The demand and supply equation for manufacturing capacities has recently become a cause for much speculation, but a just-published report from Frost & Sullivan suggests while a number of sources suggest a capacity gap - and that this represents a fundamental challenge to the industry - supply will in fact exceed demand through to 2011.
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," said Dr Raju Adhikari, F&S industry analyst. Thereafter, he predicted, 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.
Global manufacturing of biopharmaceuticals has increased significantly over the last decade due to a number of reasons, it notes. 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," said Dr Adhikari. "The success achieved by companies with a few revolutionary new drugs has brought this industry into the limelight in recent years."
Quantifying and understanding the capacity gap is essential for biopharmaceuticals developers, which will need to examine and evaluate their own financial positions to help 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.
Dr Adhikari said that companies preferring to outsource to CMOs tend to 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.
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," said 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, he noted.