The biopharmaceutical industry’s capacity pendulum has taken wide swings over the past decade—from shortfall to overcapacity—as companies built up production for projected pipeline products that failed to materialize. In the ramping-up process, the industry has made major investments in facilities, equipment, technology, and staff.
The economy has knocked many industries right out of their socks. Yet the biopharma industry has generally been relatively uninjured, according to BioPlan’s 6th Annual Report and Survey of Biopharmaceutical Manufacturing. Most budget line items decreased less than 3% and some actually increased. This year, budgets have begun to turn around and most areas have experienced a rebound.
Today, the question among many CMOs and drug innovators is whether we’re back to the “old normal” or whether the industry has established a “new normal.” According to Erik Laursen, vp of business development at CMC/ICOS Biologics, “most CMOs in this industry experienced a drop in business the first quarter of last year. As a result, CMOs became much more cost sensitive and competitive in their service delivery. There was also some minor price erosion. That has now been stabilized, and starting in Q4 of last year, we saw a lot more RFPs as business picked up.”
The recent financial pinch on CMOs appears to have been short-lived. Yet the lessons learned may be here to stay—continuously streamlined operations, keeping costs competitive, and ensuring service delivery is consistent with industry demands are signs of operational maturity. CMOs are increasing service quality; capacity gaps are being filled, including 2,000 L and 5,000 L; and customer needs are being considered more now than in the past as the economic crunch has compelled many to redouble efforts to operate more collaboratively and cost effectively.
Part of the reason for optimism is that virtually all biopharmaceutical developers sooner or later use the services of CMOs, whether for manufacture of clinical or commercial supplies, process development, testing, or for fill-finish operations. So, drug developers have a vested interest in the health of this sector.
CMOs, which tend not to be publicly traded, generally prefer not to air capacity problems. As a result, tracking the status of the biopharmaceutical CMO industry—its shortfalls, surpluses, and trends—can be challenging. Problems impacting this segment include economic uncertainty from slower than expected development pipelines, FDA regulatory concerns, and capacity problems resulting from blockbuster drugs reaching the market.