Shifting Biopharma Strategies Shape Outsourcing Market

  The fast growth of the global biopharmaceutical market has prompted global pharmaceutical and biotechnology companies to increase their R&D investment in biologics. Biologic drug candidates have, therefore, been rapidly gaining shares in their pipelines. In many major pharmaceutical companies, the ratio of biologic drug candidates to small molecules has now reached close to one-to-one. The increasing availability of funding opportunities from both private and public sources is also promoting the growth of R&D-focused small biopharmaceutical companies. Accompanying this development process is the fast growth of the demand for a variety of outsourcing services, including biologic product manufacturing.   Although biopharmaceutical manufacturing (or biomanufacturing) outsourcing is still a young industry, the global demand for biomanufacturing services is growing rapidly. Moreover, driven by the on-going efforts of all sized drug companies to further raise the proportion of biologic drug candidates in their pipelines and the growing complexities of both their R&D pipelines and their product portfolios, the global biomanufacturing outsourcing market is expected to grow at a fast pace in the future. This article gives a brief summary of a market study on global biomanufacturing outsourcing (1).    Demand for biomanufacturing outsourcing services It has been widely recognized that therapeutic biologics (i.e., biopharmaceuticals) have become a new but important type of medication. They provide not only a new class of therapeutics for those diseases previously treated with small-molecule drugs, but also a type of novel treatment for those previously untreatable diseases. The global biopharmaceutical market has therefore been experiencing fast growth in the past decade. A number of biologics have even become blockbusters. In the past seven years (2007−2013), the global biopharmaceutical market has been growing in a compound annual growth rate (CAGR) of approximately 14% and its current market value has reached $197 billion, accounting for approximately 20% of the total global pharmaceutical market (1).     Having gained the strong growth momentum, the global biopharmaceutical market has been expected to further grow at a fast pace in the foreseeable future, in particular since the development of novel therapeutic antibodies has become an industry-wide focus. The global biopharmaceutical market is forecasted to experience a CAGR of approximately 11.8% from 2014 to 2018 and could reach $344 billion by 2018, possibly accounting for approximately 27% of the total global pharmaceutical market by then. Of the forecasted global biopharmaceutical market, the fastest growth sector is expected to be the therapeutic antibody market, which is forecasted to reach $120 billion by 2018, representing a CAGR of approximately 14% during this time period. Driven by the fast growth of the global biopharmaceutical market, the demand for biomanufacturing outsourcing services has increased rapidly in recent years. Although the majority of the biomanufacturing outsourcing activities are still centered on such tasks as cell line development, bioanalysis, product characterization, and biosafety testing, the industry-wide growing demand for manufacturing service of developmental biologics is being clearly demonstrated.   Current biomanufacturing outsourcing strategies At present, the majority of the biopharmaceutical companies large and small do not have sufficiently strong internal capabilities in cell line development. Most of them outsource cell line development to specialist vendors, including professional bio-CMOs, or license it from them and then further develop it in house. The outsourcing demand in this area by drug companies has been strong.   Currently, a mixed situation exists for manufacturing of those biologic drug candidates that are still under development. Some major pharma and biopharma companies are willing to outsource part of them to professional service providers; but the others still keep all of them in house. The current strong service demands for contract manufacturing of developmental biologics mainly come from those R&D-focused small biopharmaceutical companies. In recent years, their demand has been steadily growing as they are able to secure sizeable funding for their R&D programs. 
  A number of biomanufacturing collaborations have occurred in the past few years. Lonza, for example, signed a bundled biomanufacturing contract in January 2014 with Index Ventures, a London-based VC investment firm, to provide process R&D and cGMP manufacturing services for all biological products in the pipelines of Index Venture’s portfolio biopharma companies (2).  In August 2013, Genzyme, a subsidiary of Sanofi, reached an agreement with Gallus Biopharmaceuticals (now part of Patheon/DPx) for multi-year supply of Genzyme’s clinical trial protein drug targeting Niemann-Pick type B (3).  
  For contract manufacturing of those commercialized biologics, the current service demand is still soft, primarily because most major companies have built sufficiently large internal capacities in recent years. Only some simple biosimilar therapeutic proteins such as insulin, interferon, interleukin, and growth hormone are currently outsourced.
