Roche's announcement last week that it plans to close four small-molecule manufacturing facilities is the latest move in multi-year manufacturing restructuring by the pharmaceutical majors as they also invest in biologics. DCAT Value Chain Insights (VCI) examines key highlights.
Roche said that its decision is a result of a continuing shift in its drug portfolio to smaller-volume specialty small-molecule drugs and biologics. The industry has seen other companies, such as Sanofi, also shifting its manufacturing priorities away from chemical production to biologics. DCAT Value Chain Insights (VCI) provides a roundup of recent investment activity in Big Pharma's manufacturing networks.
Roche’s latest manufacturing plan
Earlier this month, Roche announced plans to restructure its manufacturing network for small molecules to address current underutilization as a result of its evolving portfolio, which includes specialized small-molecule medicines produced in smaller volumes and biologics. As a result, Roche plans to exit four manufacturing sites in Clarecastle, Ireland; Leganes, Spain; Segrate, Italy; and Florence, South Carolina. In an effort to minimize job reductions, the company is actively looking into divestment opportunities for these facilities.At the same time, Roche will further invest CHF 300 million ($298 million) into a dedicated facility in Kaiseraugst, Switzerland to support future technology requirements for manufacturing small-molecule specialized medicines.
“With these changes we are responding to the evolution of our small-molecule portfolio towards specialized medicines produced in lower volumes,” says Daniel O’Day, chief operating officer, Pharmaceuticals Division of Roche, in a company statement. “We are aware of the impact this decision has on our colleagues, and we will do our utmost to support them during this transition.”
Roche said it will begin discussions with employee representatives in the respective countries and said it will conduct the consultation process in an open and socially responsible manner. Transition will begin in 2016 and is planned to end by 2021. Affected employees will be notified as soon as possible and will receive appropriate support during the transition, said the company. Roche said it expects that the site exits will result in non-core restructuring costs of CHF 1.6 billion ($1.58 billion) until 2021, of which up to CHF 600 million ($596 million) will be in cash. This also includes additional efficiency efforts undertaken in the manufacturing network and organization. Estimated non-core costs in 2015 are up to CHF 800 million ($794 million), with only a minor cash flow impact in 2015.
The rationalization in its small-molecule manufacturing capacity has come following a series of announced investments by Roche over the past two years of more than CHF 2 billion ($1.98 billion) in its biologics manufacturing capacity. Roche is proceeding with several expansions across sites in Penzberg (Germany), Basel (Switzerland) as well as Vacaville and Oceanside (California). The additional Vacaville capacity is expected to be operational in the first quarter of 2016. At the Oceanside site, Roche is investing approximately CHF 120 million ($125 million) into a second purification line to further increase its manufacturing flexibility. This will enable the site to process two products simultaneously. The expansion is expected to be operational by the first quarter 2016, according to the company's 2014 annual filing. At its manufacturing site in Penzberg, Germany, Roche is expanding its biologics capabilities and is investing a total of CHF 400 million ($415 million) over the next several years. This expansion project will be operational in 2018. In Basel, Switzerland, Roche has begun the construction of a production center for antibody drug conjugates (ADCs). The new ADC facility will support the manufacturing of Kadcyla, the company's ADC for the treatment of breast cancer, as well as future ADCs. This new center will cost approximately CHF 190 million ($198 million) and is planned to be operational in August 2016.
Other recent manufacturing activity
Roche is not alone in moving forward with plans to strengthen its biologics manufacturing network. A major announcement, made in November 2014, comes from Bristol-Myers Squibb, which announced plans to construct a new biologics manufacturing facility in Cruiserath, County Dublin, Ireland, which will produce multiple therapies for the company’s biologics portfolio. The 30,000-square meter project will house six 15,000-liter bioreactors and a purification area as well as office and laboratory space. The plant will be built on the grounds of the company’s existing bulk pharmaceutical manufacturing plant. Bristol-Myers Squibb’s board of directors has approved initial funding that will support the first phase of the project. The full cost of the facility, expected to be finalized in the second half of 2015, is anticipated to be comparable to the approximately $900-million investment to construct and operationalize the company’s biologics manufacturing facility in Devens, Massachusetts, which represented the company's largest single capital investment at the time. Approximately 350 to 400 scientists, engineers, bioprocess operators, quality specialists, and other skilled professionals are expected to work at the Irish facility when construction is completed, and the construction program is expected to create about 1,000 jobs. The completion of the facility, including commissioning and validation, is anticipated to take approximately four years and is estimated to be operational in 2019.
