Biologics manufacturing costs have been dropping dramatically, creating the opportunity for serious price wars to erupt in over-supplied indications. The winners will be companies savvy enough to have invested in the new low-cost processes.
The manufacturing of biologics has been going through a quiet revolution over the past decade. The old technology of fixed stainless steel systems to produce drug product for biologics has been gradually supplanted by plastic, disposal, single-use systems. Disposable technology may seem extremely wasteful, but as more and more of these systems have become operational, it has become obvious that the cost savings can be very substantial. Disposable designs have a far smaller manufacturing footprint, less staff, less expensive buffers, less energy, less solid waste, less expensive high-quality air systems, and faster turnaround time to set up new production runs from weeks to hours. This all adds up.
With the right design, single-use savings can be as high as 30% to 50% over older stainless steel designs.
Cost savings as great as these can give new entrants a major competitive advantage over existing players who become locked into old stainless technology production lines approved by the FDA a decade ago.
This story of new technology slashing costs and allowing new entrants to radically disrupt markets is far from new. It happened 200 years ago in Britain at the start of the Industrial Revolution with newfangled factory-based spinning machines snatching a whole lifetime of work away from home-based artisans. It happened as recently as 2007 with the introduction of the iPhone resulting in the spectacular success of Apple and near bankruptcy of Blackberry.
In the biologics market and those diseases areas where there may be only one or two branded compounds, manufacturing costs are not an issue. But increasingly markets dominated by biologics are being attacked by more and more branded products; plus biosimilars are starting to enter the U.S. market.
As these markets become overcrowded, marketers are likely to be forced to reduce prices; once this happens, manufacturing costs will become a major competitive factor. And if there is a price war, the ones left standing will be those with the lowest costs!
The message is simple: if you are in one of these markets, make sure you understand the cost basis of your competitors. This will mean understanding what technologies your competitors are currently utilizing, what they are building, and whether they are planning to use, plan to switch to, or are already using CMOs with disposable technology.
This is CI 101!