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pharmaceutical companies to small or "virtual" biotech firms. After a slow start in the mid-1990s, the recent growth experienced by Lonza and other contract manufacturers is nothing short of phenomenal—and is no doubt being eyed enviously by fine chemical companies focused on custom production of traditional organic intermediates and small-molecule pharmaceuticals. y Lonza's biotechnology division— made up of the Lonza Biologies cell culture unit and the smaller Lonza Biotec, a ric respiratory tract disease, launched in microbial fermentation business— Michael McCoy September 1998, recorded $184 million posted sales of $92 million last year, up a C&EN Northeast News Bureau modest 12% from 1998. However, infirst-halfsales. hen news broke last month that However, unlike drugs on the mar- through thefirsthalf of this year, RobinEU Iilly & Co. had halted enroll- ket today from pioneering biotech firms son says, Lonza Biologies sales are alment of new patients in a Phase such as Amgen and Genentech, many of most double those of the first half 1999. III clinical trial of its new sepsis treat- these newer products aren't being man- Employment at the Portsmouth facility ment, activated protein C—because the ufactured by their developers but by has grown from 80 when Robinson drug was working so well—investors third-party contractors. For example, joined the company in 1997 to an expected 350 by the end of the year. took notice, sending Eli Lilly's Lonza employs a similar numstock price up 17% in a day. ber of people at a sister facility Less noticed was the fact in Slough, England. that trial quantities of the bioBoehringer Ingelheim, detechnology-derived protein, to spite being for the most part a be marketed as Zovant penddeveloper and marketer of its ing regulatory approval, are own drugs, is aggressively exnot made by Lilly but by a conpanding its contract manufactract manufacturer, Lonza Bioturing business: The compalogics. However, in the small ny's industrial biopharmaceubut rapidly growing biopharticals unit reported sales of maceutical contract manufac$130 million last year, up 60% turing community, the news from 1998. was yet one more sign that the Covance Biotechnology Serindustry is coming of age. vices, the third largest industry 'The trial halt was wonderplayer, posted 1999 sales of ful news for victims of sepsis, $45 million, double those of wonderful news for Eli Lilly, An operator works on a 2,000-L fermenter at Covance1 5 1998, and 2000 sales are exand wonderful news for Lonza Research Triangle Park, N.C., facility. pected to increase 80%. Emas well," observes Ed Robinson, president of Lonza Biologies, the both Enbrel and Synagis are made by ployment at thefirm'sResearch Triangle world's second largest contract manu- Boehringer Ingelheim, a closely held Park, N.C., complex hasrisenfrom 200 at facturer. "But now the pressure is on." German firm that is the contract indus- the start of 1999 to 550 today. At DSM Biologics, another top company, sales this Industry analysts say Zovant has the try's largest player. potential to become a $1 billion-per-year For Zovant, Lilly and Lonza signed year are forecast at about $25 million. All drug. Each year, more than 700,000 new an agreement in 1997 calling for Lonza told, sales by the industry should reach cases of sepsis are diagnosed in the U.S. to scale up and manufacture clinical-trial half a billion dollars this year, industry exThe disease, characterized by an over- quantities at its Portsmouth, N.H., mam- ecutives estimate. The prospect of success for Zovant whelming systemic response to infec- malian cell culture facility. Robinson tion, has a 30 to 50% mortality rate, kill- won't disclose specific plans for full- and products like it promises even more ing an average of 1,400 people a day scale manufacture, but he confirms that growth for biopharmaceutical contracworldwide. Lonza will play a commercial role, not- tors, but it also raises the question of If it reaches the market—Lilly plans ing that the two firms are in the midst of where these drugs will be manufactured. Contract manufacturing executofilefor approval early next year—acti- a multiyear agreement. vated protein C will become the latest in Although potentially big, Lonza's tives say capacity, particularly for monoa string of recent successes for the bio- contract with Lilly is just one of about 35 clonal antibodies like Enbrel and Synapharmaceutical industry. Immunex's development and manufacturing agree- gis, is in increasingly short supply. "Customers are becoming somewhat Enbrel rheumatoid arthritis treatment, ments it has with some 25 companies, approved in November 1998, logged Robinson says. The partners are a mix desperate for capacity," comments John sales of $286 million in the first half of of U.S., European, and Japanese firms, Brown, president of Covance Biotech2000; Medlmmune's Synagis for pediat- he says, and run the gamut from leading nology Services. "Our capacity is very
TURNING POINT FOR BIOPHARMACEUTICALS
