HighTech Business Decisions August 2016

Transcription

1 Presented by HighTech Business Decisions 3150 Almaden Expressway, Suite 222 San Jose, California Tel: (408) Fax: (408) August 2016

2 TABLE OF CONTENTS Chapter 1: EXECUTIVE SUMMARY 1.1 Introduction Participants Locations Industry Pricing Trends Recent Industry Pricing Changes Changes in CMO Pricing in Next Two Years Outsourcing Strategies and Contractor Selection Users Outsourcing Strategies Importance of Price in Decision-Making Process Technical Support Expected from CMO Use of China CMO for Chinese Market Contractors Business Strategies and Customer Types Contractors Client Segments Importance of Price in Clients Decision-Making Process Provisions for Inflation in Contracts CMOs Management of Development Risk Contract Agreement: Expectations and Preferences Preferred Pricing Models Premium Paid for Earliest Capacity Availability Typical Pricing Model for Development Services Prices Paid and Prices Charged Contractors Pricing Models Pricing: Per-Batch, Per-Week, and Per-Gram Improving Contract Agreements and Solving Problems Users Perspective: Negotiation Challenges Contractors Perspective: Negotiation Challenges Contractors' Cancellation Fees for GMP Runs Users Tolerance of CMO Rescheduling Final Observations 1-42 Chapter 2: METHODOLOGY, DEFINITIONS AND ACRONYMS 2.1 Research Objectives Research Methodology Definition of Biopharmaceutical Manufacturing Box-and-Whiskers Plot Definition Acronyms 2-4

3 TABLE OF CONTENTS (continued) Chapter 3: INDUSTRY PRICING TRENDS 3.1 Introduction Participants Locations and Job Titles Approved Biopharmaceutical Products on Market Number of Biopharmaceuticals in Clinical Trials Product Produced in CMO Facility Licensed for 3-6 Commercial Production 3.2 Industry Pricing Trends Recent Industry Price Changes Changes in CMO Pricing in the Next Two Years Services Where Prices Have Changed the Most Key Factors Affecting Manufacturing Costs Profit Margins Contractors Target Gross Profit Margins 3-20 Chapter 4: OUTSOURCING STRATEGIES/CONTRACTOR SELECTION 4.1 Outsourcing Strategies Manufacturing Budgets: In-House versus Outsourced Outsourcing Budgets: Process Development versus 4-4 Manufacturing Users Outsourcing Strategies Users Future Changes to Outsourcing Strategy Contractor Relationships Users Current Contractors Plans for New or Different Contractors Contractor Selection Initial Contact with Contractors Number of CMOs Contacted for Proposals for Project Decision Maker for CMO Selection Importance of Price in Decision-Making Process Outsourcing of Mammalian Cell-Line Development Technical Support Expected from CMO Co-Work Opportunities with CMO Consideration of Low Base Price with Bonuses Tied to 4-52 Targets 4.4 Contractor Location Geographic Location Impact on CMO Selection Consideration of Asia-Based CMO Use of China CMO for Chinese Market 4-66

4 TABLE OF CONTENTS (continued) Chapter 4: 4.5 Technology and Service Trends Use of Proprietary Expression Systems Preferred Payment Model for Proprietary Expression 4-77 Systems Inclusion of Engineering Runs in GMP Production Price Changes in Product Portfolio and New Technologies 4-81 Needed Chapter 5: CONTRACTORS BUSINESS STRATEGIES/CUSTOMER TYPES 5.1 Business Strategies CMO Focus or Business Strategy Importance of Price in Clients Decision-Making Process Provisions for Inflation in Contracts CMOs Management of Development Risk Customer Base Fee-for-Service versus Partnership Contracts Domestic versus International Clients Contractors Client Segments Technology and Service Trends Inclusion of Engineering Runs in GMP Production Number of Runs in a Campaign Provisions for Raw and Consumable Materials Material Pass-Through Costs Charging for Product Support/Project Management Electronic Documentation 5-31 Chapter 6: CONTRACT AGREEMENT: EXPECTATIONS/PREFERENCES 6.1 Users Expectations of Pricing Models Expectations of Core Charges: Users versus Contractors Preferred Pricing Models Services Users are Willing to Pay a Premium for Speed Mammalian Cell-Line Development Pricing and Time 6-11 Expectation Markups of CMO Purchased Materials Users Management of Development Risk 6-17

