TABLE OF CONTENTS Chapter 1: EXECUTIVE SUMMARY 1.1 Introduction 1-1 1.2 Market Overview 1-2 1.2.1 Introduction 1-2 1.2.2 Industry Drivers 1-3 1.2.3 Market Size 1-5 1.3 Summary of Customer Needs 1-6 1.3.1 Products 1-6 1.3.2 Outsourcing Strategies 1-8 1.3.3 Outsourcing Budgets 1-9 1.4 Summary of Fill-and-Finish Contractors Capabilities 1-10 1.4.1 Dosage Forms 1-11 1.4.2 Capacity Increases 1-12 1.4.3 Industry and Company Growth Rates 1-13 1.4.4 Contracting Business by Product Type 1-14 1.5 Industry Trends and Observations 1-15 Chapter 2: METHODOLOGY, DEFINITIONS, AND ACRONYMS 2.1 Research Objectives 2-1 2.2 Research Methodology 2-2 2.3 Definition of Parenteral Fill-and-Finish Manufacturing 2-4 2.4 Box-and-Whiskers Plot Definition 2-4 2.5 Acronyms 2-5 Chapter 3: FILL-AND-FINISH CONTRACT MANUFACTURING: MARKET OVERVIEW 3.1 Introduction 3-1 3.2 Suppliers: The Fill-and-Finish Contract Manufacturers 3-2 3.2.1 Types of Fill-and-Finish Contract Companies 3-2 3.2.2 Fill-and-Finish Contract Manufacturing Companies 3-3 3.2.3 Dosage Forms and Services 3-5 3.2.4 Fill-and-Finish Contract Manufacturing Organizations 3-7 Capacities
TABLE OF CONTENTS (continued) Chapter 3: 3.3 The Customers: Pharmaceutical and Biotechnology 3-9 Companies 3.3.1 Customers Products 3-9 3.3.2 Outsourced Fill-and-Finish by Dosage Form 3-10 3.3.3 Customers Future Outsourcing Expectations 3-11 3.3.4 Outsourcing Needs 3-12 3.4 Market Capacity 3-14 3.5 Market Size 3-15 3.5.1 Estimates of Market Size Based on Customer Spending 3-15 3.5.2 Estimates of Market Size Based on Contractor Revenues 3-17 3.5.3 Market Size by Dosage Form and Service Categories 3-17 3.6 Market Growth Forecasts 3-18 3.7 Trends in the Fill-and-Finish Contract Manufacturing 3-20 Market 3.7.1 Industry Opportunities and Challenges 3-20 3.7.2 Overall Industry Trends 3-21 Chapter 4: PHARMACEUTICAL AND BIOTECHNOLOGY COMPANIES: CLIENT ANALYSIS 4.1 Introduction 4-1 4.1.1 Respondent Titles and Location 4-1 4.1.2 In-House Manufacturing Sites 4-2 4.1.3 Recombinant Large-Molecule Drug Products on Market 4-4 4.2 Manufacturing Demand 4-5 4.2.1 Manufacturing Needs 4-5 4.2.2 Dosage Forms 4-11 4.2.3 Clinical and Commercial Products 4-13 4.3 Manufacturing Technologies 4-17 4.3.1 Planned Format for Drug Launch 4-17 4.3.2 New Delivery Technologies 4-19 4.3.3 Special Handling Requirements 4-23 4.3.4 Yield Loss 4-27
TABLE OF CONTENTS (continued) Chapter 4: 4.4 Outsourcing Strategies 4-32 4.4.1 Current In-House Filling Capacity and Outsourcing 4-32 Strategy 4.4.2 Changes to In-House Filling Capacity 4-38 4.4.3 Impact of Core/Non-Core Technology 4-41 4.4.4 Impact of Standard/Non-Standard Technology 4-45 4.4.5 Focus of Filling Outsourcing over Next 5 Years 4-48 4.5 Outsourcing Needs 4-52 4.5.1 Outsourced Services 4-52 4.5.2 Areas Underserved by Fill-and-Finish CMOs 4-54 4.5.3 Key Challenges a Fill-and-Finish CMO Can Help 4-60 Alleviate 4.6 Contractor Selection 4-65 4.6.1 Essential Characteristics Sought in a F&F Contractor 4-65 4.6.2 Key Components for Successful Collaboration with a 4-72 Fill-and-Finish CMO 4.6.3 Regional Outsourcing Preference 4-76 4.6.4 Opinion of