Contract manufacturers want to build capacity but seek financial commitments from their customers
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JULY 31, 2000 C&EN
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ferrin, used in heart surgery. GeneWorks says DSM will be its main part ner for purification. Peter van Hoorn, DSM Biologies' di rector of marketing and sales for North America, points out that raising ani mals costs a lot less than building bioreactors. As a result, purification is the biggest cost component in transgenic drug production, and it's a skill the in novators don't have. Purification technologies are evolv ing. For example, van Hoorn says that, in order to purify serum albumin un der the agreement with GTC, DSM plans to employ simulated moving-bed chromatography, a technique now at tracting attention in small-molecule enantiomer separation (C&EN, June 19, page 17). Steve Sensoli, chief operating officer at GeneWorks, is bullish on transgen ics. GeneWorks is collaborating with eight pharmaceutical companies on egg-based routes to a broad range of drugs now made in cell culture, he says. Egg-based protein production is faster than animal methods, he claims, and drugs grown in eggs can't affect their avian hosts. Like most people in biopharmaeeu ticals, Sensoli says cell culture and transgenics can coexist. "When you're making 10 kg a year, you can do it in cell culture," he says. "When you need 50 to 100 kg, you can go either way. Over 100 kg, you need transgenics of some sort, and you need to make a de cision on which kind."
| When it comes to dealing with compet; ing technology, most biopharmaceutiI cal producers have decided it's better ! to cooperate than resist. Biopharmaeeuticals generally are human proteins grown in mammalian cells or in microbes that have been ge netically modified to express them. This growth takes place in stainless steel vessels that yield on the order of ; 1 to 2 g of protein per liter of vessel ! space. I The process is time consuming and j expensive and has led a number of I firms to pursue a next generation of protein-production technology that re lies on transgenic hosts such as ani mals, eggs, and plants. Leaders in animal transgenics in clude Framingham, Mass.-based Genzyme Transgenics Corp. (GTC), the I Iΐ.Κ/s PPL Therapeutics, and Pharm! ing of the Netherlands. In plants, Monsanto's Integrated Protein Technoloi gies unit and CropTech of Blacksburg, Va., are considered the chief players. In chicken eggs—a newer field—Ann Arbor, Mich.-based GeneWorks calls itself the leader. Although no transgenically proI duced drug is on the market, GTC is | coming close, having completed suc| cessful Phase III trials on recombinant : human antithrombin III produced in goat milk. The company expects to file ι for Food & Drug Administration api proval later this year. An antithrombin
Ill derived from human blood plasma is already being used as an anticoagu lant in heart surgery. GTC is also working with big-name drug companies such as Centocor, BASF, and Bristol-Myers Squibb on lower cost transgenic routes to their cell-culture-produced drugs. Rolf Werner, corporate director for biopharmaeeuticals at Germany's Boehringer Ingelheim, the world's largest contract producer of cell cul ture biologies, says he's doubtful that animal-derived pharmaceuticals will become a viable alternative. He says product heterogeneity and animal susceptibility to disease—such as spongiform encephalopathy in cows and scrapie in goats—are problems that have yet to be overcome. Others are more welcoming. "We feel technically and regulation-wise that transgenics will succeed," says Ed Robinson, president of Lonza Biolog ies. Lonza is working with GTC to de velop methods for purifying transgeni cally produced monoclonal antibodies and other proteins. The Netherlands' DSM Biologies has struck a number of purification alliances. With GTC and its partner, the German firm Fresenius, DSM is developing a technique to purify transgenic human serum albumin, a blood expander. With Pharming, DSM will scale up a purification method for recombinant human lacto-
tight through next year. We can take on new business depending on the vagar ies of scheduling, but if someone want ed us to undertake a significant cam paign, we'd be hard-pressed to get it in." According to Stephen Taylor, biolog ies business manager at Avecia's life sci ences molecules unit in the U.K., which is a significant player in microbial fer mentation, planning is becoming para mount. "Customers are having to plan much earlier," he says. 'The days when customers could drop into a facility with a couple of months' notice are over." Brown says pharmaceutical custom ers are waking up to the fact that there's not enough manufacturing capacity on the horizon. Firms with a multiproduct drug development pipeline, he says, are reserving future manufacturing space with Covance without even knowing which product will be made. "Some pharmaceutical companies are saying they see just having access to capacity as a huge strategic advantage over their competitors," he says.
