Report and Survey of Biopharmaceutical Manufacturing Capacity and Production

5 th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production A Study of Biotherapeutic Developers and Contract Manufacturing Organizations, 2007 April 2008 BioPlan Associates, Inc. 15200 Shady Grove Road, Suite 202 Rockville MD 20850 301-921-9074 www.bioplanassociates.com Copyright 2008 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 301-921-9074, or info@bioplanassociates.com Managing Editor: Eric S. Langer Project Director: Jilliane Lane Layout and Cover Design: ES Design, Alexandria, VA ISBN 978-1-934106-09-9

A c k n o w l e d g m e n t We wish to acknowledge the contributions of our authors and subject matter experts. Without their thorough analysis of the data this project would not have been possible: Eileen Bartholomew, Senior Consultant, PharmaBioSource, Inc. Geoff Hodge, Vice President, Technology, Xcellerex Beth H. Junker, PhD, Senior Director, Bioprocess Research and Development, Merck Research Laboratories Vladimir Kostyukovsky, Senior Director, Manufacturing, Artisan Pharma Inc. Sean P. McKee, Senior Consultant, PharmaBioSource, Inc. Mark J. Stramaglia, Senior Product Manager, Invitrogen Corporation Scott Wheelwright, President, Strategic Manufacturing Worldwide William B. Wiederseim, President & CEO, PharmaBioSource, Inc. 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 institutions include: BayBio (South San Francisco, CA) BioMelbourne Network (Melbourne, Australia) BioProcessUK (London, United Kingdom) EuropaBIO (Brussels, Belgium) Massachusetts Biotechnology Council (Cambridge, MA) PharmaBioSource, Inc. (Wayne, Pennsylvania) Strategic Manufacturing Worldwide, Inc. (California) All contributed their time and effort to ensure the broad, international coverage of this project. We also wish to thank our media sponsor, BioProcess International, (Westborough, MA), for helping ensure broad and representative coverage of industry participation. The early participation of our authors and sponsors in evaluating the areas and trends to be surveyed 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 2008 BioPlan Associates, Inc. No unauthorized reproduction permitted All rights reserved iii

Report and Survey of Biopharmaceutical Manufacturing Capacity and Production A b o u t B i o P l a n A s s o c i at e s, I n c. BioPlan Associates, Inc. is a biotechnology and life sciences market analysis, research and publishing organization. We have managed biotechnology, biopharmaceutical, diagnostic, and life sciences research projects for companies of all sizes since 1989. 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 prepare custom studies, and provide public information our clients require to make informed strategic decisions, define objectives, and identify customer needs. With market information, our clients are better able to make informed, market-based decisions because they understand the trends and needs in high technology industries. BioPlan Associates, Inc. 15200 Shady Grove Road, Suite 202 Rockville, MD 20850 USA www.bioplanassociates.com Tel: 301-921-9074 iv www.bioplanassociates.com

E d i t o r : Eric S. Langer, MS, President, BioPlan Associates, Inc. Mr. Langer is President and Managing Partner and President 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 1989. He has over 20 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, global biotechnology in China, Asia, and the Middle East; he has expertise in cell culture markets, 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 ( A l p h a b e t i c a l ) Eileen Bartholomew, Senior Consultant, PharmaBioSource, Inc. Eileen Bartholomew has over ten years experience focusing on the complex problems surrounding the valuation of pharmaceutical product and intellectual property. Her experience has spanned the healthcare therapeutic continuum, from drug products to diagnostics and medical devices. Additionally, Eileen has significant experience in the unique financial, regulatory and marketing challenges Life Science companies face when pursuing mergers, acquisitions and divestitures. Ms. Bartholomew had managed nearly $100M worth of biopharmaceutical product transactions for PharmaBioSource during her tenure with the Firm. Ms. Bartholomew holds a B.S. in Biology from Harvard College. 2008 BioPlan Associates, Inc. No unauthorized reproduction permitted All rights reserved v

Report and Survey of Biopharmaceutical Manufacturing Capacity and Production 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. Beth H. Junker, PhD, Senior Director, Bioprocess Research and Development, Merck Research Laboratories Dr. Junker has nearly 20 years of industrial experience in the development and scale up of E. coli, yeast, filamentous bacterial, fungal, and animal cell cultivations to produce diverse products ranging from recombinant proteins/antibodies to secondary metabolites. She has led a pilot scale bioprocess facility for 15 years, including aspects such as operating in a union environment, prospective and retrospective validation, maintenance, and reliability. Dr. Junker received her PhD in chemical engineering from the Massachusetts Institute of Technology. Her current interests focus on operational excellence and efficiency. She has published several articles and book chapters on a variety of topics such as fermentation process development, equipment design and start-up, validation, process analytical technology, and contamination reduction. vi www.bioplanassociates.com

Vladimir Kostyukovsky, Ph.D., Sr. Director, Manufacturing, Artisan Pharma Dr. Kostyukovsky is responsible for all aspects of production of clinical material. Prior to Artisan, he was Director of Site Operations for the Biotechnology Training and Education Center (BTEC), NCSU in Raleigh, NC which he helped to design, build, commission, and manage engineering, bioprocessing and central services staff. Before joining BTEC, Dr. Kostyukovsky worked as Director of Bioprocessing with Biolex, Inc. where he managed GMP and pre-clinical manufacturing operations for therapeutic proteins in transgenic plant system. Prior to joining Biolex, he worked as Senior Director, Bulk Manufacturing of Bioreliance Corporation, managing upstream and purification operations for contract manufacturing of viral vaccines and vectors. He also managed cell and viral banking operations. Before Bioreliance, Dr. Kostyukovsky served as Associate Director, Cell Culture with Diosynth (RTP); managed Animal and Microbial Cell culture development and operations DSM Biologics, Montreal, worked as a Scale-up Scientist at Apotex Fermentation, Inc. and developed and scaled-up recombinant protein processes at Allelix Biopharmaceutical, Toronto, Ontario. Dr. Kostyukovsky worked for research organizations in Russia, Czech Republic and Japan. He received his Masters degree in Animal Science from Ryazan School of Agriculture, Russia, and his Ph.D. in Microbiology from the Institute of Biochemistry and Physiology of Microorganisms, Russian Academy of Sciences. Sean P. McKee, Senior Consultant, PharmaBioSource, Inc. Mr. McKee has over eighteen years of experience in the pharmaceutical industry with proven success in scientific research and operations. He has significant experience in managing large Life Science capital projects with regard to planning, designing and construction in a variety of new facilities valued at nearly $1B. Mr. McKee is currently a Senior Consultant with PharmaBioSource and had deep experience with manufacturing and research facility valuations and transactions for both product development and contract manufacturing firms. Mark Stramaglia, Senior Product Manager, Invitrogen Corporation Mark Stramaglia is a Senior Product Manager with over 11 years of experience in various positions within the GIBCO branded products at Invitrogen Corporation. His current responsibilities include managing catalog products (e.g., CD OptiCHO(TM) Medium) marketed to customers moving into process development or bioproduction of therapeutics using cell culture. In previous roles, Mark has been involved in leading product developments and releases of more than 15 products for Invitrogen and has also been involved in strategic plan development including leading market research efforts to assist the organization in directing its future path. Mark comes from a prior background of 10 years in marketing and business development roles at Bristol-Myers Squibb and is a registered pharmacist in New York State. 2008 BioPlan Associates, Inc. No unauthorized reproduction permitted All rights reserved vii