Emerging Market CMOs 4-79 4.7 Contractor Pricing 4-84 4.7.1 Price Models Used 4-84 4.7.2 Fee Structure: Technology Transfer 4-88 4.7.3 Fee Structure: Reservation 4-92 4.7.4 Fee Structure: Cancelation 4-95 4.8 Outsourced Spending 4-100 4.8.1 Prices Paid to Fill-and-Finish CMOs 4-100 4.8.2 Outsourcing Budgets 4-105 4.8.3 Outsourcing Budgets by Service Category 4-108 4.9 Contractor Relationships 4-112 4.9.1 Identifying Contract Partners 4-112 4.9.2 Preferred Contractors 4-114 4.9.3 Top Concerns of Contractors Meeting Expectations 4-116 4.9.4 Warranties, Guarantees and Indemnifications 4-120 4.9.5 Ideal Production Network or Alliance Structure 4-123 4.10 Future Trends and Expectations 4-129 4.10.1 Regulatory Requirement Challenges 4-129 4.10.2 Future F&F Manufacturing Challenges and Bottlenecks 4-132 4.10.3 Future Technology and Operational Trends 4-137 4.10.4 Future Trends in Biopharmaceutical Fill-and-Finish 4-145 Contract Manufacturing
TABLE OF CONTENTS (continued) Chapter 5: FILL-AND-FINISH CONTRACT MANUFACTURERS 5.1 Introduction 5-1 5.1.1 Respondents Titles and Experience 5-1 5.1.2 Company Locations 5-2 5.1.3 Regulatory Approval Status 5-3 5.1.4 One-Stop-Shop CMO Model 5-4 5.2 Capacity 5-8 5.2.1 Dosage Forms 5-8 5.2.2 Current Capacity for Fill-and-Finish 5-10 5.2.3 Current Capacity for Lyophilization 5-13 5.2.4 Capacity Expansions 5-15 5.3 Manufacturing Practices 5-17 5.3.1 Contracting Business by Product Type 5-17 5.3.2 Current and Future Capacity Utilization 5-19 5.3.3 Average Batch Size and Batches per Fill Line 5-21 5.3.4 Number of Employees by Function 5-24 5.3.5 Cost Reduction Plans 5-25 5.4 Manufacturing Technologies 5-28 5.4.1 Technology Impacts on Operations 5-28 5.4.2 Average Yield Loss 5-30 5.4.3 Focus of Capabilities in Next 5 Years 5-32 5.5 Pricing 5-35 5.5.1 Price Structures for Fill-and-Finish 5-35 5.5.2 Batch Pricing 5-38 5.5.3 Contractors Technology Transfer Fees 5-40 5.5.4 Contractors Reservation Fees 5-43 5.5.5 Contractors Cancellation Fees 5-44 5.5.6 Gross Profit Margin 5-46 5.6 Customer Relationships 5-47 5.6.1 Strengths and Weaknesses of Contract Manufacturers 5-47 5.6.2 Competitive Attributes 5-51 5.6.3 Warranties, Guarantees and Indemnifications 5-53 5.6.4 Production Networks or Alliances 5-56 5.6.5 Trade Shows 5-59
TABLE OF CONTENTS (continued) Chapter 5: 5.7 Fill-and-Finish Industry Revenues and Growth 5-61 5.7.1 Opportunities for Growth in the Fill-and-Finish Industry 5-61 5.7.2 Industry and Company Growth Rates 5-64 5.7.3 Current and Expected Revenue Categories 5-66 5.7.4 Revenues from Industry Segments 5-68 5.7.5 Revenues from World Regions 5-70 5.8 Challenges and Future Trends for F&F Manufacturing 5-71 5.8.1 Most Significant Challenges/Threats 5-71 5.8.2 Regulatory Requirement Challenges 5-74 5.8.3 Potential Growth Areas 5-76 5.8.4 Trends for the Future of F&F Contract Manufacturing 5-78 Appendix A: Write-Ups of Interviews with 26 Pharmaceutical and Biotechnology Company BioManufacturing Directors Worldwide, Unnamed and Edited for Confidentiality Appendix B: Directory of Biopharmaceutical Fill-and-Finish Contract Manufacturers Appendix C: Interview Guide for Pharmaceutical and Biotechnology Company Respondents Appendix D: Interview Guide for Biopharmaceutical Fill-and-Finish Contract Manufacturers
