if you build it, will they come? the promise and perils of investing in biomanufacturing capacity...

If You Build It, Will They Come?The Promise and Perils of Investing in

Biomanufacturing Capacity

Thomas C. RansohoffBioProcess Technology Consultants, Inc.

2nd Annual Sanford C. Bernstein Biosimilars ConferenceNew York, NY

November 19, 2009

From Clone to Commercial®

Outline Biopharma Overview

• Molecules and Processes• Facilities

Worldwide Capacity Situation• Growth and Distribution• Utilization• Trends

Manufacturing Strategy – Make v Buy• Timeline and Cost for Construction• Make v Buy Decisions

Biopharmaceutical Manufacturing Overview


Definition of Biopharmaceuticals Biologic Products are products that are made by or

composed of viable organisms or biopolymer analogs• Recombinant Proteins• Monoclonal Antibodies• Natural Hormones and Enzymes • Synthetic Peptides and Oligonucleotides• Antibiotics, Plant & Animal Extracts, Allergens• Vaccines• Gene Therapy Products, Human & Xenogenic Cells &

Tissues• Blood & Blood Derivatives, including polyclonal

antibodies


Biopharmaceutical Blockbuster Products

There were 28 biopharmaceutical blockbuster products in 2008 [up from 27 in 2007]:* 10 manufactured in microbial fermentation processes [9]* 18 manufactured in mammalian cell culture processes [18]* 9 monoclonal antibodies/Fc fusion proteins [9]

Product Generic Company Indication(s)Yr First

Approved2008 Sales

($M)Enbrel etanercept Amgen/ Pfizer (Wyeth) Arthritis, Rheumatoid 1998 6,191

Remicade infliximabJ&J (Centocor Ortho Biotech)

/Schering-PloughArthritis, Rheumatoid/Crohn's Disease/Ulcerative Colitis

1998 5,866

Rituxan rituximab Roche (Genentech) Lymphoma, Non-Hodgkin's/Arthritis, Rheumatoid 1997 5,487Avastin bevacizumab Roche (Genentech) Cancer, Colon/Rectal/Lung, Non-Small Cell 2004 4,824Herceptin trastuzumab Roche (Genentech) Cancer, Breast 1998 4,717Humira adalimumab Abbott Arthritis, Rheumatoid/Crohn's Disease/Psoriasis 2002 4,500Lantus insulin glargine Sanofi-Aventis Diabetes 2000 3,605Neulasta pegfilgrastim Amgen Neutropenia, Chemotherapy Induced 2002 3,300Aranesp darbepoetin alfa Amgen Anemia, Renal Failure/Chemotherapy Induced 2001 3,137Novolog insulin aspart Novo Nordisk Diabetes 1999 2,644Procrit epoetin alfa J&J (Centocor Ortho Biotech) Anemia, Renal failure induced 1989 2,460Epogen epoetin alfa Amgen Anemia, Renal failure induced 1989 2,456Novo Human Insulin Products insulin, human Novo Nordisk Diabetes 1982 2,329Avonex interferon beta-1a Biogen Idec Multiple sclerosis 1996 2,203Lucentis ranibizumab Roche (Genentech) /Novartis Macular Degeneration 2006 1,775Pegasys peginterferon alfa-2a Roche Hepatitis B/C 2002 1,737Humalog insulin lispro Lilly Diabetes 1996 1,736Betaseron interferon beta-1b Bayer HealthCare Pharmaceuticals Multiple sclerosis 1993 1,683NeoRecormon* epoetin beta Roche (Chugai Pharmaceuticals) Anemia, Renal Failure/Chemotherapy Induced 1997 1,644Erbitux cetuximab Lilly (ImClone)/BMS/Merck Cancer, Head/Neck/Colorectal 2004 1,580Advate Factor VIII Baxter Hemophilia A (Bleeding Episodes) 2003 1,500Rebif interferon beta-1a Merck Serono Multiple sclerosis 1998 1,330

Neupogen filgrastim AmgenNeutropenia, Chemotherapy Induced/Leukemia, Acute Myelogenous

1991 1,300

NovoSeven/NovoSevenRT Factor VIIa Novo Nordisk Hemophilia A (Bleeding Episodes) 1996 1,260