Report and Survey of Biopharmaceutical Manufacturing Capacity and Production Scott M. Wheelwright, Ph.D., 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 Ph.D. 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 scale-up at CMOs and managed complex projects involving multiple outsource vendors. William B. Wiederseim, President & CEO, PharmaBioSource, Inc. Mr. Wiederseim has been a consultant to the pharmaceutical, automotive and petrochemical industries for more than twenty years. He co-founded The Consortium for the Advancement of Manufacturing in Pharmaceuticals (CAMP sm ), a non-profit research consortium for the Pharmaceutical Industry and was their first Executive Director. Mr. Wiederseim is the founder of PharmaBioSource, a capacity consulting firm that helps biopharmaceutical product development and contract manufacturing firms manage thier capacity and sourcing needs. viii www.bioplanassociates.com

5 th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production April 2008 A Study of Biotherapeutic Developers and Contract Manufacturing Organizations, 2007 C O N T E N T S Overview...xix Methodology...xx CHAPTER 1: Introduction and Discussion Introduction... 1-1 1-1 U.S. and World Biopharmaceutical Markets... 1-4 1-2 Continuing Need for Production Improvements and Cost Containment... 1-7 CHAPTER 2: Demographics Respondents Area of Involvement... 2-2 Respondents Titles... 2-3 Respondents Facility Locations... 2-4 Respondents Areas of Biopharmaceutical Manufacturing Operations... 2-6 Respondents Production Operations, Phase of Development... 2-7 CHAPTER 3: Capacity Utilization 3-1 Changes in Capacity Utilization (2003-2007)... 3-1 3-2 Capacity Utilization: CMOs vs. Biotherapeutic Developers... 3-4 3-3 Capacity Utilization: US vs. Western European Manufacturers... 3-6 3-4 Respondents Current Total Production Capacity... 3-7 Mammalian Cell Culture... 3-7 Estimated Bioreactor Capacity Distribution, Biotherapeutic Developers and CMOs... 3-8 2008 BioPlan Associates, Inc. No unauthorized reproduction permitted All rights reserved ix

Report and Survey of Biopharmaceutical Manufacturing Capacity and Production Microbial Fermentation... 3-10 Yeast Production... 3-11 Insect Cells... 3-12 3-5 Discussion: Current State of Capacity Utilization... 3-13 3-6 Range of Titres for MAb Production... 3-16 3-7 Discussion... 3-18 CHAPTER 4: Current Capacity Constraints 4-1 Current Capacity Constraints... 4-1 Respondents Perception of Capacity Constraints... 4-1 Respondents Perception of Capacity Constraints, 2003-2007... 4-3 Perception of Capacity Constraints in 2007: CMOs vs. Biotherapeutic Developers... 4-5 Perception of Capacity Constraints in 2007: US vs. European Biotherapeutic Developers & CMOs... 4-6 4-2 Expected Capacity Constraints4-7 Respondents Expectations of Capacity Constraints by 2012... 4-7 Expected Capacity Constraints by 2012: 2003 to 2007 Data... 4-8 Expected Capacity Constraints by 2012: CMO vs. Biotherapeutic Developer... 4-9 4-3 Factors Impacting Future Production Capacity... 4-10 Factors Creating Future Capacity Constraints... 4-10 Factors Creating Future Capacity Constraints: CMOs vs. Biotherapeutic Developers... 4-12 Factors Creating Capacity Constraints: US vs. European Respondents... 4-13 4-4 Key Areas to Address to Avoid Future Capacity Constraints... 4-17 Analysis of Areas to Avoid; Changing Perspectives, 2005-2007... 4-19 Key Areas to Address to Avoid Capacity Constraints: CMOs vs. Biotherapeutic Developers... 4-20 Key Areas to Address to Avoid Capacity Constraints: US vs. European Respondents... 4-21 4-5 Discussion... 4-24 CHAPTER 5: Future Capacity Expansions 5-1 Planned Future Capacity Expansions... 5-1 Planned Future Capacity Expansions, 2008 vs. 2012... 5-3 Planned Future Capacity Expansions by 2012, CMOs vs. Biotherapeutic Developers... 5-5 Planned Capacity Expansions by 2012: US vs. Western European Manufacturers... 5-7 Planned Future Capacity Expansions of >100%... 5-9 x www.bioplanassociates.com

5-2 Current Outsourcing, by Production System... 5-10 Facilities Currently Outsourcing No Production, 2005-2007... 5-12 5-3 Future Outsourcing... 5-14 Biotherapeutic Developers Outsourcing, 2012 Projections, by System... 5-14 Biotherapeutic Developers Outsourcing Some Production in 2012... 5-16 5-4 Critical Outsourcing Issues... 5-18 Selecting a CMO: 2007... 5-18 Selecting a CMO, 2005-2007... 5-20 Difficulty in Finding a CMO with Available Capacity... 5-22 5-5 Discussion: Selecting a CMO... 5-23 CHAPTER 6: Disposables and Single-Use Systems in Biopharmaceutical Manufacturing 6-1 Use of Disposables and Single-Use Systems... 6-1 Use of Disposables, 2007 vs. 20066... 6-1 Annual Growth Rates for Disposables... 6-3 Disposable Use by Stage of Production/Application... 6-5 Newly Introduced Disposable Applications... 6-7 Downstream Operations that are now 100% Disposable... 6-9 Leachables and Extractables... 6-10 Use of Disposables: CMOs vs. Biotherapeutic Developers... 6-11 6-2 Reasons for Increasing Use of Disposables & Single-Use Systems... 6-13 Reasons for Increased Use of Disposables, 2005 through 2007... 6-15 Reasons for Increased Use of Disposables, 2007 vs. 2006 CMOs vs. Biotherapeutic Developers... 6-17 Single Most Critical Reason for Increasing Use Disposables... 6-20 6-3 Factors Restricting Use of Disposables... 6-22 Reasons for Restricting Usage of Disposables... 6-22 Reasons for Restricting Expanded Use of Disposables: 2006 vs. 2007... 6-24 Reasons for Restricting Expanded Use of Disposables: CMO s vs. Biotherapeutic Developers... 6-26 Most Critical Reasons for Restricting Use of Disposables... 6-28 Most Critical Reasons for Restricting Use of Disposables: US vs. European Respondents... 6-30 6-4 Current Spending on Disposable Systems... 6-32 Spending on Disposable Systems, 2006-2007... 6-34 Current Spending on Disposables: CMO s vs. Biotherapeutic Developers... 6-35 Growth in Spending on Disposable Systems, 2006-2007... 6-37 2008 BioPlan Associates, Inc. No unauthorized reproduction permitted All rights reserved xi