LIST OF TABLES Chapter 1 1.2-1 Biopharmaceutical Fill-and-Finish Contract Manufacturing Industry 1-4 Capacity Estimate in Units 1.3-1 Respondents Capacity by Segment 1-8 1.3-2 Outsource Decision Criterion 1-9 1.4-1 Fill Line Expansion Plans 1-13 1.5-1 Industry Trends and Challenges 1-16 Chapter 2 2.2-1 Market Research Steps 2-2 2.5-1 Acronyms 2-5 Chapter 3 3.2-1 Rating of Respondents Fill-and-Finish Contract Manufacturers 3-4 3.2-2 CMO Revenue Mix by Service Category: 2015 3-7 3.2-3 Biopharmaceutical F&F Contract Manufacturing Industry Capacity 3-8 Estimates in Units 3.3-1 Estimates of Needs for Outsourced Volumes for the Respondent Group 3-13 3.4-1 Biopharmaceutical F&F Outsourced Manufacturing Capacity Utilization 3-15 3.5-1 Worldwide 2015 Market Size for Biopharmaceutical Fill-and-Finish 3-16 Contract Manufacturing: Estimates Based on Customer Spending: US$ 3.5-2 Worldwide 2015 Market Size for Biopharmaceutical Fill-and-Finish 3-17 Contract Manufacturing: Estimates Based on Contractors Revenues: US$ 3.5-3 Market Size by Dosage Forms: US$ 3-17 3.5-4 Market Size by Service Category: US$ 3-18 3.7-1 Observations on Biopharmaceutical Fill-and-Finish Contract Manufacturing 3-21 Industry Trends: Manufacturing Trends Chapter 4 4.1-1 Titles of Pharmaceutical and Biotechnology Company Respondents 4-2 4.1-2 Location of In-House Fill-and-Finish Manufacturing Sites 4-4 4.1-3 Number of Recombinant Large-Molecule Drug Products on Market 4-4
LIST OF TABLES (continued) Chapter 4 4.2-1 Respondents Current and Expected Capacity Needs for Outsourced 4-6 Product Vials (Lyophilized) 4.2-2 Respondents Current and Expected Capacity Needs for Outsourced 4-7 Product Vials (Not Lyophilized) 4.2-3 Respondents Current and Expected Capacity Needs for Outsourced 4-8 Products Syringes (Lyophilized) 4.2-4 Respondents Current and Expected Capacity Needs for Outsourced 4-9 Products Syringes (Not Lyophilized) 4.2-5 Respondents Current and Expected Capacity Needs for Outsourced 4-9 Products Cartridge (Not Lyophilized) 4.2-6 Number of Outsourced Products by Phase by Year 4-12 4.2-7 Average Outsourcing Percentage by Dosage Form 4-13 4.2-8 Number of Biopharmaceutical Products Filled by Dosage Form 4-14 4.2-9 Types of Respondents Biopharmaceutical Products by Dosage Form 4-17 4.3-1 Delivery Technologies Under Investigation 4-21 4.3-2 Cause for Fill-and-Finish Yield Losses 4-29 4.4-1 Respondent Capacity by Segment 4-33 4.4-2 Outsource Decision Criterion Respondents with In-House Capacity 4-34 4.4-3 Outsource Decision Criterion Respondents with No In-House Capacity 4-36 4.4-4 Impact of Core Technology on Outsourcing Decision 4-43 4.4-5 Focus of Fill-and-Finish Outsourcing Efforts in Next 5 Years 4-49 4.5-1 Outsourcing of Fill-and-Finish Related Services 4-53 4.5-2 Number of Products Currently and Planned to Outsource by Service 4-54 4.5-3 Areas Underserved by Fill-and-Finish CMOs 4-55 4.5-4 Challenges Fill-and-Finish CMOs can Help Alleviate 4-61 4.6-1 