5 TABLE OF CONTENTS (continued) Chapter 6: 6.2 Contractors Pricing Practices and Preferences Services Clients Willing to Pay Premium for Speed Typical Pricing Model for Development Services Charging for Pre-Production Services Typical Charge for IND Submission Services Long-Term Supply Agreement with Clients Price Reduction Provisions from Process Improvements 6-39 Chapter 7: PRICES PAID AND PRICES CHARGED 7.1 Process Development Prices Process Development Prices and Time Estimates: 7-1 Mammalian Process Development Prices and Time Estimates: 7-3 Microbial FTE Rates for Process Development FTE Rates Contractors Pricing Models Contractors Short-Term versus Long-Term Rates Contractors Batch Pricing: Single versus Multiple 7-17 Batches Contractors Batch Pricing: Stainless Steel versus 7-20 Single-Use Batch Pricing: Microbial Refolding Pricing: Per-Batch, Per-Week, and Per-Gram Per-Batch Pricing: Contractor versus User Averages Time-in-Facility Pricing: Contractor versus User Averages Price-Per-Gram: Contractor versus User Averages Special Analysis: Price Per-Gram 2016 versus Special Analysis: Price Per-Batch or Per-Week, Per-Liter Typical Charges for Additional Services Typical Charges for Mammalian Cell Culture Services Typical Charges for Microbial Fermentation Services 7-44

6 TABLE OF CONTENTS (continued) Chapter 8: IMPROVING CONTRACT AGREEMENTS AND FINAL OBSERVATIONS 8.1 Contract Negotiations for Production Users Perspective: Negotiation Challenges Contractors Perspective: Negotiation Challenges Users Perspective: Preparing for Problems Users Experience with Cancellation Fees for GMP Runs Users Cancellation Fees for Development/Non-GMP 8-11 Batches Users Frequency of Change Orders Contractors Perspectives: Preparing for Problems Contractors Reservation Fees For GMP Runs Contractors Reservation Fees for Development/ 8-22 Non-GMP Batches Contractors Cancellation Fees for GMP Runs Contractors Cancellation Fees for Development/ 8-26 Non-GMP Batches Flexibility in Rescheduling Manufacturing Campaigns Users Tolerance of CMO Rescheduling Final Observations Concerns Regarding Capital Expenditures or Supply 8-34 Capability Changes in Commercial Contract Terms Due to 8-41 Capacity Concerns Commoditization of Biopharmaceutical Manufacturing Market Challenges: CMOs Users Perspective: Other Observations Contractors Perspective: Other Observations 8-56

7 LIST OF TABLES Chapter Reasons for Changes in CMO Pricing in the Next Two Years Important Factors in Decision-Making Process Besides Price Reasons for Needing Technical Support from a CMO Reasons for Needing/Not Needing Regulatory Support from a CMO Circumstances for Using China CMO for Chinese Market Contractors Client Base by Segment Strategies for Managing Development Risk: CMOs Pricing Models Preferred by Users by Percentage Pricing Models Preferred by Users by Product Phase Services Users are Willing to Pay Premium for Speed Payment of Premium for Speed or Earliest Available Capacity Additional Areas Where Premium Might be Paid Contractor Preferred Pricing Models by Project Phase Users Perspective: Challenges in Contract Negotiations Contractors Perspective: Challenges in Contract Negotiations Comparison of Contractor and User Cancellation Fees for GMP Runs Observations of Clients Tolerance of CMO Rescheduling Additional User Observations about Pricing and Contract Agreements Additional Contractor Observations about Pricing and Contract Agreements 1-44 Chapter Market Research Steps Acronyms 2-4 Chapter Titles of Respondents Listed Alphabetically Reasons for Changes in CMO Pricing in the Next Two Years Services Where Prices Have Changed the Most Factors Affecting Manufacturing Costs: CMOs Contractors Target Gross Profit Margins 3-21 Chapter Contract Manufacturers Used by Respondents Contract Manufacturers Being Considered by Respondents Reasons Why a New or Different CMO is Being Considered Final Decision Maker for CMO Selection Change in Decision Maker for CMO Selection as Project Progresses Important Factors in Decision-Making Process Besides Price Important Factors in Outsourcing Mammalian Cell-Line Development Reasons for Needing Technical Support from a CMO Reasons for Needing/Not Needing Regulatory Support from a CMO Types of Business Arrangements in Co-Working with CMO Concerns to be Addressed Before Proceeding 4-54

