Outstourcing Insights: Ferment in Biomanufacturing - Small-scale biomanufacturers attract capital, while large CMOs build competitive barriers - BioPharm International

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Outstourcing Insights: Ferment in Biomanufacturing
Small-scale biomanufacturers attract capital, while large CMOs build competitive barriers


BioPharm International
Volume 20, Issue 3

Smaller biomanufacturing CMOs see themselves as catering to underserved niches in the market. The market for their services is highly segmented, with client needs varying widely across dimensions like manufacturing technology (cell culture versus fermentation), nature of the substance (e.g., glycoproteins or vaccines), need for expression or host system improvement, breadth of support services required, and geography. These wide variations in the needs of biopharmaceutical companies have probably kept price wars from breaking out despite the large number of competitors.

The clinical biomanufacturing segment continues to attract new players, especially at intermediate scale (500 L–2,500 L). Industry veterans like Laureate Pharma, Goodwin Biotechnology (Plantation, FL), and Rentschler Biotechnologie (Laupheim, Germany) are expanding; while new players like Cytovance (Oklahoma City, OK), Cook Pharmica (Bloomington, IN), and InnoBio (Selangor, Malaysia), are entering the business.

The capacity expansion is supported by real top-line growth. Most clinical-scale biomanufacturers are reporting robust top-line growth, generally in the mid-to-high double digits. For instance, Danish biomanufacturer CMC Biopharmaceuticals reported its revenues grew 50% in 2006, and Laureate Pharma saw its volume jump over 200% for the year. However, most of the growth has been off a relatively small base (revenues in the low tens of millions at best) and most companies have yet to reach a volume sufficient to generate profits.

In fact, the quest for profitability is a major objective for increasing capacity. Limited batch size and project capacity make it difficult for clinical scale biomanufacturers to grow their client base and retain existing customers as their requirements increase. More and larger capacity enables biomanufacturers to leverage the fixed costs of operating their facilities and developing new business. It also helps companies to hold on to clients as their needs graduate to pilot-and launch-scale quantities. Improved titers and yields are making intermediate-scale bioreactors feasible for commercial supply.

ATTRACTING CAPITAL

The dramatic growth and perceived opportunities for clinical manufacturers is attracting badly-needed capital into the industry. Venture capitalists have made substantial investments in Xcellerex ($20 million) and Althea Technologies ($23 million). Laureate Pharma gained access to capital thanks to its acquisition in 2005 by Safeguard Scientifics, a publicly-traded holding company.

Private investors are actively looking for more opportunities in the industry, and are likely to finance more deals in coming months. We are aware of at least one small CMO that is actively looking to be acquired, and it is expected that the ICOS manufacturing facility, which has been doing a lot of contract work and which Lilly declared redundant following its acquisition of ICOS, will be sold this year. There is speculation that VaxGen could sell its South San Francisco biomanufacturing facility as part of its restructuring following the cancellation of its vaccine contract with the US government.

Jim Miller is president of PharmSource Information Services, 703.383.4903;


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