Presented by:

William Downey

408-978-1035

wdowney@hightechdecisions.com

Trends in Biopharmaceutical Contract Manufacturing

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Date Source:

Industry Reports

Biopharmaceutical Contract Manufacturing 2011: New

Participants, Expanded Services and Emerging Markets

Biopharmaceutical Contract Fill-and-Finish : Best Practices

2010

Primary research based on interviews and inputs from

biomanufacturing directors from pharmaceutical and

biotechnology companies and representatives from contract

manufacturing organizations

2

Definition of Biopharmaceutical Manufacturing

The manufacturing of biomaterials proteins, monoclonal

antibodies, plasmid DNA, viral products or other biologics

from microbial or mammalian cells, or transgenics

production methods for therapeutics, diagnostics and

vaccines.

3

Biotechnology Landscape: A CMO’s Perspective

4

Biotechnology

Medical

Diagnostics & Discovery

Therapeutics

& Vaccines

Small Molecules

Chemical Synthesis

Fragments

Large Molecules

Natural

Blood Products

Penicillin

Other Products

Recombinant

Suppliers

Cell Lines

Consumables

Analytics

CMO

API

Fill-and-Finish

Pharma/

Biotech

Innovators

Biosimilars

Agriculture Industrial

Contractors For Biopharmaceuticals

5

CMO

API Fill-and-Finish

• Drug Substance

• Fermentation or Cell Culture

• Limited Fill Capabilities

• Drug Product

• Parenterals/Aseptic Fill

• No Fermentation

Topics

6

API: Growth Drivers in the CMO market

API: Outsourcing to low cost regions

Fill-and-Finish: Outsourcing and Trends

API CMOs

7

BioCMO Market Size

8

$0.8

$1.0 $1.1

$1.2

$1.4

$1.7

$2.2 $2.1

$2.8

$2.6

$2.1 $2.1

$-

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

1998 2000 2001 2002 2003 2004 2005 2006 2008 2009 2010 2011

Bill

ion

s of D

olla

rs

BioCMO Market Drivers

Underlying Commercial Market

Biotechnology Development Projects

Drug Developer Outsource Strategies

New Services

Productivity

Price

Participants

9

BioCMO Market Drivers: Commercial Market

10

$74 $85

$98 $112

$128

$146

$-

$20

$40

$60

$80

$100

$120

$140

$160

2006 2007 2008 2009 2010 2011

Bill

ion

s o

f U

.S. D

olla

rsBiotechnology Drug Sales

• Biotechnology market growth is projected to continue at a compound

annual growth rate of 7%.

• The growth in biotechnology sales will continue to fuel the growth in the

biopharmaceutical contract manufacturing market.

BioCMO Market Drivers: Commercial Market

11

2433

4662

83100

113128

140153

176193

203218

226235

256 262 265

0

50

100

150

200

250

300

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Cu

mm

ula

tive

Nu

mb

er o

f Ap

pro

ved

Pro

du

cts

U.S. Biotechnology Approvals

1,469 1,484

1,779

2,042

2,239 2,247 2,148

1,850 1,657

1,684

-

500

1,000

1,500

2,000

2,500

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Nu

mb

er o

f Pro

ject

s

Biotechnology Projects in Development

CMO Market Growth Model: Development Projects

12

-26%

Peak-

to-

Valley

Change

CMO Market Growth Model: Development Projects

13

1%

20%

15%

10%

0%

-4%

-14%-10%

2%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

2003 2004 2005 2006 2007 2008 2009 2010 2011

Year

Ove

r Ye

ar C

han

ge

Biotechnology Projects in Development

• Inflection point in 2009

• Positive growth in 2011

• Improved outlook in

2012

CMO Market Growth Model: Outsource Mix

14

0%

10%

20%

30%

40%

50%

60%

70%

80%

2004 2011 2016

Outs

ourc

e S

pendin

g

CMO Market Growth Model: Outsource by Segment

15

CMO Market Growth Model: New Services

16

Material Production(incl. DSP)