AbbVie. In 2014, AbbVie announced it will invest $320 million to establish operations in Singapore for small-molecule and biologics active drug substance manufacturing. The completed facility will provide manufacturing capacity for emerging compounds within AbbVie's oncology and immunology pipeline to serve markets globally. The investment will establish the first manufacturing presence in Asia by AbbVie. AbbVie anticipates the new facility will be fully operational by 2019. Also, in 2014, Abbvie expanded its manufacturing facility in Sligo, Ireland. The expansion provides increased manufacturing capacity for the company's existing product portfolio as well as new therapies within the company's pipeline. Since the initial announcement of the expansion in 2012, AbbVie has invested EUR 85 million ($116 million) in the Sligo facility. The company has operated in Sligo since 1974.
Amgen. Amgen is proceeding with a restructuring plan, announced during the second half of 2014, which involved closing its facilities in Washington State and Colorado and reducing the number of buildings it occupies at its headquarters in Thousand Oaks, California, as well as at other locations. At the same time, the company is moving forward with biologics investment. In November 2014, Amgen announced that it had completed construction of its $200 million biomanufacturing facility in Tuas Biomedical Park in Singapore to expand its manufacturing capability for monoclonal antibodies. The facility is designed to manufacture both clinical and commercial products.
Built in less than two years, the biomanufacturing facility was completed in half the time required for conventional biomanufacturing single-use plants. It uses bioreactors, disposable plastic containers, continuous purification processing, and real-time quality analysis. It has flexible, modular design that can be replicated in future facilities. The biomanufacturing facility is expected to have the same annual output as a conventional facility but in a single building that will use less energy and water and have lower solid waste and emission levels, according to the company.The company estimates that enhanced bulk production capabilities at the new plant, when compared to conventional alternatives, represents at one-quarter of the capital costs, one-third of the operating expense, and twice the speed. The company estimates these new capabilities will result in an estimated cost reduction of 60% or more per gram of protein. Amgen also announced it will continue building at its Tuas site in Singapore and for another facility where it will make carfilzomib, the active ingredient for Kyprolis, an anti-cancer drug.
AstraZeneca. In November 2014, AstraZeneca announced plans to expand its biologics manufacturing center in Frederick, Maryland. The more than $200-million project will increase production capacity at the facility to support AstraZeneca’s maturing pipeline and to meet future demand for its biologics portfolio, which currently represent nearly 50% of AstraZeneca’s overall pipeline, according to the company. AstraZeneca’s Frederick biologics manufacturing center is a US Food and Drug Administration (FDA) licensed, large-scale cell-culture production facility with administrative, production, warehouse, laboratory and utility space. The expansion project is expected to be complete in mid-2017, will add approximately 40,000 additional square feet of manufacturing, laboratory, and administrative space. The expansion is also expected to bring a total of 300 new jobs to the site. AstraZeneca’s Frederick manufacturing center is the largest biologics manufacturing facility within the company’s global network and portfolio of assets and provides cell culture manufacturing. The site currently produces a pediatric medication as well as other investigational biologic products.
GlaxoSmithKline. GSK India, part of GlaxoSmithKline (GSK), has started work on a new Rs.1000 crore ($154 million) pharmaceutical solid dosage manufacturing facility in Vemgal, Karnataka, India. When fully operational in 2017, the factory will make more than 8 billion tablets and 1 billion capsules in the areas of gastroenterology and anti-inflammatory medicines for the Indian market.
GSK is also investing an additional £38 million (US$59 million) in its antibiotic manufacturing plant on Quality Road in Singapore, building on its initial investment of S$60 (US$44 million) committed in 2012. The Quality Road plant is GSK’s sole production site for amoxicillin; the active compound used in the manufacture of antibiotics for treating bacterial infections.The new investment will be used to construct an additional downstream isolation facility for GSK’s enzymatic manufacturing facility at Quality Road. GSK said this will increase production by 50% and help the company meet the growing demand for antibiotics in emerging markets. Singapore is home to GSK’s Regional Headquarters (Emerging Markets & Asia Pacific), two global primary manufacturing and supply sites (Jurong and Quality Road) and a vaccines plant (Tuas). In October 2014, GSK announced it was investing £19 million ($29 million) in a continuous manufacturing facility in Jurong, Singapore. The facility is scheduled to be completed in 2015 and become operational in the first quarter of 2016 and produce one of GSK’s key respiratory active pharmaceutical ingredients.