Although a capacity shortage may be3 I the 20% range, he says, down from last brewing, company plans to remedy itt year because of capacity constraints. At the rest of the contractors, capacity are for the most part still in the formaιaddition plans come in two forms: defitive stages. Of the major contract manufacturers,i, nite, approved, but ultimately modest Boehringer Ingelheim is the only one to3 projects, and larger additions that managstep up with a major board-approved ini- ers are pitching to their boards and cusvestment in new capacity. In May, thes tomers but haven't pinned down, At Lonza, for example, last year the company announced that it would investt more than $200 million at its Biberach,L, company started up its biggest vessel Germany, biopharmaceutical facility to3 yet, a 5,000-L batch cell culture reactor add six new 12,500-L mammalian cell11 in Portsmouth, and is in the process of culture reactors, doubling capacity to3 validating a second one. A suite housing make its own and third-party products.;. a 1,500-L perfusion reactor—one that At the same time, the company is spend[- makes product in a continuous rather ing $30 million to modernize its microbii- than batch fashion—started in Novem al fermentation plant in Vienna. ber. And a 2,000-L batch reactor will According to Rolf Werner, Boehring:- start in Slough in the third quarter, But beyond these definite additions, er Ingelheim's corporate director forr biopharmaeeuticals, the Biberachι Robinson says the company is designing project should be complete by 2004. Unι- two big new manufacturing suites that til then, he says, the company will be caι- would each contain two reactors with capapacity limited, although it can accomL- city of 15,000 to 20,000 L, sizes almost unmodate smaller scale developmentt heard-of in contract manufacturing today. work in anticipation of the new capacity.r. 'We are talking to clients now; the numBusiness growth this year should be inn I bers could even grow bigger," he says.
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JULY 31, 2000 C&EN
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business Likewise, DSM Biologies is currently installing a 2,000-L cell culture reactor at its Montreal facility that will be on line in the second quarter of 2001. The unit will complement a 3,500-L microbi al fermenter and two 750-L perfusion re actors already at the site, as well as smaller scale equipment at a sister facil ity in Groningen, the Netherlands. At the same time, Peter van Hoorn, director of marketing and sales for North America, says DSM Biologies is pursuing three avenues for larger scale expansion. One, a 10,000- to 15,000-L cell culture reactor, is in the early plan ning stages. A second avenue, a 15,000to 20,000-L microbial fermenter neces sary to accommodate customer prod ucts now in development, is in prelimi nary engineering design, van Hoorn says. A third plan is to add large-scale equipment to purify pharmaceutical pro teins made by companies that use trans genic production methods. Covance has its own big-ticket expan sion plans. Roger Lias, vice president of business development, says the company added two new vessels last year and now
operates three microbial fermenters and one cell culture bioreactor, all at the 2,000-L scale. It's also been working to ac commodate production of Centocor's Retavase, a microbially derived protein used in heart attack treatment. Covance won a contract to make the drug last year after Centocor acquired rights to itfromHoff mann-La Roche. Covance can fit some additional ca pacity in its current facility, Lias says, but to meet the future needs of biopharmaceutical customers, more space is needed. Lias says the company is about to sign for the purchase of 90 acres adja cent to its Research Triangle Park facili ty. There, the company is proposing a major new manufacturing complex with 60,000 L of cell culture bioreactor capac ity, 25,000 L of microbial fermentation capacity, and associated purification and quality-control equipment. A 15,000-L bioreactor with associated equipment costs tens of million of dol lars; a multireactor greenfield addition such as the one Covance is proposing would run to $300 million or even more and take at least three years to build.