Report and Survey of Biopharmaceutical Manufacturing Capacity and Production Budget Increase for Disposable and Single use Components in Biopharmaceutical Manufacturing... 6-38 6-5 Scale of Use of Disposables... 6-40 Switching from Disposables in Late Stage Biopharmaceutical Manufacturing... 6-43 6-6 Satisfaction with Vendors of Disposable and Single Use Components for Biopharmaceutical Manufacturing... 6-45 6-7 Discussion... 6-47 CHAPTER 7: Downstream Purification 7-1 Impact of Downstream Processing on Capacity... 7-1 Impact of Downstream Processing on Capacity, US vs. Western European Biomanufacturers... 7-4 Impact of Downstream Processing on Capacity, Biopharmaceutical Developers vs. CMOs... 7-5 7-2 Specific Purification Step Constraints... 7-6 Specific Purification Step Constraints, US vs. Western European Biomanufacturers... 7-7 7-3 Downstream Purification Issues Facing the Industry Today... 7-8 7-4 Areas Where Major Improvements will Occur in Downstream Processing... 7-9 Membrane Technology: Opinions... 7-11 Moving Bed Technology: Opinions... 7-12 7-5 Problem Areas in Downstream Operations... 7-13 7-6 Microfiltration Problems in Biopharmaceutical Downstream Processing... 7-14 7-7 Discussion... 7-16 CHAPTER 8: Quality Issues, Batch Failures, and PAT in Biopharmaceutical Manufacturing Introduction... 8-1 8-1 Process Analytical Technology... 8-1 8-2 Hurdles to Implementing Process Analytical Technology... 8-3 8-3 Batch Failure Frequency in Biopharmaceutical Manufacturing... 8-5 8-4 Primary Cause of Batch Failures, Percentages in Biopharmaceutical Manufacturing... 8-7 8-5 Quality Problems Traced to Vendors in Biopharmaceutical Manufacturing... 8-9 xii www.bioplanassociates.com

CHAPTER 9: Hiring, Employment Growth, and Training in Biopharmaceutical Manufacturing Introduction... 9-1 9-1 Hiring in 2008... 9-2 9-2 Hiring in 2012... 9-3 9-3 Formal Education Requirements in Biopharmaceutical Workforce... 9-4 Level of Biopharmaceutical Workforce Education, 2006 vs. 2011 Estimate... 9-4 9-4 Training in Biopharmaceutical Manufacturing Additional Training Needed... 9-7 9-5 Discussion... 9-9 CHAPTER 10: Suppliers to Biopharmaceutical Manufacturing and Life Sciences Introduction... 10-1 10-1 Demographics... 10-2 Areas of Involvement... 10-2 Location of Vendor Sales... 10-3 Respondents Primary Job... 10-5 10-2 Growth Rate of Sales by Suppliers... 10-6 Average Industry Growth Rate, Distribution... 10-6 Average Industry Growth Rate, By Segment... 10-7 Industry Growth Rate, 2006 vs. 2007... 10-8 10-3 Discussion: Industry Growth Rates... 10-9 10-4 Supplier Issues... 10-10 Problems Faced by Suppliers... 10-10 Problems Faced by Vendors Clients... 10-11 10-5 Discussion: Supplier Issues... 10-12 10-6 Sales Staff Training... 10-14 Days of Training Provided... 10-14 Areas Where More Training Needed, Sales Staff vs. All Staff... 10-16 10-7 Vendor Business Longevity... 10-18 2008 BioPlan Associates, Inc. No unauthorized reproduction permitted All rights reserved xiii

Report and Survey of Biopharmaceutical Manufacturing Capacity and Production F i g u r e s a n d T a b l e s : Fig. 1.1 Current Worldwide Pipeline, Large Molecules, 2008... 1-3 Fig. 2.1 Area of Involvement in Biopharmaceutical Manufacturing... 2-2 Fig. 2.2 Respondents Job Responsibilities... 2-3 Fig. 2.3 Facility Location... 2-4 Fig. 2.4 Facility Location, by Region... 2-5 Fig. 2.5 Biopharmaceutical Manufacturing Systems... 2-6 Fig. 2.6 Phase of Development... 2-7 Fig. 3.1 Capacity Utilization 2003-2007... 3-2 Fig. 3.2 Capacity Utilization, CAGR 2003-2007... 3-3 Fig. 3.3 Fig. 3.4 Capacity Utilization, by System, Comparing CMOs vs Biotherapeutic Developers... 3-5 Capacity Utilization, by System, Comparing US vs Western European Biomanufacturers... 3-6 Fig. 3.5 Current Production Capacity Distribution, Mammalian Cell Culture... 3-7 Fig. 3.6 Fig 3.7 Estimated Bioreactor Capacity Distribution, by Biotherapeutic Developer (2006 vs 2010)... 3-8 Estimated Bioreactor Capacity Distribution, by Contract Manufacturing Organizations (CMO), 2006 vs 2010... 3-9 Fig. 3.8 Current Production Capacity Distribution, Microbial Fermentation... 3-10 Fig. 3.9 Current Production Capacity Distribution, Yeast Systems... 3-11 Fig. 3.10 Current Production Capacity Distribution, Insect Systems... 3-12 Fig 3.14 Range of Titers Being Obtained in MAb Production, Commercial vs Late-stage Clinical Scale Production... 3-17 Fig. 4.1 Capacity Constraint, by Stage of Production... 4-2 Fig. 4.2 Capacity Constraint, 2003 vs 2007... 4-4 Fig. 4.3 Capacity Constraint, Biotherapeutic Developers vs CMOs... 4-5 Fig. 4.4 Capacity Constraints, US vs. Europe... 4-6 Fig. 4.5 Expectations of Capacity Constraints by 2012... 4-7 Fig. 4.6 Five-year Projections for Capacity Constraints: 2003-2007... 4-8 Fig. 4.7 Five-year Projections for Capacity Constraints: Biotherapeutic Developers vs. CMOs... 4-9 Fig. 4.8 Factors Creating Future Capacity Constraints... 4-11 Fig. 4.9 Fig. 4.10 Factors Creating Future Capacity Constraints, CMOs vs Biotherapeutic Developers... 4-14 Factors Creating Future Capacity Constraints, US vs Western European Biomanufacturers... 4-16 xiv www.bioplanassociates.com