8 LIST OF TABLES (continued) Chapter Reasons for Importance of Geographic Location in CMO Selection Reasons for Not Considering an Asia-Based CMO Circumstances for Using China CMO for Chinese Market Expression Systems Used by Respondents Reasons for Use of Expression Systems New Technologies Needed at CMOs 4-83 Chapter CMOs Additional Services Strategies Strategies for Managing Development Risk: CMOs Percentage of Clients: Fee-for-Service versus Partnership Contracts Contractors Client Base by Segment Pass-Through Cost Payment Terms 5-27 Chapter Pricing Models Preferred by Users by Percentage Pricing Models Preferred by Users by Product Phase Services Users are Willing to Pay Premium for Speed Strategies for Managing Development Risk: Users Payment of Premium for Speed or Earliest Capacity Availability Additional Areas Where Premium Might be Paid Attributes of Long-Term Agreements 6-37 Chapter Contractors Preferred Pricing Models by Project Phase Average Number of Batches Per Project By Tank Size Average Number of Weeks Per Project By Tank Size Average Number of Grams Per Project By Tank Size Number of Users Products Included in the Analysis Prices Paid or Charged for Additional Services: Mammalian Cell Culture Prices Paid or Charged for Additional Services: Microbial Fermentation 7-47 Chapter Users Perspective: Challenges in Contract Negotiations Contractors Perspective: Challenges in Contract Negotiations Types and Amounts of Cancellation Fees for Development Services or 8-12 Non-GMP Batches Users Payment of Change Orders 8-16

9 LIST OF TABLES (continued) Chapter Reservation Fee Arrangements for Development Services or Non-GMP 8-23 Batches Comparison of Contractor and User Cancellation Fees Cancellation Fees for Development Services or Non-GMP Batches Rescheduling Offerings for Manufacturing Campaigns Observations of Clients Tolerance for CMO Rescheduling Concerns Regarding Capital Expenditures or Supply Capabilities Types of Changes in Commercial Contract Terms Areas of Commoditization Barriers to Commoditization Future Market Challenges for Biopharmaceutical Contract Manufacturing Additional User Observations about Pricing and Contract Agreements Additional Contractor Observations about Pricing and Contract Agreements 8-56

10 LIST OF FIGURES Chapter A Locations of Study Participants A Opinions Regarding Price Changes in the Past Two Years B Changes in CMO Pricing in the Next Two Years A Summary of Outsourcing Strategies B Rating of Importance of Price in Decision-Making Process C Importance of Price for Commercial Supply D Technical Support Expected from a CMO E Regulatory Support Expected from a CMO F Interest in Using China CMO for Chinese Market A Contractors Client Base by Segment B Rating of Importance of Price in Clients Decision-Making Process C Comparison of CMO and User Rating of Importance of Price in 1-16 Decision-Making 1.5-D Provisions for Inflation in Contracts A Pricing Models Preferred by Users B Willingness to Pay Premium for Speed or Earliest Capacity Availability C Distribution of Average Premium for Speed or Earliest Capacity Availability D Distribution of Expected Premium for Speed or Earliest Capacity Availability E Comparison of Premium for Speed or Earliest Capacity Availability F Contractors Pricing Model for Development Services A Contractors: Primary Pricing Models B Contractor Preferred Pricing Models by Project Phase C Per-Batch Pricing: Average Prices Charged and Paid: Mammalian D Per-Batch Pricing: Average Prices Charged and Paid: Microbial E Time-in-Facility Pricing: Average Prices Charged and Paid: Mammalian F Time-in-Facility Pricing: Average Prices Charged and Paid: Microbial G Per-Gram Pricing: Fee Per Gram by Project Volumes: Mammalian H Per-Gram Pricing: Fee Per Gram by Project Volumes: Microbial A Contractors Cancellation Fees for GMP Runs B Users Tolerance of CMO Rescheduling 1-41 Chapter A Explanation of Box-and-Whiskers Plot 2-4 Chapter A Locations of Study Participants B Respondents with Biopharmaceutical Products on the Market C Respondents with Biopharmaceuticals in Clinical Trials D Number of Biopharmaceuticals in Clinical Trials E Product Produced in CMO Facility Licensed for Commercial Production A Opinions Regarding Price Changes in the Past Two Years B Changes in CMO Pricing in the Next Two Years A Contractors Target Gross Profit Margins by Phase: 2016 and

