Chris Hayden:
Hi everyone. Thank you for joining us today. My name is Chris Hayden. I’m a producer here at FIERCE. And I’m here today with Dieter Kramer. And Dieter is the managing director of the Heidelberg facility of AGC Biologics facility in Heidelberg, Germany. And today we’re going to be discussing the growing demand for microbial capacity, and we’ll be discussing the data behind this trend and the innovative solutions required to meet future demands. Welcome Dieter, thank you so much for joining us today.
Dieter Kramer:
Thank you, Chris.
Chris Hayden:
And I understand you’re joining us today from beautiful downtown Heidelberg.
Dieter Kramer:
Yes, that’s a bit true.
Chris Hayden:
That’s lovely. It’s lovely. I love it. Well, Dieter, today we’re discussing a critical issue facing the biopharma industry, a potential microbial manufacturing crunch. And before you dive into the topic, I’d love to start by talking about just what exactly is running a site in Heidelberg, Germany?
Dieter Kramer:
Yeah, of course. Thank you for the question. Yeah. I’m here now since eight years and we are doing microbial fermentation. And then our downstream processes to isolate and purify therapeutic proteins and nucleic acids here. So we have a very long tradition, so the site operates already more than 40 years. And we are coming out of early phase project focus, but the last eight years we have also transformed to late phase projects and even get also ready for commercial. And we are seeing increasing demand, especially from the late phase projects, which are demanding more volume of microbial fermentation capacity and downstream capacity.
Chris Hayden:
Now, 40 years, that’s really impressive. You’d be hard-pressed to find a lot of facilities with 40 years of institutional knowledge there. So what have you observed in terms of the trends in the market and what is the data telling you about where the market is going?
Dieter Kramer:
If we are looking to the future, it’s always a little bit looking into the crystal ball, but we can also use the data from the history and from the present to make anticipation and the projection. And what our market data is also telling us is that there is a huge installed capacity currently with around 275,000 liters of microbial fermentation in downstream capacity. But there’s also a growing demand from the shift to late phase projects and also preparing for commercial. Even in already established products, we see also the trend to go away from single source sourcing. And therefore we expect and also have seen in the last years, the 10% growth of microbial therapeutic molecules. Because the microbial molecules have still a significant share in the total API market of around 28 to 30%, so it’s also still a very strong modality, which is growing together with all the market. So also the capacity we see double-digit growth, which will be needed to supply all the projects which we are seeing in the next five years to approach the late phase and commercial production.
So we anticipate a 50% shortage of volume in the market. And this leads to this crunch, which we’re discussing today. And as already mentioned, yeah, we have a solution for that, or a part of the solution.
Chris Hayden:
I love it. Well, that that’s a fantastic number. And with that level of growth, where will all these products be manufactured? Can you talk a little bit about, like you mentioned, the crunch ahead, and what it would mean for those in need of microbial production in the near future?
Dieter Kramer:
Yeah. No, it’s also interesting number that 70% of the current capacity is in the possession of 10 companies. So it’s a very focused capacity on just 10 providers here. And half of them are product companies who have a special also conflict of interest to give this capacity free for CDMO use. And therefore, this additionally causes this crunch in the future. And also taking into perspective that to build a new facility for microbial API production, you need really the land where you build the facility with a lot of utilities and infrastructure. So it’s also, you need a certain footprint for that. And also you need, because we are talking about a huge stainless steel technology, you also need here a special lead times for the main equipment. Also, you have to have all the permits to build this facility. And then finally, yeah, you have to qualify it and set it in operation for full GMP production. We also need then the manufacturing license. So there is a lot of process steps to get a microbial facility in operation and fully qualified for GMP production.
Chris Hayden:
Yeah. And it’s interesting, because at AGC Biologics it sounds like you’re a step ahead in that conversation. You recently acquired land around your Heidelberg site to prepare for possible expansion. So can you explain why that was important to do and how it might provide solutions to this microbial manufacturing crunch that the industry might encounter?
Dieter Kramer:
Yes, absolutely. When I look out of the window, I see it, our land-
Chris Hayden:
I love it.
Dieter Kramer:
… in between our office building and our main production building. And we have seen that the last years really a pickup in our utilization of the existing production lines. We have already built a third production line in our main building. And now we are fully installed here and cannot extend the legacy building anymore. So we have spoken with the city, and the city of Heidelberg was very open for our ideas and plans. And we were able to acquire new land, which is also not easy in that location we are currently. We are really very central in the city and have a very good location, very close to the main station. Also, Heidelberg is very prominent in the center of Germany, very close to Frankfurt airport, just 45 minutes, so from a logistics point of view. And now we have also already clients in our portfolio who are asking for long-term perspectives, especially getting to late phase projects phase. And therefore we have already prepared the land and also have first engineering concept.
Chris Hayden:
Great. I love it. I love it. So to address this crunch, it’s pretty clear AGC Biologics has come up with an innovative financing plan to take on additional customers that are in Heidelberg. So what does that look like? And I think it’s pretty clear, you just mentioned it, but what’s the reaction that you’re getting?
Dieter Kramer:
Of course, our current clients are very positive about that, that they can stay at the site and we don’t need additional tech transfers. So that’s very positive from our existing clients. And now we are also reaching out to new clients, also especially big pharmaceutical companies who can also de-risk their portfolio of late phase projects and don’t have to build the capacity yet. So we have really thought a business plan where we can slice the capacity of five years to a certain number of clients. And they can already reserve up to 18 batches for the next five years, starting from ’29 on, for having the capacity ready for late phase projects or even commercial projects. And we have also built that concept that we can grow with our clients further, because we have additional land available and can start with a phase one project, only building one line. And then adding a second line five years later. And even further acquire land and build additional production lines. So it’s really a scalable concept where our clients can de-risk the capacity crunch in the future.
Chris Hayden:
Now, Dieter, 2026 is right around the corner screaming up on us. So for developers anticipating the microbial manufacturing crunch, how long do you think they have to get ahead of that? And what can they do to kind of prepare for this?
Dieter Kramer:
Yeah. That’s also the challenge, to synchronize the demand of our clients because every project is in a different phase. But our message is very clear, sign up earlier than later to also secure the capacity. And we are now looking for end of first quarter, beginning second quarter next year, to have the LOAs, the letter of agreements in place, so that we can start with the next engineering phase to go in basic and detailed engineering, and really get also to our time schedule to be ready with GMP production in beginning of ’29. So that’s our current plan. And therefore we are now approaching our existing clients and potential new clients for that.
Chris Hayden:
That’s great. Well, Dieter, thank you so much for joining us today. Really appreciate it. Really appreciate your time.
Dieter Kramer:
Yeah.
Chris Hayden:
Thank you for tuning in today. Once again, my name is Chris Hayden. And thank you so much for joining us, and we hope to see you on the next one.