Shrinking facility size, growth of biologics, and emerging market demand influence pharma investments.
Aug 2, 2014
By: Cynthia Challener, PhD
Volume 37, Issue 8, pp. 18-22
Numerous trends in the pharmaceutical industry, and particularly in the biopharmaceutical sector, are leading to the need for smaller-capacity production facilities, which in turn is affecting the types of investments being made by pharmaceutical manufacturers. First is the shift to biologic-based drugs, which has occurred along with a dramatic increase in the productivity, mainly in terms of much higher titers, of biopharmaceutical processes. “While demand has increased for biopharmaceuticals, it has not kept pace with the 10-fold increase in productivity,” states Günter Jagschies, senior director of strategic customer relations for BioProcess, GE Life Sciences. “As a consequence, there is an opportunity to scale down biologics manufacturing, and newer facilities are typically based on 2000-L or smaller reactors and are much less cash-intensive, which is a key factor for pharmaceutical companies today given the growing pressure for them to be more cash aware,” he adds.
The second factor is the shift to production in emerging markets, both because the middle class is increasing and demand for drugs is expected to grow significantly, and in response to individual government requirements, such as in Brazil and Russia, for western manufacturers that want to sell products--both large and small-molecule--in those countries to produce the drugs locally. “At present, however, demand for biopharmaceuticals in particular remains limited, generally due to affordability issues, so smaller production volumes are still required. In addition, domestic manufacturers are already serving these markets, which further reduces the required facility size,” Jagschies notes. In the biosimilar sector, the stiff competition will also keep volumes quite low, at least initially. There are approximately 100 companies worldwide looking to produce 5-7 of the most successful biologics that are coming off patent, and even if just 10 of them are successful, each will have a small share of the market, according to Jagschies. At the same time, many new drug candidates (i.e., antibody drug conjugates) have much higher potency and thus require much smaller doses, which also translates to lower production quantities.
Increasing access to single-use technologies for biologics production is further enabling the scale-down of manufacturing facilities, because such systems provide flexibility and enable companies to quickly change their portfolios in response to market needs. For batch reactions in particular, Jagschies notes that the use of disposable technology can also help improve cash flow. The introduction of modular facilties is another enabling factor. “With modular facilities, companies can export the technology required for quality production to anywhere in the world, including areas where it would not be possible to construct such facilities otherwise,” says Jagschies. By their nature, modular facilities are smaller-scale.
“All of these trends together are driving interest in smaller facilities and smaller investments, particularly in the biopharmaceutical sector,” Jagschies concludes.
A summary of selected investments in both small- and large-molecule manufacturing facilities during the last year is presented as follows.
Abbott: Abbott signed an agreement in June 2014 to acquire Russian pharmaceutical manufacturer Veropharm for approximately $495 million, according to the company. Abbott will acquire Garden Hills, the holding company that currently owns more than 80% of Veropharm, but is expected to own more than 95% by the time the transaction closes. Veropharm’s portfolio includes products in the areas of women’s health, central nervous system disorders, cardiovascular disease, gastroenterology, and oncology. Veropharm is currently constructing a new manufacturing facility to expand its production capabilities, according to Abbott.
AbbVie: AbbVie officially opened its newly expanded facility in Sligo, Ireland in June 2014 (announced in 2012), which provides manufacturing capacity to deliver on AbbVie’s existing portfolio of medicines and to support potential new therapies within its pipeline, according to the company, which invested €85 million ($115 million) in the project. AbbVie also announced in February 2014 that it will invest $320 million to build a facility in Singapore for the production of both small-molecule and biologic APIs. The facility will have 250 workers once it is operational in 2019, according to the company.
Actavis: Actavis is investing $48 million to reopen in Puerto Rico its solid dosage manufacturing and packing facility in Manati and expand hormone production at its site in Fajardo. The company expects to create 300 jobs by the time the facilities are operational in 2016.
AstraZeneca: AstraZeneca announced in late 2013 that it is expanding its presence in Macclesfield, UK. The company is investing $190 million in a new plant to increase production of its blockbuster prostate cancer drug Zoladex (goserelin acetate). While no new jobs will be created, the decision does mean that the existing 300 jobs at the site will be retained.
