cited current difficulties hiring upstream process development staff at their facilities, with this topping the list of ‘most difficult’ positions to fill. Downstream process development staff followed, cited by 35.2% of respondents, with process engineers (26.8%) also a challenging hire (see Figure 1).

Indeed, process development jobs (both upstream and downstream) have been consistently cited in the past five years as difficult positions to fill. This generalized bottleneck in hiring may also reflect the continuing adoption of new initiatives, new technologies, and facility expansions that require specialized staff, such as process analytical technology (PAT) and quality by design (QbD).

Hiring bottlenecks creating industry capacity problems
The inability to hire qualified staff is having a significant impact on capacity usage (see Figure 2). In fact, the industry considers it one of the factors most likely to create capacity constraints in the future. Some of the top factors cited by survey respondents as likely to create a capacity crunch by 2019 included:

• Facility constraints (52%)

• Analytical testing and drug product release (41%)

• Inability to hire new, experienced technical and production staff (33%)

• Inability to hire new, experienced scientific staff (29%)

• Physical capacity of downstream purification equipment (28%).

Essentially, hiring difficulties figure to be as prominent a challenge (if not greater) as the physical capacity of downstream purification equipment, which is often seen as a major culprit when it comes to existing constraints.

Hiring is one of the few factors measured that has steadily grown as a concern over the past few years. For example, the 33% of respondents indicating potential future capacity constraints owing to the inability to hire technical and production staff represents a large increase from fewer than one-quarter (24%) feeling that way in 2010. Additionally, the 29% sharing that concern with regards to scientific staff is almost double the proportion of respondents (16%) who felt that way in BioPlan’s 2008 study. Clearly, this is a growing problem.

CMOs worried about hiring
CMOs appear to be even more concerned than biotherapeutic developers about this trend in hiring. When the respondents were segmented into those two groups, the inability to hire new, experienced technical and production staff was the second-most cited factor likely causing future constraints for CMOs, by 43.8%. (The comparable figure among biotherapeutic developers was 31.8%). CMOs were also more likely to see future capacity constraints arising from the inability to hire new, experienced scientific staff (37.5% vs. 27.3%), the inability to retain experienced technical and production staff (37.5% vs. 20%), and the inability to retain experienced scientific staff (25% vs. 20%).

Conclusion
The future looks bright for contract manufacturing. Biopharmaceutical manufacturers are outsourcing more activities and expect to be doing so to a greater degree in the medium-term. Along with that, outsourcing budgets have been on the rise in recent years, rebounding from a recession-induced contraction. Contract manufacturers are working to meet that demand, with industry players of different sizes and in different geographies securing investments and breaking ground on new facility expansions. Still, it’s important to note that there are challenges ahead for CMOs besides increased competition from market entrants. Facility expansions will require new specialized staff, and finding, developing, and retaining the right talent is a consistent pain point. It takes time, and significant company resources, to build up the required expertise, and much of the hiring that currently takes place (at least anecdotally) is the result of poaching talent. For second-tier CMOs looking to attract more business and strategically partner with clients, being able to boast top technical expertise is a significant (and arguably requisite) factor.

The importance of attracting that talent is not going away-and should only grow as CMOs raise their levels of sophistication and lead the charge in new technology adoption. It will be interesting to see how they go about attracting and retaining the necessary talent to do so.

References
1. Cytovance Biologics, “Cytovance Biologics Breaks Ground on GMP Warehouse and Manufacturing Operations Facility,” Press Release (Oklahoma City, OK, Jan. 28, 2014).
2. Rentschler, “Rentschler Expands Single-Use Manufacturing Capacities,” Press Release (Laupheim, Germany, June 6, 2014).
3. C. Copley, “Lonza to focus on pharma as benefits from outsourcing,” Reuters (Jan. 23, 2014).
4. BioPlan Associates, 11th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production (Rockville, MD, April 2014). 

About the Author
Eric Langer is president of BioPlan Associates, tel. 301.921.5979, elanger@bioplanassociates.com, and a periodic contributor to Outsourcing Outlook.

*All figures are courtesty of the author.

Article DetailsPharmaceutical Technology
Vol. 39, No. 3
Pages: 76-77
Citation: When referring to this article, please cite it as E. Langer, “CMOs Plan for Capacity Expansions,” Pharmaceutical Technology39 (3) 2015.