11 LIST OF FIGURES (continued) Chapter A Outsource versus In-House Manufacturing B Manufacturing Budgets: Outsourced versus In-House C Percentage of Budget Spent on Outsourcing D Change in Proportion of Manufacturing Budget for Outsourced Production E Outsourcing Budgets: Process Development versus Manufacturing F Level of Outsource Spending for Process Development and Manufacturing G Change in Outsourcing Spending for Process Development and 4-7 Manufacturing 4.1-H Summary of Outsourcing Strategies I Future Changes in Outsourcing Strategy A Plan to Use New or Different CMO A Initial Discussions with Contractors B Number of CMOs that Users Seek Proposals From C Change in Decision Maker for CMO Selection as Project Progresses D Rating of Importance of Price in Decision-Making Process E Importance of Price for Commercial Supply F Technical Support Expected from a CMO G Regulatory Support Expected from a CMO H Interest in Co-Work Opportunities with CMO I Consideration of Low Base Price with Bonuses Tied to Target A Effect of Geographic Location on CMO Selection B Willingness to Use an Asia-Based CMO C Interest in Using China CMO for Chinese Market A Use of Expression Systems B Preferred Payment Model for Proprietary Expression Systems C Changing Product Portfolio D New Technologies Needed at CMO 4-82 Chapter A Phase-Based Business Focus B Rating of Importance of Price in Clients Decision-Making Process C Comparison of CMO and User Rating of Importance of Price in 5-6 Decision-Making 5.1-D Provisions for Inflation in Contracts A Fee-for-Service versus Partnership Contracts B Percent of Clients Located in Same Country as Contractor s Facility C Contractors Client Base by Segment A Treatment and Charging of Engineering Runs B Average Number of Runs in a Campaign C Engineering Runs Included in Campaign D Provisions for Raw and Consumable Materials E Average Markup Charge for Pass-Through Costs F Charging for Product Support/Project Management G Implementation of Electronic Documentation 5-32

