Funding shortfalls and a capacity gap are threatening to hamper the European biopharmaceutical industry's progress and could lead to a reduction in its global market share, according to new market research.
Accounting for over 70 per cent of total revenues and R&D spend, the U.S. currently dominates the $41.30 billion (€34.7bn) global biopharmaceuticals market, notes the report, published by Frost & Sullivan.
Europe is well entrenched in second place with nearly 20 per cent share of global revenues and 22 per cent share of R&D outlays. However, sustained expansion in the region will require industry participants to effectively address funding deficits and concerns related to manufacturing capacity, according to the report.
Europe generated an estimated $8.30 billion in global biotech revenues with R&D spends totalling almost $5.00 billion in 2002 boasts the largest number of biotech companies in the world. However, serious funding shortages are threatening to erode the sector's global market share.
"In order for the 'cash-poor' companies to survive, they would have to look at means to reduce cost and be performance-oriented. This is to say, they should carry out effective research which will bring more products to launch and reduce the number of failures in clinical stages," said F&S research analyst Raju Adhikari.
Change in capacity
Another critical challenge for the industry as a whole has been the gap between demand and supply of manufacturing capacities.
In the short term, a projected shortfall of supply in manufacturing capacities means companies are currently able to charge premium prices for providing this service. This could, however, change entirely in the long run as new facilities and expansions could mean that manufacturers will face more difficult market conditions, noted Dr Adhikari.
Underpinned by hectic expansion activity, an estimated manufacturing capacity in 2003 of two million litres is set to increase to over three million litres in 2006. Meanwhile, the 350-plus biopharmaceutical drugs undergoing clinical trials are expected to generate a sizeable demand for capacity, while stimulating more expansion.
Ongoing trials of key drugs for cancer, AIDS, diabetes and cardiac disease are likely to place additional pressures on supply levels. The rapid growth of reported diseases coupled with an increase in the elderly population is anticipated to further contribute to rising capacity demand.
However, at the same time, process yield improvements and pioneering expression systems for large-scale manufacturing of biotech drugs could dramatically alter the capacity gap. For instance, transgenic technology has the potential to deliver large manufacturing capacities at much lower production costs than current expression systems.
"If capacity supply exceeds demand, this would have important implications for the entire industry diluting the importance of the manufacturing function. A reduction in contract manufacturing organisations (CMO) charges can be expected, which would affect their profit margins. However, the excess capacity would be beneficial in terms of higher product availability and easier access to capacity by R&D firms," added Dr Adhikari.
The report, entitled Biopharmaceuticals Industry Analysis - Quantification of Supply and Demand of Manufacturing Capacities (B181), is available from F&S. For sales enquiries, contact Noel Anderson.