Kogenate FS/Helixate FS Factor VIII Bayer HealthCare Pharmaceuticals Hemophilia A (FVIII Deficiency) 1993 1,248Cerezyme imiglucerase Genzyme Gaucher Disease, Type 1 1994 1,239Synagis palivizumab AstraZeneca (MedImmune) Respiratory Syncytial Virus infection, prevention 1998 1,230Humulin insulin, human Lilly Diabetes 1982 1,063


Biopharmaceutical Industry Growth

BPTC database covers 126 commercially marketed biopharmaceuticals as of 2009

Biopharmaceutical Commerical Product Sales Growth

-

5

10

15

20

25

30

35

40

2002 2003 2004 2005 2006 2007 2008

An

nu

al S

ales

($B

)

Mammalian Recombinant Products109 Kg required for 2008

Mammalian MAb Products6,918 Kg required for 2008

Microbial Recombinant Products12,975 Kg required for 2008

Microbial MAb Products4 Kg required for 2008


General Scheme for Biopharmaceutical Bulk Drug Substance Processes

Intracellular(microbial fermentation)

Bulk Formulation

PurificationPurification

Isolation/Recovery

Isolation/Recovery

Cell Disruption/Refold

Cell Harvesting Cell Removal

Bioreactor Conversion

Bulk Formulation

Working Cell BankExtracellular(microbial fermentation and mammalian cell culture)

“Downstream” Process

“Upstream” Process


20,000 L Fermentation Suite

Source: Lonza Presentation, “US Operations Overview”


Purification – Large-Scale Chromatography

Source: Lonza Presentation, “US Operations Overview”


Phase I(12 months)

Phase II(24 months)

Phase III(24 months)

Filing & Review (18 months)

• Dose Finding • First Efficacy

• Safety

• Pivotal Trials

Lead-Time for Building a Commercial PlantLead-Time for Building a Commercial Plant(~4 years)(~4 years)

Design(12 months)

Construction(24 months)

Validation(12 months)

Clinical Development Timeline(6-7 years)

ProductLaunch

Plant investment decisions must be made long before product approval

Timing of Plant Construction

Source: P. Seymour, IBC Bench to Clinic 2002


Mammalian Cell Culture Facility Costs

Capital Cost per Liter vs. Plant Capacity

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

2.50 3.00 3.50 4.00 4.50 5.00

Log Plant capacity (L)

Co

st

pe

r L

(0

00

)

Industry-Wide Capacity Analysis


BPTC Approach to Biopharmaceutical Capacity and Pipeline Analysis

Bottom-up methodology• Plant-by-plant estimation of capacity “supply”• Product-by-product and dose-driven estimation of “demand”

Market segmentation• Focus on recombinant protein and monoclonal antibody products manufactured

using Microbial fermentation Mammalian cell culture

• Commercially marketed products and product candidates in clinical development

Probability weighting factors• Accounting for multiple products targeting same indication• Assumptions for probability of success and time to market

Apply sensitivity analyses (i.e., Monte-Carlo) to quantify probability of predicted outcomes


The State of Mammalian Cell Culture CapacitySufficient capacity worldwide to meet

current annual production needsAdequate capacity forecast through

2013• Increases in product titers and

Operational Excellence initiatives improve productivity of existing capacity

Probability of sufficient capacity through next decade is very high

• Relatively few new “volume-drivers” forecasted to be approved

• Growth of the existing commercial products slowing

BioProcess Technology Consultants report,December 2008


Existing and Forecast Cell Culture Capacity

Includes equivalent fed-batch capacity for companies using perfusion technology (1 L perfusion ≈ 5 L fed-batch)

Product companies control ~80% of installed capacity

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2006 2007 2008 2009 2010 2011 2012 2013 2014

Year

Est

. In

stal

led

Rea

cto

r V

olu

me

(KL

) Product Co.

CMO


0%

5%

10%

15%

20%

25%

A B C D E F G H I J K L M

Per

cen

t o

f T

ota

l C

apac

ity

2009 2014

Current and Projected Distribution of CapacityTop 10 companies control 80% of total worldwide capacity in 2009 decreasing slightly to 79% in 2014

• By 2014, Merck KgA & AstraZeneca/MedImmune (2014 included in “All Others”) replaced by Celltrion & BMS/Medarex (2009 capacity included in “all others”) in Top 10

A. Roche/Genentech B. Pfizer/Wyeth C. Amgen D. LonzaE. Novartis/Sandoz F. Boehringer Ingelheim G. Lilly/ImClone H. Biogen Idec I. Merck KgA J. AstraZeneca/MedImmuneK. Celltrion L. Bristol-Myers Squibb/Medarex M. All Others


Distribution of Capacity Worldwide

Capacity expected to increase from ~2.5 Million L in2008 to ~4 Million L in 2013

In 2008, ~52% total installed capacity utilized; growing to ~73% by 2013

Figures include• 96 Companies• 21 Countries

NOTE: Analysis does not include perfusion capacity.