12 LIST OF FIGURES (continued) Chapter A Services Types Expected to Be Included in Batch Pricing B Services Types Expected to Not Be Included in Batch Pricing C Pricing Models Preferred by Users D Willingness to Pay Premium for Speed or Earliest Capacity Availability E Distribution of Average Premium for Speed or Earliest Capacity Availability F Pricing Distribution for Mammalian Cell-Line Development G Time Frame Distribution for Mammalian Cell-Line Development H Clients CMO Charging Markups for Purchased Materials I Distribution of Users Material Markups Charged by Their CMO J Comparison of CMO Markups Charged for Purchased Materials K Management of Development Risk Comparison: Users versus CMOs A Distribution of Expected Premium for Speed or Earliest Capacity Availability B Comparison of Premium for Speed or Earliest Capacity Availability C Contractors Pricing Model for Development Services D Charging for Pre-Production Services E Provide IND Submission Service F How IND Services are Charged G Long-Term Contracts with Clients H Price Reduction Provisions from Process Improvements 6-40 Chapter A Estimates of Process Development Cost: Mammalian Process B Estimates of Process Development Hours: Mammalian Process C Estimates of Process Development Cost: Microbial Process D Estimates of Process Development Hours: Microbial Process E Annual FTE Rates for Process Development F FTE Rates for Process Development: Users Expectations versus Experience A Annual FTE Rates for Manufacturing Staff B Annual FTE Rates for QC Staff C Annual FTE Rates for Project Management Staff D Annual FTE Rates for Regulatory Support Staff E Annual FTE Rates for Analytic Development Staff F FTE Rates for Management Staff: Users Expectations versus Experience G FTE Rates for QC Staff: Users Expectations versus Experience H FTE Rates for Project Management: Users Expectations versus Experience I FTE Rates for Regulatory Support: Users Expectations versus Experience J FTE Rates for Analytic Development: Users Expectations versus Experience A Contractors: Primary Pricing Models B Contractors Preferred Pricing Models by Project Phase A Batch Pricing: Average CMO Rates Per Batch or Run: Mammalian 7-18 Single Batch versus Multiple Batches 7.4-B Batch Pricing: Average CMO Rates Per Batch or Run: Microbial 7-19 Single Batch versus Multiple Batches 7.4-C Batch Pricing: Average CMO Rates Per Batch: Mammalian 7-20 Stainless Steel versus Single-Use

13 LIST OF FIGURES (continued) Chapter D Batch Pricing: Average Rates Per Batch: Microbial 7-21 No Refolding versus Refolding 7.5-A Per-Batch Pricing: Average Prices Charged and Paid: Mammalian B Per-Batch Pricing: Average Prices Charged and Paid: Microbial C Time-in-Facility Pricing: Average Prices Charged and Paid: Mammalian D Time-in-Facility Pricing: Average Prices Charged and Paid: Microbial E Per-Gram Pricing: Average Prices Charged and Paid: Mammalian F Per-Gram Pricing: Average Prices Charged and Paid: Microbial A Per-Gram Pricing: Fee per Gram by Project Volumes: Mammalian B Per-Gram Pricing: Fee per Gram by Project Volumes: Microbial A Per-Batch Pricing: Fee per Batch per Liter by Tank Size B Time-in-Facility Pricing: Fee per Batch per Liter by Tank Size C Explanation of Box-and-Whiskers Plot D Box-and-Whiskers Plot: Per-Batch Pricing: Mammalian Cell Culture E Box-and-Whiskers Plot: Per-Batch Pricing: Microbial Fermentation A Average Price Paid by Users for Additional Services: Mammalian B Average Price Paid by Users for Additional Services: Mammalian C Average Price Paid by Users for Additional Services: Mammalian D Average Price Paid by Users for Additional Services: Mammalian E Average Price Charged by CMOs for Additional Services: Mammalian F Average Price Charged by CMOs for Additional Services: Mammalian G Average Price Charged by CMOs for Additional Services: Mammalian H Average Price Paid by Users for Additional Services: Microbial I Average Price Paid by Users for Additional Services: Microbial J Average Price Paid by Users for Additional Services: Microbial K Average Price Charged by CMOs for Additional Services: Microbial L Average Price Charged by CMOs for Additional Services: Microbial L Average Price Charged by CMOs for Additional Services: Microbial Chapter A Cancellation Fees Paid by Users for GMP Runs B Cancellation Fees for Development Services or Non-GMP Batches C Users Change Orders D Users Frequency of Change Orders A Distribution of Average Reservation Fees for GMP Runs Charged by CMOs B Charging of Reservation Fees for GMP Runs C Time Slot Guarantee and When Reservation Fee is Paid D Reservation Fee Differences Between GMP Runs and Development Services E Contractors Cancellation Fees for GMP Runs F Charging of Cancellation Fees for Development Services or Non-GMP 8-27 Batches 8.3-G Users Tolerance of CMO Rescheduling A Concerns Regarding Capital Expenditures or Supply Capability B Change in Commercial Contract Terms C Commoditization in the Biopharmaceutical Manufacturing Industry 8-44