Fig. 4-11 Key Areas to Address to Avoid Capacity Constraints... 4-18 Fig. 4-12 Key Areas to Address to Avoid Capacity Constraints, 2005-2007... 4-19 Fig. 4.13 Fig. 4.14 Key Areas to Avoid Capacity Constraints, CMOs vs Biotherapeutic Developers... 4-21 Key Areas to Avoid Capacity Constraints, US vs W. European Biomanufactures... 4-23 Fig. 5.1 Industry Average Planned Production Increase by 2012... 5-2 Fig. 5.2 Fig. 5.3 Fig. 5.4 Fig. 5.5 Planned Future Capacity Expansion: 5-year Estimates, 2008 through 2012... 5-4 Planned Future Capacity Expansion: 5-year Estimates, 2008 through 2012; Biotherapeutic Developers vs CMOs... 5-6 Planned Future Capacity Expansion: 5-year Estimates, 2008 through 2012; US vs Western Europe... 5-8 Percent of Respondents Projecting Production Increases of over 100% by 2012... 5-9 Fig. 5.6 Current Percentage Production Outsourced by System, 2007... 5-11 Fig. 5.7 Percent Biotherapeutic Developers Outsourcing NO production, 2007 vs 2006 vs 2005... 5-13 Fig. 5.8 Future Outsourcing: Percent Production Outsourced in 2012, by System... 5-15 Fig. 5.9 Fig. 5.10 Five-year Projections: Percent Biotherapeutic Developers Planning to Outsource at Least Some Production, 2012 vs 2011... 5-17 Issues of Greatest Importance when Considering Outsourcing Biopharmaceutical Manufacturing... 5-19 Fig. 5.11 Critical Issues When Selecting a CMO, 2005-2007... 5-21 Fig. 5.12 Difficulties in Finding CMOs with Available Capacity... Fig. 6.1 Usage of Disposables in Biomanufacturing, Any Stage, 2005-2007... 6-2 Fig. 6.2 Fig. 6.3 Disposables Increased Market Penetration: Percentage Point Market Gain, 2006-2007... 6-4 Usage of Disposables in Biomanufacturing, by Stage of Manufacturing, Early R&D through Commercial Production... 6-6 Fig. 6.4 Newly Introduced Disposables, Past 12 Months... 6-8 Fig. 6.5 Percent of Respondents where Downstream Operations are 100% Disposable, by Application... 6-9 Fig. 6.6 Fig. 6.7 Perceptions and Opinions on Leachables and Extractables: Testing, Validation, Costs... 6-10 Usage of Disposables in Biomanufacturing, CMOs vs Biotherapeutic Developers... 6-12 2008 BioPlan Associates, Inc. No unauthorized reproduction permitted All rights reserved xv

Report and Survey of Biopharmaceutical Manufacturing Capacity and Production Fig. 6.8 Reasons for Increasing Use of Disposable System Components... 6-14 Fig. 6.9 Fig. 6.10 Reasons for Increasing Use of Disposable System Components, 2005-2007... 6-16 Reasons for Increasing Use of Disposable System Components, CMOs vs Biotherapeutic Developers... 6-19 Fig. 6.11 Most Critical Reason for Increasing Use of Disposables... 6-21 Fig. 6.12 Reasons for Restricting Use of Disposables... 6-23 Fig. 6.13 Reasons for Restricting Use of Disposables: 2006 vs 2007... 6-25 Fig. 6.14 Reasons for Restricting Use of Disposables: CMOs vs Biotherapeutic Developers... 6-27 Fig. 6.15 Most Critical Reason for Not Increasing Use of Disposables... 6-29 Fig. 6.16 Most Critical Reasons for Not Increasing Use of Disposables: US vs Western Europe... 6-31 Fig. 6.17 Average Spending on Single-use Disposable System Components... 6-33 Fig. 6.18 Fig. 6.19 Average Spending on Disposable System Components: 2006 vs 2007... 6-34 Average Spending on Disposable System Components: CMO s vs. Biotherapeutic Developers... 6-36 Fig. 6.20 Annual Growth Rate in Spending on Disposable System Components... 6-37 Fig. 6.21 Expected Budgetary Increases for Disposables Over Next 12 Months... 6-39 Fig. 6.22 Rejecting Disposable Devices, Based on Scale of Production... 6-42 Fig 6.23 Fig. 6.24 Switching from Disposables to Fixed Systems in Late-stage Biomanufacturing... 6-44 Satisfaction with Vendors of Disposables for Biopharmaceutical Manufacturing... 6-46 Fig. 7.1 Impact of Downstream Processing on Overall Capacity... 7-2 Fig. 7.2 Fig. 7.3 Impact of Downstream Processing on Overall Capacity, US vs Western European Biomanufacturers... Impact of Downstream Processing on Overall Capacity, Biopharmaceutical Developers vs CMOs... 7-5 Fig. 7.4 Impact of Purification Steps on Overall Capacity... 7-6 Fig. 7.5 Fig. 7.6 Fig. 7.7 Impact of Purification Steps on Overall Capacity: US vs Western European Biomanufacturers... 7-7 Downstream Purification Issues Affecting Biopharmaceutical Production... 7-8 Areas Where Major Improvements in Purification Processes May Occur in the Next Five Years (2012)... 7-10 Fig. 7.8 Problem Areas in Downstream Operations... 7-13 xvi www.bioplanassociates.com