Bayer HealthCare: Bayer HealthCare is making several investments at home in Germany and abroad. The company will spend nearly $694 million at existing sites in Leverkusen and Wuppertal, Germany to expand production of its hemophilia drug Kogenate (antihemophilic factor), adding 500 workers by 2020. Bayer Healthcare is also investing $138 million to expand its packaging, logistics, and analytical capabilities at its facility in Beijing, China.
Boehringer Ingelheim: After investing more than $350 million to improve manufacturing operations for injectable drugs at its Ben Venue Laboratories site in Bedford, OH, Boehringer Ingelheim announced that the plant would be closed because the cost and time required to overcome systemic problems was too high. Across the globe in China, the $95 million expansion of its plant in Shanghai that began two years ago and included the addition of manufacturing, packing, and distribution operations is now operational. Boehringer Ingelheim also indicated that it would make further investments at the site in 2014 to establish a development lab for biologic drugs.
Bristol-Myers Squibb (BMS): BMS is consolidating more than 575 jobs in information technology, marketing services, and financial services at its new North America Capability Center over the next three years. In 2013, the company also announced a $250 million expansion of its biologics plant in Devens, MA, adding R&D and clinical trial manufacturing capabilities. Over in Ireland, however, it is closing an API plant near Dublin and eliminating one manufacturing line at its API plant in Swords County.
Eli Lilly: The $450 million, 240,000-square-foot biologics facility in Kinsale, Ireland that Eli Lilly announced in 2012 is expected to be complete by the end of 2014, with the first production of GMP lots taking place in early 2016. In 2013, the company also announced nearly $1 billion in planned plant expansions for the production of its insulin products, including API and cartridge manufacturing capabilities: $245 million at its sites in Indianapolis, IN and Puerto Rico, $120 million in France, and $350 million in China. In addition, Lilly is spending $60 to $70 million on the construction of a 260,000-square-foot manufacturing facility in Nantong-Jiangsu, China with its Chinese partner Novast that will produce generic versions of several Lilly drugs. This plant is expected to be operational by the end of 2014.
GlaxoSmithKline (GSK): GSK and Novartis made big news in April 2014 when they announced a three-way swap of various businesses. GSK is selling its oncology business to Novartis and buying Novartis’ vaccines business (excluding influenza vaccines), and the two companies are combining their over-the-counter businesses.
In March 2014, GSK announced plans to invest as much as £130 million ($222 million) in five African manufacturing facilities and an R&D laboratory for non-communicable diseases over the next five years. Possible locations include Rwanda, Ghana, and Ethiopia. In the same month, the company announced that it is increasing production of several over-the-counter products at is Zebulon, NC plant. In September, 2013, GSK opened a $40 million plant in Cork, Ireland for the production of Gantrez, the adhesive used in the company’s Poligrip denture product.
Also in 2013, following its announcement in 2012 that it would invest more than $790 million upgrading two production sites in Scotland and construct a new plant in Ulverston, Cumbria, GSK indicated that it would invest a further $330 million on additional upgrades and a new technology center focused on continuous manufacturing, biocatalysis, nanotechnology, and supply-chain processes. The company also intends to use continuous processing for some of the manufacturing processes at the new facilities.
In November 2013, GSK announced that it will invest approximately $136 million to build a new facility in India that will also use continuous processing. The facility is expected to be operational in 2017. The company is also constructing a $50 million facility in Singapore that will use continuous processing.
Johnson & Johnson: Jannsen, a business unit of Johnson & Johnson, announced plans to construct a $200 to $300 million, 267,000-square-meter plant in Xi’an, Shaanxi province, China to replace a Janssen Pharmaceutical facility built by J&J and a Chinese partner in 1985. The new facility will serve as a supply-chain center for China and other Asian countries.
Merck KGaA: The company’s biopharmaceutical division Merck Serono will construct an €80 million ($108 million), 431,000-square-foot facility for the bulk production and packaging of drugs for the treatment of diabetes, cardiovascular disease, and thyroid disorders in Shanghai, China that is expected to be completed in 2016 and ready for production in 2017. In Europe, Merck Serono is spending $68 to $69 million (€50 million) to modernize its fill-finish plant in Bari, Italy. Merck’s Allergopharma unit, meanwhile, is constructing a $55 million (€40 million), 64,600-square-foot facility near Hamburg, Germany for the production of allergy medicines destined for China and other emerging markets. It is expected to be completed in 2016.
