Global Bio/pharma Continues to Spend on PP&E

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Global bio/pharma companies continued to invest heavily in new capital assets in 2015. Capital expenditure (capex) by the largest US and European bio/pharma companies experienced robust growth in 2015. Analysis of 21 of the top 25 bio/pharma companies (by revenue) revealed that total spend on property, plant and equipment grew by 12.1% to $21.7 billion in 2015, up from $19.3 billion in 2014 (see chart below). The growth in capital spending was nearly twice the 6.4% rate at which capex grew from 2010-2014. Fifteen companies increased spending in 2015, while six reduced expenditure.

Roche accounted for more than 40% of the overall spending increase; capex for the pharmaceutical arm of the Swiss-based company increased by more than 60% in local currency terms to CHF 2.7 billion in 2015. To put that into context, Roche’s R&D spending was flat, while sales increased by a little over 1%.

The junior members of the top 25 global bio/pharma companies—Biogen, Celgene and Gilead—collectively accounted for 25% of the capex increase; those companies traditionally have relied on Contract Manufacturing Organizations (CMOs). In contrast, Amgen, Boehringer-Ingelheim, Lilly and Novartis Pharma reduced spending by more than 20% in aggregate, with the latter two shaving more than $900 million from their 2014 budget.

While the investment in captive capacity might be a negative for the CMO industry, the increasing complexity of sourcing strategies suggests that isn’t necessarily the case. For instance, both Bristol Myers Squibb and Roche are building biomanufacturing capacity, despite their ongoing relationships with Samsung Biologics for large-molecule API manufacture.

This article is reprinted from the June issue of Bio/pharmaceutical Outsourcing Report. The full article addresses outsourcing trends and capital expenditure. To learn more, click here.

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Saul is PharmSource’s Director of Market Intelligence. He brings over 15 years of experience in market analysis, having worked in business intelligence roles at Evaluate Pharma, Cardinal Health (now Catalent) and Abbott Laboratories. Prior to that, he was a Post-doctoral fellow in Neuropharmacology at the Universities of Birmingham and Bristol.  Saul holds an MSc (Neuroscience) from the Institute of Psychiatry (King’s College London) and a D.Phil in Neuropharmacology from the University of Oxford.

More posts by Saul Richmond