Big growth in Big Pharma, specifically for drugmakers that produce the popular weight-loss drugs known as GLP-1s, has touched off a new run on real estate for biomanufacturing sites.
Contract development and manufacturing organizations, or CDMOs, which do this type of manufacturing, are coming back to the U.S. and are expected to grow quickly, JLL Life Sciences Contract Organizations Leader Charlie Hoff said.
He projects the industry will double globally by 2033, which means more large manufacturing operations opening up in the U.S. and a corresponding number of significant land and development deals.
“We're seeing a huge influx in the U.S.,” Hoff said. “Time is money, and big firms are competing to see how fast they can get drugs to market.”
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Major examples of recent deals in this realm include Novo Nordisk’s $16B purchase of Catalent, Lonza’s $1.2B buyout of a Bay Area manufacturing site, and Fujifilm Diosynth’s $1.2B expansion in the Research Triangle. These deals all point to rising demand for domestic plants that outsource drugmaking.
A large part of the growth has come from the surge in demand for GLP-1 weight-loss drugs, which utilize peptides and require a unique kind of manufacturing site.
In addition, private equity firms see an advantage in investing in and forming relationships with CDMOs to provide their portfolio firms with access to manufacturing capacity. Private equity has made numerous billion-dollar investments in CDMOs over the last decade.
“When I first started, 80% of viral vector manufacturing was outsourced, as was 50% of cell therapy manufacturing,” said Audrey Greenberg, co-founder and chief business officer of Philadelphia's Center for Breakthrough Medicines. “Since then, it’s gone up considerably.”
The Center for Breakthrough Medicines and many of these other big manufacturing firms offer Big Pharma and biotech firms a way to save on manufacturing costs.
These third-party players can run large manufacturing sites around the clock, producing materials for multiple clients and allowing them to make biologics and therapeutics more cheaply than a single-client plant that focuses on specific drugs. Startups and pharmaceutical firms see the value in staying focused on research and development instead of building, maintaining and staffing these factories, which can cost more than $2K per SF to construct and start at 100K SF.
In the aftermath of the pandemic, drug manufacturing that had been sent offshore to locations like Puerto Rico, Ireland and Singapore is continuing to come home via reshoring and investment by foreign multinationals. About 80% of small molecule drugs are made overseas, CRB Senior Fellow of Pharmaceutical Process Bill Jarvis said.
Locating land for these large facilities or finding the right shuttered or underutilized plant to refurbish and restart can be tricky, Hoff said, and specialized equipment can take years to deliver.
There are a few elements at play, including cost, tax implications and having the talent available to run these manufacturing sites. Hoff has recently seen more interest along the East Coast in areas like New Jersey, which has a large number of pharmaceutical plants, and North Carolina and the Research Triangle. The Midwest, where land is cheap, is also popular. Philadelphia has also emerged as a center for CDMOs, with WuXi Advanced Therapies and the Center for Breakthrough Medicines.
Going forward, Greenberg sees even more reasons life sciences firms may want to outsource to these firms, which are offering more services, including testing. New cures like cell and gene therapies have become more complex to make, and the complexity of keeping a biomanufacturing facility up to code can be significant. Upgrading might require significant investment and retrofits going forward.
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