Global Biopharmaceutical Contract Manufacturing Market - Qualitative and Quantitative Analysis


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This presentation which highlights the key market and technology trends in the global biopharmaceutical contract manufacturing market was delivered as a lecture at the In-Focus Seminar session at CPhI Worldwide 2013 held at Frankfurt, Germany.

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Global Biopharmaceutical Contract Manufacturing Market - Qualitative and Quantitative Analysis

  1. 1. Global Biopharmaceutical Contract Manufacturing Market – Qualitative and Quantitative Analysis Aiswariya Chidambaram Senior Research Analyst - Life Sciences 24-10-2013
  2. 2. Focus Points The Rise of Biopharmaceuticals Comparative Analysis: Generics, Biosimilars and Biologics Global Biopharmaceutical Market Overview Biopharmaceutical Contract Outsourcing – Benefit Analysis Biopharmaceutical Contract Manufacturing Market Overview Biopharmaceutical Contract Manufacturing Segment Life Cycle Analysis Focus Points Key Market Drivers and Restraints Technology – The Powerful Tool Key Competitive Factors in the Selection of a CMO Anticipating Capacity Demand – A Tricky Speculation What can be Expected in the Future? Facing the Change – Strategic Recommendations 2
  3. 3. The Rise of Biopharmaceuticals “Biopharmaceuticals – The Length and Breadth of Healthcare in Future” What are biopharmaceuticals? – Biopharmaceuticals are pharmaceutical drugs based on protein, therapeutic serum, virus, vaccine, blood components or derivatives or gene transfer products, directly administered into the blood stream by injection. They are complex macromolecules with very high molecular weights compared to small molecules. Biopharmaceutical Manufacturing – Biopharmaceuticals are generally expressed in mammalian cells (mice, rabbits, etc.) or micro-organisms (yeast, bacteria, etc.). Manufacturing involves highly sterile, aseptic conditions and highly sensitive to changes in environment. Formulations are predominantly injectables – pre-filled syringes or cartridges. Technology  Monoclonal Antibodies  Recombinant Proteins Applications  Research  Therapeutics  Diagnostics  Protein Therapeutics  Oligonucleotides  Gene Therapy Why Biopharmaceuticals? Stronger focus on target diseases, more effective and potent action, potential to cure diseases rather than just treating symptoms, lesser side effects. 3
  4. 4. Comparative Analysis: Generics, Biosimilars and Biologics Generics Development Product Probability of success Time Cost Pricing Biosimilars Biologics Moderate (5075%) High (~90%) Short (34 Yrs) Moderate (78 Yrs) $100200 million Low (~$5 million) Lower pricing value Low (~30%) Long (812) High ($350900 million) Premium (full pricing) Commodity pricing Marketing Moderate Marketing investment Decision makers Low Group purchasing / Medical professional Organisations Competitors High, Less differentiated Point of differentiation High Payers, prescribers Few, Partially differentiated Price, breadth of portfolio Prescribers, patients Few, well differentiated Other Dynamics Price, Product profile & technology Barriers to entry Product operational profit margins Low (Cost efficiency) Low (~20%) Product profile, marketing High (capital and development) High (development process) Mixed (2530%) High (~40%) 4
  5. 5. Global Biopharmaceutical Market Overview Biopharmaceutical Market: Per cent Revenue Contribution by Region (Global) Rest of World Asia 10% 5% Biopharmaceutical Market: Per cent Revenue Contribution by Therapeutic Segment (Global) Vaccines U.S. Insulin 6.5% Monoclonal Antibodies 10.3% 45% 48.9% 34.3% Europe 40% Recombinant Proteins The European Biopharmaceutical Industry grew by 11 per cent from 2009 to 2010.  2009 and early 2010 characterized by financial crisis and poor performance of venture capital industry in Europe.  Monoclonal antibodies (mAbs) and recombinant proteins are the two largest segments, growing at rates of 11.8 and 8.2 per cent in 2011.  The future of Biopharmaceutical industry is promising, with biotech companies focusing more on innovation and technological advancements and increasing interest of pharmaceutical companies to enter into the biotech business. 5
