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Determining the Cost of Manufacturing a Biologic Product

 

A biologics cost of goods analysis or specifically, the cost of manufacturing a unit of biological material for clinical trials and ultimately for the market is an important part of the overall analysis of product value. There are several components to determining an accurate and verifiable cost of goods. These include process performance parameters, facility operational limitations, the direct and indirect costs of manufacturing including labor and materials, facility overhead, and depreciation costs of facility and equipment.

 

Process Parameters

 

At a high level, process parameters include expression levels/product titers and overall recovery and purification yields. However, product losses are typically incurred upon harvest and consideration should also be given to reduction in material due to allotments for QC and other sampling. It is important also to include bioreactor size since lower productivity often occurs as the size of the bioreactor increases. Bigger is usually better however since the reduced number of batches (and resulting decrease in labor and materials costs and QA/QC costs) can easily offset lower expression levels. Finally, it is necessary to include the longest unit manufacturing time in the calculations since this will directly affect throughput.

 

Operational Parameters

 

Often overlooked in the cost calculation are the operational limitations of the facility. Many people wrongly assume that a facility can be operated at close to 100% of the theoretical capacity and use this in their planning.


Also see the accompanying outline:  Checklist for Cost of Goods Calculations

 

 

 

The biologics contract manufacturing industry is a competitive, low margin business. During their hey-day – approximately 10 years ago – when demand was high, investor’s money for biotech companies was easier to get, and capacity was lower, it was relatively easy for CMOs to ask for and get a long term manufacturing capacity commitment. This led to entry of more competitors and additional capacity – which became excess capacity when investor’s money became harder to get.  To win business CMOs have had to adjust by taking on smaller projects with limited immediate revenue prospects and without long term commitments. Nonetheless, since they negotiate many contracts they are quite good at hiding things they don’t want you to know in order to improve their prospects of winning your business. Here are ten things they won’t tell you which will help you when you are considering signing a services contract with them.

 

Read the full article:  Ten Things Biologics Contract Manufacturing Organizations Don't Want You to Know