Cell Therapy Manufacturing Market

Just to prove I haven't abandoned serious blogging to become a cartoonist, I've got a heavy one for ya. Grab a beverage and a comfy chair - this one’s a little dense for a blog but I excerpted it out of an article I'm submitting for publication and didn't want it to go to waste...

This is my attempt to define the cell therapy manufacturing market. According to my database, there are currently 700+ stakeholder companies[i] in the cell therapy sector. This includes ~250 therapeutic “cell therapy” companies with approximately 344[ii] products in the market or in some stage of clinical or pre-clinical development[iii].

Companies
My data suggests the cell therapy products around the world (both commercially available and in development) can currently be broken down into the following categories:

Table 1
Manufacturing Costs
What follows is a sample analysis of one way to assess the manufacturing sector of the cell therapy market.

For the purposes of this analysis, I have assumed average spending at the various stages of therapeutic product manufacturing to be that shown in the table below. It must be noted that while these numbers are clearly within the range of what a company might spend at each phase they are chosen merely for illustrative purposes and are NOT the result of any researched conclusion that these numbers represent the average or mean amount spent by companies.

Table 2
Using those averages and based on the number of products in each stage as outlined in Table 1, the current global value of cell therapy product manufacturing would be estimated to be as follows:

Table 3
Manufacturing as a % of Global Cell Therapy Market
A $542 million manufacturing expenditure in 2008 would represent 2.2% of an overall market estimation of $25 billion (see my upcoming paper for more analysis of why I believe this is the best available estimate of the 2008 cell therapy market as I define it). This would average out to roughly $1.6 million per product and $2.2 million per company spent on manufacturing[vi].

To help test the accuracy of these calculations, Michael Lysaght graciously provided the data set behind his recent publication in Tissue Engineering[iv]. Lysaght provided the annual expenditures for over 150 therapeutic companies broken down by phase of development (pre-clinical, phase I, II, II, and commercial). The average expenditures per company by phase are shown below:

Table 4
Using the previous estimations of manufacturing costs-per-phase as shown in Table 2, one can estimate what percentage of overall annual expenditures is represented by manufacturing costs in the different phases of development. These are show below:

Table 5
Based on those figures, the overall estimated amount spent on manufacturing by these companies in 2008 would be $160 million. Using Lysaght’s current market estimate of $3.4 billion, $160 million represents 4.7% of the market.

Based on both these calculations, the amount of money spent on manufacturing as a percentage of the overall market would lie somewhere 2.2% and 4.7%.

If one applies these percentages to a broader market definition and the broader market assessment at $25 billion market, the manufacturing subsector would be between $550 million and $1.175 billion.

It should be noted, however, that Lysaght’s “market” does not include all therapeutic companies as I define the sector and also excludes tools, reagents, services, non-clinical research, etc.

It is also worth noting that percentage-of-market is quite different from percentage-of-expenditures. Most organizations developing therapeutics are likely to spend more like 10-20% of their cost of goods on manufacturing but the market is comprised of more than just therapeutic companies’ expenditures thus explaining the lower percentage as expressed as a percentage of the market.


Outsourced Manufacturing Market
Based on information gleaned from public sources and confidential discussions with the primary contract manufactures in the industry[viii], I believe approximately 40 of the total 340+ cell therapy products currently in development or on the market – approximately 12% - are being outsourced to corporate contract manufacturing organizations (CMOs)[ix] for manufacturing.

On another analysis, again based on information gleaned from public sources and confidential discussions with the primary contract manufactures in the industry[x], I believe not more than $60 million is being spent this year for CMO manufacturing services. This represents ~11% of the ~$550 million used in the sample analysis above.

Based on data from more mature predecessor biotechnology sectors, a number of experts believe the rate of manufacturing outsourcing will increases as the cell therapy industry matures.

According to a 2005 survey conducted by BioPlan Associates[xi], 35% of biomanufacturers were at that time outsourcing at least some of their biologics production in mammalian, microbial, yeast, plant, or insect systems. These manufacturers projected this number would increase by 30% by 2008. Overall, nearly half of all biopharmaceutical manufacturers responded that they might contract-out production of biologics by 2008. According to a 2005 Frost & Sullivan report, the global contract manufacturing industry for pharmaceuticals was then projected to grow at a rate of 11% over the next 6 years from $13.6 billion in 2005 to $25 billion in 2011 [xii].

I believe it is reasonable to assume that the percentage of products in the cell therapy sector being outsourced for manufacturing will increase.