Ranked Characteristics of a Good Service Level at F&F Contractor 4-66 4.6-2 Rationale for Number 1 Ranked Good Service Characteristic 4-68 4.6-3 Key Component for Successful Collaboration 4-72 4.6-4 Regional Outsourcing Preferences 4-77 4.6-5 Observations and Influences on Opinion about Emerging-Market CMOs 4-80 4.7-1 Price Model Used for Fill-and-Finish Services by Respondent Type 4-84 4.7-2 Average Technology Transfer Fees Paid by Dosage Form 4-89 4.8-1 Price Per-Batch by Dosage Form by Product Phase 4-101 4.8-2 Examples of Other Services and Material Charges 4-105 4.8-3 Fill-and-Finish Outsourcing Budgets by Respondent Type: 2015, 2017, 2020 4-107 4.8-4 Simple Average: Percentage of F&F Outsourcing Budget by Service 4-109 4.8-5 Weighted Average: Percentage of F&F Outsourcing Budget by Service 4-111
LIST OF TABLES (continued) Chapter 4 4.9-1 Search Modes for Fill-and-Finish Contractors 4-113 4.9-2 Rating of Respondents Fill-and-Finish Contract Manufacturers 4-115 4.9-3 Top Concerns of Fill-and-Finish Contractors Meeting Expectations 4-116 4.9-4 Warranties, Guarantees and Indemnifications Negotiated by Respondents 4-121 4.9-5 Proposed Models and Arrangements with a CMO 4-125 4.10-1 Regulatory Requirements That Present the Greatest Challenges 4-129 4.10-2 Challenges and Bottlenecks Facing Fill-and-Finish Manufacturing 4-133 4.10-3 Technology Trends in Drug Presentations 4-138 4.10-4 Technology Trends at CMOs 4-139 4.10-5 Operational and Business Trends in Fill-and-Finish Contract Manufacturing 4-140 4.10-6 Future Trends in Biopharmaceutical Fill-and-Finish Contract Manufacturing 4-145 Chapter 5 5.1-1 Titles of Fill-and-Finish Contractor Respondents 5-1 5.1-2 Fill-and-Finish Contractors: Headquarter Locations 5-3 5.1-3 Regulatory Agency Approvals 5-4 5.1-4 Relevance of Being a One-Stop-Shop 5-5 5.2-1 Average Batch Size per Fill Line and Contractor 5-11 5.2-2 Fill Capacity by Batch Size at Respondents Facilities in 2015 5-11 5.2-3 Lyophilizer Capacity by Shelf Space at Respondents Facilities in 2015 5-13 5.2-4 Lyophilizer Capacity by Batch Size at Respondents Facilities in 2015 5-14 5.2-5 Fill Line Expansion Plans 5-16 5.2-6 Lyophilizer Expansion Plans 5-17 5.3-1 Percent of Contracting Business by Product Type: 2015 and 2017 5-18 5.3-2 Capacity Utilization Rate: Fill Line 5-19 5.3-3 Capacity Utilization Rate: Lyophilization 5-21 5.3-4 Number of Batches Ran per Fill Line 5-22 5.3-5 Batch Size Ran by Fill Line 5-23 5.3-6 Number of Employees by Function 5-24 5.3-7 Plans to Reduce Fill-and-Finish Manufacturing Costs 5-26 5.4-1 Technology Impacts on Fill-and-Finish Operations 5-29 5.4-2 Sources of Product Yield Loss 5-31 5.4-3 Focus of Manufacturing Capabilities 5-33 5.5-1 Pricing Methods for Clinical and Commercial Phase 5-37 5.5-2 Calculation Methods of Technology Transfer Fees 5-41 5.5-3 Contractors Cancellation Fees: Average Percentage of Total Project Fee 5-45 5.5-4 Gross Profit Margin 5-46
