1、L I F E S C I E N C E T O O L S&D I A G N O S T I C S Cell&Gene Therapy Deep DiveSee the end pages of this presentation for analyst certification and important disclosures,including non-US analyst disclosures.J.P.Morgan does and seeks to do business with companies covered in its research reports.As
2、a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.North America Equity ResearchJune 2019Life Science Tools&Diagnostics,SMi
3、d Medical TechnologyTycho Peterson AC+1 212 622 J.P.Morgan Securities LLCBloomberg JPMA PETERSON Julia Qin+1 212 622 9253JJ.P.Morgan Securities LLCTejas Savant+1 212 622 5650TJ.P.Morgan Securities LLCEleni Apostolatos+1 212 622 0136EJ.P.Morgan Securities LLCTable of ContentsPage2Tycho P +1 212 622 6
4、568Tejas Savant +1 212 622 5650Julia Qin +1 212 622 9253Portfolio Managers SummaryMarket OverviewKey Questions for CDMOs1.Current Viral Vector Supply/Demand Dynamics2.Causes For Viral Vector Supply Shortage3.Current Viral Vector Capacity Distribution4.Competitive Positioning of Key CDMOs5.Pace of Ca
5、pacity Expansion and Expected Utilization6.Future Outsourcing Trend7.Competitive Risks from Non-Viral VectorsInvestable OpportunitiesCDMOsBioprocessing Equipment VendorsAnalytical Tools Vendors34789101113152021222324Appendix&Disclosures253Tycho P +1 212 622 6568Julia Qin +1 212 622 9253Tejas Savant
6、+1 212 622 5650Eleni Apostolatos +1 212 622 0136Portfolio Managers Summary1.How tight is current viral vector capacity?Industry average CDMO contracting waiting time is 16 months(sometimes two years)Companies pay capacity reservation fees,even if that capacity is not utilizedCapacity expansion of 1-
7、2 orders of magnitude is needed to meet eventual commercial demand2.Why is viral vector capacity so tight?Demand has surged in recent years following the first FDA CAR-T approvals in 2017Viral vector production is highly complex,and legacy technology is hard to scale up;talent shortage is also bottl
8、enecking capacity expansion3.How is current viral vector capacity distributed?Highly fragmented market with 130+players globally,80%are clinical-scale and 40%academic.Only 2x the number of gene therapy assets in clinical development than mAbs,according to MTS Partners Expect 22%CAGR for cell&gene th
9、erapy and 25%CAGR for the outsourcing marketCoherent Market Insight estimates the global cell&gene therapy market will grow from$6B in 2017 to over$35B in 2026,representing a+22%CAGRAccording to Frost&Sullivan,the market for cell and gene therapy outsourcing is expected to grow from$1.2B in 2017 to$
10、3.6B in 2022,representing a+25%CAGRViral vector manufacturing is a crucial part of the equationEach gene transfer therapy contains two components,a payload and a delivery technology,both of which are critical to therapeutic potential.Viral vectors are an important tool for introducing genes into tar
11、get cells,with 2/3 of the clinical trials to date delivered via viral vector The most commonly used viral vectors for gene therapy include retrovirus,adenovirus,adeno-associated virus(AAV),and lentivirus.AAV is the most widely used(in 70%of gene therapies)According to New York Times reports,manufact
12、uring custom-made viruses can cost biotech firms 1/3 or more of a development budget,so viral vector manufacturing efficiencies have a direct impact on drug cost,patient access and ultimately,commercial potentialFor more color on the broader bioprocessing market,please see our recent Bioprocessing D
13、eep Dive 2.0 here.Projected Growth for Cell&Gene TherapyCell&Gene Therapy Outsourcing Market($B)Source:Frost&Sullivan0.51.23.60.00.51.01.52.02.53.03.54.020132017202225%CAGR635051015202530354020172026Global Cell&Gene Therapy Market($B)Source:Coherent Market Insights22%CAGR7Tycho P +1 212 622 6568Juli
14、a Qin +1 212 622 9253Tejas Savant +1 212 622 5650Eleni Apostolatos +1 212 622 0136K E Y Q U E S T I O N S F O R C D M O S8Tycho P +1 212 622 6568Julia Qin +1 212 622 9253Tejas Savant +1 212 622 5650Eleni Apostolatos +1 212 622 0136How Tight Is Current Viral Vector Capacity?The industry average waiti
15、ng time for securing cell&gene therapy CDMO capacity is 16 months,in some cases even two years.The New York Times has also reported that“some have taken to buying slots in virus production queues years in advance“.Several biotech companies(like BOLD,BMRN and QURE)have chosen to build in-house capaci
16、ty in order to better control the development timeline.Current Capacity Shortage1Sarepta(SRPT)Agreement provides Sarepta with committed capacity and dedicated manufacturing slots for GMP-grade plasmid production for its micro-dystrophin Duchenne muscular dystrophy(DMD)gene therapy program,as well as
17、 plasmid capacity for future gene therapy programs.“-Press release on Aldevron partnershipRegenxbio(RGNX)Under the terms of the agreement with FUJIFILM,REGENXBIO gains guaranteed capacity for the supply of NAV AAV drug substance manufactured under current good manufacturing practice(cGMP)at large sc
