Since the late 1990s, the use of CMOs has steadily increased. Our research indicates that complications remain, however, as
companies with relatively sophisticated manufacturing capabilities still encounter issues in replicating a facility. Consequently,
biologics manufacturing companies should carefully weigh the risks associated with contract manufacturing against the potential
benefits before making an outsourcing decision. Our research also indicated, however, that an increased level of knowledge,
experience, and skills among contract manufacturers and their deeper understanding of biologics manufacturing are helping
to reduce these risks, thereby keeping the outsourcing of manufacturing as a viable option.
DEMAND FOR BIOTECH PRODUCTS ON THE RISE
Since recombinant insulin was first developed and commercialized in the early 1980s, biotechnology-derived therapeutic products
have grown in both number and revenues generated. The growth has accelerated in recent years and is expected to continue in
the near future. The worldwide market for biotech drugs in 2010 is estimated to be nearly $70 billion, with an estimated compound
annual growth rate of around 10% from 2005 to 2010 (Figure 1).
As shown in Figure 1, the number of biotech drugs is expected to grow from 100 in 2005 to about 150 in 2010. A closer look
at the current research and development (R&D) pipeline shows more than 500 protein and 150 peptide drugs in various stages
of development, suggesting that this growth will continue (Figure 2). This increasing demand for biotech products will likely
require greater manufacturing capacity.
Spare capacity based on planned capacity projections is decreasing from around 57% to 25% for monoclonal antibodies (Figure
3). While it may appear that no additional capacity is required, we believe this is not the case, for two reasons.
First, all capacity is not the same. While certain types of manufacturing capacity, such as those used for fill-and-finish
operations, are abundant, industry professionals have indicated that other types of capacity for upstream processes like fermentation
and purification are scarce.
Second, both supply and demand in biotech operations can be highly uncertain. Even though biologics manufacturing is more
advanced now than before, it is still relatively immature and may lead to significant supply uncertainties. On the demand
side, drug development and commercialization risks can lead to large demand variations. These uncertainties require a substantial
buffer in manufacturing capacity.
We believe these reasons, combined with the significant reduction in spare capacity we expect to see in the near future, indicate
that the need to develop more manufacturing capacity is high. However, additional capacity is needed more in some areas than
others, as we will discuss below.
MAMMALIAN CELL CULTURE SHOWS HIGH POTENTIAL
There are significant differences in the outsourcing market for the two main types of biotech drug manufacturing, microbial
manufacturing and mammalian cell manufacturing.
As a first-generation technology, microbial manufacturing is typically less complex than mammalian cell culture, but has limitations.
As a result of less frequent use in new products and the commoditization of technologies, the majority of microbial manufacturing
capacity already resides in CMOs (Figure 4). Thus, the growth potential for microbial manufacturing appears to be limited
(Figure 5). These observations suggest that microbial manufacturing is maturing and there may not be a substantial need for
additional capacity in the future.