June 15, 2016 APR-M06-16-NI-001
Whether seeking market leverage or financial advantage, drug owners across Pharma’s primary sectors are increasingly seeing contract service providers as strategic partners, allies with the development tools, technologies and operational expertise to help them remain cost competitive and speed their products to market. These and other dynamics are spurring increased capital equipment spending by contract manufacturers pursuing new business across the space. It’s also spurring new investment in operations that support major strategic initiatives like a move to large-molecule processing or the launch of a “branded” prefilled sterile injectable into the generics space. Similarly, industry and regulatory forces are driving general demand for faster, safer, versatile and perhaps most importantly connected manufacturing capacity — whether to manufacture compliantly, meet new therapeutic discovery regimes in the biologics space or just make ton after ton of a single high-demand compound extremely efficiently and reliably.
Increased capital spending on equipment by drug owners and contractors is being prompted by a number of factors:
Other change agents impacting equipment purchasing include mergers and acquisitions, the globalization of pharmaceutical supply chains and the advent of serialization, track-and-trace regulations.
Nice Insight’s 2016 Pharmaceutical Equipment Survey queried 489 highly qualified pharmaceutical and biotech industry professionals involved in specifying and purchasing new systems and technology. Equipment purchasing budgets are on the rise with a majority (69%) reporting an increase to their annual equipment purchasing budgets. More than a third (36%) of those involved in equipment buying decisions now have an annual budget of $50 million to $100 million, and another 21% have a budget of more than $100 million to spend strategically on equipment [1].
Revealing their central role as equipment specifiers, Nice Insight’s survey revealed nearly all (93%) were interested in acquiring new pharmaceutical processing equipment for the formulation and manufacturing of small-molecule pharmaceuticals. A majority (81%) also intend to focus on buying biopharmaceutical processing equipment, 87% are interested in purchasing laboratory equipment and 77% are looking to buy fill / finish and packaging equipment. Responding to market opportunities globally, drug-owners and contract service providers alike are increasing their spending on manufacturing operations and equipment.
Building for decades, biologics remain the fastest-growing pharmaceutical industry sector. Most companies operating in the space understand that in biopharma, “the process is the product” and that capital spending on bioprocessing equipment is inexorably linked to the product’s ultimate quality and therapeutic success. Similarly R&D spending is also shifting away from blockbusters and small-molecule NCE development and toward other targets like NMEs, orphan drugs and small-volume specialty drugs.
Reformulation, bioavailability tactics and dose forms requiring additional processing steps are prompting equipment purchasing and those dynamics are growing demand for contract services as well. According to the study, demand for new cell-culture techniques and biomanufacturing formats are also influencing equipment spending.
Vendors are simultaneously creating and answering demand for equipment that is safer, more efficient and less costly to operate. What’s influencing equipment purchases? What are the priorities? The study reveals quality and sterility initiatives are high on the list, as is responding to market demands and needs. Increasing capacity in response to rising demand for an existing product garnered a significant response, as did the desire to boost OEE.
What do equipment managers like in their equipment? Reliability was ranked by 36% of Nice Insight survey respondents as the leading driver of pharmaceutical equipment purchase decisions across Pharma’s major sectors. Next, in order of rank, came process integrity, customer service and total cost of ownership. These were followed by equipment efficiency and post-sale support, which were judged only marginally lower in priority among those purchasing equipment for their organizations.
What’s being bought recently? Focused on three primary segments, the survey covered processing, bioprocessing and packaging equipment. According to the study, a consistent third indicated they had purchased single-use and similar disposable technologies in the last year to equip their upstream bioprocessing systems. However, incubators were revealed as the most purchased upstream bioprocessing equipment followed by general bioprocessing equipment. Not surprisingly, most responding from the bioprocessing ranks are constantly purchasing purification and filtration equipment, at 50% each. Fewer are buying separation equipment (38%) and chromatography systems and equipment (36%).
When it comes to general pharmaceutical processing, tableting and encapsulating equipment were the most commonly purchased production technologies for solid-dose form processors. About a third of equipment buyers purchased blenders, counting equipment, form/fill and seal equipment and high-shear mixers. According to the study, buyers are most interested in mixing/blending, heating and cooling equipment and homogenizing equipment for semi-solid dose production Those manufacturing liquid dose forms indicated they’re most interested in filtration technologies, likely seeking technologies that speed this critical quality control measure.