18、ale-up to 2,000L-for three years,with the option to extend the agreement for an additional three years.“-Press release on Fujifilm partnershipThermo Fisher(TMO)The pricing in the short term in this market is attractive,because there is a real shortage of capacity,so there are many contracts have res
19、ervation fees associated with it and that helps with the industry economics.“-1Q19 earnings callCatalent(CTLT)But this is a model whereby a lot of these suites theyre building-being build out are the capacities actually reserved by customers,whether or not theyre being utilized.So its a quite an int
20、eresting model,if you will.And as I said,everybody is racing to lock up as much quality capacity as they can.So certainly,theres capacity that were continuing to eke out,if you will,in their product development areas.So theres room for growth there.And then,I would just say theres a race to bring on
21、 the additional capacity that is quickly being allocated and reserved for customers.“People are looking to you know lock up capacity and in a specific case you may have a customer that one,contributes capital to build out a suite.You bring it online and then theyre paying you kind of a periodic rese
22、rvation fee whether or not that suite is actually being used.And then you also have take or pay that happens for batches.”-Conference call discussing Paragon acquisition16-Month WaitCapacity Reservation Fees1-2 Orders-of-Magnitude GapBoth CTLT/Paragon and TMO/Brammer Bio have noted customers paying
23、capacity reservation fees,even if such capacity is not utilized,which is hardly heard of for traditional CDMO contracts.That said,at this stage,we have not heard about customers agreeing to royalties on gene therapy development work.An NCBI article published in 2015 estimated that viral vector manuf
24、acturing capacity needs to increase by 1-2 orders of magnitude in order to meet eventual commercial demand.While capacity has clearly grown since 2015,the leap in clinical progress since 2015 has also dramatically increased demand.9Tycho P +1 212 622 6568Julia Qin +1 212 622 9253Tejas Savant +1 212
25、622 5650Eleni Apostolatos +1 212 622 0136Why Is Viral Vector Capacity So Tight?Demand has surged since the first FDA approvals in 2017The clinical trial pipeline grew+35%y/y in 2017 and+27%y/y in 2018,driven by multiple tailwinds,including(1)financing(more than doubled y/y in 2018);(2)regulatory(FDA
26、s RMAT designation enacted in Dec 2016);and(3)M&A interest from large biopharma.Viral vectors are harder to make than traditional biologics and require special handlingViral vector production is customized,with no“one-size-fits-all”solution.Vector choice depends on the organ/tissue targeted.Viral ve
27、ctors tend to be more fragile than protein-based products and require special buffer systems and process manipulations.Viral inactivation requires special methods so that the viral product itself is not removed.Viral vectors require dedicated filling lines to avoid cross-contamination.Filling of sma
28、ll-volume products can also be challenging.Storage of viral vectors is usually at-80 C(vs.-20 C for mAbs)and requires different container and packaging solutions that can maintain their integrity for extended periods of time at ultra-low temperatures.Legacy technologies(borrowed from academia and mA
29、b)are hard to scale upAdherent cells were often grown in roller bottles or cell factories,but these technologies are difficult to scale up and risk cross-contamination.Many vectors were generated by transient transfection due to convenience,cost,or the lack of a stable producer cell line.Scale-up of
30、 these platforms can be limited by cell density and the need for sufficient raw materials(e.g.plasmid DNA).Currently,there are challenges with transfection of cells at scales 200L.Centrifugation or size-exclusion chromatography for purification and polishing steps are also not easily scalable.Talent
31、 shortage bottlenecks capacity expansionTheres a shortage of trained personnel with experience in virus.Vaccine manufacturing is the most closely related field,but still not the same,and vaccines have received limited interest and investment by the industry(compared to drugs)due to the relatively sm
32、all market opportunity(vaccines are used at most several times in a lifetime,government purchasing caps prices,along with increasing vaccine hesitancy,etc.)and high capital needs(due to high safety bar and complex manufacturing).Therefore,North America has seen a significant decline in the number of
33、 vaccine manufacturers over the years.Causes for Capacity Shortage210Tycho P +1 212 622 6568Julia Qin +1 212 622 9253Tejas Savant +1 212 622 5650Eleni Apostolatos +1 212 622 0136How Is Current Viral Vector Capacity Distributed?130+players making viral vectors and plasmid DNA globallyRoots Analysis h
34、as identified 90+active manufacturers of viral vectors and 30+producers of plasmid DNA,with an additional 14 companies capable of manufacturing bothOver half of global manufacturers are in North AmericaDue to the high volume of active clinical studies being conducted in the region 80%players are at
