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.

1. Global Biopharmaceutical Contract Manufacturing
Market – Qualitative and Quantitative Analysis
Aiswariya Chidambaram
Senior Research Analyst - Life Sciences
24-10-2013

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
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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.
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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. 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.
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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.
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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. 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. 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. 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. 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. 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
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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
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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.
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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.
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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.
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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. 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.
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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”.
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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. 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. Related Market Research Reports

Global Pharmaceutical Contract Manufacturing Market

Global Next Generation Biosimilars Market

Global Contract Research Outsourcing Market
22

23. Questions

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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
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Chennai 600 006
www.frost.com
Tel: +91 (0) 44 61606666 (Extn: 4097)
Fax: +91 (0) 44 4230 0369
Email: AiswariyaC@frost.com
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