Until recently, China had not been considered a global contender for outsourced biopharmaceutical manufacturing. In fact, it's been less than a decade since pharmaceutical contract manufacturing in China became legal (1). Yet, the industry now ranks China as the most likely biomanufacturing outsourcing location. According to our recently released study, 17% of the industry considers China as the top future offshore production destination (Figure 1). The BioPlan 2011 Eighth Annual Report and Survey of Biomanufacturing Capacity and Production shows China moving from seventh place last year to first this year — surpassing the United States, which moves to second place with 15.1%.

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As the pharmaceutical market expands globally, outsourcing takes on an increasingly seamless international dimension. In the study, we asked respondents to consider their five-year time horizon (lead-up to 2015) and evaluate their facility's current plans for international capacity expansion (not domestic). The 352 respondents identified 35 countries as potential outsourcing destinations. Following China and the United States as potential international outsourcing destinations were India (13.2% of respondents) and Germany (12.3%).

China's jump in these rankings indicates active interest in the Asia–Pacific biomanufacturing environment, as well as its potential for growth as domestic pharmaceutical markets expand. With increasing domestic middle classes comes expanded economic clout and greater demand for pharmaceuticals. Changes in Factors Driving Outsourcing Choice

Usually, geographical outsourcing trends reflect availability of contract manufacturing organizations (CMOs), testimonials, and colleague recommendations. However, in China, there are relatively few CMO facilities, and CMOs’ reputations and experiences are very limited. So, the interest in China is being driven more by an awareness of domestic market opportunities and — in some cases — a perceived imperative that biopharmaceutical companies must develop their own “China strategy.”

Concerns regarding intellectual property (IP) have abated in India and China. As recently as six years ago, we conducted a survey that showed IP was, by far, biomanufacturers’ critical reason for avoiding doing business in China. That was the main factor inhibiting biopharmaceutical companies consideration of China as an outsourcing destination. With recent court decisions on IP in China, World Trade Organization agreements, and other international recognition of trade rights, this issue has taken a back seat to the opportunities that are opening up.

Increased interest is also driven by dynamic developments in new investments, facilities coming on-line, clients’ accumulated experiences with CMOs in general, and expanded capabilities and expertise among other Asia–Pacific CMOs. Locations with regulatory accreditations and conforming new construction draw business — especially as CMOs build facilities compliant with good manufacturing practices (GMP). As outsourcing and off-shoring become part of mainstream operations strategies and CMOs improve, companies expect increasingly more value from their partners’ services beyond low-cost performance of low-level activities. Results from US and Western European Respondents

Together, the United States and Western Europe biopharmaceutical companies represent >70% of the global research and development efforts, and the primary sources of new drug innovation. They represent an even greater percentage of commercial manufacturing capacity. However, when we compare US and European destinations for future biomanufacturing outsourcing locations, we find significant differences in geographical interest.

US-based biomanufacturers mentioned China most often in the study, with India and Singapore in close proximity. China topped US consideration, with 15.3% considering China either a “likelihood” or a “strong likelihood,” followed by India with 13.9%. This is a significant shift from only a year ago when China ranked fifth as a destination for US outsourcing.

Western European biomanufacturers registered a less favorable view of emerging Asia–Pacific markets than did US respondents. This result is likely due to proximity to other EU countries’ outsourcing vendors with capability, capacity, and experience. China was a location with a “strong likelihood” or “likelihood” for 9.4% of European respondents but was outranked by Germany, the United Kingdom, and the United States (12.5%, 12.4%, 9.4%, respectively). Compared with 2010, both China and India showed a drop in popularity on this question for Western European biopharmaceutical companies.