LIST OF TABLES (continued) Chapter 5 5.6-1 Contract Manufacturers Strengths and Weaknesses 5-48 5.6-2 Contractor Competitive Advantage 5-51 5.6-3 Warranties, Guarantees and Indemnifications Accepted by F&F CMOs 5-54 5.6-4 Desired Arrangements with Clients 5-57 5.6-5 Trade Shows Named by Fill-and-Finish Contractors 5-60 5.6-6 Trade Shows for Best Quality Leads 5-60 5.6-7 Trade Shows for Best Technical Information 5-61 5.7-1 Opportunities for Growth in the Fill-and-Finish Industry 5-62 5.7-2 Annual Growth Rates: Industry Estimate versus Company Forecast 5-64 5.7-3 Revenue by Service Category: 2015 5-66 5.7-4 Revenue Change Expected by Service Category: 2015 to 2017 5-68 5.7-5 Customer Mix 5-69 5.7-6 Geographic Mix 5-70 5.8-1 Future Challenges to Business Operations 5-72 5.8.2 Current Regulatory Challenges 5-74 5.8.3 Potential Fill-and-Finish Manufacturing Growth Areas 5-76 5.8.4 Future Technology Trends 5-78 5.8.5 Future Business Trends 5-79
LIST OF FIGURES Chapter 1 1.2-A Size of Worldwide Biopharmaceutical Fill-and-Finish Contract 1-6 Manufacturing Industry in US$B 1.3-A Respondents 82 Biopharmaceutical Products by Phase 1-7 1.3-B Number of Products Outsourced by Dosage Form: 2015 2020 1-7 1.3-C Simple Average Percentages of Expected Overall Outsourced Budget 1-10 1.4-A Dosage Forms Produced by Number of Contractor Respondents 1-11 1.4-B Percent of Fill Lines Available among Contractor Respondents for Various 1-12 Dosage Forms 1.4-C Annual Growth Rates: Industry Estimate versus Company Forecast 1-14 1.4-D Percent of Contracting Business by Product Type: 2015 and 2017 1-15 Chapter 2 2.4-A Explanation of Box-and-Whiskers Plot 2-5 Chapter 3 3.2-A Dosage Forms Produced by Number of Contractor Respondents 3-5 3.2-B Percent of Fill Lines Available among Contractor Respondents for Various 3-6 Dosage Forms 3.3-A Respondents 82 Biopharmaceutical Products by Phase 3-10 3.3-B Percent of Products Outsourced: 2015 3-11 3.3-C Simple Average Percentages of Expected Overall Outsourcing Budget 3-12 3.3-D Number of Products Outsourced by Dosage Form: 2015 2020 3-13 3.3-E Estimates of Needs for Outsourced Batches for the Worldwide Industry 3-14 3.6-A Size of the Worldwide Biopharmaceutical Fill-and-Finish Contract 3-19 Manufacturing Market in US$B Chapter 4 4.1-A In-House Fill-and-Finish Manufacturing Capability 4-3 4.2-A Summation of Outsourced Units Required Vials 4-10 4.2-B Summation of Outsourced Units Required Syringes 4-11 4.2-C Percentage of Products Outsourced 2015 4-12 4.2-D Number of Respondents Products Produced by Dosage Form 4-15 4.2-E Respondents 82 Biopharmaceutical Products by Phase 4-15 4.2-F Respondents 82 Biopharmaceutical Products by Company Type 4-16 4.3-A Format Used for Drug Product Launch 4-18 4.3-B Investigation of New Delivery Technologies 4-20 4.3-C Needle-Based versus Needle-Free Delivery Technologies Under 4-21 Investigation