  6. 6. Increasing Adoption of the “Large Molecules” Model by Big Pharma Key Takeaway: As large molecules are commercially attractive and less competitive, big pharma companies will likely increase their focus on these segments in the future. Pharmaceutical Contract Manufacturing Market: Percent of Combined Prescription Sales for Big Pharmaceutical Companies by Molecule Type, Global, 2012–2017 100% Prescription Drug Sales 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2012 2013 2014 2015 2016 2017 Year Small Molecules mAbs Therapeutic Proteins Vaccines Note: Sales from generic drugs have been excluded. 6
  7. 7. Biopharmaceutical Contract Outsourcing – Benefit Analysis Focus on core competencies Life-cycle management Rationalization of assets Cost-efficiency Operational efficiency Benefit Analysis Regulatory Expertise 7
  8. 8. Biopharmaceutical Contract Manufacturing Market Segment Analysis Mammalian-based manufacturing currently represents the largest segment, accounting for twothirds of the Biopharmaceutical Contract Manufacturing Market and is likely to be the major growth driver over the next five years. Biopharmaceutical Contract Manufacturing Market: Per cent Revenue Contribution by Segments (Global) Biopharmaceutical Contract Manufacturing Market: Per cent Revenue Contribution by Segments (Global) Revenue Segment (%) Growth Rate (%) Mammalian- 35% Revenue 65 5-6 35 2-3 65% based manufacturing Microbialbased manufacturing Mammalian-based manufacturing Microbial-based manufacturing 8
  9. 9. Market Value Biopharmaceutical Contract Manufacturing Market Segment Life Cycle Analysis Microbial Contract Manufacturing Market is mature and stable, and experiencing minimal growth rates. It is a very old technology and not suitable for complex, glycosylated molecules. Hence, most CMOs do not plan for capacity expansions in this segment. The current period being the decade of monoclonal antibodies, significant growth is expected in this segment. The cutting-edge technologies and remarkable success of mAbs in oncology presents a promising future for this segment. Capacity additions are expected to increase by 66 per cent in the next five years globally. The profit margins are also relatively higher in this segment. Key: Mammalian Microbial Time Development Growth Maturity Decline 9
  10. 10. Biopharmaceutical Contract Manufacturing Market – Key Drivers and Restraints Drivers Cost and time saving benefits CMOs have made huge investments in infrastructure, technology and personnel Restraints Patent Cliff Biologics worth $110 billion to lose patent protection between 2010 and 2020 Strong Biologics Pipeline New product launches and novel drug delivery mechanisms to drive outsourcing Integrated/ Risk-sharing Business Model End-to-end service providers offering valueadded services Increasingly stringent regulations Increased over head costs and reduces time-tomarket Lack of VC Funding for early-stage companies Greater preference for companies with promising late-stage candidates 10
  11. 11. Biopharmaceutical Manufacturing Costs Breakdown Key Takeaway: The cost to build, equip, and validate a bio manufacturing facility ranges between $350 and $900 million, depending upon the product manufactured Biopharmaceutical Contract Manufacturing Market: Manufacturing Cost Breakdown by Process (Global) 10% Biopharmaceutical Contract Manufacturing Market: Manufacturing Cost Breakdown by Component (Global) 30% 40% 21% 28.5% 20% Process Development Others 16% Upstream Processing Downstream Processing 34.5% Capital Labour Materials, Utilities & Wastes Overhead 11
  12. 12. Patent Expirations Total Biologics Market: Patent Expirations, (Global), 2010–2020 Neupogen (Pfizer) 2013 Humalog (Eli Lilly) 2013 BeneFIX (Pfizer) 2011 Enbrel (Amgen/ Pfizer) 2012 Product Avonex (Biogen Idec) 2013 Rebif (Merck KGaA) 2013 Neulasta (Amgen) 2015 Procrit/ Eprex (J&J) 2013 2012 Year Elaprase (Shire) 2019 Orencia (Bristol Myers Squibb) 2019 Apidra (Sanofiaventis) 2018 Norditropin SimpleXx (Novo Nordisk) 2015 2014 Levemir (Novo Nordisk) 2019 Avastin (Roche) 2018 Nimotuzumab (YM Biosciences) 2015 Epogen (Amgen) 2013 Erbitux (Merck KGaA/ Bristol Myers Squibb) 2019 Cervarix (GSK) 2017 Gonal-F (Merck KGaA) 2015 Rota Teq (Merck & Co) 2019 Victoza (Novo Nordisk) 2017 Actemra (Roche) 2015 Gardasil (Merck & Co) 2019 Provenge (Dendreon) 2017 Lantus (Sanofiaventis) 2015 Cerezyme (Genzyme) 2013 2010 Tysabri (Elan/ Biogen Idec) 2017 Prevnar (Pfizer) 2015 Herceptin (Roche) 2019 2016 2018 2020 Source: Frost & Sullivan 12