Fig 7.9 Fig. 8.1 Problems Involving Microfiltration Steps in Biopharmaceutical Manufacturing... 7-15 Implementation of Process Analytical Technology (PAT): New vs Existing Biomanufacturing Processes... 8-2 Fig. 8.2 Hurdles Hindering Implementation of PAT... 8-3 Fig. 8.3 Batch Failure Frequency... 8-6 Fig. 8.4 Primary Causes of Batch Failures, by Facility Capacity... 8-7 Fig. 8.5 Quality Problems Traced to Vendors... 8-9 Fig. 9.1 New Hires in Biopharmaceutical Manufacturing, 2008... 9-2 Fig. 9.2 New Hires in Biopharmaceutical Manufacturing, 2012... 9-3 Fig. 9.3 Comparison of Percent of Workforce with Specific Education Levels (2006 Data)... 9-5 Fig. 9.4 Training Time for New Operations/Manufacturing Employees... 9-6 Fig. 9.5 Areas Where Very high or High Need for Additional Training is Require... 9-8 Fig. 10.1 Primary Products or Services Area... 10-2 Fig. 10.2 Geographic Locations in which Vendors Currently Actively Sell Products or Services... 10-4 Fig. 10.3 Respondents Primary Job Function... 10-5 Fig. 10.4 Biopharmaceutical Supply Market Segment Sales Growth... 10-6 Fig. 10.5 Average Industry Growth Rate, By Segment... 10-7 Fig. 10.6 Supplier Segment Growth Rate, 2006 vs. 2007... 10-8 Fig. 10.7 Problems Faced by Suppliers to Biopharmaceutical Manufacturers and CMOs... 10-10 Fig. 10.8 Days of Sales Staff Training Provided... 10-15 Fig. 10.9 Areas Where Training May Help Sales Staff Perform Better... 10-17 Fig. 10.10 Vendor Business Longevity... 10-18 T a b l e s Table 1.1 Biologics (Large Molecule), Worldwide, through February 2008...1-2 Table 1.2 Summary All Therapeutics vs Biologics (Large Molecule), Worldwide, through February 2008...1-2 Table 1.3 Worldwide Pipeline, Large Molecules, by Therapeutic Area, 2008...1-3 Table 1.4 Worldwide Biopharmaceutical Revenue by Product Class...1-5 Table 1.5 Biopharmaceutical Blockbusters: >$1 billion revenue in 2006, and Expression Systems/Host Cells...1-5 Table 1.6 Biopharmaceutical World Markets Products and Revenue, by Class...1-6 2008 BioPlan Associates, Inc. No unauthorized reproduction permitted All rights reserved xvii

O v e r v i e w There are an estimated 10,000 large molecule biotechnology medicines in preclinical discovery or clinical trials around the world today. Over 2,000 of these are in clinical development 1. These biotherapeutic drugs target nearly 150 disease states and promise to bring better treatments to patients. However, if new biotherapeutics are to be made more accessible and 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. Building new capacity and improving existing systems to meet the demand for new therapeutics, whether through in-house manufacturing or out-sourced contract manufacturing, has long-term cost implications. Designing new production facilities, bringing new capacity on line, and establishing new support services in these areas require 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 late 2007. 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 global industry bottlenecks. 1 2006 Biopharm Insights Data (www.biopharminsight.com) 2008 BioPlan Associates, Inc. No unauthorized reproduction permitted All rights reserved xix

Report and Survey of Biopharmaceutical Manufacturing Capacity and Production M e t h o d o l o g y This report is the fifth in our annual evaluations of the state of the biopharmaceutical manufacturing industry. The strength of the methodology remains in its breadth of coverage, which yields a composite view from the respondents closest to the industry. This year, BioPlan Associates, Inc. surveyed 434 responsible individuals at biopharmaceutical manufacturers and contract manufacturing organizations in 39 countries around the world. The survey methodology also, separately, provided data from an additional 126 direct suppliers of materials, services and equipment to this industry segment. Using a web-based survey tool, we obtained and evaluated information regarding respondents current capacity, production, novel technology adoption, 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 biopharmaceutical manufacturing in 2008-2013. Our subject matter experts include: Eileen Bartholomew, Senior Consultant, PharmaBioSource, Inc. Geoff Hodge, Vice President, Technology, Xcellerex Beth H. Junker, PhD, Senior Director, Bioprocess Research and Development, Merck Research Laboratories Vladimir Kostyukovsky, Senior Director, Manufacturing, Artisan Pharma Inc. Sean P. McKee, Senior Consultant, PharmaBioSource, Inc. Mark J. Stramaglia, Senior Product Manager, Invitrogen Corporation Scott Wheelwright, President and Founder, Strategic Manufacturing Worldwide William B. Wiederseim, President & CEO, PharmaBioSource, Inc. 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. 15200 Shady Grove Road, Suite 202 Rockville, MD 20850 301-921-9074 elanger@bioplanassociates.com www.bioplanassociates.com xx www.bioplanassociates.com

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 I n t r o d u c t i o n There are over 4,300 investigational new drugs of all types in clinical trials today, up from 3,106 in 2005. 2 Biotechnology drugs now make up more than one-quarter of the FDA filings for approval, and over 40% of preclinical trials are now large molecule candidates. The 2007-2008 pipeline for biotherapeutics continues to show strong evidence that planning for biologics manufacturing will continue to require strategic approaches to avoid potentially disruptive bottlenecks. 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 planning demands a new level of partnership between manufacturers and suppliers to develop new technologies that will keep pace with industry s need for capacity. Strategic production decisions must be based on solid data, trend tracking, and effective benchmarking of capacity and production issues. This study provides an ongoing evaluation of the vital manufacturing trends shaping this industry. Table 1.1 provides an overview of the worldwide biologics manufacturing situation, by indication. Figure 1.1 shows the current worldwide pipeline for large molecules. 2 Source: BioPharm Insight, February 2008, www.biopharminsight.com 2008 BioPlan Associates, Inc. No unauthorized reproduction permitted All rights reserved 1-1

Report and Survey of Biopharmaceutical Manufacturing Capacity and Production Table 1.1 Biologics (Large Molecule), Worldwide, through February 2008 Total Investigational Drugs NDA/ BLA Filed Phase III Phase II Phase I / IND Filed Preclinical / Discovery Products Launched Cancer 3,460 47 276 741 633 1,635 106 Infectious Diseases 1,589 27 110 208 235 838 165 Miscellaneous 826 1 4 4 48 744 19 Central Nervous System 779 10 50 98 88 492 40 Immune System 629 12 44 51 99 389 33 Hormonal Systems 596 24 54 109 80 227 99 Cardiovascular 524 9 65 84 51 258 52 HIV Infections 473-14 45 87 307 16 Diagnostic / Imaging Agents / Delivery 417 6 5 9 69 296 32 Musculoskeletal 384 13 33 69 56 152 56 Gastrointestinal 299 10 32 68 40 126 22 Hematological 271 11 14 44 48 114 38 Respiratory 268 5 24 45 51 114 26 Dermatology 197 9 12 59 32 52 31 Pain 146 9 14 22 13 70 17 Genitourinary 120 7 10 22 17 37 27 Eye and Ear 111 4 13 21 14 48 11 Total 11,089 204 774 1,699 1,661 5,899 790 Note: 62 drugs had unclear status; these were not included in the subtotals. Source: BioPharm Insight, www.biopharminsight.com Table 1.2 Summary All Therapeutics vs Biologics (Large Molecule), Worldwide, through February 2008 Total, for ALL Therapeutics, worldwide Total Investigational Drugs NDA/ BLA Filed Phase III Phase II Phase I / IND Filed Preclinical / Discovery Products Launched 27,636 878 1,972 4,248 4,605 11,583 4,040 Percentage of ALL Therapeutics, that are large molecule drugs 40.1% 23.2% 39.2% 40.0% 36.1% 50.9% 19.6% Source: BioPharm Insight, www.biopharminsight.com 1-2 www.bioplanassociates.com