LIST OF FIGURES (continued) Chapter 4 4.3-D Respondents Special Handling Requirements 4-23 4.3-E Distribution of Percent of Products with Special Handling Needs 4-24 4.3-F Special Handling Needs Required 4-25 4.3-G Handling Needs for Typical Biologics 4-25 4.3-H Distribution of Average Fill-and-Finish Yield Losses 4-28 4.4-A Distribution of Respondents with In-House Capacity 4-32 4.4-B Changes to In-House Filling Capacity 4-38 4.4-C Core Technology s Impact on Outsourcing Decisions 4-41 4.4-D Standard Technology s Impact on Outsourcing Decisions 4-46 4.6-A Number 1 Ranked Good Service Characteristics 4-65 4.6-B Most Important Good Service Characteristics by Weighted Ranking 4-67 4.6-C Changing Opinion about Emerging-Market CMOs 4-79 4.7-A Different Price Model Used for Commercial Products 4-85 4.7-B Average Technology Transfer Fees Paid by Respondent Type 4-89 4.7-C Payment of Reservation Fee 4-93 4.7-D When Cancellation Charges are First Expected to be Incurred 4-96 4.7-E Cancellation Fees: Average Percentages of the Total Contract Fee 4-97 4.8-A Average Per-Batch Price by Clinical Phase 4-102 4.8-B Unit Price versus Batch Size: Non-Lyophilization 4-102 4.8-C Unit Price versus Batch Size: Lyophilization 4-103 4.8-D Price per Batch by SafeBridge Level: Vials 4-104 4.8-E Price per Batch by SafeBridge Level: Prefilled Syringes 4-104 4.8-F Average Fill-and-Finish Outsourcing Budgets by Respondent Type 4-108 4.8-G Simple Average: Percentage of F&F Outsourcing Budget by Service: 2015 4-110 4.8-H Weighted Average: Percentage of F&F Outsourcing Budget by Service 2015 4-112 4.9-A Search Modes for Fill-and-Finish CMOs 4-113 4.9-B Warranties, Guarantees and Indemnifications 4-122 4.9-C Negotiation of Contractor s Final Product Quality and Consequential 4-123 Damages 4.9-D Preference for Production Networks or Alliances 4-124 4.9-E Preferred Characteristics of Production Networks or Alliances 4-125 Chapter 5 5.1-A Number of Years Fill-and-Finish Services Offered 5-2 5.1-B One-Stop-Shop CMO Model 5-5 5.2-A Dosage Forms Produced by Percent of Contractors Respondents 5-8 5.2-B Percent of Fill Lines Available among Contractor Respondents for Various 5-9 Dosage Forms 5.2-C Comparison of Percent of Dosage Forms Produced by Contractor Type 5-10 5.2-D Capacity Expansion Plans 5-15 5.2-E Dosage Forms Being Added 5-16
LIST OF FIGURES (continued) Chapter 5 5.3-A Percent of Contracting Business by Product Type: 2015 and 2017 5-18 5.3-B Fill Line Capacity Utilization Rate 5-20 5.3-C Lyophilization Capacity Utilization Rates 5-21 5.3-D Average Number of Employees by Function 5-25 5.3-E Plans to Reduce Fill-and-Finish Manufacturing Costs 5-26 5.4-A Average Yield Loss 5-31 5.5-A Pricing Methods 5-35 5.5-B Use of Different Pricing Methods Based on Product Phase 5-36 5.5-C Dosage Form 5-39 5.5-D Batch Size 5-39 5.5-E Batch Pricing 5-40 5.5-F Technology Transfer Fee Charged 5-41 5.5-G Reservation Fee Charged 5-43 5.5-H When Cancellation Fees Are First Charged 5-44 5.5-I Average Targeted and Achieved Gross Profit Margins 5-47 5.6-A Warranties, Guarantees and Indemnifications Accepted by F&F CMOs 5-55 5.6-B Comparison of CMO and Pharma Respondents Always Negotiation Term 5-56 5.6-C Plans for Production Network or Alliances with Clients 5-57 5.7-A Average Annual Growth Rates: Industry Estimate versus Company Forecast 5-65 5.7-B Service Revenue by Contractor Type: 2015 5-67 5.7-C Revenue Contribution from Customer Groups by Contractor Type 5-69 5.7-D Percentage of Business from the World Regions by Contractor Type 5-71