Large pharma focusing on in-house biologic manufacture, not outsourcing

By Ben Hargreaves

- Last updated on GMT

(Image: Getty/Ivan Balvan)
(Image: Getty/Ivan Balvan)

Related tags Capital expenditure

Capital expenditure is rising across the pharma industry as portfolios and pipelines shift towards biologics, but the largest companies are sticking to in-house production.

Capital expenditure at public pharma companies has increased by a compound annual growth rate (CAGR) of 4.7% between 2014 and 2018. When broken down further, large cap pharma companies account for approximately 75% of expenditure in 2018, according to information released by GlobalData​.

Through the data analytics company’s research on capital expenditure, the suggestion is that ‘mega’ and large cap companies are choosing to invest considerable sums in their own manufacturing capabilities and facilities.

As a result, the market for contract development and manufacturing organizations (CDMOs) to provide outsourcing capabilities to the larger companies is proving difficult, GlobalData suggests.

The company further highlighted that a large number of pharma companies have invested heavily into projects focused on active pharmaceutical ingredient (API) biologics and injectable capabilities.

This type of capital expenditure is reflected in some of the moves by the larger companies in the field, such as Novartis' decision to buyout the CDMO​, CellforCure, it had partnered with to develop its chimeric antigen receptor (CAR)-T treatment, Kymriah (tisagenlecleucel), rather than continue to work together on a contract basis.

Rival company in the area, Gilead, also chose to invest in expanding its production capabilities​ for its own CAR-T treatment rather than look for an outsourcing partner. CEO, Daniel O’Day, explained that the decision had been made for the company to ensure a quick production turnaround time.

Not all doom and gloom for CDMOs

However, just because larger companies are forgoing working exclusively with CDMOs, GlobalData suggests that there are still promising developments for the outsourcing market. As such, one recent report suggested that this market could reach a value of $87.6bn (€79.4bn)​.

GlobalData explained how this could happen by noting that though larger companies are focusing on developing their own capabilities, they are also leaning on CDMOs to provide additional, back-up supply.

Adam Bradbury, pharma analyst at GlobalData, explained: “Dual sourcing, where a product is both manufactured in-house and outsourced, has become a key part of the manufacturing strategy for many larger pharma companies as a way to manage supply chain risk and financial risk.”

Such an example can be seen at bluebird, which is working with its CDMO partner, apceth Biopharma, to commercialize its gene therapy in Europe, whilst also building out its own manufacturing capacity​.

However, as suggested by GlobalData, bluebird confirmed that its own capacity would be used to ‘complement’ its relationship with manufacturing partners.

Such a partnership was also seen when Lonza recently announced that it would work with Celltrion​, allowing the latter company to manage the increased demand it received for its biosimilar portfolio in a ‘flexible’ manner.

Despite this avenue for CDMOs to work with the larger companies, business remains concentrated on the startups and the smaller companies. Previously, an executive at Thermo Fisher told us​ that 65-70% of its clients were ‘emerging’ and small companies.

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