The leading new equipment purchases in the primary packaging category were aseptic filling and sealing/capping equipment for vials, syringes, ampoules and other parenteral drug delivery devices. Buyers were also interested in purchasing aseptic blow/fill/seal equipment for eye drops, blood and intravenous liquids by approximately one third, across the board. This is also true for unit-dose blow/fill/seal equipment, high-speed inspection systems and packaging/assembly lines for inhalers and patches.
When it comes to secondary packaging, close to half indicated they are purchasing labelers and printers. According to the study, another third are specifying tamper-evident solutions, serialization equipment, bulk packaging equipment and end packaging.
Industry consolidation, evolving processing and manufacturing techniques, and shifting global market forces are prompting drug manufacturers to rethink their overall equipment acquisition and disposition strategies. Much of this equipment is far from obsolete and possesses years of remaining service life. Disposing of equipment that is no longer in service is fast becoming an effective way to recover some of the capital spent on acquisitions, depending on the type and condition of the machine, as well as the cost of removing it. Many companies and contract service providers are turning to highly reputable, reliable used equipment brokers to help them determine the best strategies for acquiring or selling idle, but serviceable equipment and systems.
Such activity apparently is popular; with 69% indicating their organization is pursuing an equipment investment recovery strategy. According to the study the top two reasons equipment becomes surplus is either the machine’s become outdated or an upgrade is desired; however equipment that’s become redundant or idle (for most any reason associated with operational changes) round out the list of reasons to attempt the recovery of some of the capital spent on those machines.
What’s being placed on the used equipment market? According to Nice Insight’s study, fill/ finish and packaging machines (41%) and liquid processing systems (35%) were the most popular, followed by solid dose processing and semi-solid dose processing equipment at 29% respectively.
To meet the changing requirements of drug owners and the industry’s response to market forces and competitive dynamics, contract service providers have been busy remaking and realigning their operations to win Pharma’s business. Consolidation is increasing as companies acquire and merge their way to competitive advantage. The industry’s leaders are seeking contract service providers with advanced technical capabilities and equipment, best-in-class automation and informatics as well as the ability to process highly potent compounds and highly controlled substances. Nice Insight’s 2016 CDMO Outsourcing Survey [2] revealed a significant increase in spending for contract services. A majority indicated they annually spend $51 million to $100 million on outsourcing, while another 28% spend more than $100 million. During the year prior, Nice Insight’s study revealed the majority spent $10 million to $50 million for outsourcing services.
There is a growing interest in the continuous manufacturing of APIs and finished pharmaceutical products. The benefits include simplified scale-up and production runs that more closely match or respond to demand. In a continuous manufacturing scheme for example, equipment scale remains constant, it’s the supply of inputs and the length of running time that dictates production volume. Other major advantages of continuous manufacturing include assured product quality (as it mitigates process variability) and a more efficient consumption of resources and labor. The FDA’s approval of Janssen’s continuous manufacturing-based production of Prezista is a shining example of how this manufacturing technique is being adopted by Pharma and supported by regulators.
Overall, Nice Insight’s survey results reveal Pharma’s equipment specifiers and purchasers are responding to the Pharma sector’s major strategic imperatives, seeking advantage by increasing capital spending on equipment and operations. Some 15 years ago regulators recognized that the road to safer more effective and affordable medicines is directly related to how well they are made. What followed, the doctrine of current Good Manufacturing Practice (cGMP) has been guiding the industry ever since and recent purchasing and specifying behavior continues to support the industry’s ongoing effort to achieve the overarching goals of the FDA’s quality initiative.
Steve offers the life science industry insight and perspective from his more than 30 years of editorial, corporate and agency communications experience. Drawing from tenure as a lead communicator and media relations director for one of world’s largest technology and engineering companies, as well the editorial leadership of industry-leading B2B journals serving the energy, transportation and pharmaceutical sectors, including Pharmaceutical Manufacturing magazine, Steve delivers brand strategy, market-moving content and decision support. Steve holds a Bachelor of Science degree from Ohio University.
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