CHAPTER 1: Introduction and Discussion Table 1.3 Worldwide Pipeline, Large Molecules, by Therapeutic Area, 2008 # Investigational Percent of Total New Drugs Pre-Clinical/ Discovery 5,899 53.2% Phase I / IND Filed 1,661 15.0% Phase II 1,699 15.3% Phase III 774 7.0% NDA / BLA Filed 204 1.8% Product Launched 790 7.1% Source: BioPharm Insight, February 2008 www.biopharminsight.com Fig. 1.1 Current Worldwide Pipeline, Large Molecules, 2008 Product Launched 7.1% NDA/BLA Filed, 1.8% Phase III 7.0% Phase II 15.3% Pre-Clinical/ Discovery 53.2% Phase I/ IND Filed 15.0% Source: BioPharm Insight, February 2008 www.biopharminsight.com 2008 BioPlan Associates, Inc. No unauthorized reproduction permitted All rights reserved 1-3

Report and Survey of Biopharmaceutical Manufacturing Capacity and Production 1-1 U. S. a n d W o r l d B i o p h a r m a c e u t i c a l M a r k e t s There is a wide range of estimates for the size of the world market for biopharmaceutical products. These commonly range from $40-$60 billion 3 to $80 billion or more. Most of these discrepancies are due to differences in what is and is not included as a biopharmaceutical. An estimate of the total, comprehensive, world market for biopharmaceutical products, based on summing reported and estimated product revenue is about $93 billion. With the world pharmaceutical market in 2006 about $653 billion (as reported by IMS), biopharmaceuticals on the market today constitute <15% of the world pharmaceutical revenue. For Recombinant Proteins, revenue increased ~15% from 2005 to 2006. The most significant growth in revenue was in Recombinant Monoclonal Antibodies, increasing from $12.5 to $19.5 billion or ~56%. Much of this growth is attributable to ramping-up of sales of new products approved in recent years. Non-recombinant vaccines, as a class, also experienced a significant increase, from an estimated $7.5 to $9.5 billion or ~27%. However, much of this growth is due to just a few newer products. Biopharmaceutical revenue is increasing at an annual rate in the range of ~15%, roughly twice the rate of the pharmaceutical industry. Thus, it is valid to claim that biopharmaceuticals are the fastest-growing sector of the pharmaceutical industry. The U.S. constitutes the largest market for biopharmaceuticals, as it does for most pharmaceuticals. It accounts for just under half of all pharmaceutical sales worldwide. As reported by IMS for 2006, global pharmaceutical sales were ~$653 billion, with North America accounting for $290.1 billion or 45% of global pharmaceutical revenue. Presuming a comparable 45% of biopharmaceutical sales are in the U.S., current U.S. annual biopharmaceutical sales would be about $42 billion. However, biopharmaceutical sales, relative to other pharmaceutical (drug) sales, are disproportionately higher in the U.S. (and, to a lesser extent, in Europe and other affluent major markets). When considering that biopharmaceuticals are relatively expensive and that most biopharmaceuticals are developed and manufactured in the U.S, combined with the fact that many major products are only marketed the U.S. and other major markets, the U.S. accounts for more than 50% of current worldwide biopharmaceutical sales, probably in the range of $50 billion/year. The markets for biopharmaceuticals in lesser-developed countries, e.g., India and China, are rapidly growing. Much of this involves locally-produced biogeneric versions of products originally developed by Western innovators. The majority of these products at present are, at best, in the tens of millions of dollars range. However, with growing affluence, sales of biopharmaceuticals are likely increasing faster in many lesserdeveloped than in the major, affluent markets. 3 According to the recently released, BioPlan Associates Industry Reference: Biopharmaceutical Products in the US and European Markets, 6th Edition (Rader, 2007) 1-4 www.bioplanassociates.com

CHAPTER 1: Introduction and Discussion Table 1.4 Worldwide Biopharmaceutical Revenue by Product Class Product Class Sales ($ million) Recombinant proteins (rdna) 65,300 Monoclonal antibodies, rdna 19,500 Insulin Products (nearly all rdna) 8,300 Monoclonal antibodies, non-rdna 300 Vaccines 11,000 Vaccines, non-rdna 9,500 Enzymes, non-rdna 500 Toxins (Botulinum) 1,050 Cultured cells/tissues 100 Blood Products (human) 15,000 Blood Products (animal) 600 Misc. foreign biogenerics, etc. 1,000 Total ~$93,300 Source: Biopharmaceutical Products in the US and European Markets, 6 th Edition (Rader, Pub: BioPlan Associates, Inc.). Table 1.5 Biopharmaceutical Blockbusters: >$1 billion revenue in 2006, and Expression Systems/Host Cells Name Revenue Expression System ($million) EPO, rdna/amgen 5,680 Mammalial - CHO cells TNF Receptor-IgG Fc, rdna 4,474 Mammalial - CHO cells EPO, darb-, rdna 4,121 Mammalial - CHO cells CD20 Mab, rdna 3,973 Mammalial - CHO cells TNF Mab, rdna 3,764 Mammalian - murine myeloma HER2 receptor Mab, rdna 3,225 Mammalial - CHO cells G-CSF, rdna, PEG- 2,710 Bacteria - E. coli Insulin glargine, rdna 2,188 Bacteria - E. coli VEGF Mab, rdna 2,188 Mammalial - CHO cells TNF Mab, rdna, human 2,044 Human cells, unspecified Pneumococcal Vaccine-CRM197 1,960 Bacterial cell culture EPO, rdna/roche 1,829 Mammalial - CHO cells Interferon beta-1a, rdna/biogen 1,794 Mammalial - CHO cells Insulin aspart, rdna 1,500 Yeast - Saccharomyces Interferon beta-1a, rdna/merck Serono 1,418 Mammalial - CHO cells EPO, rdna/ortho 1,400 Mammalial - CHO cells G-CSF, rdna/amgen 1,314 Bacteria - E. coli Interferon betaser, rdna/berlex 1,273 Bacteria - E. coli Interferon alfa-2a, rdna, PEG- 1,204 Bacteria - E. coli Insulin lispro, rdna 1,198 Bacteria - E. coli EGF receptor Mab, chimeric, rdna 1,089 Mammalian - murine myeloma RSV Mab, rdna 1,065 Mammalian - murine myeloma Factor VIII, rdna/bayer 1,020 Mammalial - BHK cells Source: Biopharmaceutical Products in the US and European Markets, 6 th Edition (Rader, Pub: BioPlan Associates, Inc.). 2008 BioPlan Associates, Inc. No unauthorized reproduction permitted All rights reserved 1-5

