Biotech industry in race for space

Shortage: The most critical issue facing those who create and test cutting-edge drugs is finding adequate space to manufacture them.

April 02, 2002|By Julie Bell | Julie Bell,SUN STAFF

Maryland's biotechnology industry, flush with cash and riding a wave of new drug discoveries, is in the middle of a manufacturing-space building boom.

But as the earth is churned and blueprints drawn for projects ranging from a new Human Genome Sciences Inc. plant in Rockville to more drug-manufacturing space at Baltimore's Cambrex Bio Science Inc., the industry's success has given rise to a new worry: Will there be enough manufacturing capacity to make all the new drugs headed for larger phases of human testing - and even the market?

The question looms nationally over a maturing industry that has seemed recession-proof over the last year. Biotech companies collectively raised at least $43 billion in the last two years, according to San Francisco-based merchant bank Burrill & Co., allowing them to hire while others industries laid off.

But if there's anything that could slow biotech's charge - an estimated 1,000 drugs now in development and 400 in mid- and late-stage human testing - some experts say it's the lack of space to make all the drugs - at least in the near term.

The shortage, say analysts such as Stefan Loren of Legg Mason Wood Walker, temporarily could deprive some patients of helpful drugs, cost companies millions in lost revenue and hurt investors as stock-market values suffer. In some cases, it could even drive small companies out of business or into the arms of acquirers.

"These are severe issues," Loren said about the income companies stand to lose if they can't make enough of a drug. "We're talking about hundreds of millions lost a year because of this."

His views are echoed in a recent report by HighTech Business Decisions, a Moraga, Calif., consulting firm, which said "a lack of sufficient capacity seems inevitable." The report - based on spring 2001 surveys of contract manufacturers and pharmaceutical and biotechnology companies - said that "almost all current capacity is being utilized" at the contract manufacturing plants on which many drug companies rely. The additional capacity now under construction, the report predicts, will not be enough.

To be sure, the crunch is mostly a matter of projection, dependent on such wild cards as how many of the experimental drugs will warrant continued production and how much manufacturing processes will improve.

Therapeutic proteins

Not all biotech drugs - those made from living systems - face the same potential shortage of manufacturing space. Primarily, say analysts such as Loren and Peter L. Ginsberg of US Bancorp Piper Jaffray, the shortfall appears to lie with therapeutic proteins, which grow in living soups nourished in a succession of ever-larger vats. Other kinds of drugs may be less likely to be affected.

At GenVec Inc. in Gaithersburg, for example, executives expect few near-term problems finding contract manufacturers to make two experimental gene-therapy drugs, TNFerade for cancer and BioBypass for vascular problems. Both involve genes that are injected directly at the site of the problem, where they produce proteins that go to work. In contrast, intravenously delivered proteins require much larger amounts of a drug, meaning larger production runs and bigger plants.

Ginsberg's January report projects that, after interim shortages, there will be more than enough capacity by 2005 or 2006. But he also estimates just four biotech companies - Amgen, Biogen, Boehringer-Ingelheim and Genentech - will control more than half of the world's biologics production capacity by then.

"As a result," his report said, "biotech companies that do not have either in-house manufacturing capacity or long-term contracts/partnerships with those that do will be in a difficult position."

Some hints of impending shortage already have popped up locally. Cambrex Bio Science Inc., a Baltimore contract manufacturer owned by East Rutherford, N.J.-based Cambrex Corp., has seen demand for its services increase so much that it rented a nearby building for expansion and is now looking for equipment, Cambrex Corp. President Claes Glassell said. It also is beginning to plan another building for large-scale manufacturing adjacent to its Lombard Street plant, though a final decision hasn't been made.

Idle capacity

Despite the demand, Cambrex is keeping some of its Baltimore manufacturing capacity idle as it negotiates with companies that can book it for a year or more, Glassell said. Like a homeowner showered with multiple offers, Cambrex is keeping its options open to get the best deal.

"From our point of view, it's preferable to have customers with longer-term commitments," Glassell said. "We'll keep them open in hopes of getting a longer-term commitment."

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