Biopharma Suppliers’ Budgets Increase: Bellwether for Better Times

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Biopharmaceutical companies have weathered a rough recession, layoffs, and budget trimmings. These cutbacks have affected their vendors as well. In BioPlan Associates’ 8th Annual Report and Survey of Biopharmaceutical Manufacturing, we surveyed 352 biotherapeutic manufacturers, and 180 of their vendors, in 32 countries. The substantial budget cuts at vendors that started in 2008 have begun to turn around. We measured 10 budget areas for vendors to this industry. Sales budgets, the only area that did not take a downturn, continued to increase, this year, by an average of 5% globally.   

We asked 180 biopharma vendors, “By what percentage will your budget/funding change over the next twelve months?”  Most vendors’ budget categories will grow significantly. The only areas not growing were in-licensing of new technologies, and new facility construction.  Largest growth areas include:

·        Sales budgets are increasing, up 5.0%

·        Hiring new operations staff is increasing, up 3.2%

·        Basic R&D for New Product Development is increasing, up 2.7%

·        Hiring new commercial staff is increasing, up 2.4%

When we compare annual budget changes from 2009 and 2011, we find budgets two years ago were down in all departments except for sales. Last year, that had significantly improved, and essentially all areas except in-licensing and new facilities were seeing their budgets recharged.  This year, that increase had jumped again significantly, in almost all areas. 

Although the reported increases in budgets for “operations staff” and “R&D for new products” were somewhat lower than those reported for sales budgets, the increases reflect the need to ensure inventory levels to support sales of current products and the recognition that new products will be needed to compete for the future.  While most budget increases are less than current revenue growth rates, the overall picture is one of optimism. 

Selected Vendors’ Average Budget Change 2009-2011

Source; 8th Annual Report and Survey of Biopharmaceutical Manufacturing, April, 2011, BioPlan Associates, Inc. www.bioplanassociates.com

US and Europe Still Dominate; China and India on the Rise

In this year’s study, we found that more than half of the industry’s suppliers are actively selling products and services into both China and India (51.2% each).  The percentage is up from just 3 years ago, when 38.7% of vendors were actively selling in India, and 37.7% in China.  This mirrors the global optimism associated with these large markets.  It also suggests that vendors recognize the strategic importance of establishing a presence within domestic foreign markets.  We also found this year that there is modest growth in the percentage of suppliers selling to these geographies: South America (to 41.1%), the Middle East (36.7%), and Central America (35.7%).

This growth is also seen in our analysis of global biopharmaceutical manufacturing concentration, at our industry WIKI site: www.top1000bio.com.[2]  Here, we find that, as of December 1, Chinese biomanufacturers made up 8.6% of the concentration of biologics production (aggregated capacity, employment, and pipeline products).

References:

[1] 8th Annual Report and Survey of Biopharmaceutical Manufacturing, April, 2011, BioPlan Associates, Inc. www.bioplanassociates.com

[2] See www.top1000bio.com; Biopharmaceutical Manufacturing Concentration WIKI, Accessed Dec 5l, 2011, BioPlan Associates, Inc. 

About the Author:  Eric S. Langer is president and managing partner at BioPlan Associates, Inc., a biotechnology and life sciences marketing research and publishing firm established in Rockville, MD in 1989. He is innovator of the open-source BioPlan Bio-Facility Index wiki: www.top1000bio.com, and editor of numerous studies, including “Biopharmaceutical Technology in China,” “Advances in Large-scale Biopharmaceutical Manufacturing”, and many other industry reports.  elanger@bioplanassociates.com  301-921-5979.  www.bioplanassociates.com