  13. 13. Patent Expirations (continued) Total Biologics Market: Patent Expirations, (Global), 2010–2020 NovoMix (Novo Nordik) 2014 Helixate (CSL Biotherapies) 2015 Humira (Abbott Laboratories) 2016 Product NovoRapid (Novo Nordisk) 2014 Rituxan (Roche) 2014 Forteo/ Forsteo (Eli Lilly) 2018 Remicade (J&J/ Merck & Co) 2018 Zostavax (Merck & Co) 2016 Pegasys (Roche) 2019 PEGIntron (Merck & Co) 2019 Vectibix (Amgen) 2020 Xolair (Roche/ Novartis) 2018 Lucentis (Roche/ Novartis) 2020 Kogenate (Bayer) 2014 Botox (Allergan) 2020 Synflorix (GSK) 2020 Replagal (Shire) 2020 2010 2012 2014 Year 2016 2018 2020 Source: Frost & Sullivan 13
  14. 14. Biopharmaceutical R&D in Europe – What’s in the Pipeline? Biopharmaceutical Market: Number of Drugs in Various Stages of Clinical Pipeline, by Country (Europe) 250  More than 1,200 biopharmaceuticals in the pipeline. 200  More than 50% drugs represented by the five major countries. 150  UK (over 230) and Germany (150 approximately) have the maximum number of drug candidates in the pipeline. Number of drug candidates 100  Spain has shown a significant increase of 30% in 2010 from its 2009 pipeline. 50 0 Spain Italy Phase I France Phase II Germany United Kingdom Phase III  The biopharmaceutical R&D expenditure in Europe, grew by 5 per cent from 2010 to 2011.  As venture capital firms in Europe are interested to invest only in late stage biopharmaceutical companies, start-up biotech companies gain access to funding, predominantly through venture capital firms based at the U.S.  More than 50.0 per cent of the products in the European pipeline account for therapeutic monoclonal antibodies. 14
  15. 15. Venture Capitalist (VC) Funding Analysis Biopharmaceutical Contract Manufacturing Market: VC Investment in Biopharmaceutical Companies and CMOs, (Global), 2000 - 2011 $5,000 VC Investment (million) $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Year First Time VC Follow-on VC  Overall greater interest from VC firms in the biopharmaceutical sector than small molecules.  Greater capital allocation to the U.S. than Europe. 15
  16. 16. Technology – “The Powerful Tool” Disposables/ SUBs  Innovation  Funding  Expertise  Regulatory compliance • Customizable design • Enhanced Productivity • Significant operational benefits Upstream & Downstream • Optimized expression systems • Enhanced cell productivity & viability • Simplified purification process • Improved selectivity Lyophilisation & PAT • Minimizing human errors • Maximizing productivity • Improvised product quality “Any sufficiently advanced technology is indistinguishable from magic” – Arthur C. Clarke Upstream technologies Single Use Technologies are specially designed for • cell productivity - 2-4 g/L in established production processes • Lyophilisation - protein based drugs, preservation and packaging. • Easy transfer of operations • 4-6 g/L in pre-clinical and clinical manufacturing processes,. • Process Analytical Technologies (PAT) - product driven approach to process based one. • Busy facilities and lean operations. Downstream technologies • Standardization of processes. • mAbs – filtration & purification resins • Reduced degree of variation. • Muti-product contract manufacturing. • Recombinant proteins - higher selectivity and flow-through mode purification steps. 16
  17. 17. Competitive Landscape Biopharmaceutical Contract Manufacturing Market: Key CMOs by Tiers of Competition Tier 1 • Lonza Group Ltd • Boehringer Ingelheim Tier 2 • Sandoz • Fujifilm Diosynth Biotechnology • Royal DSM • Rentschler Biotechnologie Tier 3 • Celonic GmbH • BIOMEVA GmbH • ProBioGen AG • Others 17
  18. 18. Key Competitive Factors in the selection of a CMO High Low Quality Technical expertise Reputation/ Credibility Capacity Cost 2 5 6 8 10 High Low 2 4 6 8 10 Low High 2 4 6 8 High 4 6 8 10 High Low 2 4 6 Timely delivery/ Speed Communication Low High 2 8 10 Personal relationship Location 4 6 8 10 High Low 2 4 6 8 10 High Low 2 10 Low 2 Approved facilities/ Regulatory support 4 6 8 10 High Low 2 4 6 8 10 High Low 2 4 6 8 10 Note: Above are the key competitive factors in the selection of a CMO by Pharmaceutical/Biotech companies for contract manufacturing services. The factors are rated on a scale of 1 to 10 with 1 = Low importance and 10 = High importance based on the end-user’s input. 18