In addition to a growing rate of outsourced manufacturing, it would be fair to assume growth in the overall dollar value of the outsourced manufacturing market based on the assumption that the products currently in commercial or mature stages of the development pipeline are comprised of a higher percentage of simpler and unregulated cell therapy products than is represented in the second wave of cell therapy products now making their way through the development pipeline.

While this may not represent a linear path of growth if the third wave of products are – more proportionately allogeneic and arguably again on the simpler side of the processing-complexity scale – it is reasonable to expect manufacturing costs to be higher for the same number of products over the next five years than they have been for the past 5 years. Depending on the development of embryonic stem cell (ESC) products, one can currently expect they will involve a more complex manufacturing process and therefore again raise manufacturing costs comparatively.

Based on this data and understanding and given an industry CAGR ranging from 13-40%, it would appear conservative to project that the global contract manufacturing business for cell therapy products will grow at a rate of at least 2% per year above the sectors’ CAGR over the next 5 years.


Summary
Based on the assumed manufacturing-expenditures-per-product-phase in Table 1, the total spent on cell therapy product manufacturing is estimated to be around $542 million.

Based on an estimated $25 billion cell therapy market in 2008, this means somewhere between 2.2% and 4.7% of the overall market is spent on manufacturing.

Approximately 11-12% of cell therapy product manufacturing is currently outsourced to private, industry contract manufacturers with this rate expected to grow faster than the market over the next number of years.

The assumed manufacturing-expenditures-per-product-phase in Table 1 are gross estimated averages. Changing these numbers skew the end result considerably. Consequently this is no better than a a rough-order-of-magnitude and sample assessment of the industry's manufacturing costs but I hope it serves to inform further discussion and better analysis.

As always, I welcome your comments and hope a few of you will read this close enough to point out any errors or ways we could improve this analysis ...

--Lee
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[i] Estimates range from ~225 to ~300 therapeutic companies among what I define as ~700 stakeholder companies in the cell therapy industry. Sources: author’s database; Cell Therapy Pages (Connexon Communications); Proteus Venture Partners; Bionest Partners. Cell therapies and tissue engineering. February 2007; Burger SR. 2004. Cell and Gene Therapy - Challenges and Strategies for an Emerging Industry. Cell and Gene Therapy 5:9-14.
[ii] For the purposes of my analysis below I have lowered this to 329 product discounting basic stem cell transplants being done commercially by companies in various countries. Even the larger number (344) does not include pre-licensed “products” being researched or “developed” by academic institutions.
[iii] “Pre-clinical development” is defined to product in development prior to initiation of a phase I trial but not including products in the early research phase.
[iv] This figure is based on calculations from the data used by Michael Lysaght, PhD, Professor and Director of the Center for Biomedical Engineering at Brown University, in publication of Lysaght M, Jaklenec A, Deweerd E: Great Expectations: Private Sector Activity in Tissue Engineering, Regenerative Medicine, and Stem Cell Therapeutics. Tissue Eng 14, 305. 2008. That data indicates that the average annual spending of companies categorized as “commercial” was $30 million. I then assumed that manufacturing represents 10% of annual expenditures based on the calculation that manufacturing represents between 8-15% of annual expenditures cited by Lysaght in the data. Annual expenditure for commercial-stage manufacturing does and will vary wildly depending on the type of product and the volume of production by as much, for example, as $1.5 million and $80 million for production of 20,000 products per year - the difference largely driven by the products being allogeneic versus autologous.
[v] Calculated using 53 companies discounting for at least some of the basic stem cell transplants being done commercially by companies in various countries.
[vi] Calculated using 329 products and 250 companies.
[vii] Average annual expenditure of the 26 company in the Lysaght database with at least one product listed.
[viii] Lonza, Progenitor Cell Therapy, Cognate BioServices, Apptec Laboratories, Angel Biotechnology, Eufets, Cell Therapy Pty, and PharmaCell. We have not included products outsourced to other biotechnology companies using excess capacity to provide contract services not products outsourced to academic centers.
[ix] This excludes manufacturing being done by pharma partners, academic institutions or non-profit organizations.
[x] Lonza, Cognate BioServices, Apptec Laboratories, Angel Biotechnology, Eufets, Cell Therapy Pty, and PharmaCell. I have not included products outsourced to other biotechnology companies using excess capacity to provide contract services not products outsourced to academic centers.
[xi] “Advances in Large Scale Biopharmaceutical Manufacturing and Scale-Up Production, 2005”, a survey by BioPlan Associates, Inc. (2005), as quoted in Broeze RJ: Key Challenges facing Bio Manufacturing, BioProcessing & BioPartnering 1 (2006).
[xii] Frost & Sullivan: Global Pharmaceutical Contract Manufacturing Market 2005.