86%

Process Development

4%

Cell line Development

3%Analytical Assay Development and

Validation3%

Other4%

Current Services Offered

Additional Services Sought

0% 5% 10% 15% 20% 25%

Additional Analytical Services

Conjugation Services

High Yield Expression Systems

Formulation

CMO Market Growth Model: Productivity

17

Microbial 1.9 g/L 2.8 g/L 1.5x

Mammalian 1.0 g/L 2.0 g/L 2.0x

Phase III material

0.0 g/ L

0.5 g/ L

1.0 g/ L

1.5 g/ L

2.0 g/ L

2.5 g/ L

3.0 g/ L

Microbial Mammalian

Yie

lds

2004

2011

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

2002 2008 2011

$ P

er G

ram

CMO Market Growth Model: Change In Price

18

90% Confidence

Market Growth Drivers: Past and Future

19

Growth Drivers

Recent

Past

Current

Outlook

Impact on

CMOs

Commercial Market

Development Projects

Outsource Strategy

Expanded Service Offerings

Productivity

Price

Participants

BioCMO API Market Growth

20

$2.1 $2.1

$2.6

$3.1

$-

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

2010 2011 2013 2016

Bill

ion

s of D

olla

rs

Outsourcing To Low-Cost Regions

21

Would consider outsoucing to

low-cost region, 29%

Would outsource only for local

country requirements,

15%

Would not consider

outsourcing to low-cost region,

56%

Challenges in Outsourcing to Low-Cost Regions

22

5

7

8

8

9

11

13

16

0 5 10 15 20

IP protection

Manpower to deal with oversight, project management support

Cultural differences, integrity

Experience, technical capability

Quality

Regulatory approval, experience

Communication, language barriers

Distance, time differences

Number of Mentions

Fill-and-Finish CMOs

23

Reasons for Outsourcing

24

Capacity, including different-sized

requirements, 35%

Special services, different

technology, 25%

Commercial capability, 10%

Historical relationship, long-term contract, 10%

Risk mitigation, redundant supply,

10%

Reduce capital spending, 5%

Tax benefit considerations,

5%

Pricing Models Used

25

Price Per Batch49%

Price Per Unit34%

Time in Facility11%

Other6%

Pricing: Vials

26

y = 18681x-0.829

R² = 0.8109

$0.1

$1.0

$10.0

$100.0

$1,000.0

1,000 10,000 100,000 1,000,000

Price

/Bat

ch/B

atch

Size

Batch Size

n=24

0% 20% 40% 60% 80%

Production liability

Scheduling

Price

Quality specifications

Capacity

Mentions per Contractor Type (%)

F/F

API

Most Mentioned Negotiation Roadblocks

27

CMO: Manufacturing Trends

28

0 2 4 6

Changing regulatory environment

Changing dosage forms, more convenience for patients

Increased adoption of isolator technologies

Growth of biologics sector

Smaller batches of more targeted drugs

Increasing need for specialized handling and technologies

Number of Mentions

Contract Manufacturing Companies: Industry Trends

“Products are becoming more complex all the time.

Recombinant and antibodies will still need to be filled, but new

conjugate drugs and adenovirus-based drugs are coming along.

The challenge will be meeting the demand for these new

complex drugs.”

“The future of the CMO industry won’t be drugs like Enbrel™ and

Humira™ with volume demands for which it makes sense to

build a facility just for one product. That will be the exception,

and the trend will be toward small-volume, specialized drugs

and smaller batch numbers and sizes per product.”

29

Pharmaceutical and Biotechnology Companies: Industry

Trends

“There will be an increased need for fill-and-finish

contractors. There will be some consolidation within the

industry and M&A activity. The future looks good. The

production of biopharmaceuticals and need for fill-and-finish will

increase.”

“There won’t be just one type of fill-and-finish. There will be

more flexibility, broader offerings, more capability to do

small- and large-scale fills in a wide range of containers.”

30

Thank You

31