  19. 19. Anticipating Capacity Demand – A Tricky Speculation Biopharmaceutical Contract Manufacturing Market: Capacity Supply-Demand Gap Analysis (Global) 2020 Biopharmaceutical Contract Manufacturing Market: Demand Rate for Outsourcing to CMOs (Global) 17.4% 17.5 17.5% 17.0% 17 16.8% 2018 16.5% 16.5 2015 Demand for Outsourcing (%) 2011 16.2% 16.1% 16 15.9% 15.5 15 Demand < Supply Demand < Supply Demand = Supply Demand >Supply 2011 2012 2013 2014 2015 2016 2017 2018 Year  The global biopharmaceutical industry has been alternating between cycles of excess and inadequate manufacturing capacity (including captive and contract).  Current scenario conforms to slightly surplus capacity supply than the actual demand. Captive manufacturers are increasingly shutting down plants or selling excess capacities. “It is highly essential that CMOs make cautious decisions regarding capacity expansions and choice of contract deals, lest they be hit by over capacity and witness a subsequent erosion of profit margins”. 19
  20. 20. What Can Be Expected in the Future? Globalization Consolidations, mergers, acquisitions Opening and expansion of Asian markets Global capital markets Government Regulatory bodies like EMEA to drive new product and technology introduction Increase in approval rates of new biopharmaceuticals and biosimilars. Therapeutics Development of RNA-i based therapeutics Development of anti-sense based therapeutics Recombinant protein therapeutics Monoclonal antibodies Technology Development of Transgenic technologies Stem cell technologies Cloning technologies “ The best way to predict the future is to create it” – Peter Drucker  Transition from “small molecule blockbuster” model to “biopharmaceutical” model.  Increase in public awareness, acceptance and approval of biopharmaceuticals.  Increase in outsourcing of biopharmaceutical manufacturing by Big Pharma companies.  Development of “Virtual Pharma”  Differentiation and consolidation strategies adopted by Biotech companies and CMOs.  “A-one-stop-shop” offered by CMOs, promoting a complete portfolio of products and comprehensive range of services.  Large CMOs moving into niche areas of biopharmaceutical manufacturing.  Further development and implementation of transgenic technologies.  Establishment of regulatory pathways for biosimilars and transgenics. 20
  21. 21. Facing the Change – Strategic Recommendations “ Change is the law of life. And those who look only to the past or present are certain to miss the future.” – John F. Kennedy Strategic Posture Actions • Develop biopharmaceuticals for key indications. Reacting to Change • Customize according to customer needs and preferences. Strategy • React and respond as needed. • Defend and protect company’s position in the market. • Comply with new government policies. • Analyze prospects for market globalization. Anticipating Change • Plan ahead for future changes. • Research customer needs, preferences and expectations. • Invest in R&D. • Monitor new technological developments to predict future. • Improve product line. • Foresee capacity requirements. • Instill competitive capabilities. • Strengthen distribution. • Pioneer new and better technologies. Leading the Change • Seize the offensive. • Introduce innovative products, that open new market opportunities and spur creation of whole new industries. • Be the agent of industry change. • Seek to set industry standards. • Influence rules of the game. • Force rivals to follow. 21
  22. 22. Related Market Research Reports  Global Pharmaceutical Contract Manufacturing Market  Global Next Generation Biosimilars Market  Global Contract Research Outsourcing Market 22
  23. 23. Questions
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  25. 25. Contact Information State your need, we would be happy to serve you… AISWARIYA CHIDAMBARAM Senior Research Analyst – Life Sciences Frost & Sullivan (I) Pvt. Ltd. ASV HANSA No.53, Greams Road Thousand Lights Chennai 600 006 Tel: +91 (0) 44 61606666 (Extn: 4097) Fax: +91 (0) 44 4230 0369 Email: Your Growth Partner 25