Source: E. Reynolds, IBC BPI 2008


Manufacturing Capacity Demand – Existing Mammalian Commercial Products

Mammalian cell culture demand:• Monoclonal antibodies/Fc fusion proteins dominate mammalian cell culture demand for bulk product

on a kg/yr basis• Growth of existing commercial products remains a driver for capacity demand growth

1,225 1,191

1,044 1,032

916

412

1,207

-

200

400

600

800

1,000

1,200

1,400

Rituxan Remicade Enbrel Avastin Herceptin Erbitux All OtherProducts (60)

Bu

lk R

equ

irem

ents

200

8 (K

g)


Pipeline Weighted Towards MAb ProductsMonoclonal antibodies represent the fastest growing segment of the pharmaceutical industry 85 – 90% of the mammalian cell culture product pipeline Approximately 65% of all biopharmaceutical products in

development are produced in mammalian cell culture

0

20

40

60

80

100

120

140

Market BLA/NDA Phase 3 Phase 2 Phase 1**

No

. o

f P

rod

uct

s

Mammalian

Microbial

Other (Plant, Insect, etc.)

0%

20%

40%

60%

80%

100%

Market BLA/NDA Phase 3 Phase 2 Phase 1**

Per

cen

t M

Ab

-Bas

ed

Mammalian

Microbial


Do We Need 10 Ton Capacity? Demand for all existing commercial products will approximately

double from the current 5.8 metric tons to approximately 11.8 metric tons by 2013• Current annual product requirements for each of the top five

monoclonal antibody products is 800 – 1,200 Kg each At 5 g/L titer a single large “six pack” facility can make 10 tons of

monoclonal antibody (Kelley, 2009) Demand for products currently in development will increase the

future demand for cell culture manufacturing capacity The anticipated demand for virtually all products currently in

development is expected to be less than 5 metric tons per year

Kelley B, “Industrialization of MAb Production Technologies,” MAbs 1:5, Sep/Oct 2009


Trends That Will Impact Future Capacity Utilization Fewer “blockbuster” drugs with greater focus on smaller markets

and niche products• Less difference in scale between pilot and commercial

facilities• Use of multipurpose plants; potential for continuous

production Mergers and acquisitions, resulting in:

• “Volume driver” product candidates moving to product companies with significant capacity -> free up CMO capacity

• Redundant facilities in larger organizations (the rich get richer)


Trends That Will Impact Future Capacity Utilization Product company strategic initiatives to offer existing captive

capacity on the CMO market Continued improvement in throughput and utilization of existing

facilities, driven by:• Continuing increases in process yields• “Continuous improvement” initiatives, enabled by QbD and

other regulatory trends Increased availability and use of disposable/single-use

technologies


Driving Forces for Single-Use Technologies

Improved return on capital

• Reduced and deferred capital investment

• Increased speed of deployment

Process control and portability

Process and product flexibility

Improved ability to manage and implement change


The Biopharmaceutical Facility of the Future Facility design will incorporate high titer (>10 g/L) processes Facilities of the future will require greater DSP space and

capabilities to better handle the high titer bioreactor output• Ratio of bioreactor space to DSP space will decrease

Use of disposable technologies can reduce capital investment by over 50% and operating costs of manufacturing facilities (Roebers, 2009)

Smaller bioreactors will produce similar quantities to today’s larger bioreactors

Smaller facility requirements may enable smaller companies to construct and manage their own facilities more cost effectively

Roebers J, “Future trends in biopharmaceutical operations and facilities,” presented at BPI 2009, Raleigh NC


The Biopharmaceutical Facility of the Future Plant has 6 x 2,000 L bioreactors (possibly single use bioreactors) 12 day fed-batch CHO culture for MAb Production

• 2,000 L volume, 10 g/L = 20 Kg MAb in harvest

• 80% purification yield = 16 Kg per batch Harvest every 4 days

• 85 harvests/year (340 days) = 1,360 Kg/year Capital investment < $100M Overall COGS < $70 per gram