Report and Survey of Biopharmaceutical Manufacturing Capacity and Production The CHO cell blockbusters clearly dominate those with the highest sales, including five of the six (83%) with revenue over $3 billion/year. Factors contributing to CHO/ mammalian cell expression dominating the products with the most total sales include: manufacture with these technologies being more expensive than with microbial systems, with mammalian cell systems more complex and generally providing higher production yields, resulting in more expensive products; and most of the CHO/ mammalian expressed products are monoclonal antibodies requiring relatively high and frequently repeated doses (large amounts of protein), meaning patients consume relatively large amounts of protein (e.g., tens of milligrams rather than micrograms per relatively frequent dose). Table 1.6 Biopharmaceutical World Markets Products and Revenue, by Class Product Class Products FDA approved Products Revenue ($million, 2006) Recombinant proteins (rdna) 178 107 65,300 Erythropoietin (EPO) products 11 2 11,000 Monoclonal antibodies, rdna 30 20 24,000 Cancer Monoclonal antibodies, rdna 13 8 10,700 Tumor Necrosis Factor antibodies, rdna 4 3 10,300 Factor VIII and IX, rdna 13 12 4,500 Insulin Products (essentially all rdna) 11 8 8,000 Monoclonal antibodies, non-rdna 13 5 300 Vaccines 162 63 11,000 Blood-derived Products (human and animal) 134 104 15,000 Enzymes (excluding rdna) 22 14 500 Interferons (most rdna) 14 11 7,200 Granulocyte colony Stimulating factors 3 2 4,300 (G-CSF) Enzymes for replacement therapy 7 6 1,700 Botulinum Toxins 4 2 1,050 Cultured cells/tissues 9 9 100 Borderline/grey biopharmaceuticals 21 18 400 Total (excluding overlaps among product classes) ~$93,000 Source: Biopharmaceutical Products in the US and European Markets, 6 th Edition (Rader, Pub: BioPlan Associates, Inc.). Table 1.6 represents major biopharmaceutical product classes (based on their underlying composition-based nature or functionality) with the number of products, number of FDA approved products in parentheses, and the collective estimated 2006 worldwide revenue for these products. Note, some products may be included in multiple classes, e.g., recombinant vaccines are included as recombinant proteins and as vaccines. 1-6 www.bioplanassociates.com

CHAPTER 1: Introduction and Discussion A number of observations may be made. For example, the total world market for vaccines, with over 163 products, including 63 currently approved in the U.S., is about the same size as the markets for erythropoietin (EPO) products; cancer monoclonal antibodies; and tumor necrosis factor (TNF) antibodies. Other than vaccines, each of these product classes is dominated by a few blockbusters. 1-2 C o n t i n u i n g N e e d f o r P r o d u c t i o n I m p r o v e m e n t s a n d C o s t C o n t a i n m e n t The complex manufacturing process for biopharmaceuticals requires constant improvements in each element in order to increase overall capacity. As the biopharmaceutical industry continues to grow both its pipeline and its supporting technologies, each link in the chain must be strengthened. Upstream efficiency improvements, for example, can create downstream purification bottlenecks. Today, as technological improvements allow, suppliers and manufacturers are shifting their focus from improving production to reducing costs. Production capacity constraints continue to decrease, and this allows manufacturers to scrutinize costs as well as technology improvements. The reliance on contract manufacturing organizations is continuing to grow as CMOs provide valuable technical expertise, and flex capacity that supports biotherapeutic developers and reduces the total risks associated with building additional capacity. Capital expenses also are a driver for process innovations as companies attempt to decrease their capacity requirements for biotherapeutics. To this end, disposable technologies continue to expand into segments of the market as manufacturers recognize their potential for reducing capital expenses. Suppliers are also expanding their presence in the industry, and increasingly expected to meet customer needs in cost cutting, novel downstream purification technologies, and disposables that offer solid regulatory compliance. As the industry expands industry participants must continue to determine whether they are meeting the needs of this ever-changing market. For example: Biotherapeutic Developers How should these biotherapeutic innovators and developers improve their overall efficiency? Show should demand predictions that change over time, be managed to reduce problems with supply and demand imbalances? Which production technologies must be developed today, to ensure suppliers have sufficient lead time? 2008 BioPlan Associates, Inc. No unauthorized reproduction permitted All rights reserved 1-7

Report and Survey of Biopharmaceutical Manufacturing Capacity and Production To what extent will outsourcing manufacturing to lower-cost areas reduce overall costs associated with the commercialization of a biotherapeutic? CMOs Can suppliers and CMO s establish effective agreements, such as royalty arrangements, that reduce risk and financial exposure? Can Biotherapeutic developers rely on CMOs to provide the flex capacity needed to meet expected capacity demands? To ensure a trained workforce, what must be done to retain current biopharmaceutical employees and attract new ones? Which technologies must be developed today to reduce overall production costs? Which technology platforms will most likely reduce scale-up costs? Is available CMO capacity sufficient? Do CMOs provide adequate communications and customer service for tech transfer and project management? Industry Suppliers Are suppliers actively tracking potential product needs in a way that provides sufficient development lead time? Are suppliers providing the needed regulatory support that customers need? Can suppliers work to reduce costs for products and services to help allow early adoption? Government Can governments support regional industries with what is really required, including a trained workforce, a critical industrial mass and the required human resources. Does the current regional work force meet the needs of the industry? Are local educational institutions working rationally to meet human resource requirements? 1-8 www.bioplanassociates.com

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 39 countries. Our partner organizations, BayBio (San Francisco, CA), BioMelbourne Network (Melbourne, Australia), BioProcessUK (London, United Kingdom) EuropaBIO (Brussels, Belgium), Massachusetts Biotechnology Council (Cambridge, MA), PharmaBioSource, Inc. (Wayne, PA) and Strategic Manufacturing Worldwide, Inc. (CA) contributed their time and effort to ensure accurate coverage of the worldwide biopharmaceutical industry. The diversity of respondents provides a comprehensive view of the industry from those closest to the present state of their organizations; those with a good understanding of the current and future business drivers, and manufacturing plans and needs. This offers a means for understanding the current state of the industry and its future course. The breakdown of organizations into CMO s and biotherapeutic manufacturers provides insights into two major segments of the industry. These two types of organizations have different business drivers, risk profiles, and costs of capital. 2008 BioPlan Associates, Inc. No unauthorized reproduction permitted All rights reserved 2-1

