Finding Incentives for Equipment Innovation in Biotechnology

John Kossik, Beacon Engineers

I made an interesting observation from the "Chementator" section of the February, 1999 issue of Chemical Engineering magazine. As you may know, "Chementator" features the latest new technology entering the chemical process industries. The innovations mentioned in these short columns usually fit into the areas of "New Processes and Equipment" or "New Chemical Entities." This last subject, New Chemical Entities, would be analogous to new drug discoveries in Biopharmaceuticals. What I found was two items that fell under the "new entities" column and 12 for new equipment.

As this (unscientific) sampling shows, most innovations in chemical processing involve new equipment and processes. These are usually targeted at producing existing materials more efficiently or solving existing problems, not the development of new chemical entities. This is in stark contrast to the type of articles on developments that you will find in many biotech-oriented magazines, where the majority of articles cover new drugs (or new chemical entities) in the discovery or clinical trials stages. Biotech magazines also cover financing and new laboratory techniques, as well as new equipment and processes, with much of the equipment news in the form of advertising.

Biotech and pharm industry chemical engineers would like to believe that the lack of interest in new equipment and processes is some great conspiracy. It isn't. The "equipment-entity" discrepancy simply illustrates the large differences in the driving forces between the chemicla process and biopharmaceutical industries. By understanding the underlying differences and motivations driving innovation in these two industries, we can determine the best way to transfer technology between them.

Innovation in Chemical Processing
To understand what drives innovation in chemical process industries we must first look at the products and markets served by these industries. Most strictly chemical products (e.g. oil and gas, plastics, metals, inorganic chemicals, etc.) are commodities and thus have a very low profit margin as compared to pharmaceuticals. Even many chemicals that are "prioritary" or "patented" by a company will usually have competing commodity products, so even the profit margin on these seemingly high-value materials are driven down. As a result, the production cost of the product makes up a large percentage of the price at which it can be sold. Any reduction in these production costs has a significant influence on the profitability of the product.

In addition, most chemical operations concern themselves with improving, or adding value, to a material that already exists. Thus, the emphasis is on not creating new materials, but on converting existing materials into a more valuable form.

Lastly, many innovations from chemical companies involve solving an existing problem of their own making. Whether this be finding more cost effective ways to run a reactor, or new ways to reduce pollutants emanating from the facility. All these have significant effects on how much the final product costs.

Bottom line: Although many new chemical entities debut each year, most innovations are based on equipment and processes for more efficient production or for solving existing production problems.

Innovation in Biopharmaceuticals
In the biotech and pharmaceutical industries the emphasis is much different. The drug industry primarily concerns itself with the production of patent-protected materials in which the profit margin is very high. As it turns out, when profit margins are not very high (for example, in generic drugs) the pharmaceutical industry takes on a decidedly "chemical process" character vis a vis innovation. Because the profit margins on prioritary products are so high, the production process itself has very little impact on the final price at which the product can be sold. Instead, the primary factors driving price are demand and the need to recover large development costs.

Contributing to the apparently skewed process priority among biotech companies is the fact that many small to medium sized biotech firms are in a constant battle for funding. With anywhere from a few months to a few years of funding available, small biotech companies are satisfied to demonstrate that their products are safe and effective. Making products more efficiently is the farthest things from their minds.

Large pharmaceutical firms with long-term funding still must contend with regulatory concerns inhibit them from changing any of their unit operations, lest they risk alerting regulators or introducing risk into their production processes.

Incentives for Technology Transfer to Biopharmaceuticals
So the differences between chemical and biotechnology companies all comes down to economics. Presented with these vastly different economic models and incentives, how can we promote technology transfer between the two sectors? If chemical engineers wish to influence the pharmaceutical industry through new equipment introductions, they must demonstrate a substantial improvement in process economics. For this to happen, innovations must be targeted at reducing development cost related to the new chemicals. If technology from chemical process industries can be transferred to biopharmaceuticals in a way that reduces the latter's bottom line development costs and/or significantly increases the reliability of the production process, then the effort will be successful. If technology transfer provides only small increases in efficiency of the production process, predominately at the large scale, then its incorporation and eventual success within biotech will be limited.

Large pharmaceutical firms are in the best position to promote the kinds of technology transfer discussed here. Small to medium sized Biotech firms usually have their hands full keeping the doors open and cannot be expected to champion equipment innovations. Large, well-funded pharmaceutical firms, although they may not be interested in developing new equipment for use in their development labs, must nevertheless find ways to promote the adoption of new equipment.

As new equipment from chemical processing finds its way into biotech development labs and reduces costs in this area, the biopharmaceutical production plant will not be far behind.

John Kossik, a process engineer at Beacon Engineers, lives in Seattle, WA.

For more information: John Kossik, Beacon Engineers, 18940 Northeast 150th St., Woodinville, WA 98072. Tel: 425-742-9693. Fax: 425-883-2171. Email: jmk@beaconengr.com.