Outsourcing of Biomanufacturing in 2016

Outsourcing budgets have rebounded in recent years, swinging from contractions to expansion after the 2008 recession. The budget growth of recent years appears to be slowing, though, according to BioPlan Associates’ 13th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production(1). Even so, the breadth of outsourcing activity continues to increase, as a greater proportion of companies undertake outsourcing across a range of activities.

Budgets still growing, but more slowly
Results from BioPlan’s annual report indicate that outsourcing budgets continue to grow, but at a slower pace than observed in the past couple of years. Indeed, only slightly more than one-third (35.7%) of respondents this year report an increase in funding for outsourced biopharmaceutical manufacturing, which is the smallest proportion of all the areas examined. For example, about 7 in 10 respondents are hiking budgets for new capital equipment this year, and close to two-thirds expect to increase their funding for new technologies to improve efficiencies for both upstream and downstream production (see Figure 1).
 

On average, it is estimated that outsourcing budgets will rise by 2.3% this year, with the next-smallest increases seen for new facility construction (3.6%) and operations for current products (3.7%). Moreover, the 2.3% planned increase for 2016 is a step back from the 3.8-3.9% range in 2014 and 2015.

The trend is a little different, however, when factoring R&D into the equation. Indeed, this year, a majority (56.5%) of respondents intend to increase spending on outsourcing of R&D or manufacturing in the next 12 months, up from 52.6% in 2015. More than one-quarter expect to increase their budgets by more than 10%, with the overall estimated increase in spending on outsourced R&D being somewhere around 14%, which would represent a step up from not only last year, but the prior couple of years, also. This suggests that budgets for outsourced R&D are growing more quickly than for outsourced biomanufacturing.

Where will the budgets be allocated?
Growing budgets spread across several activities within bioprocessing. This year, data indicate that the activities being outsourced to at least some extent by the largest proportion of respondents include:

• Analytical testing, bioassays (89.7%)

• Toxicity testing (76.3%)

• Fill/finish operations (74.2%)

• Validation services (70.1%).

In each case, save for validation services, the percentage of companies engaged in outsourcing of these activities grew from 2015.

The greatest increases this year appear to be for host-cell protein analysis testing (55.7% outsourcing to some extent, up from 42.1% last year); upstream process development (45.4%, up from 38.9%); and cell-line stability testing (62.9%, up from 55.8%).

However, breadth of outsourcing does not necessarily equate to depth. In other words, while many companies may be outsourcing these activities, they may be only doing so to small degrees. To determine just how much activities are indeed being outsourced, respondents were asked to estimate the extent to which they were engaged in outsourcing them, and the results were averaged out to reach an estimate.

Fill-finish operations are the most heavily outsourced, with an estimated average of 35.6% (up from 34.5% in 2015) of these operations being outsourced. Fill-finish is the only area in which at least one-third of all activities are performed by contract manufacturers, indicating that while more companies are engaging in outsourcing, few are doing so heavily.

Beyond fill-finish, other activities that are relatively heavily outsourced include analytical testing of other bioassays, toxicity testing, and plant maintenance services. Compared to last year, however, the greatest change in outsourcing depth are seen in:

• GMP training (13.2% of this activity overall being outsourced up from 8.3% last year)

• Regulatory services (10.5% share of activities, up from 6.7%)

• Cell line stability testing (18.1%, up from 13.4%)

• Upstream production operations (10%, up from 7.5%).

Interestingly, the increase in the depth of outsourcing of GMP training and regulatory services is not the result of more companies outsourcing these activities. Instead, the proportion of companies outsourcing them has remained relatively flat, with just a 3.9% relative increase for GMP training and no increase for regulatory services. This suggests that those companies that outsourced these activities last year were satisfied with their results and are doubling down this year.

Looking ahead, the industry can expect more outsourcing of analytical testing of bioassays, fill/finish operations, and API biologics manufacturing, per industry respondents, at least 20% of whom expect to outsource these activities at significantly higher levels in the next 24 months.

Offshoring projections remain flat at best
One of the key outsourcing trends in recent years has been the globalization of the outsourcing market, as biomanufacturing clusters increasingly emerge around the world. Indeed, approximately 40% of global biopharmaceutical manufacturing capacity exists outside of the traditional hubs of North America and Europe, with China and India alone accounting for almost one-sixth of global capacity (2).

However, many of these developing markets and hubs lack regulatory approval for CGMP manufacture in developed countries. Perhaps as a result, we have yet to see an uptick in future off-shoring projections, as evidenced by this year’s study results.

Survey respondents were asked to estimate the percentage of operations currently done at their facility that would be outsourced internationally in five years to India, China, or another lower-cost country. This year, the industry expects to off shore:

• An average of 10.2% of clinical trials/operations within the next five years, a figure up slightly from five-year projections made from 2013-2015 (ranging from 9.3%-10.1%)

• An average of 9.4% of biomanufacturing operations, down from 10.3% last year and 11.3% the year prior

• Just 3.9% of process development for biomanufacturing, outside of the 4.4-8.8% range observed in the previous five years.

It’s perhaps not too surprising to see only a small percentage of process development marked for future off-shoring, if only as these tend to be high-value activities, and that outsourcing them to lower-cost countries may bring up quality concerns or managerial problems. By comparison, clinical trials activities, where in-country trials may be mandatory and where there is a long track record for international contract research organization activities, fewer concerns are expected. It’s also worth remembering that only 7.6% of upstream process development activities are currently outsourced anywhere (not just offshoring), and an even smaller percentage (6.2%) of downstream process development activities are currently outsourced.

Conclusion
The biopharmaceutical manufacturing community is continuing to increase its budgets on outsourced manufacturing, but those budget increases are slowing in favor of other areas such as new capital equipment and innovative technologies. At the same time, there continues to be double-digit growth in outsourcing of R&D and manufacturing, suggesting that outsourcing budgets are growing more quickly for R&D than for manufacturing.

Data do not show a huge drop off in off-shoring projections-and in fact there is a slight increase in potential off shoring of clinical trials and operations--but the trend for off shoring of biomanufacturing operations and process development is flat at best.

Nevertheless, there appears to be wider comfort with outsourcing of various activities, with a majority of those tracked this year being outsourced by a greater share of respondents than last year. Traditionally outsourced areas such as fill-finish operations and analytical testing of bioassays continue to be the most heavily outsourced, but there are indications that outsourcing of newer areas, such as regulatory-related activities, are on the rise.

Survey methodology
BioPlan Associates’ 2016 Thirteenth Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production yields a composite view and trend analysis from more than 200 responsible individuals at biopharmaceutical manufacturers and contract manufacturing organizations in 30 countries. The methodology also included more than 150 direct suppliers of materials, services, and equipment to this industry.

References
1. BioPlan Associates, 13th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production (Rockville, MD, April 2016).
2. Top 1000 Global Biopharmaceutical Facilities Index, BioPlan Associates, online database at www.top1000bio.com.

Article DetailsBioPharm International
Vol. 29, No. 5
Pages: 10–12

Citation
When referring to this article, please cite it as E. Langer, "Outsourcing of Biomanufacturing in 2016," BioPharm International 29 (5) 2016.