  The current outsourcing strategy of almost all major drug companies in biomanufacturing is still tactical, only on the needed basis, although their strategies also vary from company to company. Most major companies seek external resources only when they lack internal capability and/or capacity, or need a backup capacity. It is an indication that biomanufacturing outsourcing is still at its early development stage.   Role of emerging countries Supported and encouraged by the local government, coupled with the increasing availability of funding opportunities to local biopharma companies, the biopharmaceutical industry in emerging countries, especially China and India, is growing rapidly. A variety of biologic products, including recombinant proteins and monoclonal antibodies (mAbs), have been successfully developed, manufactured, and marketed in the local market.   Meanwhile, attracted by the fast growth of the local biopharmaceutical market and the thriving of the local biopharmaceutical industry, growing numbers of the multinational biopharma companies large or small have become interested in either conducting biologic drug R&D or performing biomanufacturing in these countries, besides marketing their products there. Accompanying their entrance and further expansions in the local market are their growing demands for various types of service to support their local activities, including biomanufacturing.
  Although at present the service scopes and capabilities in all emerging countries are still limited, the entrance of the multinational biopharma companies and the fast growth of the local biopharmaceutical industry are promoting this outsourcing service industry in these countries. Meanwhile, growing numbers of the professional bio-CMOs have also been emerging, in particular in China and India. At present the manufacturing of those low-end products (i.e., biosimilar proteins) or those discrete processes (i.e., bioanalysis and product characterization) are increasingly being conducted in the emerging countries.     With unprecedented increase in financial power, advances in biotechnology, and growth in local biopharmaceutical market, the emerging countries, especially China and India have been recognized as the most potential growth markets in the world. All pharma and biopharma companies around the world would like to capitalize on the growth, including seeking the opportunities to collaborate/partner with the local organizations. Their demands for all types of service to support their local activities are expected to further drive up the growths of the local biomanufacturing outsourcing market. Biomanufacturing outsourcing is thus expected to be the next wave in both China and India in the following years.   Outlook of future growth potential At present most major companies are still investing to expand their internal biomanufacturing capacities. Some R&D-focused small biopharma companies are also attempting to build their own biomanufacturing facilities encouraged by the reduced cost and setup time provided by the more advanced single-use bio-equipment. Coupled with the short history of the global biomanufacturing outsourcing industry, the current industry-wide average penetration of biomanufacturing outsourcing is approximately 10%; and the current global market of the biomanufacturing service is approximately $4.9 billion. In the past five years (2009−2013), it has been growing in a CAGR of about 11%.   However, driven by a number of factors, including the expected future fast growth of the global biopharmaceutical market (including the biosimilar market), and the growing pipelines of biologics in all sized drug companies, especially those new antibodies, antibody-drug conjugates (ADCs), peptides, and vaccines, the global biomanufacturing outsourcing market is expected to grow in a faster rate in the foreseeable future. Based on research done by JZMed, the global biomanufacturing outsourcing market will likely experience a CAGR of 14.5% during 2014−2018 and reach close to $10 billion by 2018. It is estimated that by 2018 the average outsourcing penetration in the global biomanufacturing industry will likely reach around 12%. In the near term the growth of the global biomanufacturing outsourcing market is expected to primarily result from the increased investment in biologic drug R&D (including R&D on biosimilars) among growing numbers of the small- to medium-sized biopharma companies, rather than from the increase in outsourcing proportions by the major pharma/biopharma companies.   References 1. JZ Med, Inc., “The New Trends of Global Biomanufacturing Outsourcing” (July 2014). 2. Lonza, Lonza Signs Exclusive Agreement with Index Ventures for the Development and Manufacture of Biologics for Portfolio Companies, press release, www.lonza.com/about-lonza/media-center/news/2014/140109-indexventure-agreement-e.aspx, accessed Feb. 19, 2015. 3. Gallus, “Gallus Biopharmaceuticals Enters Clinical Supply Agreement with Genzyme,” Press Release, http://gallusbiopharma.com/news/2013/07/31/gallus-biopharmaceuticals-enters-clinical-supply-agreement-with-genzyme-for-niemann-pick-type-b-disease/, accessed Feb. 19, 2015.