Such investments are not made lightly, and the challenge for biopharmaceutical manufacturers isfiguringout how to make them without undue risk. Executives at Lonza and DSM main tain that their units are part of larger chemical organizations that are accus tomed to major capital investments. Rob inson notes that he recently met with Lonza Group Chief Executive Sergio Marchionne to discuss the unit's plans. Likewise, van Hoorn says DSM board members have warmed considerably to the biologies unit since DSM bought con trol of it in 1998 and recently gave their blessing to pursue the build-out plan. Still, with the exception of Boehringer Ingelheim, which is footing the entire bill for its project, none of the others plan to build their dream facilities with out some kind offinancialguarantees or participation by customers. 'There are not many companies that will build a $200 million facility on spec anymore," Robinson says. Lias says a typical agreement be tween Covance and a pharmaceutical partner would involve cofunded con-
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struction of a large-scale bioreactor that would be dedicated to the partner for perhaps six months of the year. Covance would then market the balance of the capacity to other customers and share in the proceeds with its partner. Covance is also pursuing financial investors in the proposed facility; a concerted effort to line up investors will begin in a month or two, he says. A totally dedicated facility that takes advantage of shared quality control and purification services is possible as well. Van Hoorn notes that DSM struck such an agreement with Hoffmann-La Roche in the traditional pharmaceutical business, building a Roche-owned plant in Austria to produce an intermediate for the antiobesity drug Orlistat. "There are several ways forward," he says. "The industry is at a decision-making moment." Although most contract manufac- Biologies production Is preceded by media turers are seeking some sharing of preparation at DSM's Montreal facility. thefinancialrisk,there is little history of it in the biologiesfield.Susan Dexter, in the risk of adding it. "Biologies are vice president of business development not a commodity," Dexter says. "It's unat Collaborative BioAlliance, a smaller reasonable for biotech companies to contractfirmbased in Stony Brook, N.Y., take no risk." says ready availability of contract capaciBiotech companies needing manuty in the past has spoiled biopharmaceuti- facturing have always had the option of cal makers into believing manufacturing bypassing contractors and turning to could be arisk-freeendeavor. competing biotechfirmsthat offered exCollaborative was for most of its his- cess capacity, either because their own tory a small-volume producer that made products were awaiting approval or bebiologies mainly for early clinical trials. cause of clinical failures. Contractors' Then last year it acquired a 50-acre site warnings that excess-capacity providers in Rhode Island formerly owned by Al- are fair-weather friends generally fall on pha Beta Technology, which went bank- deaf ears. rupt when its lead product failed in Excess capacity continues to be Phase III clinical trials. The site houses something of a nemesis to pure contraca 2,000-L microbial fermenter and has tors. In April, for example, the Rockville, room for an additional 10,000 L of capac- Md., biotechfirmEntreMed announced ity, Dexter says. that it was moving some production of Collaborative found a customer for its cancer-fighting recombinant human the plant in May of this year when it protein Endostatin from 2,000-L microstruck a deal to produce StaphVax, a bial fermenters at Covance to 10,000-L vaccine being developed by Boca Raton, fermenters at the biotechfirmChiron to Fla.-based Nabi to prevent Staphylococ- ensure adequate, low-cost capacity for cus aureus in patients at high risk of in- expanded clinical trials. Covance was infection. Production of the vaccine, cur- volved in the technology transfer and rently in late stages of a Phase III clini- continues to manufacture a second Encal trial, could be worth $85 million to treMed product, Angiostatin. Collaborative over four years. New excess capacity hits the market Dexter says Collaborative will have periodically as well. IDEC Pharmaceuticapacity to spare even when the Nabi cals of San Diego began offering its product hits the market. Although Col- 3,000-L mammalian cell culture plant laborative won't need new capacity for a late last year after it transferred producwhile, Dexter says she is looking ahead tion of Rituxan, a monoclonal antibody at coinvestment as a reasonable way for for the treatment of non-Hodgkin's lymthe company and its customers to share phoma, to its marketing partner Genen-
