Biopharmaceutical Contract Manufacturing: The Need of The Hour

Biologics represents one of the fastest growing segments of the pharmaceutical industry. This can be attributed to the rapid pace of innovation in this field, driven by the need for effective and personalized pharmacological interventions. Although biopharmaceuticals offer significant profit margins and have demonstrated the potential to treat a myriad of disease indications, they are generally associated with high costs of development and complex manufacturing protocols. This has compelled many biopharmaceutical developers to outsource various aspects of their operations to contract service providers. The biopharmaceutical contract manufacturing market is presently characterized by the presence of both niche, specialty companies, focused on early-stage development and production (preclinical and / or clinical scales), and one-stop-shops, which have, over time, acquired an extensive range of capabilities to cater to essentially all the product development and commercialization requirements of sponsors. Biopharmaceutical contract manufacturing market is anticipated to grow at a CAGR of around 9.6%, till 2035, according to Roots Analysis.

Overview of Contract Manufacturing in Biopharmaceutical Industry

A contract manufacturer is a third-party organization that offers services on a contract basis to other organizations. Typically, a client may approach a contract manufacturing firm after conducting initial R&D for a product and employ its services to manufacture the product, usually at larger scales. Conversely, many contract manufacturers are known to develop proprietary products and out-license them to marketing organizations. It is worth mentioning that outsourcing business operations to third party developers and manufacturers provides excellent opportunities for client organizations to access greater production capabilities and / or new products.

Additionally, there are several contract development and manufacturing companies that cater to the needs of biopharmaceutical companies worldwide. Commonly outsourced processes by biopharma clients include design, production, assembly, and distribution of lead candidates. Although contract partners may serve as stand-alone service providers in multiple areas, such as analytical testing or marketing, contract research organizations (CROs) and CMOs are slightly bigger organizations with larger service portfolios offering support services, in addition to research and / or manufacturing.

The figure below highlights the various types of third-party service providers that cater to the biopharmaceutical industry.

Need for Outsourcing Biopharmaceutical Manufacturing Operations

The following points illustrate the need for outsourcing microbial manufacturing operations to service providers:

• Manufacturing expertise and capabilities, including design, construction and maintenance of a facility, required for production of biologics in-house involves high capital investments.
• Requirement of higher biopharmaceutical manufacturing capacity products owing to the increasing demand for such drugs.
• Advanced and complex technologies are required for manufacturing, as well as testing of biopharmaceuticals.
• Availability of innovative platforms / technologies with service providers, such as XS Technologies (Lonza), pAVEway microbial expression platform (FUJIFILM Diosynth Biotechnologies), Corynex protein expression system (Ajinomoto Bio-Pharma Services) and SCOPE technology (Batavia Biosciences), that enables production of various biologics with increased efficiency.

The above-mentioned factors have compelled many small developers, as well as certain pharma giants engaged in this domain, to outsource their manufacturing operations to contract service providers. Further, the increasing demand for companies capable of offering manufacturing and development services to biopharmaceutical developers has resulted in the establishment of several CMOs and CDMOs over the past few years.

It is worth mentioning that the extent of outsourcing varies depending upon the nature of the project and other requirements. However, in some cases, simple procedures, such as cell bank characterization or virus testing, are outsourced. On the other hand, clients may also outsource the entire biopharmaceutical manufacturing process or only a particular step. It is also important to highlight that there are some virtual biopharmaceutical companies that choose to outsource almost all development and manufacturing activities, and just act as marketers / distributors of their products.

Advantages of Outsourcing Biopharmaceutical Manufacturing Operations

CMOs offer a number of benefits; some of the primary advantages of partnering with such third-party service providers are mentioned below:

• Cost savings: Companies that partner with CMOs need not invest in establishing new facilities, employing, training and maintaining a proper workforce, and insurance policies. A number of companies outsource their business processes to developing countries where labor-costs are minimal. Additional cost benefits are derived from economies of scale. In other words, since individual CMOs service multiple consumers, they offer reduced costs for raw materials, for large scale production.
• Access to advanced capabilities and technologies: Partnering with CMOs grants customers access to capabilities and technology platforms that they would otherwise have to procure at very high costs.
• Validated quality control setup: Contract manufacturers have a better understanding of the manufacturing services that they offer. It is, therefore, very likely that they have stringent quality control protocols in place. Hence, it is easier for a company to rely on the expertise of a third-party manufacturer rather than establishing and validating their own processes.
• Flexibility: This is one of the key reasons for outsourcing for many companies. The contracts of outsourcers as well as the jobs of the employees directly depend on the degree of flexibility to reflect changes in the business environment.
• Risk Sharing: One of the crucial factors determining the net outcome of any industrial process is risk-analysis. Outsourcing a few components of an industrial process is just like shifting certain responsibilities to the outsourced vendor. Henceforth, it is a mutual understanding between the companies to handle the risk factors in a better way.

Future Perspectives

The specificity, efficacy and safety-related advantages of biologics have captured the attention of industry stakeholders and consumers. Presently, a variety of biologic drugs are being developed for a wide range of diseases, including those characterized by large target patient populations and rare disease indications, which are typically associated with smaller target patient populations and lower demands. In this competitive market, outsourcing has evolved into a viable and profitable business model. Although it is mostly the mid-sized and small players that opt to recruit the services of contract service providers, some of the larger and more established players are also known to outsource certain aspects of biologic development and manufacturing. In fact, most developers tend to rely on service providers for the development and production of low value / opportunity products, such as drugs for rare indications and biosimilars.

According to Contract Pharma’s Survey, conducted in 2023, the lack of specialized capabilities and expertise was cited among the key reasons why sponsor companies opt for outsourcing. Additionally, the ability to focus on other business priorities was identified to be another major reason for companies to recruit the services of contract service providers. It is also worth mentioning that owing to the availability of contract services organizations, several virtual companies have been established. These business entities inherently lack the physical resources to develop and manufacture their own products. As a result, virtual companies constitute a large segment of the client base of CMOs.

A review of the current scenario suggests that analytical testing, toxicity testing and fill / finish operations are among the most outsourced operations. In addition, the demand for contract services related to downstream process development is also on the rise. To exploit this demand and attract more clients, the smaller service providers are expanding their capabilities and / or partnering with other players, to expand their offerings. The growing demand for biologics, coupled to the increasing capital investments in this market, have prompted the establishment of several startups in this domain. These firms make up a notable part of the clientele of CMOs.

It is worth highlighting that there is a significant rise in the interest of stakeholders in the biopharmaceutical contract manufacturing segment; this can be validated by the increase in partnership and funding activity within this domain. Further, the growing demand for biologics has compelled the players engaged in this domain to expand their existing capabilities / capacities in order to accommodate the future needs of their clients. In addition, as mentioned earlier, innovation in this field, coupled to the development of novel fermentation technologies, has further expeditated the growth of biopharmaceutical contract manufacturing segment.