Report and Survey of Biopharmaceutical Manufacturing Capacity and Production Respondents Area of Involvement Of the 434 biopharmaceutical manufacturers and contract manufacturing organizations (CMOs) responding to the 2007 survey, 25.1% were primarily involved in large-scale cell culture production for therapeutics. 17.7% were involved primarily in process development for biopharmaceutical manufacturing whereas 15.7% were involved in scale-up (or clinical-scale) production for biopharmaceuticals only. Large-scale microbial fermentation for therapeutics accounted for 10.6% and 9.2% of the respondents indicated that they were primarily involved in vaccine production. Other large-scale biopharmaceutical manufacturing accounted for 8.8%. Other contract manufacturing (CMO) for biopharmaceuticals accounted for 7.1% and 5.8% were involved in large-scale contract manufacturing (CMO) for biopharmaceuticals. Fig. 2.1 Area of Primary Involvement in Biopharmaceutical Manufacturing In which area of biopharmaceutical manufacturing is your organization currently involved? (n=434) 0% 5% 10% 15% 20% 25% 30% Large-scale cell culture production for therapeutics 25.1% Process Development for biopharmaceutical manufacturing Scale-up (or clinical-scale) production for biopharmaceuticals only 17.7% 15.7% Large scale microbial fermentation for therapeutics Vaccine production Other large-scale biopharmaceutical manufacturing Other contract manufacturing (CMO) for biopharmaceuticals Large-scale contract manufacturing (CMO) for biopharmaceuticals 10.6% 9.2% 8.8% 7.1% 5.8% 0% 5% 10% 15% 20% 25% 30% 2-2 www.bioplanassociates.com

CHAPTER 2: Demographics Respondents Titles Respondents were questioned in regards to their areas of responsibility. VP s or directors of manufacturing, production, and operations made up 18% of respondents. Biopharmaceutical scientists or engineers composed 17.1% of respondents. 13.8% of respondents were process development scientists or engineers while 13.4% were managers of manufacturing, production or operations. 12% of respondents indicated that they were VP s or directors of QA, QC, and validation. VP s or directors of business development made up 9.7% of respondents and 9.2% were VP s or directors of process development. The two smallest groups were presidents/ceo s (4.1%) and VP or directors or research and development (2.8%). Fig. 2.2 Respondents Job Responsibilities Which best describes your primary job responsibilities?(n=434) 0% 5% 10% 15% 20% VP or Director: Manufacturing, Production, Operations Biopharmaceutical Scientist or Engineer, Other 18.0% 17.1% Process Development Scientist or Engineer Manager: Manufacturing, Production or Operations VP or Director : QA, QC, Validation VP or Director: Business Development, etc VP or Director: Process Development 13.8% 13.4% 12.0% 9.7% 9.2% President/ CEO 4.1% VP or Director: R&D 2.8% 0% 5% 10% 15% 20% 2008 BioPlan Associates, Inc. No unauthorized reproduction permitted All rights reserved 2-3

Report and Survey of Biopharmaceutical Manufacturing Capacity and Production Respondents Facility Locations This year, we surveyed respondents in 39 countries. Over half of the respondents were from the United States with the Northeastern U.S. representing 31.3% (136 responses) of the respondents. 25.1% of respondents were from Western Europe. Other countries in the survey ( Rest of World ) made up 8.8% of the respondents. Fig. 2.3 Facility Location Where is your facility located? (N=434) US - Northeast US- Southwest US- Central US- Northwest US- Southeast Puerto Rico United Kingdom Germany Switzerland Canada Belgium India Austria France Italy Sweden China Denmark Ireland Australia Netherlands Russia Japan Other Country 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 1.2% 3.7% 2.5% 2.1% 1.8% 1.4% 1.2% 1.2% 1.2% 1.2% 0.9% 0.9% 0.9% 0.7% 0.7% 0.7% 0.5% 3.7% 8.5% 8.3% 5.8% 8.8% 11.1% 323 31.3% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% (Other countries include: Argentina, Cuba, Egypt, Estonia, European Union, Finland, Iceland, Israel, Korea, Lithuania, New Zealand, Poland, Portugal, South Africa, Spain, Taiwan) 2-4 www.bioplanassociates.com

CHAPTER 2: Demographics Fig. 2.4 Facility Location, by Region Respondents' Facility Location, by Region (Biotherapeutic Developers and CMOs, n=434) Rest of World 8.8% Western Europe 25.1% U.S. 66.1% Respondent countries in Western Europe include: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. Respondent countries in Rest of World include: Argentina, Australia, Brazil, Bulgaria, Canada, China, Cuba, Egypt, Estonia, Iceland, India, Israel, Japan, Korea, Lithuania, New Zealand, Poland, Russia, Singapore, Slovenia, South Africa, and Taiwan. 2008 BioPlan Associates, Inc. No unauthorized reproduction permitted All rights reserved 2-5

Report and Survey of Biopharmaceutical Manufacturing Capacity and Production Respondents Areas of Biopharmaceutical Manufacturing Operations Over half of the respondents indicated that they were involved in mammalian cell culture (66.4%). 52.7% of respondents were involved in microbial fermentation and 16.7% said that their facility was involved primarily in yeast. Production of other types of cells earned 7.7% of the responses. Production of insect cells (7.0%) and plant cells (2.0%) accounted for a small portion of the responses. Fig. 2.5 Biopharmaceutical Manufacturing Systems In which of the following does your facility currently have production operations for biopharmaceutical products?(n=402) 0% 20% 40% 60% 80% Mammalian Cell Culture 66.4% Microbial Fermentation 52.7% Yeast 16.7% Insect Cells 7.0% Plant Cells 2.0% Other 7.7% 0% 20% 40% 60% 80% 2-6 www.bioplanassociates.com

CHAPTER 2: Demographics Respondents Production Operations, Phase of Development In 2007, just over half of respondents (53.5%) had R&D biopharmaceutical operations, and 57.9% had preclinical operations. These are both declines from 2005 and 2006. R&D had 73.3% in 2005 and 60.1% in 2006. Preclinical was at 75.4% in 2005 and 69% in 2006. The number of companies that have biopharmaceutical products on the market has risen 13.2% since 2005, from 42.8% in 2005 to 56% in 2007. Fig. 2.6 Phase of Development In which phases of development does your organization currently have biopharmaceutical products? 2005-2007 0% 10% 20% 30% 40% 50% 60% 70% 80% R&D 53.5% 60.1% 73.3% Preclinical 57.9% 69.0% 75.4% Phase I Phase II Phase III Marketed Biopharmaceuticals 51.8% 51.3% 46.5% 44.9% 42.8% 56.0% 62.3% 62.6% 53.3% 57.6% 63.6% 56.0% Percent 2007 Percent 2006 Percent 2005 0% 10% 20% 30% 40% 50% 60% 70% 80% 2008 BioPlan Associates, Inc. No unauthorized reproduction permitted All rights reserved 2-7