tech, which operates larger bioreactors in South San Francisco and Vacaville, Calif. Steve Ruhl, associate director of technical services at IDEC, sees IDEC as something of a smaller version of Boehringer Ingelheim, balancing manufacture of its own products with contracted ones. IDEC is pursuing construction of a 10,000-L plant that would be primarily dedicated to IDEC products but also likely entertain contract business as well, Ruhl adds. But, on the whole, excess capacity is drying up. A case in point is SmithKline Beecham, which entered the contract manufacturing market last year, offering four 5,000-L cell culture reactors at its King of Prussia, Pa., facility. They had been sitting partially idle for about three years following setbacks in SmithKline's own biotech drug program. According to Don Bergmann, general manager of SmithKline's biopharmaceuticals business, the company has already signed a contract—for a commercial product now being made elsewhere—that will soak up half the plant's available capacity. He says the company is in "active" negotiations on additional deals. "I don't expect we'll have any troublefillingit," he says. Helping SmithKline in its marketing effort, Bergmann acknowledges, is the tight market for biopharmaceutical manufacturing capacity. But he says other draws are SmithKline's reputation, the quality of the plant and its staff, and wellwritten contracts that are flexible for clients while accounting for SmithKline's future requirements. "We're balancing our capacity between our clients' needs and our own needs," he says. "We've been pretty successful at it so far." Pure contractors are cautioning biopharmaceutical companies that they can't continue to count on excess capacity to be there when they need it "Most companies have eitherfilledup or have pulled back to accommodate their own products," Covance's Lias says. "It has become extremely robust quite quickly." The flip side of the coin, however, is that biopharmaceutical companies that have relied on contractors to scale up production and get them through clinical trials often opt to take at least some of the production of a successful product back in-house. This is happening with Immunex's Enbrel, currently made only by BoehJULY31,2000C&EN
21
business ringer Ingelheim. Soon after Enbrel was approved in 1998, Immunex and its ma jority owner, American Home Products (ΑΗΡ), began to explore their own man ufacturing options. In September of last year, ΑΗΡ acquired a Glaxo Wellcome biopharmaceutical plant in Rhode Is land for $60 million. The plant was mak ing Wellferon, an interferon product that Glaxo decided to phase out because of declining demand. Immunex and ΑΗΡ are now retrofit ting the Rhode Island plant to make En brel in order to meet demand expected from an expanded indication for the drug approved by the FDA in June. A new $685 million biopharmaceutical plant that ΑΗΡ announced in April for Ireland is also expected to make Enbrel when it starts in 2004. Boehringer Ingelheim's Werner says these decisions were reached with his company's blessing and that his firm will continue to produce at current levels for Immunex on a long-term basis. A similar scenario is evolving with Medlmmune, he notes, which in December started up a biopharmaceutical plant in Frederick,
Md., that will complement Boehringer In gelheim's contract manufacturing. Werner says these firms are taking a middle course among manufacturing strategies. Some companies, he ac knowledges, will want to take full con trol of manufacturing when products are successful, whereas others are hap py to stick with contractors. An example of the latter is Schering A.G., which has relied on Boehringer Ingelheim for many years to produce its successful Betaferon interferon beta-lb product. Although all contractors would love to have permanent manufacturing con tracts, none are expecting them to come along too often. "We are not so naive as to think a major pharmaceutical company will leave all its products in our hands for ever," Lonza's Robinson says. "But in creasingly, clients are coming to us ask ing for R&D, launch, and a good number of years of commercial production, if for no other reason than dual sourcing. We at Lonza are very comfortable with that." Indeed, a lot of fine chemical compa nies would be comfortable with a busi ness like the one Robinson describes.
Lonza and DSM entered biologies man ufacturing in the mid-1990s to comple ment their traditional custom chemicals business, and fine chemicals makers such as Cambrex and Sigma-Aldrich seem to be edging toward the contract business as well. In addition, industry executives say Dow Chemical has been evaluating en try into the field as an extension of its four-year-old contract manufacturing services unit and its industrial biotech nology efforts. The company is said to have explored a partnership with a drug company such as IDEC or SmithKline Beecham that has excess capacity. Dow declined to comment. Of course, launching a full-scale biop harmaceutical manufacturing business would require tens or even hundreds of millions of dollars, a three- to four-year ca pacity buildup, and dozens of experi enced scientists—people who are cur rently in short supply. Still, Covance's Lias says he wouldn't be surprised if a number of companies are looking at en tering the fast-growing industry. "It's a very interesting space," he says.^
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