4 th Annual Report and Survey of Biopharmaceutical Manufacturing, Capacity, and Production

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2 4 th Annual Report and Survey of Biopharmaceutical Manufacturing, Capacity, and Production A Study of Biotherapeutic Developers and Contract Manufacturing Organizations 2006 BioPlan Associates, Inc Shady Grove Road, Suite 202 Rockville, MD USA Copyright 2006 by BioPlan Associates, Inc. All rights reserved. Unauthorized reproduction prohibited.

3 4th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production A Study of Biotherapeutic Developers and Contract Manufacturing Organizations, 2006 BioPlan Associates, Inc Shady Grove Road, Suite 202 Rockville MD Copyright 2006 by BioPlan Associates, Inc. All rights reserved, including the right of reproduction in whole or in part in any form. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the written permission of the publisher. For information on special discounts or permissions contact BioPlan Associates, Inc. at , or info@bioplanassociates.com Managing Editor: Eric S. Langer Text and Cover Design: ES Design, Alexandria, VA Layout: Emerald Ong, Washington, DC ISBN

4 A c k n o w l e d g e m e n t We wish to acknowledge the contributions of our authors, without whom the thorough analysis of the data in this project would not have been possible. Geoff Hodge, Vice President, Technology, Xcellerex Barbara Immel, President, Immel Resources Howard L. Levine, President and Founder, BioProcess Technology Consultants Deborah Moon, President, Technical Sales Association Leigh Pierce, President, PacificGMP Thomas C. Ransohoff, Sr. Consultant, BioProcess Technology Consultants Scott Wheelwright, President, Strategic Manufacturing Worldwide We would also like to recognize our sponsoring organizations, and our media sponsor. Their efforts in assuring the cooperation and participation in the survey of their respective memberships helped guarantee the largest group of survey participants thus far. Our Sponsoring organizations include: BayBio (South San Francisco CA), BioProcessUK (London, United Kingdom) EuropaBIO (Brussels, Belgium), and Massachusetts Biotechnology Council (Cambridge, MA) All contributed their time and effort to ensure the broad, international coverage of this project. We also wish to thank our media sponsor for helping ensure broad, and representative coverage of industry participation: BioProcess International, (Westborough, MA) The early participation of our authors and sponsors in evaluating the areas and trends to survey this year ensured the project covered the most relevant issues in biopharmaceutical manufacturing today. Their support was, again this year, critical to the success of the project. Eric S. Langer Editor iii

5 E d i t o r Eric S. Langer, MS, President, BioPlan Associates, Inc. Mr. Langer is President and Managing Partner of BioPlan Associates, Inc. a biotechnology and life sciences consulting company that has been providing management and market strategy services, and technology analysis to biopharmaceutical and healthcare organizations since He has over 19 years experience in biotechnology and life sciences management and market assessment. He is an experienced medical and biotechnology industry practitioner, strategist, researcher, and science writer. He has held senior management and marketing positions at biopharmaceutical supply companies. He teaches Biotechnology Marketing, Marketing Management, Services Marketing, Advertising Strategy, and Bioscience Communication at Johns Hopkins University, American University, and lectures extensively on pricing and channel management topics. Mr. Langer has a degree in Chemistry and Masters in International Business. He has written and consulted extensively for companies involved in: large scale biopharmaceutical manufacturing, cell culture, media, sera, tissue engineering, stem cells, diagnostic products, blood products, genetics, DNA/PCR purification, blood components, and many other areas. A b o u t t h e A u t h o r s James V. Blackwell, Senior Consultant, BioProcess Technology Consultants James V. Blackwell, PhD, has over 13 years experience in manufacturing, cell culture and fermentation technologies, biopharmaceutical development, and technical operations. He has held senior management and technical positions with Abbott Bioresearch Center, Genzyme and Repligen Corporations. While at the Abbott Bioresearch Center, Dr. Blackwell oversaw site technical support for HUMIRA arthritis drug production and served on the site validation review board and quality management teams. He also served on the project team for Abbott s re-organization of its global pharmaceutical operations. At Genzyme, Dr. Blackwell provided technical support for several prominent commercial and clinical projects. He has also been a research scientist in cell culture and fermentation process development at Genzyme and Repligen. He is Past President of the Greater Boston Chapter of ISPE, a society for pharmaceutical manufacturing professionals, and serves on its Process and Product Development Committee at the society s international level. Dr. Blackwell has Bachelor s and Master s degrees in Chemical Engineering and Microbiology, respectively, from The Ohio State University. He has a Doctorate degree in Chemical Engineering from Northeastern University and received dual Master s degrees in Business Administration and Technology Management from the University of Maryland. iv

