We examined areas of greatest change in biopharma companies’ budgets to assess where these effects, both positive and negative, are most prevalent. We found that process development is the area where the greatest budget increases are likely (3.8% on average). Following that is budget increases for new technologies to improve efficiencies for downstream production (2.5%). These shifts both mirror general trends toward more up- and downstream productivity in biomanufacturing.
Despite the leaner purchasing environment, downstream areas are still being funded. Not unexpectedly, the areas of greatest budgetary decrease are in new facility construction (down 6.2%). Interestingly, the change in budgets for new capital equipment appears to be relatively flat (-0.6%).
There appears to be something of a bimodal distribution, where some companies are planning to eliminate budget items, while others are planning significant increases. This may suggest that decisions on capital equipment expenditures at some companies could have been made months or years prior.
Similarly, we found that while 8.8% of companies planned to eliminate their new facilities budget, 9.4% planned large increases (more than 20%). Apparently, expenditures on long-term items may be dependent on budget cycles and when construction decisions were made. Other areas targeted for budget elimination included hiring of new scientific staff (5.8% of respondents) and hiring of operations staff (4.5% of respondents).
Areas where there may be significant budgetary increases (greater than 20%) included new facility construction (9.4%) and new capital equipment (8.4%). The budget data for outsourced biopharmaceutical manufacturing exhibited no substantial swings, but did indicate a modest decline of 1.3%.
To evaluate the impact of the current economic situation on vendors to this industry, this year we also queried 140 vendors regarding their average annual growth rates. This establishes a derived demand for products used by the biopharmaceutical industry, which in turn, provides insight into the growth rate of end users of these products.
In our study, we found relatively robust growth for 2008: on average, vendors reported an annual growth rate of 13.2%. Whether this is sustainable in 2009 is problematic. Trendwise, this represents a slight flattening of growth from the previous two years (Figure).
While it is clear that current growth rates to the industry are declining, we believe these data show that the biopharmaceutical segment remains healthier than other segments into which these vendors may also be selling.
We believe that vendors’ strategies will include stretching their current budgets to achieve goals, while keeping their new product R&D pipeline appropriately stocked to ensure growth when the economy turns the corner.