Biopharmaceutical industry-related indicators and trends are supporting continued incremental increases in outsourcing of pre- and commercial API and biopharmaceutical product manufacturing services to contract manufacturing organizations (CMOs). BioPlan Associates’ survey of bioprocessing professionals overall confirms that outsourcing to CMOs is being viewed increasingly as a desirable option (1). Routine services and products with smaller markets will be outsourced more frequently, and products requiring novel bioprocessing, where expertise or capacity remain limited, will also be outsourced more frequently, such as cellular and gene therapies. Most innovator drug companies continue to retain manufacturing and development of their prospective blockbusters in-house.
The financial outlook for CMOs is solid, with growth in revenue tracking that of the overall biopharmaceutical sector, which consistently grows at more than 12% annually. CMOs continue to expand capacity, staff, etc., to try to retain clients as their products advance in development. Total annual biopharmaceutical CMO revenue was approximately $3.4 billion in 2018 and is expected to grow to about $3.8 billion in 2019. Biopharmaceutical CMOs remain a relatively small niche, however, with chemical substance-based drug outsourcing revenue more than 10 times that of the biopharmaceutical sector.
Despite being just a small part of the overall biopharmaceutical industry, CMOs play important roles. CMOs currently commercially manufacture approximately 30% of marketed mainstream (recombinant) commercial products, although this remains concentrated among a few, large-capacity CMOs. Most CMOs primarily support R&D and early-phase support—and only a minority performing commercial manufacturing—so, in general, CMOs’ involvement in earlier-phase aspects of product development and manufacturing is even larger than with commercial manufacturing. CMOs also play an important role in new bioprocessing technology development and adoption, with CMOs often the first (compared with developer companies) to implement new technologies. CMOs often have much more technical expertise than developer companies, with CMOs having worked on more products/projects and using a wider variety of technologies.
A decade or more ago, Big Pharma and other well-established developer companies outsourced as much work as possible to CMOs, often without critical analysis. Most biopharmaceutical companies traditionally turned to outsourcing to control costs and/or manage their internal staff and resources. Biopharma companies are now increasingly taking a more strategic view of outsourcing and seeking to outsource as much as possible. Most companies periodically re-evaluate their core competencies and rationally decide how they will manage their R&D, manufacturing, and related outsourcing. As a result, almost every area of R&D and manufacturing is considered a candidate for outsourcing (1).
The number of products in development continues to grow, with this carrying over to CMO outsourcing. FDA approved approximately 25 new biopharmaceuticals in 2018 (1), and the number of annual approvals is expected to increase in coming years, as new classes of products receive approvals, particularly biosimilars and cellular and gene therapies. In the next five years, the number of approved biosimilars will exceed the number of approved mainstream products.
The evolving mix of biopharmaceuticals in the development pipeline is also expected to increase outsourcing to CMOs, because CMOs often have more capabilities and expertise in new areas of bioprocessing than developer companies. Product types, classes, and the underlying molecular structures of products in R&D continue to diversify. Rather than just familiar-type recombinant proteins and monoclonal antibodies, CMOs are often the pioneers in terms of manufacturing novel products, including antibodies with novel core structures/backbones, antibody-drug conjugates (ADCs), cellular therapies, gene therapies, RNAi, pegylated proteins, and other novel types of products. Also, lesser innovative classes of products are often outsourced; CMOs report a 15% increase in business in recent years from biosimilars projects.
Successful CMOs continually expand capacity and staff/expertise. The industry is starting to see a major trend for CMOs adding 1000–2000-L single-use bioreactor process lines for commercial manufacturing as products currently in development manufactured with single-use systems advance to approvals. In the past year, BioPlan has identified approximately 180,000 L of single-use systems with capacities greater than 1000 L added as CMO expansions or new facilities (2). As CMOs develop this ‘entry-level’ commercial scale single-use capacity, the number and percentage of marketed products commercially manufactured by CMOs will further increase, at the expense of stainless steel-based bioprocessing.
Survey data and trends
Developers generally outsource a higher percentage of projects/products involving mammalian vs. microbial expression systems. The historical picture of respondents to the annual BioPlan survey reporting that they do not outsource bioproduction is shown in Figure 1.
In 2018, 30% of survey respondents reported no mammalian outsourcing, meaning that 70% outsourced at least some of their mammalian projects/products; 43% reported no (57% reported some) outsourcing of microbial work. The percent not outsourcing of any mammalian or microbial work has generally decreased (i.e., percent reporting some outsourcing has increased) since 2006. Comparable small portions, approximately 15%, report outsourcing the majority of their mammalian and microbial work. Growth and trends in outsourcing of microbial work remain omewhat unclear, with the largest CMO market, the United States, relatively lacking in microbial CMOs and GMP capacity greater than 100–200 L; Europe is the clear leader in microbial CMOs and GMP capacity.
When developer respondents to the 2018 survey were asked about expectations for outsourcing any work (any expression system) in five years, 72.3% projected at least some mammalian and 58.3% said the expected to outsource at least some microbial work. More than 61% of respondents are currently outsourcing at least some API manufacturing. But this percentage was lower than for many tasks outsourced to contract research organizations, including 77.8% outsourcing some analytical testing/bioassays, and 72.6% outsourcing at least some toxicology testing. More than one-quarter of the respondents (27.7%) cited expectations/plans to outsource more biopharmaceutical API manufacturing in the next two years, increasing from 12.4% in 2010.
The US continues to be the destination for the largest portion of outsourcing to foreign CMOs, with 30.1% of respondents citing US facilities as likely being considered for CMO work within five years. Figure 2 shows the top 10 countries, other than their own, respondents expected to be a destination for outsourcing of their international expansions in the next five years. Among US respondents, China was the top destination, cited by more than 50%.
Despite these industry expectations of more outsourcing to China, CMOs are not fully permitted in China; just a few select companies currently participate in government-run CMO pilot programs (3). Once China turns on its domestic bioprocessing industry, China may become a major off-shoring destination, even if these CMOs are hired to only manufacture products for China’s massive domestic market. BioPlan expects Chinese CMOs to capture business, potentially doing this at the expense of Indian CMOs. India appears to be focusing on serving its own and international markets for lesser-regulated biogenerics, while nearly 85% of the Chinese biopharmaceutical industry targets GMP manufacture for their own domestic and Western markets (3).
1. E.S. Langer, et al., Report and Survey of Biopharmaceutical Manufacturing Capacity and Production, 15th Edition. BioPlan Associates: Rockville, MD, April 2018.
2. BioPlan Associates, Top1000Bio.com, www.top1000bio.com.
3. V.Q. Xia, et al., Advances in Biopharmaceutical Technology in China, BioPlan Associates, November 2018, www.bioplanassociates.com/china