Novartis. In its 2015 third-quarter earnings release, Novartis provided an update to is multiyear plan to optimize its manufacturing footprint. In the third quarter 2015, the company announced the planned exit of its Sandoz manufacturing site in Turbhe, India. For continuing operations, this brings the total number of production sites that have been or are in the process of being restructured, closed or divested to 24. In 2014, the company closed its biotechnology site in Basel, Switzerland and its biotechnology site in Vacaville, California was transferred to Novartis Animal Health (Novartis subsequently sold its animal health business to Eli Lilly and Company in a deal completed in early 2015). Also, in 2014, Novartis announced the closing of its production facility located in Suffern, New York and announced the planned divestment of its pharmaceutical manufacturing site in Taboão da Serra, Brazil.
At the same time, Novartis is proceeding with biologics investment. In the fourth quarter of 2012, Novartis announced the planned construction of a new biotechnology production site in Singapore with an investment valued at over $500 million. The new facility will focus on drug substance manufacturing based on cell culture technology. Groundbreaking happened in February 2013, and construction is underway. The site is expected to be operational in 2016. It will be co-located with the pharmaceutical production site based in Tuas, Singapore. In the future, Singapore is expected to be a technological competence center for both biotechnology and pharmaceutical manufacturing at Novartis.
Also, Novartis is moving forward with a new production facility to produce solid dosage form medicines for the Pharmaceuticals Division in Stein, Switzerland. The new $518 million facility, announced in 2012, is planned to replace an older facility. Stein is planned to be a technological competence center for both sterile and solid dosage form drugs,
Sanofi. Sanofi is continuing the refinement of its manufacturing network with an estimated 102 sites in operation. In 2008, the company had 70 sites and later gained 52 sites by acquisition, including the acquisition Genzyme, transferred/invested six sites, and divested 26 sites. The company plans to invest between EUR 1.8 billion ($1.9 billion) and EUR 1.9 billion ($2.0 billion) annually in capital expenditures over 2016-2018 up from an estimated EUR 1.5 billion ($1.6 billion) in 2015 with a large percentage coming from investments in manufacturing for biologics, injectables, vaccines, and Genzyme products.
Sanofi also is developing three dedicated biotech hubs in Europe at Frankfurt (Germany); Vitry-sur-Seine (France), Sanofi’s biggest integrated cell culture facility, which in 2013 completed a production campaign of aflibercept (the active ingredient of Zaltrap) as well as launching production of a new product; and Lyon Gerland (France), a new world center dedicated to production of thymoglobulin for the prevention and treatment of transplant rejection. In 2009, Sanofi began construction of a new vaccine manufacturing center at its Neuville-sur-Saône site in France. The EUR 300 million ($334 million) investment over the 2009-2011 period replaced the chemicals activity on the site, which was discontinued at the end of 2013, by vaccine production from 2014 onward.
In January 2015, Sanofi entered into a strategic agreement with Boehringer Ingelheim for the manufacture of therapeutic monoclonal antibodies to reinforce Sanofi’s manufacturing capacity to support upcoming product launches.Sanofi said that 72% of its research and development projects are in biologics, nearly half of which are monoclonal antibodies. Boehringer Ingelheim’s cell-culture operations will provide contract manufacturing capacities to support the production of Sanofi’s biologics pipeline. Under the agreement, Sanofi will have access to Boehringer Ingelheim’s capabilities in Biberach an der Riss, Germany to transfer and manufacture therapeutic monoclonal antibodies for global market supply.
In another investment, Shantha Biotechnics, a Sanofi company,laid the foundation for a new production facility to manufacture Insuman, human insulin product from Sanofi’s range of diabetes treatments. Sanofi will make an investment of INR 460 crores in this insulin facility, which is located in Muppireddipalli (Telangana), India. This will be Sanofi’s second plant aside from the company’s existing Insuman manufacturing plant in Frankfurt. The construction of the 13,400 square-meter building is underway with the site expected to be fully operational by 2019. While Sanofi’s Frankfurt facility will continue to manufacture the human insulin, Insuman, the new facility will contribute toward addressing local demand. Shantha is a fully integrated biotechnology company involved in R&D, manufacturing, and marketing. It was acquired by Sanofi in 2009