6 Geoff Hodge, Vice President, Process Development and Technology, Xcellerex Geoffrey Hodge is Vice President, Process Development and Technology at Xcellerex, a contract manufacturing and development company based in Marlborough, Massachusetts. He is responsible for process development and the identification, development and integration of new technologies into the Xcellerex technology platform. Prior to joining Xcellerex, Mr. Hodge was Associate Director of Process Development at Millennium Pharmaceuticals, Cambridge, MA, with responsibility for the process development and clinical manufacturing of Millennium s biologics pipeline. In this role he pioneered the use of disposable manufacturing systems for the production of monoclonal antibodies and helped to develop a novel manufacturing platform and many of the high-throughput process development technologies subsequently licensed to Xcellerex. Mr. Hodge has also held positions in commercial manufacturing as Manufacturing Section Head at Genetics Institute (now Wyeth BioPharma), Andover, Massachusetts, and various management positions in process development, clinical manufacturing, manufacturing and validation at Alpha-Beta Technology, Worcester, Massachusetts. Mr. Hodge received his B.A. in Biology from Colgate University, and his M.S. in Biotechnology from Worcester Polytechnic Institute. Barbara K. Immel, President, Immel Resources LLC Ms. Immel is president of Immel Resources LLC, and editor of the Immel ReportTM. She has 24 years of industry experience, working in compliance and training, documentation and labeling, corporate quality assurance and marketing for Syva Company, Chiron Corporation, and Syntex Corporation for more than 12 years before starting the company. Barbara has served as a GMP and regulatory compliance columnist with BioPharm Magazine since She has published more than 50 articles. She wrote the Quality Assurance of Pharmaceuticals chapter for the Dekker Encyclopedia of Pharmaceutical Technology. Barbara has presented at hundreds of national and international industry meetings, and has taught GMP classes for 20 years. She has taught biotechnology and drug development courses for UC Berkeley Extension, served as an instructor for the Pharmaceutical and Biotechnology Quality Assurance Course for the University of Wisconsin at Madison, served as a panelist at the Stanford Professional Publishing Course, and recently taught a tutorial on FDA s phase 1 proposals at the 30th Annual GMP Conference, University of Georgia. She was elected to serve on the national training committees for trade associations, PhRMA and PDA, for eight years, where she helped plan and organize educational conferences for training professionals. She is a graduate of the Buckley School of Public Speaking, the Stanford Professional Publishing Course, and the University of California, Santa Barbara. Honors and awards. v

7 Howard L. Levine, PhD, President and Founder, BioProcess Technology Consultants Dr. Levine has over 20 years of experience in the biopharmaceutical industry. Prior to founding BioProcess Technology Consultants to provide process development, manufacturing, quality control and quality assurance assistance to biopharmaceutical clients, Dr. Levine was Vice President of Manufacturing Operations at Repligen Corporation. There, he was responsible for all process development and manufacturing activities, including production of therapeutic proteins and monoclonal antibodies and recombinant Protein A. Dr. Levine previously held positions of increasing responsibility in process development and manufacturing at Genentech, Amgen, and Xoma. Dr. Levine is currently a member of the Editorial Advisory Boards of BioPharm Magazine, BioProcess International, and Bio/Pharmaceutical Outsourcing Report. He is also a member of the Neose Technologies, Inc. GlycoAdvance Advisory Board, and is on the Scientific Advisory Boards of AsepCo and the Boston Area Chapter of the International Society of Pharmaceutical Engineering (ISPE). He was chairman of the Parenteral Drug Association s (PDA) Task Force on Chromatography Validation; has lectured extensively on manufacturing strategy, downstream processing, and manufacturing in biotechnology; and is co-editor of a directory of biologics contract manufacturers. Dr. Levine holds a PhD in chemistry from the University of Chicago and completed a postdoctoral fellowship at Harvard University. Thomas C. Ransohoff, Senior Consultant, BioProcess Technology Consultants Mr. Ransohoff is a Senior Consultant with over 15 years of experience in the biopharmaceutical industry. Mr. Ransohoff s areas of expertise include development and scale-up of biopharmaceutical processes; separations and purification technologies; cgmp manufacturing; and process economics. Before joining BioProcess Technology Consultants, Mr. Ransohoff was Vice President, Operations at TranXenoGen, Inc., responsible for purification process development and facilities. Prior to that he was Vice President, Bioseparations at Dyax Corp, where he was instrumental in establishing a business unit to develop novel affinity separations products using phage display technology. At Repligen, Mr. Ransohoff was Senior Director, Manufacturing, responsible for cgmp pilot plant operations producing material for clinical trials and reagent products such as Protein A for commercial sale. He is a member of the Editorial Advisory Board of BioPharm Magazine and has served on a number of scientific advisory boards, including the National Research Council Committee on Opportunities in Biotechnology for Future Army Applications and the Boston Area Chapter of ISPE. Mr. Ransohoff has a Bachelor s degree from MIT and a Master s degree from UC-Berkeley, both in Chemical Engineering. Deborah Moon, President, Technical Sales Association Deborah Moon is President of the Technical Sales Association (TSA). As a national organization, TSA is dedicated to the advancement and recognition of the technical selling profession and its benefits to members. Through a network of more than 500 individuals, TSA is committed to fulfilling its mission. Through TSA, members meet colleagues from the technical selling profession as well as researchers, scientists and technicians, and establish a network/information base that is vital to continued professional advancement. Debbie Moon has worked as a technical sales representative for more than 15 years. vi

