Quantitative Analysis of Global Biopharmaceutical Manufacturing
Demand-Supply Balance of Manufacturing Capacities Critical to Growth of Biopharmaceuticals
01-Dec-2004
Global manufacturing of biopharmaceuticals has increased
significantly over the last decade due to a number of reasons. Biopharmaceuticals offer
several advantages such as highly effective and potent action, fewer side effects and the
potential to actually cure diseases rather than merely treat the symptoms. These advantages,
combined with the increasing number of new diseases that can be treated with biopharmaceuticals,
are driving enhanced production of these drugs worldwide.
"The biopharmaceuticals industry is a rapidly growing sector within the pharmaceuticals
industry with immense opportunities and implications for healthcare," remarks Industry
Analyst Dr. Raju Adhikari from Frost & Sullivan. "The success
achieved by companies with a few revolutionary new drugs has brought this industry into
the limelight in recent years."
However, the demand and supply equation for manufacturing capacities has recently become
a cause for much speculation. The capacity gap - the difference between the demand and
supply of manufacturing capacities - represents a fundamental challenge to the industry.
Deficit of capacity is expected to significantly impede industry progression.
Quantifying and understanding this capacity gap is essential for biopharmaceuticals developers.
Developers also need to examine and evaluate their own financial positions. This will enable
them to decide whether to outsource the manufacturing to contract manufacturing organisations
(CMOs) - chiefly on long-term basis - or invest in setting up manufacturing plants.
Frost & Sullivan's research reveals that companies preferring to outsource to CMOs include
small drug discovery companies and large integrated biotech companies that require additional
manufacturing capacity.
Entering into long-term manufacturing contracts with CMOs is particularly advantageous
for small drug discovery companies. By handing over the responsibility and complexity of
daily production to CMOs, these companies are able to minimise their risk considerably.
The global manufacturing capacity of biopharmaceuticals was around 2.27 million litres
in 2004. This includes the capacity held by both captive use and contract manufacturers.
It is expected to increase to 3.69 million litres in 2011 at a compound annual growth rate
(CAGR) of 7.2 per cent.
"The largest capacity increase is likely to be in 2005 when over 600,000 litres of capacity
is expected to be added," notes Mr. Adhikari. "Thereafter, Frost & Sullivan estimates that
the addition of new capacity will be slower with single digit growth levels of three to
five per cent."
Manufacturing capacity supply is expected to be greater than the worldwide demand throughout
2005-2011. Currently, global demand stands at 1.37 million litres and is likely to increase
to 3.13 million litres in 2011. The industry therefore suffers from overcapacity with present
utilisation estimated at around 60 per cent. This is expected to increase to 70 per cent
by the end of 2006 and 80 per cent in 2008, after which demand is likely to continue rising
due to certain key drug approvals.
Apart from the demand-supply balance, resource and product portfolio management is also
proving to be a major concern. With the drug pipeline drying up in the pharmaceuticals
industry, the impact is being felt in biopharmaceuticals as well.
Additionally, the absence of internationally accredited intellectually property laws or
patent models affects companies by preventing any significant innovation and confining
application to certain countries only.
"Companies will have to collaborate with academics to clarify the patents required for
a particular licence as well as keep a close track of developments in the areas where they
have filed for patents," says Dr. Adhikari. "Only then will they be able to realise the
full potential of this industry."
Again, the high cost of biopharmaceuticals and the low reimbursement levels from insurance
companies present a major challenge. Companies need to explore various strategies to counter
this challenge such as developing technologies that bring down the cost of drugs as well
as manufacturing pharmaceuticals with substantial market size.
Simultaneously, raising public and clinician awareness of the cost benefits of biopharmaceuticals
and collaborating with other insurance companies and government agencies to introduce reimbursement for biopharmaceuticals can help resolve this challenge to some extent.
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