By Bernard Tulsi
The big picture woes of the biotech and pharmaceutical sectors are legion: real and perceived perils lurking within the new administration’s ever-shifting healthcare overhaul plans, acute fiscal pain from an ailing global economy, and constricting financial lifelines — as venture capitalists turn their attention elsewhere while investment bankers and investors, in general, nurse a severe bite from the caution bug.
More troubles emerge when the micro-picture is reviewed — traditional drug developers’ ultraexpensive, though not so fruitful, small-molecule pipelines are turning out new products at a tortoise-like pace; patent expirations, especially on mega-selling drugs, seem ubiquitous; and lack of efficacy and safety issues seem perennial.
Product approvals in the biotech segment slowed in the last six to eight years, as well. In 2009, however, the pipeline seems to be filling up again, which is seen as a hopeful sign by BioPlan Associates, a leading biotech trend research firm, which conducts an extensive annual survey with more than 400 industry participants.
Meanwhile, a Pharmaceutical Research and Manufacturers of America (PhRMA) Report, Medicines in Development—Biotechnology, in 2006 identified 418 biotechnology-derived drugs and vaccines in development. As has generally been the case, monoclonal antibodies (mAbs) represented the largest class of agents being developed, and still does (PhRMA estimates that more than 190 mAbs are currently in development), followed by vaccines, gene therapy agents, recombinant hormones, and proteins.
Despite its characteristic gyrations, the biotech segment grows noticeably faster than the overall pharmaceutical sector. The United Kingdom-based research firm, LeadDiscovery, estimated the global biotech market to be worth more than $75 billion in 2007. This is a reflection of robust growth — in 2005, aggregated worldwide revenues in the biotech sector were projected at $45 billion, which was then about 10% of all drug sales globally.
Still, process and capacity challenges linger on. Biotech’s brightest spot — biomanufacturing — has been embattled by technical and fluctuating capacity challenges over the years. But the implementation of multiproduct facilities and modular and single-use (disposable) systems have helped address those challenges. Recent reports suggest that the addition of more smart technological and process initiatives — using smaller bioreactors and plants, higher capacity resins and modified purification systems while eschewing expensive hardware such as storage tanks — may deliver even greater dividends.
The Challenge Of Production Capacity
Regarding capacity utilization, the BioPlan survey found some degree of stability during the past four to five years. This represents a dramatic shift from the mammalian cell capacity shortage around 2003, and demand seems to have settled down at a utilization level of about 64% of overall capacity now.
Production capacity has always been central to the economic challenges in biomanufacturing, according to Dr. Gary Pisano, a professor of business administration at Harvard Business School and author of Science Business (Harvard Business School Press, 2006), an examination of the structure and evolution of the biotech industry and the economic challenges confronting it. “Excess and under capacity occur in cycles, and capacity management has been really tricky in the biotech industry over time,” says Pisano, whose research and consulting activities have focused on the organization and management of process and product development.
He recalls that in the early days, “Biotech production with mammalian cells was more art than science. This was not seen as mainstream activity, as many companies were not interested in the process — though some big companies were quite involved with process development — as this was perceived only as a secondary area. The main focus was to discover the product, but both process and product development seem to have hit their strides during the last 10 years or so.”
Early in the development of the sector, there were numerous technical challenges, according to Pisano. “These included how to coax cells to produce the required proteins and how to increase yields — some of these challenges still persist today.” These challenges were further complicated by such questions as how to measure the activity of biotech products and defining what constituted product efficacy, according to Bruce Kaylos, who is currently program manager for the Biotech Manufacturing Forum, a subset of the North Carolina BIO. Kaylos has nearly 36 years of high-level involvement in the manufacture of biologics and biotech products ranging from blood plasma, blood derivatives, recombinant biotechnology products, and vaccines with Wyeth Pharmaceuticals. “Those are difficult challenges when dealing with new biological products, which are known to have a cascade of effects within the body. New technologies are helping to address these questions and are making it possible to know more about products on a day-to-day basis. These technologies are also providing answers on what might influence product yields and helping to determine critical and noncritical process steps using risk-based analysis and parameter [pH, temperature] comparisons,” says Kaylos.
The Push To Optimize Production
Acknowledging the substantial strides that have been made already and noting that the forthcoming ones will be no less dramatic, Pisano recalls that the first generation mammalian cell processes have been “right on the frontier.” “Early on it was a pure technology consideration,” he explains. “After that, it became more optimized, and as experience was gained with the basic technology, the industry started to tackle issues such as improving yields, industrializing its processes, and making them repetitive while increasing the yields of existing processors [rather than building additional plant capacity].”
Today, these are key issues in this industry. Companies want greater performance from their expression systems, according to BioPlan’s findings. Workhorses such as E. coli, Chinese hamster ovary (CHO), and yeast have performed admirably over the years, but with the strong push to optimize production, many biomanufacturers seem open to paying royalties for improved yields. More than half of the survey participants reported considering alternative expression systems in early R&D, and surprisingly more than 40% considered alternatives for their process development stages.