8 Leigh N. Pierce. President, PacificGMP Leigh Pierce has over 15 years experience in the biotechnology industry and is currently the President of PacificGMP, a contract manufacturing organization that specializes in the development and manufacturing of biologics utilizing disposable technology. Formerly, she was President of Pierce BioDevelopment, a consulting firm that assists pharmaceutical companies with development and manufacturing of biologics. Prior to consulting, she was Manager of Process Development and Manufacturing of mammalian cell culture products at Arizeke Pharmaceuticals, Inc. In less than a year, Ms. Pierce was able to take Arizeke s lead compound from a DNA construct to a 500L scale production utilizing disposable technology. At Immusol, Inc. she identified genes involved with regulating breast cancer genes and assisted with the development of Immusol s patented Inverse Genomics platform. At Chiron Center for Gene Therapy, she developed, optimized and scaled-up new methods of recombinant retrovirus production. Scott M. Wheelwright, PhD, Founder and Principal, Strategic Manufacturing Worldwide, Inc. Dr. Wheelwright has over twenty years experience in bringing novel products to market, including new drug applications (BLAs and NDAs) in the US and Japan, numerous investigational applications (INDs) and commercial product launches. Dr. Wheelwright s work experience encompasses pharmaceutical firms and both large and small biotech companies, including Abbott, Chiron, Scios, Calydon, DURECT and Genitope. Dr. Wheelwright received his PhD in chemical engineering from the University of California at Berkeley and continued post-doctoral studies at the Max Planck Institute for Biophysics in Frankfurt, Germany. He is the author of a book on protein purification and has published numerous articles on manufacturing and process development. Dr. Wheelwright s focus is on long-term strategic and near-term planning for development (CMC issues including process development, analytical testing and characterization), manufacturing and facilities. He has lead project teams that have conducted technology transfer within the US and overseas, supervised scaleup at CMOs and managed complex projects involving multiple outsource vendors. vii

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10 4 th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production C o n t e n t s About the Authors iv Overview and Methodology xiii Overview xiii Methodology xiv Chapter 1: Introduction and Discussion Introduction State of the Biopharmaceutical Industry Need for Improvements in Production Biotherapeutic Developers CMOs Industry Suppliers Government Chapter 2: Demographics Area of Involvement Respondents Titles Facility Locations Respondents Size Respondents Areas of Biopharmaceutical Manufacturing Operations Respondents Production Operations, Phase of Development Chapter 3: Capacity Constraints Current Production Current Production as Percent of Capacity Changes in Capacity Utilization ix

11 4th Annual Report and Survey of Biopharmaceutical Manufacturing, Capacity, and Production 3.2 Discussion Current Total Production Capacity Mammalian Cell Culture Microbial Fermentation Yeast Production Insect Cells Overall Industry Capacity Utilization Overall Industry Capacity, Average, All Systems CMOs vs Biotherapeutic Developers Discussion Chapter 4: Current Capacity Constraints Current Capacity Constraints Perception of Capacity Constraints vs 2005 and CMOs vs Biotherapeutic Developers Future Capacity Constraints Expectations of Capacity Constraints by to CMO / Biotherapeutic Developer Capacity Constraints by Factors Impacting Future Production Capacity Factors Creating Capacity Constraints CMO vs Biotherapeutic Developers US vs European Respondents Key Areas to Address to Avoid Capacity Constraints CMOs vs Biotherapeutic Developers US vs European Respondents Chapter 5: Future Capacity Expansions Planned Future Capacity Expansions vs CMOs vs Biotherapeutic Developers Planned Future Capacity Expansions of >100% Current Outsourcing, by Production System Facilities Currently Outsourcing No Production in 2006, vs Future Outsourcing Biotherapeutic Developers Outsourcing, 2011 Projections, by System Biotherapeutic Developers Outsourcing Some Production in Critical Outsourcing Issues Selecting a CMO vs Discussion x

