Outsourcing Insights: Why European CMOs Are Coming to America

The BIO annual meeting in early May had an upbeat tone. Investment capital is flowing into the industry at high levels, resulting in strong demand for contract development services. The funding stream is particularly strong in the US, and that is attracting more European contract manufacturers (CMOs) eager to improve business development here.

Jim Miller

In the biomanufacturing sector, Eden Biodesign (Liverpool, UK) and Angel Biotechnology (Cramlington, UK) reported they are looking to hire sales representatives in the US. Eden Biodesign has the contract to operate the UK National Biomanufacturing Center in Liverpool, which recently received its license from the UK government's Medicines and Healthcare products Regulatory Agency (MHRA) to begin manufacturing clinical trial materials.

Rentschler Biotechnologie (Laupheim, Germany) has appointed a new US representative, and in 2006, the company began a €50 million expansion of its biomanufacturing capabilities.

Eden, Angel, and Rentschler join other clinical-scale European biomanufacturers that have been generating business in the US for some time. Cobra Biomanufacturing (Keele, UK) has had sales representatives in the US for several years and obtains almost 80% of its business here. Netherlands-based Crucell N.V. has teamed up with DSM Biologics to offer manufacturing services using its propriety PER.C6 expression system. Among dose manufacturers, Haupt Pharma recently appointed a US-based sales representative, while NextPharma Technologies (Surrey, UK) has had a US sales representative for several years.

The desire to tap into the US market reflects the greater opportunities here: venture capital support for biophamaceutical and pharmaceutical start-ups is nearly three times greater in the US than in Europe, as is the number of stage development candidates. The depreciating US dollar means that using European CMOs is more expensive. However, the strong demand for development and clinical manufacturing services has pushed US biomanufacturer capacity close to its limits so companies have been forced to overlook those cost differences.

SAFC ACQUIRES MMB

Given the strong demand for clinical biomanufacturing services, it is surprising that there has not been more acquisition activity in the industry. Acquisitions are usually driven by strong business prospects and the need for additional capacity. However, most clinical biomanufacturers are small businesses with limited manufacturing capacities; their allure as acquisition targets is minimal. One large company that has been building industry presence with small acquisitions is Sigma-Aldrich (SIAL, St. Louis, MO). During BIO in May, SIAL announced that it had acquired Molecular Medicine BioServices, Inc. (MMB, Carlsbad, CA), a contract biomanufacturer that specializes in developing viral products and manufacturing viruses for vaccines and gene therapy.

Founded in 1997, MMB employs 60 people and has revenues of $12 million. It has two sites in the Carlsbad area, a 23,700-sq.-ft. laboratory and office facility, and a 21,400-sq.-ft. manufacturing facility. The company can manufacture clinical trial materials under GMP, using Wave bioreactors, cell factories, and other small-scale production technologies. It can also do small-scale vial fills.

MMB will operate as part of SIAL's SAFC Pharma business segment, which develops and manufactures small-molecule active pharmaceutical ingredients. SAFC Pharma is pursuing a strategy of offering niche services for the biologics industry, i.e., manufacturing and processing capabilities beyond the usual tank-based cell culture and microbial fermentation for monoclonal antibodies and recombinant proteins. In April, the company announced completion of two GMP-compliant facilities for purifying transgenically derived proteins.

SAFC Pharma's niche biologics strategy mirrors what it has done in the small molecule sector, where it has been successful at buying niche service providers to build up its capabilities.

LONZA CONSOLIDATING ACQUISITION

In a move impacting another biomanufacturing acquisition completed in 2007, Lonza (Basel, Switzerland) announced it will close its Baltimore, MD, development and manufacturing facility as part of a plan to consolidate its US microbial fermentation operations in Hopkinton, MA. Lonza acquired the Hopkinton and Baltimore facilities earlier this year when it acquired the biologics-based businesses of Cambrex, Inc. (East Rutherford, NJ). Lonza officials said the move will be completed in early 2008, and that much of the equipment from Baltimore will be relocated to the Hopkinton facility. Industry experts have said that the Baltimore facility was poorly designed for contract manufacturing and has never been profitable.

Lonza intends to make Hopkinton its center for microbial fermentation in North America, complementing its European center for microbial fermentation in Visp, Switzerland, where it is installing two 15,000 L fermenters. Much of that capacity has been booked by UCB Pharma to manufacture Cimzia, its new treatment for autoimmune diseases. Hopkinton will eventually have its own commercial-scale capacity, and will invest $30 million. Currently, Hopkinton has capacity up to 2800 L scale, and Baltimore has a 2000 L fermenter. An additional 250 jobs will be created at Hopkinton as a result of the expansion.

Hopkinton is within a two-hour drive of Lonza's huge cell culture manufacturing operation in Portsmouth, NH, but the facilities will run independently. The company recently began construction of a new 330,000-sq.-ft. facility in Portsmouth to further expand its cell culture capabilities there. Lonza has 93,000 L of operating capacity in Portsmouth, and is installing another 5000 L bioreactor there.

Jim Miller is president of PharmSource Information Services, Springfield, VA, 703.383.4903., jim.miller@pharmsource.com