35、clinical scale,and 40%are from academiaAs most cell&gene therapies are still under development,demand is dominated by research and clinical grade vectorsAcademic institutions and nonprofits have been a main source of supply,but these players have no expertise in industrial scale-up In short,the mark
36、et is highly fragmented due to the early-stage nature of cell&gene therapy,with only a handful of large players capable of commercial-scale production Global Capacity DistributionNumber of Viral Vector and Plasmid DNA ManufacturersSource:Research and Markets3NA52%EU38%APAC10%By GeographyBy ScaleClin
37、ical80%Commercial20%Industry60%Academia40%By Player Type11Tycho P +1 212 622 6568Julia Qin +1 212 622 9253Tejas Savant +1 212 622 5650Eleni Apostolatos +1 212 622 0136How Are Key CDMO Players Positioned Competitively?(1)Major Cell&Gene Therapy CDMOs in the U.S.4Major CDMOs in U.S.LocationsDisclosed
38、CustomersCapabilitiesAdvanced Bioscience LabsUS,FranceRegenxbioExpertise in virology.Facility in France dedicated to viral vector GMP CMO for oncolytic,vaccine and gene therapy projects in all stages of clinical development to commercial launch,with comprehensive services for design,development,manu
39、facturing and analytical testing.AldevronUS,GermanyGenprex,SareptaLeading manufacturer of plasmid DNA spanning from early research to commercial supply,with thousands of customers for plasmids,mRNA,and gene-editing enzymes.Can accommodate 9 client projects at the same time.Catalent/ParagonUSSareptaL
40、eading CDMO focused on gene therapies delivered via AAV(70%of projects).Working with 30+customers on 70+projects,including GMP projects with 20+of the top 40 leading gene-therapy companies.325,000 SQFT current capacity.Plans to expand into lentivirus capability and vertically integrate into cell the
41、rapy products.Fujifilm DiosynthUS,UKRegenxbio,VoyagerBiologics CDMO with clinical and commercial cGMP facilities for the production of biologics and advanced therapies.New Flexible BioManufacturing Facility is designed for cGMP production of viral products for Phase I-III and commercial.LonzaUS,Neth
42、erlands,SingaporeAvalanche,Benitec,Bluebird,Renova,Selecta,TxCellLeading CDMO offering fully integrated range of services for cell and gene therapy.Texas plant(250,000 SQFT)is the worlds largest site dedicated to the production of cell and gene therapies,capable of making 40 batches of 2000L per yea
43、r and could support production of several hundred batches of viral vectors per year over time.Merck KGaA/BioRelianceUS,UKApplied Genetic Technologies,BluebirdViral vector CDMO that has produced 500+batches of virus to support gene therapy development from clinical through commercialization(40%lentiv
44、irus/retrovirus,20%adenovirus,19%AAV).Orgenesis/MaSTherCellUS,BelgiumCRISPR,ServierCDMO dedicated to cell and gene therapy.Thermo Fisher/Brammer BioUSAboena,Bluebird,Sangamo,Sarepta,VoyagerLeading viral vector CDMO that has executed 100+projects.Broad expertise across different vectors and manufactu
45、ring platforms and end-to-end offering including development,process scale-up and establishment,clinical and commercial drug substance manufacturing,fill/finish,visual inspection,labeling and packaging,storage and final product distribution.196,000 SQFT total capacity.UW-Madison/WaismanUSPTC/AgilisN
46、on-profit biotherapeutics development and manufacturing group with extensive experience in cGMP production of biologics for phase I/II human clinical trials including:viral vectors and vaccines,plasmid DNA,recombinant proteins,and cell therapeutics.WuXi AppTecUS,ChinaJuno,RegenxbioCurrently has 8.1%
47、(4th largest)and 18.2%(2nd largest)market share in the global and U.S.cell and gene therapy CDMO market.220,000 SQFT of total manufacturing capacity in the U.S.Can be a single-source for process development,clinical and commercial cGMP manufacturing,and analytical testing.12Tycho P +1 212 622 6568Ju
48、lia Qin +1 212 622 9253Tejas Savant +1 212 622 5650Eleni Apostolatos +1 212 622 0136How Are Key CDMO Players Positioned Competitively?(2)Major Cell&Gene Therapy CDMOs in Europe4Scale is the most important competitive advantage,in our view,given the industrys transition from research to commercial pr
49、oduction and current capacity shortage.In the U.S.,there are$100M($150-200M according to CTLT).Such high cost hurdles have led gene therapy developers to hold off manufacturing investments until they have evidence that their product is likely to be successful.Faster scale-up due to expedited regulat
50、ory pathway:Breakthrough or fast-track designations can shorten the development timeline from 5-8 years to 2.5 years,leaving companies with significant challenges to scale up production and establish cGMP compliance over very short time periods.Short amortization period for drugs targeting rare dise