12 Chapter 6: Disposables and Single-Use Systems in Biopharmaceutical Manufacturing Use of Disposables and Single-Use Systems Use of Disposables, 2006 vs CMOs vs Biotherapeutic Developers Increasing Use of Disposables & Single-Use Systems Reasons for Increased Use of Disposables, 2006 vs CMOs vs Biotherapeutic Developers Reasons for Increased Use of Disposables, 2006 vs Factors Restricting Use of Disposables Reasons for Restricting Usage of Disposables vs CMOs vs Biotherapeutic Developers Current Spending on Disposable Systems CMOs vs Biotherapeutic Developers Discussion Chapter 7: Downstream Purification Downstream Purification Systems Impact of Downstream Processing on Capacity Biopharmaceutical Developers vs CMOs Areas Where Major Improvements will Occur in Downstream Processing Membrane Technology: Opinions Moving Bed Technology: Opinions Microfiltration Problems in Biopharmaceutical Downstream Processing Filtration Factors in Discussion Chapter 8: Hiring, Employment Growth, and Training in Biopharmaceutical Manufacturing Introduction Hiring in Hiring in Projected Employment Growth in Biopharmaceutical Manufacturing Growth in Hiring, 2006 to 2007; and 2006 to Growth in Hiring, 2006 to Growth in Hiring, 2006 to Compound Annual Growth Rate, , by Job Function Formal Education Requirements in Biopharmaceutical Workforce Level of Biopharmaceutical Workforce Education vs 2011 Estimate Distribution Training in Biopharmaceutical Manufacturing In-House Training External Training xi

13 4th Annual Report and Survey of Biopharmaceutical Manufacturing, Capacity, and Production 8.7 External Training in Biopharmaceutical Manufacturing Discussion of Hiring, Growth, Education and Training Chapter 9: Suppliers to Biopharmaceutical Manufacturing and Life Sciences Introduction Demographics Areas of Involvement Vendor Location Respondents Primary Job Growth Rate of Sales by Suppliers Average Industry Growth Rate, Distribution Average Industry Growth Rate, By Segment Supplier Issues Problems Faced by Suppliers Establishing Effective Partnerships with Clients Sales Staff Training Days of Training Provided Areas Where More Training Needed Areas Where More Training Needed, Sales Staff vs All Staff Discussion About BioPlan Associates, Inc xii

14 Overview and Methodology O v e r v i e w a n d M e t h o d o l o g y O v e r v i e w There are currently over 2,100 large molecule biotechnology medicines in clinical trials around the world, and nearly 3,600 in preclinical development. 1 These biotherapeutics target nearly 150 disease states and promise to bring better treatments to patients. However, if new biotherapeutics are to be made more affordable, most industry participants agree that improvements in performance and optimization of processes will be necessary. As the demand for production of biotherapeutics continues to grow, the question of whether current manufacturing capacity and production performance are sufficient to deal with the challenge becomes an important strategic issue. The ability to meet demand, whether through in-house manufacturing or out-sourced contract manufacturing, carries long-term cost implications. Building production facilities, bringing new capacity on line, and establishing support services in these areas requires accurate market knowledge, lead-time, large capital expenditures, and careful planning. Both biopharmaceutical producers and contract manufacturers maintain a keen interest in the current and future status of industry capacity and trends. This report summarizes information obtained from worldwide biopharmaceutical manufacturers in March Its intent is to provide a quantitative assessment of industry capacity, production trends, and benchmarks. As an on-going benchmarking effort, it offers a view into current and future potential industry bottlenecks. 1 Source: Biopharm Insights 2006 Data ( BioPlan Associates, Inc. All rights reserved. xiii

