MANUFACTURING ON A LARGE SCALE:
Courtesy of Biogen Idec
Workers calibrate and monitor equipment and production processes at a large-scale manufacturing facility.
Biotech companies are focusing on manufacturing after years of struggling to come up with advances in the laboratory. As biotech finance sources become available and new products continue to reach the marketplace, research companies debate whether to become manufacturers as well.
For drug discovery companies, adding manufacturing to their corporate repertoire can be a high-risk endeavor, requiring expertise in an entirely different business area. Many decide to sell or license discoveries to other firms that can make and distribute their products to patients. But for companies looking to make manufacturing successful, blockbuster sales and huge profit margins can be achieved by maintaining sole ownership of their initial discoveries. "Historically, the big success stories, the Amgens, the Genentechs, the Biogen Idecs, are the ones that have been able to...
The overall market for manufacturing biotech products is more than $4 billion (US) and growing at a rate of 20% each year, says Nick Hyde, business director of Dowpharma (a division of Dow Chemicals), which provides manufacturing services to companies. As more biotech products come to market, the demand for new manufacturing facilities will increase in the coming years. Companies are expected to expand their need for manufacturing capacity by 78% over the next five years, according to a survey conducted last year by BioPlan Associates of Gaithersburg, Md., for the American Society for Microbiology.
As the youthful biotech industry is finally producing a substantial number of products, the need for manufacturing facilities is increasing as well. "Interest started to crest about three years ago," says Lee Kennedy, president of Dynamic Engineering, a pharmaceutical and biotech engineering firm in Ben Lomond, Calif.
The decision to manufacture is not taken lightly in an industry in which a basic plant costs more than $100 million and most companies are not even generating revenues. In addition to buildings and equipment, biotech firms would need to bring on new employees with different skills than those required for drug discovery.
A shortage of trained manufacturing personnel is a concern for many companies. The BioPlan survey found that a lack of production workers is expected to be the top constraint on biotech capacity in the next five years, with 52 of the 100 companies surveyed citing that concern. A lack of trained scientific and research personnel is the second-ranking problem, cited by 30 companies.
Even a small facility can require as many as 100 employees, a significant increase in size over the typical biotech startup. "For a smaller company, or even a midsized company, to do manufacturing is saying 'We want to put our future into manufacturing,' whereas the base of expertise in the company is research," says John Ward, vice president for global engineering at Biogen Idec, Cambridge, Mass. "They're making a huge transition at that point in time."
Companies that don't want to take on the risk of building their own manufacturing facilities can use plants owned by contract manufacturers. According to Ward and other industry analysts, some of the largest players in this field include Boehringer Ingelheim of Germany and the Lonza Group of Switzerland, which operate bioreactors in Europe and the United States.
The market for contract manufacturing reached $1.3 billion last year and is expected to grow to $1.7 billion this year, according to the BioPlan survey. Gerhart Klement, who heads Lonza's biopharmaceuticals business sector, says companies choose to use contract manufacturers for different reasons. Smaller companies can contract the manufacturing through approval of a product without having to develop that expertise in-house. "For larger companies it is a strategic choice to mitigate risk, offset risky capital purchases, and manage internal resources," he says.
Companies choosing to offload risk by choosing contract manufacturers over building their own facilities still face a risk of price fluctuations based on available supply of production capacity and demand from biotech firms. "The major issue [is whether there will] be adequate capacity to handle the products that are coming through the pipeline," Davis says. "If you do have a product that is moving through the clinic successfully and you're looking at three to seven years to build a $300 to $500 million plant, there's a real question whether the right capacity is available."
Even if overall capacity exists, it might be difficult to find the right match in the highly specialized world of biotech manufacturing. "Contract manufacturing is not necessarily tight, but it's hard to find the right one," says Ward. "There are a lot of manufacturers out there that you can go to, but if you have a block-buster you're not going to have the capacity you need." Klement says that a large expansion of capacity in recent years, and the failure of some key products to pass through clinical trials, has managed to keep enough capacity in the market. However, he sees an impending shortage of large-scale mammalian capacity at quality levels necessary for commercial production.
In addition to building new plants, companies are looking for ways to make the manufacturing process more efficient, for example by developing cells to increase the amount of product per unit volume or titer that can be generated from a bioreactor. "The leverage to increasing your titers is huge. You can spend a few million dollars and come up with a process that will double your titer," Ward says. "In some cases it will prevent you from having to build a significant amount of capacity."
Alternate technologies, such as the use of plants and animals to generate products, still have a minor share of the market but could eventually lead to increased capacity. "The equation is changing, though, as progress is made with alternate technologies, particularly transgenics, which require dramatically less up-front capital investment and may provide significant cost advantages," Davis says.
To improve manufacturing, Dowpharma is working on a new generation of microbial expression systems for production of bio-therapeutics, manufacturing oligonucleotides, RNA interference, and plant-based technologies, Hyde says. "To be successful when relying on a contract manufacturer, it is important to involve the manufacturer as early as possible in the life of the drug, typically around the time the company decides to initiate clinical trials," Hyde suggests. He adds that contract manufacturers should demonstrate that they can provide regulatory compliance, maintain good communication with the biotech firm, and have enough technical skill "to help solve the problems that will inevitably arise as the drug progresses to a launched product."
By manufacturing their own products, and keeping a greater share of the payoff, companies can then plow more money into their original business, research, and discovery. Though a big undertaking, a sufficient market exists to merit investment in manufacturing by biotech companies, Ward says. "Some will be successful by making the bet, but some will make the bet and fail. I think there are a few more out there that will make it," he adds.
"In the end, curing cancer in the mouse is not what this is all about," says Ed Holmes, dean of medicine at the University of California, San Diego. "These are companies that are for-profit entities. Whether they license their discoveries to someone else or carry them all the way, they have to be a successful business venture. They can't give it away."