Cost-Capacity Chart: Selected Biologics

1

10

100

1000

10000

100000

1000000

10000000

100000000

0.1 1 10 100 1000 10000 1E+05 1E+06

Volume Requirements (kg/yr)

Pri

ce

($

/g)

Human serum albuminIVIGInsulinEnbrelRemicadeRituxanAvastinErbituxHumiraXolairrFactor VIIIsESAsInnovator hGHsGeneric hGHsAlpha InterferonPEG-IFN-AlphaFSHFit Data

Log-log linear relationship between 2007 price and volume requirements

r2=0.96

Manufacturing Strategy:Make v. Buy Decisions


Managing Risk

“The essence of risk management lies in maximizing the areas where we have some control over the outcome while minimizing the areas where we have absolutely no control over the outcome…”

- Bernstein, PL, Against the Gods: The Remarkable Story of Risk, 1998Risk management tactics

Estimate the range of probable outcomes; not just the “base” case Develop an organization that can manage change Utilize options (back-up strategies) Understand the cost of being wrong Evaluate parallel paths


Developing a Manufacturing Strategy

“We will not get this perfectly right”- Art Levinson, Genentech, SF Chronicle 12/21/03

Inadequate Capacity Cost of Lost Sales

• Estimated loss of operating profit (50% shortage): >>$10 M/mon

• Does not include other costs (reputation, competition, etc.)

Excess Capacity Carrying Cost of Facility and

Organization:• Estimated carrying cost of a

facility operating at 50% capacity: <<$10 M/mon

What’s the cost of being wrong?

Estimating the range of probable outcomes is important

See also: Mallik, A. et al, The McKinsey Quarterly, 2002 Special Edition: Risk & Resilience


RIS

K

Product Launch

Development Uncertainty

MarketUncertainty

Maturity

Manufacturing costsset at decision point

Make

Make or Buy

Product Life Cycle

Make vs. Buy Decision (Risk minimization)Primary Driver:

Maximizing Control

“Make” strategy during highest risk period to maximize control of supply

“Buy” strategy may make sense once product lifecycle stabilizes, risk decreases, and control less important

Example: Genentech outsourced Rituxan to prepare for Avastin approval• Easier to transfer mature process• Minimize impact of “know-how leaks”• Retain control of less mature processes


Product Launch

Development Uncertainty

MarketUncertainty

Maturity

Manufacturing costsset at decision point

Buy

Buy or Make

Product Life Cycle

Primary Driver:Conserving Capital

“Buy” strategy during highest risk period to conserve capital

“Make” strategy may be attractive once product lifecycle stabilizes, capital becomes more available, and risk reduced

RIS

K

Example: Imclone outsourced through clinical supply and launch then switched to in-house production

• Outsourcing minimizes capatial expense during risky development phase• Following successful product launch capital is more available to build its own

facility and reduce operating costs

Make vs. Buy Decision (Capital conservation)


An Emerging Alternative: Acquiring Existing Capacity As the biopharmaceutical industry matures, older

manufacturing facilities may become available for acquisition.• Advantages: rapid and reduced capital access to needed capacity• Disadvantages: need for renovation likely; facility not optimized for

requirement; often available in most expensive locations Examples:

• Genentech acquisition of NIMO from Biogen Idec• Alexion acquisition of Dow facility in Rhode Island• Centocor acquires plant from Wyeth

Plant history: Invitron Centocor Chiron Wyeth Centocor• Lonza acquires Porrino plant from Genentech

Plant history: Glaxo Wellcome Genentech Lonza• Merck acquires Insmed facility in Boulder Colorado

Plant history: Somatogen Baxter Insmed Merck


Conclusions Capacity likely to be available industry-wide, but:

• Closely held• Geographical distribution shifting

Product and process innovations resulting in higher yields per batch and lower demand for bioreactor capacity implies:• Investments in manufacturing facilities will continue to slow• Disposable/single-use technologies possible for some commercial supply

Significant price reductions possible with biosimilar products Make v buy decisions becoming more complex

• Acquisition is increasingly an option for capacity• Regulatory, market and technical uncertainties -> poor ability to forecast

biopharma capacity requirements accurately • Risk assessment is critical


Thank you!

BioProcess Technology Consultants, Inc.

289 Great Road, Suite 303

Acton, MA 01720

978.266.9154 (phone)

978.266.9152 (fax)

[email protected]

www.bioprocessconsultants.com

if you build it, will they come? the promise and perils of investing in biomanufacturing capacity...

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