15 4th Annual Report and Survey of Biopharmaceutical Manufacturing, Capacity, and Production M e t h o d o l o g y This report is the fourth in a series of annual evaluations by BioPlan Associates, Inc, of the state of the biopharmaceutical manufacturing industry. The strength of the methodology lies in its breadth, which yields a composite view from respondents closest to the industry. BioPlan Associates surveyed 377 responsible individuals at biopharmaceutical manufacturers and contract manufacturing organizations in 29 countries around the world. The survey methodology also encompassed an additional 157 direct suppliers of materials, services and equipment to this industry. Using a web-based survey tool, we obtained and evaluated information regarding respondents current capacity, production, human resources, and outsourcing issues. We assessed respondents projected reasons for bottlenecks, and their perception of how these bottlenecks might be resolved. This year, we brought in experts from the industry to provide in-depth analysis of the events shaping the past year, and the trends that will shape 2007: James V. Blackwell, Sr. Consultant, BioProcess Technology Consultants Geoff Hodge, Vice President, Technology, Xcellerex Barbara Immel, President, Immel Resources Howard L. Levine, President and Founder, BioProcess Technology Consultants Deborah Moon, President, Technical Sales Association Leigh Pierce, President, PacificGMP Thomas C. Ransohoff, Sr. Consultant, BioProcess Technology Consultants Scott Wheelwright, President and Founder, Strategic Manufacturing Worldwide The detailed benchmarking information and industry analysis contained here was prepared based on these data, and information from earlier studies. Additional information on methodology, breakouts on specific segments, and data from earlier surveys may be obtained by contacting us at the address below. Eric S. Langer President BioPlan Associates, Inc Shady Grove Road, Suite 202 Rockville, MD elanger@bioplanassociates.com xiv 2006 BioPlan Associates, Inc. All rights reserved.

16 Chapter 1: Introduction and Discussion C H A P T E R 1 : I n t r o d u c t i o n a n d D i s c u s s i o n 1.1 I n t r o d u c t i o n With 284 biopharmaceutical products approved for marketing in the US, and 276 products approved in the EU, 1 and 6,083 products in the biopharmaceutical pipeline, 2 there is ample evidence of continued growth. Effective planning for biotherapeutic production is strategically important to every biotherapeutic developer, Contract Manufacturing Organization (CMO), and supplier to this industry. The long lead-time required to successfully launch a biotherapeutic requires pre-planning for capacity. This requires a unique level of partnership between manufacturers and suppliers who are capable of developing new technologies. If production is to continue to keep pace with industry s need for capacity, these strategic production decisions will need to be based on solid data, trend tracking, and effective benchmarking of capacity and production issues. Fig. 1-1: Pipeline of Large Molecule (Protein Therapeutics), Worldwide, 2006 # Investigational Drugs NDA/BLA Filed 78 Phase III 312 Phase II 850 Phase I/IND Filed 949 Pre-Clinical/Discovery 3,588 Recent Product Launches 306 Total 6,083 Phase II 14.0% Phase III 5.1% Recent Product Launches 5.0% Others 1.3% Pre-Clinical/ Discovery 59% Source: 2006 Biopharm Insights Data ( Phase I/ IND Filed 15.6% 1 Biopharmaceutical Products in the US and European Markets, 5th Edition (Aug 2006), BioPlan Associates, Inc. Includes recombinant products, vaccines, and blood derivative products. 2 Source: Biopharm Insights 2006 Data ( BioPlan Associates, Inc. All rights reserved

17 4th Annual Report and Survey of Biopharmaceutical Manufacturing, Capacity, and Production Table 1-1: Investigational Drugs: Large Molecule (Protein Therapeutics), Worldwide Total # of Investigational Drugs NDA BLA Filed Phase III Phase II Phase I IND Filed Pre-Clinical Discovery Recent Product Launches Cancer 1, Infectious Diseases 1, Miscellaneous 542 na Central Nervous System Immune System HIV Infections 323 na Diagnostic / Imaging Agents/ Delivery na Cardiovascular Musculoskeletal Hematological Hormonal Systems Respiratory 134 na Gastrointestinal Dermatology Pain Genitourinary 37 na Eye and Ear Total 6, , Source: Biopharm Insight ( BioPlan Associates, Inc. All rights reserved.