Novartis: In addition to its purchase of GSK’s oncology business and sale to GSK of its vaccines operations (except influenza vaccines) in April 2014, Novartis also announced that the two companies would combine their over-the-counter businesses in a joint consumer-health venture. At the same time, Novartis announced that it was selling its animal-health business to Eli Lilly. According to the company, it now has a more focused portfolio with depth in dermatology, heart failure, respiratory, cell therapy, and oncology in its pharmaceuticals business, a strong position in eye care through its Alcon unit, leadership in generics with its Sandoz business, and is well-positioned for innovation with Novartis Institutes for BioMedical Research (NIBR).
Also in April 2014, Alcon announced the opening of a S$200 million (US$160 million), 330,000-square-foot plant in Singapore for the production of products for the treatment of dry eye, allergies, bacterial infections, and glaucoma. In addition to the $500 million the company announced in 2012 that it would spend on a second facility for biologic drugs, Novartis indicated in February 2014 that it is expanding one of its existing plants in Singapore, adding a new GMP warehouse and raw material laboratory.
Novartis is also working with African partners to expand research capacity in the region. In 2013, Novartis conducted workshops in Kenya and Ghana to help African researchers construct safe and effective Phase I trial facilities for bioequivalence, and may hold additional workshops in other countries. NIBR and the University of Cape Town in South Africa also launched a collaboration in 2013 to expand research capabilities at the university’s Drug Discovery and Development Center.
In December 2013, Novartis announced the closure of an outdated Ciba Vision plant in Canada.
Novo Nordisk: Novo Nordisk is constructing a $100 million, 29,100-square-foot purification pilot plant at its new research and development facility in Denmark to expand its capacity for early-phase diabetes projects. The facility is being built to allow for a doubling of capacity if needed. The company is also constructing a plant in Denmark with R&D centers for diabetes and biologics, and recently announced plans to add 6000 positions in Denmark by 2022, half in R&D and half in production.
Pfizer: Pfizer recently completed a $30 million expansion of its product technology lab in Ireland and is spending an additional $100 million to upgrade its biologics plant in the country.
Regeneron: In Ireland, Regeneron is spending $300 million to create a pharmaceutical plant at a former 400,000-square-foot Dell computer manufacturing site and expects to employ a total of 300 people by 2016. The company is also investing $70 million to complete the second phase of an expansion of its East Greenbush, NY facility, which will include the addition of two 10,000-liter bioreactors.
Roche: Following its 2013 announcement to expand its biologics production capabilities at a cost of more than $880 million, Roche said in April 2014 that it will also be upgrading its small-molecule manufacturing operations, investing approximately $135 million to construct a new plant at is headquarters in Basel and improve other facilities for the production of both developmental and existing drug products. The new plant is expected to be onstream late in 2016.
The biologics investments include ~$210 million for a new ADC manufacturing plant in Basel, ~$286 million to expand production capacity at two sites in California, and nearly $385 million to upgrade its Penzberg, Germany plant.
Roche is also spending $105 million on a new packaging and logistics training center in Switzerland.
Sanofi: Sanofi is investing in emerging markets. The company is not only increasing insulin production at its facility in Russia, it is investing $95 million in a new manufacturing plant in Algeria, which will have a capacity of 100 million units per year, and $75 million to construct its third facility in Vietnam, which will be operational in 2015. Meanwhile, Sanofi’s Genzyme business is investing $80 million at its recently approved facility in Framingham, MA, adding more downstream processing capabilities for Fabrazyme (agalsidase beta), its treatment for Fabry disease.
Teva: Teva’s $2 billion cost-cutting efforts continue and will include the definite closure of 11 plants, and possibly an additional 16, which are under evaluation by the company. Plans to build an API plant in India have also been scrapped. In October 2013, however, Teva opened a $100 million plant in Croatia that produces tablets, capsules, and sterile formulations for the European and US markets.
About the Author
Cynthia Challener is a contributing editor for Pharmaceutical Technology.