Greater use of disposables has been reported, with increasing employment of single-use bags, bioreactors, sampling systems, and mixing units, among others, set to become the norm, as manufacturers strive to increase the flexibility and efficiency of their operations. CMOs have been gravitating to single-use systems for some time now because of the necessity to cope with rapid production turnover. BioPlan reports that the uptake of disposable systems by CMOs is starting to show signs of peaking. In general, the main drivers behind single-use systems have been linked to their ability to reduce capital expenditures and overall operating costs, especially the high costs associated with cleaning.
Downstream purification persists as a highly important area. BioPlan reports that a bit over half of all the participants consider this a serious bottleneck in production capacity, while a little less than 60% are contemplating alternative purification systems.
With increasing maturity, manufacturing organizations can perform more functions better now, according to Pisano. “In the early days, companies had to scale up to almost full commercial levels to figure out if they had a viable process. Companies are much better now at gauging the scalability of processes run at pilot scale or even on a laboratory bench scale. They are much better at managing standardized cell lines, the characteristics of which they understand very well. In general, some of the crucial challenges have been taken out,” he says.
Nevertheless, there are still persistent challenges to biopharmaceutical companies’ in-house manufacturing as well as to CMOs. In addition to the balancing act around capacity questions, they have to constantly wrestle to balance production capacity with product demand and staffing, which is usually complicated, time-consuming, and costly.
A Difficult Space To Enter
Turning to the question of how the biomanufacturing space is organized and managed today, Pisano notes that a number of companies have their own processing facilities. Notable among these vertical integrators are the large biotechs such as Biogen Idec., Genentech, Genzyme, and some of the larger pharmaceutical companies such as Eli Lilly and Wyeth. “But there is also a third-party market made up of large players such as Boehringer-Ingelheim, DSM, and Lonza that offer services [all of these provide contract manufacturing of mAbs, one of the largest classes in the biotech field],” says Pisano.
There are formidable barriers to entry that hamstring small companies seeking to enter the bioprocessing field and build manufacturing capacity. “It is expensive and has overwhelming management challenges, but even more daunting is the range and depth of expertise needed,” Pisano says. “There is now about 20 to 30 years of experience on how to do this, but that is contained within individual companies and is not widely diffused. It is hard for new players not only to build facilities but also to understand the intricacies involved.” In general, newer players typically seek contractors or companies with in-house manufacturing who contract out some of their excess capacity, all of whom already have the relevant expertise.
Biosimiliars, Emerging Markets = Opportunities
The BioPlan researchers hold the view that the shifting regulatory environment with respect to biosimilars will present additional opportunities. Follow-on biologics are being facilitated by advances in manufacturing technology, and the EU has already approved them, while they are under consideration in the U.S. Congress. Industry players seem open to biosimilars as well. Esther Alegria, VP of manufacturing and general manager for Biogen Idec’s RTP site, says, “We support the creation of a regulatory pathway for biosimilars in the United States. The specific approach taken will have a big impact on the industry’s ability to meet society’s unmet medical needs. The pathway should focus on three key elements: ensuring patient safety, expanding access to therapies, and promoting the continued innovation of the biotech industry. Our Research Triangle Park, NC facility manufactures a drug substance for Biogen Idec’s two marketed multiple sclerosis therapies — Avonex and Tysabri. The manufacturing process for these and any other biologics is markedly more complex than what it takes to manufacture traditional small-molecule drugs, and the pathway for biosimilars must account for that complexity and the reality that biosimilars will be just that — similar to, but not the same as, innovator products.”
Harvard Business School’s Pisano believes, “Generics are good. If they work well and are governed by the right regulatory framework, they can play an important role economically. They will help to create competition, which will create an incentive for continued innovation. They can help to reduce costs but they can also provide stimulus.”
Trend watchers in the field also see opportunities in emerging markets, which are likely to expand. BioPlan expects to see positive growth in China (for vaccines, especially), India, which has a growing biotech sector and a solid export orientation in the drug area, and to some extent in the Middle East.
To be sure, there are also reports of considerable interest in additional offshore production, according to BioPlan. Their findings suggest that the United States is the top outsourcing destination followed by Germany and then the UK — some Asian countries are also on this list, but they are not top of mind for executives contemplating outsourcing.
Sizing up the situation, Pisano says, “We should not allow the drought of new firms because of the current capital situation. It is true that we could end with too many companies, but I hope that the dearth in capital does not go too far and stifle innovation.
“I am concerned about the consolidation in the pharmaceutical industry and in the inability to create more lasting structural changes in that business. I don’t think that the big mergers and acquisitions do much good for anybody. I would like to see some of the smaller companies gain some traction and grow. In that, I see a major role for biotech companies in general and for biomanufacturing in particular.”