18 Chapter 1: Introduction and Discussion 1. 2 S t a t e o f t h e B i o p h a r m a c e u t i c a l I n d u s t r y 3 The biotech industry is celebrating its 30th birthday in 2006 (Genentech was founded on April 7, ). Since then, the industry has grown from a lone startup to one that generates more than $63 billion worldwide. In 2005, revenues for the world s publicly traded biotech companies grew by 18 percent, reaching an all-time high of $63.1 billion. 5 This increase is similar to previous years performance revenues increased by 17 percent in In 2005, the total number of public and private biopharmaceutical companies worldwide was estimated by Ernst & Young in their Beyond Borders, Global Biotechnology Report 2006, as 4,203 companies, with 671 of them being public companies. Worldwide public company R&D expense in 2005 was $20.4 billion, and net loss for the industry was $4.4 billion. Industry employment at public companies in 2004 was estimated at 183,820 employees worldwide, including 137,400 (U.S.), 25,640 (Europe), 13,410 (Asia-Pacific), and 7,370 (Canada). 6 In their BIO Guide to Biotechnology, the Biotechnology Industry Organization estimates U.S. biotechnology employment slightly higher, possibly including employment at private companies as well at 198,300 employees at the end of December 31, In the United States alone, the industry gained 32 new product approvals in 2005, including 17 first-time approvals. Average annual wages in 2004 for employees in the U.S. working in drug and pharmaceutical firms was $79,303 U.S. or $40,000 U.S. above the average, private sector annual wage of $39, Between 2001 and 2004, drugs and pharmaceutical employment in the U.S. grew by 3 percent to 313,000 employees, even in a recessionary period and an era of mergers and acquisitions. 3 We thank Barbara Immel, President of Immel Resources for the industry research in this section, 4 Coming of Age, Beyond Borders: The Global Biotechnology Report 2005, Ernst & Young, nsf/international/beyond_borders_2005_-_coming_age/$file/beyondborders2005comingage.pdf. 5 Global Introduction and Global Year in Review, Beyond Borders, The Global Biotechnology Report 2006, Ernst & Young, 6 Competitive Growth, Growing Competition, Beyond Borders: The Global Biotechnology Report 2005, Ernst & Young, www. ey.com/global/download.nsf/international/beyond_borders_2005_-_competitive_growth/$file/beyondborders2005competitvegrowthgrowing.pdf 7 Biotechnology Industry Facts, BIO Guide to Biotechnology, Biotechnology Industry Organization, Washington, D.C., 8 Growing the Nation s Bioscience Sector: State Bioscience Initiatives 2006, BIO, Biotechnology Industry Organization and Battelle Technology Partnership Practice and SSTI, April 2006, BioPlan Associates, Inc. All rights reserved

19 4th Annual Report and Survey of Biopharmaceutical Manufacturing, Capacity, and Production 1. 3 N e e d f o r I m p r o v e m e n t s i n P r o d u c t i o n The need for improvements in production, and its impact on overall capacity requirements, will be a constantly moving target. Given the pipeline of new products being developed, there will be no shortage of need for production improvement. The biopharmaceutical industry continues to grow both its pipeline and its supporting technology. As upstream yield and efficiencies improve, bottlenecks form downstream at the purification end. Suppliers and manufacturers are beginning to shift their focus from improving yield to reducing costs, and to addressing process complexities such as downstream processing. While production capacity constraints in recent years have decreased, the dynamic nature of this business means that trends shift rapidly, and must be watched and benchmarked. As a case in point, organizations once again this year fear near-term capacity constraints. The 5-year projection for capacity problems this year was up 8 percentage points over Concurrently, the reliance on CMOs is expected to continue to grow as CMO capacity provides support for biotherapeutic developers and reduce the total risks associated with building additional capacity for regulated products that may not reach the market. The expense of capital will drive continued product and process innovations in an effort to decrease the total fixed capacity required for biotherapeutics. Disposable technologies are expanding as manufacturers recognize the potential for reducing capital expenses. Suppliers are being expected to expand their role as participants in the industry s technology growth. There are opportunities for suppliers to better meet their customer s needs in areas such as downstream purification, cost-efficient disposables, regulatory compliance, and overall cost reduction. To maximize efficiencies as the industry expands, suppliers, product developers, CMOs, and governments should continually question how they are supporting this industry, and whether the available technologies are meeting market needs. Each industry participant should ask questions such as: Biotherapeutic Developers Should we focus on increasing total capacity, or improving our overall efficiency? How can we plan more effectively to predict changes in industry forces so that supply and demand imbalances are reduced? Which production technologies are going to be needed in 2-5 years? This lead-time is needed for suppliers to develop new technologies that decrease our need for capacity. Will outsourcing to lower-cost areas reduce overall costs associated with manufacturing? How will regulatory issues change to handle such shifts? How should suppliers and CMOs create agreements, such as licensing, or royalty arrangements, that reduce risk and financial exposure to all parties? Can CMOs today meet the expected capacity demands, given the lead time for new pipeline products? Since availability of a trained workforce is a primary bottleneck to production, what must we do to retain current biopharmaceutical employees, and attract new ones? How will we train employees in the future, so that overall productivity increases? BioPlan Associates, Inc. All rights reserved.

20 Chapter 1: Introduction and Discussion CMOs What technologies should we be working on today that can reduce overall costs to ourselves and to our customers? What technology platforms might be used to reduce costs of scale-up? Do we have reasonable levels of available capacity for customers future needs? Are we actively tracking technology and industry developments so we can support this industry and grab opportunities? Are we providing our customers the level of customer service they need, such as through better tech transfer, and project management? How will this improve our efficiency? How can we better support biotherapeutic developers with installed capacity by meeting surge capacity requirements? Industry Suppliers Are we actively tracking which novel products, services, and technologies the industry needs today, and in 5 years? Those needs may require years of new product development to provide effective solutions. Can we be providing better regulatory support as part of our product or service offering? Can we reduce costs for products or services that customers have indicated are too expensive for them to be able to adopt? Do we consider how our products provide a competitive economic advantage to our customers? Government In what ways can we attract industry to our region beyond tax breaks or reduction in red-tape? Do we understand what the industry really needs? Are we actively working on providing a regional work force ready, willing, and able to meet the needs of the industry? Are we actively and productively working with educational institutions at all levels to meet human resource requirements? Can we enhance our region s/nation s position in biotechnology and can we attract more biotherapeutic manufacturing? How can we improve our capabilities to rapidly develop and manufacture products that will be needed to address biodefense or pandemic threats? 2006 BioPlan Associates, Inc. All rights reserved

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22 Chapter 2: Demographics C h a p t e r 2 : D e m o g r a p h i c s Survey respondents were a diverse group of biopharmaceutical managers and executives covering a spectrum of biopharmaceutical and CMO firms. We included firms of all sizes, but we specifically sought input from larger manufacturers with substantial current capacity. While respondents had a broad range of responsibilities, all were involved with manufacturing in some way and most were senior people in their organizations. This was an international effort, and we received responses from organizations around the world, including input from facilities in 29 different countries. Our partner organizations, BayBio (South San Francisco CA), BioProcessUK (London, United Kingdom) EuropaBIO (Brussels, Belgium), and Massachusetts Biotechnology Council (Cambridge, MA), contributed their time and effort to ensure accurate coverage of the worldwide biopharmaceutical industry. The diversity of respondents provides a unique and comprehensive view of the industry from those closest to the present state of their organizations, with a good understanding of the current and future business drivers, and manufacturing plans and needs. This provides one of the best means for understanding the current state of the industry and its future course. The breakdown of organizations into CMOs and biotherapeutic manufacturers provides insights into the two major segments of the industry; these two types of organizations have different business drivers, risk profiles, and costs of capital BioPlan Associates, Inc. All rights reserved

23 4th Annual Report and Survey of Biopharmaceutical Manufacturing, Capacity, and Production Area of Involvement Of the 337 biopharmaceutical manufacturers and contract manufacturing organizations (CMOs) responding to the 2006 survey, 23.4% of respondents were primarily involved in process development specifically for biopharmaceutical manufacturing; 21.1% were involved primarily in scale-up or clinical-scale production. Large-scale cell culture for therapeutics accounted for 16.9%, and large-scale microbial fermentation for therapeutics were 9.2% of respondents. Large-scale contract manufacturers accounted for 11.3%, and 6.8% were involved in vaccine production. Fig. 2-1: In which areas of biopharmaceutical manufacturing is your organization currently involved? (N=337) 0% 5% 10% 15% 20% 25% Process Development for biopharmaceutical manufacturing Scale-up/clinical-scale production for biopharmaceuticals 21.1% 23.4% Large-scale cell culture production for therapeutics 16.9% Large-scale contract manufacturing (CMO) for biopharmaceuticals Large-scale microbial fermentation for therapeutics Other contract manufacturing (CMO) for biopharmaceuticals Vaccine production Other large-scale biopharmaceutical manufacturing 11.3% 9.2% 8.0% 6.8% 3.3% 0% 5% 10% 15% 20% 25% BioPlan Associates, Inc. All rights reserved.

24 Chapter 2: Demographics Respondents Titles Respondents were screened with regard to their areas of responsibility. Process development (PD) managers and scientists made up 21.4% of respondents. VP s or directors of manufacturing accounted for 16.3%. Those directly involved in PD, manufacturing, operations, or engineering made up nearly 63% of the survey respondents. Fig. 2-2: Which best describes your primary job responsibilities? (N=337) Process Development Manager or Scientist 21.4% VP or Director Manufacturing Production 16.3% VP or Director Marketing, Sales Business Dev. 13.6% VP or Director R&D 9.5% VP or Director Operations 8.9% Process Engineering 8.3% Other Scientist or Engineer 8.0% VP or Director QA/QC, Validation 6.8% President / CEO 6.2% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 2006 BioPlan Associates, Inc. All rights reserved

25 4th Annual Report and Survey of Biopharmaceutical Manufacturing, Capacity, and Production Facility Locations Nearly 49% of respondents were from the United States, with Europe representing 40% of respondents. Other countries represented in the survey included: Canada, Sweden, Switzerland, Denmark, Belgium, Netherlands, India, Austria, France, Ireland, Italy, Portugal, Finland, Australia, Spain, Korea, Argentina, Puerto Rico, Vietnam, Taiwan, Slovakia, Russia, New Zealand, Malaysia, Czech Republic, and Cuba. Fig. 2-3: Where is your facility located? 0% 20% 40% 60% 80% 100% US-Northeast 85 US-Southwest US-Central US-Northwest US-Southeast Germany United Kingdom Canada Sweden Switzerland Denmark Belgium Netherlands India Austria France Ireland Italy Portugal Finland Australia Spain Korea Argentina Others % 20% 40% 60% 80% 100% Fig. 2-4: Respondents' Facility Location, by Region Europe 40% R.O.W. 11% U.S. 49% Others: Puerto RIco, Vietnam, Taiwan, Slovakia, Russia, New Zealand, Malaysia, Czech Rep., Cuba BioPlan Associates, Inc. All rights reserved.

26 Chapter 2: Demographics Respondents Size In terms of size of respondents biopharmaceutical manufacturing facilities in 2006, the greatest percentage of respondents (35.9%) had manufacturing staff in the person range while nearly 15% of respondents had over 500 employees engaged in biopharmaceutical manufacturing at their facility. In comparison to the 2005 data, there were relatively fewer small-scale production (1-9 employee) facilities (7.2% in 2006, and 18.6% in 2005). Part of this shift in the size of representative companies in 2006 may have occurred as a result of the survey methodology and efforts to target larger-scale respondents. Fig. 2-5: Number of Employees (Range) Associated with Biopharmaceutical Manufacturing Working at Facility (Percent of Respondents) 0% 5% 10% 15% 20% 25% 30% 35% 40% % 18.6% % 35.9% % 25.1% % 15.0% Percent in % 16.8% Percent in % 5% 10% 15% 20% 25% 30% 35% 40% 2006 BioPlan Associates, Inc. All rights reserved

27 4th Annual Report and Survey of Biopharmaceutical Manufacturing, Capacity, and Production Respondents Areas of Biopharmaceutical Manufacturing Operations Over three-quarters of respondents were involved in mammalian cell culture (77%). Sixty-three percent had microbial fermentation production operations. This is similar to the percentages in 2005 (75.5% for mammalian, and 62.0% for microbial systems). Fig. 2-6: Biopharmaceutical Manufacturing Systems: In which of the following does your organization currently have production operations? Mammalian Cell Culture 76.8% Microbial Fermentation 63.4% Yeast 29.9% Insect Cells 14.1% Other 8.7% Plant Cells 3.0% 0% 10% 20% 30% 40% 50% 60% 70% 80% BioPlan Associates, Inc. All rights reserved.

28 Chapter 2: Demographics Respondents Production Operations, Phase of Development In 2006, over two-thirds of respondents (69.0%) had preclinical biopharmaceutical operations, and 44.9% had biopharmaceutical products on the market. In comparison to last year, the number of companies with marketed products rose slightly from 43% to 45%. However, the number of companies with products in R&D declined 13 percentage points, from 73% to 60%. The number of companies with preclinical products declined as well, from 75% in 2005 to 69% in Fig. 2-7: Phase of Development In which of the following does your organization currently have products or operations? R&D 60.1% 73.3% Preclinical 69.0% 75.4% Phase I 62.3% 62.6% Phase II 57.6% 63.6% Phase III Marketed 51.3% 46.5% 44.9% 42.8% year 2006 year % 10% 20% 30% 40% 50% 60% 70% 80% 2006 BioPlan Associates, Inc. All rights reserved

29 A b o u t B i o P l a n A s s o c i a t e s, I n c. BioPlan Associates, Inc., is a biotechnology and life sciences market analysis, research and publishing organization. We have worked with biotechnology, biopharmaceutical, diagnostic, and life sciences companies of all sizes since Our extensive market analysis, research and management project experience covers biotechnology and biopharmaceutical manufacturing, vaccine and therapeutics development, contract research services, diagnostics, devices, biotechnology supply, physician office labs and hospital laboratory environments. We provide information our clients require to make informed strategic decisions, define objectives, and identify customer needs. Our clients are better able to make informed, market-based decisions because they understand the market and customer needs in high technology industries. On the training side, our principals and associates teach biotechnology commercialization courses at Johns Hopkins University, American University, and for customized seminars. Programs include: Marketing Technical Products, Marketing Research for Technical Products, ROI/Value Based Selling, Managing Technical People, Pricing Technology, and others. BioPlan Associates, Inc Shady Grove Road, Suite 202 Rockville, MD USA Tel: