Revolutionizing Biomanufacturing: Real Estate Opportunities in the New Cell and Gene Therapy Era

Recent groundbreaking scientific advancements in the biomanufacturing industry have ushered in a new era of cell and gene therapy. Now, there is surging demand to scale cell and gene therapy operations. This requires biomanufacturing facilities with unique characteristics, which are in limited supply.

This viewpoint offers background on how this new era of cell and gene therapy originated, details the unique complexities of this form of real estate, the availability of third-party service providers and emerging location trends. Case studies are used to demonstrate certain responses to current market needs.

Key Takeaways:

• The pandemic fueled mRNA vaccine development, which built on the preexisting body of knowledge of monoclonal antibodies (mAbs). Surging capital infusion and scientific innovation have ushered in this era of cell and gene therapy.
• Biomanufacturing facilities require unique quality assurances, infrastructure, architecture and zoning. Investors have adopted varied strategies, such as traditional leases, ground-up development, purpose-built projects, sale-leasebacks and shell conversions.
• Contract Development and Manufacturing Organizations (CDMOs)—third-party biomanufacturing service providers that offer supply chain efficiency, expanded service offerings and new technology—are among the key drivers of real estate requirements for biomanufacturing facilities. Pharmaceutical companies are contracting them at a rapidly growing rate.
• Biomanufacturing facilities have tended to cluster in specific regions due to real estate viability, venture capital inflows and access to top-tier talent. This is leading to ecosystems that drive significant innovation and business value.

The COVID pandemic ignited a flurry of mRNA vaccine development activity, propelled by unprecedented collaboration among academia, government entities and large biopharmaceutical companies. This increased collaboration not only spurred significant capital investment and disease-specific partnerships¹ but also triggered a fundamental shift in scientific innovation.² The resulting alliances catalyzed advancements in vaccine development and fueled co-development processes for other pharmaceuticals, amplifying the impact of pandemic-driven research efforts.^3,4 Simultaneously, advances in cell therapies are propelling the development pipeline forward.

Amid this dynamic landscape, there is a clear shift towards cell and gene therapy, evolving from the established era of mAbs. The wealth of insights gleaned from mAb manufacturing has catalyzed the development of novel therapeutic modalities, evidenced by the expanding accessibility of advanced therapies in clinical settings.⁵

These industry advancements have yielded state-of-the-art processes capable of consistently delivering intricate biopharma products of unparalleled quality. These pioneering processes provided direction for scaling and streamlining batch unit operations, addressing the growing demand for therapeutic solutions. Simultaneously, the evolution of technology and private sector collaboration with regulatory authorities have propelled a transition towards quality-focused methodologies, underscoring how superior processing conditions yields product excellence.

¹ Yu TH, et al. Biopharma innovation trends during COVID-19 and beyond: an evidence from global partnerships and fundraising activities, 2011-2022. Global Health. 2023;19(1):57.
² Thanh Le T, et al. The COVID-19 vaccine development landscape. Nat Rev Drug Discov. 2020;19(5):305-306.
³ Reilly P. The Impact of the COVID-19 Pandemic on the Biotech Industry. Hum Gene Ther. 2020;31(11-12):608-609.
⁴ Farrugia G, et al. Innovation Lessons From the COVID-19 Pandemic. Mayo Clin Proc. 2020;95(8):1574-1577.
⁵ Walsh G et al. Biopharmaceutical benchmarks 2022. Nat Biotechnol. 2022;40(12):1722-1760.

As the biomanufacturing landscape shifts towards cell and gene therapy (CGT), demand has surged for manufacturing space in critical life sciences clusters. Accommodating this demand is extremely difficult because there is a limited supply of suitable facilities. Increasing supply is essential to facilitate the rapid deployment of CGT innovations and expedite go-to-market initiatives. Strategic infrastructure investments and collaborative solutions within the biopharma ecosystem are needed.

CGT’s patient health impact is fundamentally reshaping talent, regulatory and infrastructure requirements for drug development, particularly for manufacturing facilities. The benefits of research and development (R&D) collaboration can be seen in innovation ecosystems, but it also influences other strategic biomanufacturing decisions. Both R&D and biomanufacturing decision-making entail selecting locations that offer access to specialized workforces and tailored real estate facilities. Increasingly, companies are simultaneously executing CGT biomanufacturing and R&D activities during the clinical-trial stage, driving demand for leasable biomanufacturing spaces integrated within their R&D operations. This strategic alignment not only enhances competitiveness but also fosters innovation within leading life sciences markets.

⁶ McKinsey. Eight Imperatives for Launching Cell and Gene Therapies.
https://www.mckinsey.com/industries/life-sciences/our-insights/eight-imperatives-for-launching-cell-and-gene-therapies

CGT-focused biomanufacturing facilities require new considerations from real estate developers. They must address stringent regulatory and quality standards, increased customization needs, varied investment strategies and evolving tenant preferences.

Biomanufacturing facilities are obligated to adhere to strict regulations such as Good Manufacturing Practice (GMP) standards or the even more rigorous Current Good Manufacturing Practice (cGMP), which are enforced by the FDA. To be compliant, these facilities, particularly CGT facilities, must be state-of-the-art. This commitment to quality is also reflected in how modern therapeutic companies prioritize quality control and onshore availability during the manufacturing process. As the biomanufacturing industry evolves, developers are increasingly recognizing the value of GMP/cGMP facilities and investing in them more. These facilities share fundamental traits with industrial structures, particularly costly infrastructure systems that are unlikely to be moved, fostering long-term tenant retention and minimizing the need for subsequent tenant modifications. Moreover, most tenants finance their own specialized enhancements.

Each of these spaces requires a bespoke approach tailored to each tenant. This customization includes infrastructure requirements such as heavy power systems, cold rooms, specialized HVAC systems and reinforced flooring. Collaboration between landlords and tenants becomes crucial, extending beyond financial considerations. It encompasses joint decisions on architect and contractor approvals, shared space planning responsibilities, coordinating permit acquisition and agreement on costs under the tenant improvement allowance. The size of these facilities varies, with those producing complex small-molecule medicine batches generally ranging from 40,000 to around 100,000 sq. ft., while mega-scale facilities are over one million sq. ft., like those owned by Genentech Vacaville and Fujifilm Holly Springs. This variety of needs exemplifies the complex nature of biotech and, more specifically, biomanufacturing space design and construction.

Investors have adopted various strategies to meet growing demand for specialized real estate infrastructure. These approaches include traditional leases, ground-up development, purpose-built projects, sale-leaseback transactions and shell conversions.

Tenant preferences are moving towards either converted buildings or purpose-built shell structures. Converted spaces leverage structural alterations and cost-saving measures to disrupt the traditional leasing model. In contrast, purpose-built life sciences campuses offer tailored solutions that align with the evolving needs of the industry. This has sparked discussions about regional variations in landlord contributions, influencing lease rates and, consequently, landlords' returns. The vast majority of leasable GMP/cGMP space is built as improved shell and only converted to biomanufacturing upon lease commitment by a tenant. This same improved shell can be repurposed for clean tech, microelectronics and other applications. As developers are confronted with the daunting task of securing limited greenfield sites or repurposing existing industrial properties amid intensifying competition, this enables the landlord more flexibility in potential service offerings and broadens the competition for this useable biomanufacturing space.

CDMOs play a pivotal role in supporting pharmaceutical companies throughout the entire drug development process, spanning research initiation to formulation and finishing stages.

The CDMO market is valued at $100 billion as of 2023 and is growing rapidly. Its projected annual growth rate is approximately 7%, and long-term growth is projected at approximately $172 billion by 2032.⁷ CDMOs have seen a surge in private equity investments, highlighting the biopharma industry's consolidation potential as smaller biotech companies turn to partnering to produce and sell drugs. High deal volume, valued at $71.1 billion during H1 2023, further underscores the market's growing attractiveness to investors and industry participants.⁸

CDMOs provide value to life sciences clients in three core ways⁹:

1. Broadening capabilities within existing value chains
2. Evolving service offerings
3. Diversifying service offerings beyond products, such as clinical trial services

The most progressive CDMOs are assuming a tech-driven role by integrating new technologies and partnering with or acquiring biotech startups to advance their offerings. This trend is more pronounced in novel therapy domains, where CDMOs are diversifying their service offerings. The inclusion of clinical trial services signifies a significant pathway for CDMOs into high-value, low-volume segments, like personalized medicine, necessitating a unique business model distinct from the traditional large-volume product output approach.

CDMOs have become integral to the biopharma industry. Currently, only a minority of biologics are manufactured in-house, which continues to lessen. Outsourcing has become key to companies’ manufacturing strategies, rather than just temporarily increasing capacity or cutting costs. Stresses caused by the pandemic and post-pandemic manufacturing landscape have also demonstrated the value of CDMOs.¹⁰

⁷ Precedence Research. Pharmaceutical CDMO Market Size to Hit USD 172.02 Bn by 2032. https://www.precedenceresearch.com/pharmaceutical-cdmo-market
⁸ Grand View Research. Biologics Market Size, Share & Trends Report. https://www.grandviewresearch.com/industry-analysis/biologics-market
⁹ EY. How CDMOs Are Leading Innovation for Pharmaceutical Partners. https://www.ey.com/en_gl/strategy/how-cdmo-companies-are-leading-innovation-for-pharmaceutical-partners
¹⁰ Outsourced Pharma. Here's Why Outsourcing to CDMOs Doubled In 13 Years. https://www.outsourcedpharma.com/doc/here-s-why-outsourcing-to-cdmos-doubled-in-years-0001

In 2021, Fujifilm Diosynth, a global CDMO, announced a planned $2 billion investment to develop the world’s largest cell culture CDMO, near RTP in Holly Springs, North Carolina. It was announced on April 11 that this investment will be increased to expand the facility’s capacity for drug substance production. The expansion will add two production modules, each with 20,000-L production bioreactors, harvesting capabilities and downstream processing. When the facility opens in 2025, it will include eight 20,000-liter bioreactors. There are plans for 24 more of the same size.¹¹

Holly Springs was selected due to local incentives:

The CDMO has already secured its inaugural client, Johnson & Johnson’s Janssen Supply Group. Janssen Supply Group has preleased a large-scale manufacturing suite at the plant, with scheduled occupancy beginning in 2025.¹²

¹¹ FiercePharma. Fujifilm Starts Build-Out for Massive NC Plant, the Latest Piece of Its Multibillion-Dollar CDMO Expansion Effort. https://www.fiercepharma.com/manufacturing/fujifilm-begins-construction-massive-plant-north-carolina-part-its-push-to-build-cdmo
¹² FiercePharma. J&J Books Manufacturing Space at Fujifilm Diosynth's Upcoming Mega-Plant in North Carolina. https://www.fiercepharma.com/pharma/jj-books-manufacturing-space-fujifilm-diosynths-upcoming-mega-plant-north-carolina

The emergence of CGT hubs across the U.S. is largely a product of strategic partnerships between public and private entities. Real estate viability, venture capital inflows and access to top-tier talent are key determiners of partnership feasibility. Additionally, the presence of local academic institutions, startups and research institutes aid in developing a flourishing ecosystem that translates groundbreaking research into tangible therapeutic solutions. Biopharma and burgeoning biotech companies can leverage these established R&D ecosystems for better outcomes. Much of the CGT revolution is emerging at these hubs, so they are critical in shaping the future of biotech.

Ecosystems are adding significant value to life sciences businesses. Average outcome of joining a high-performing ecosystem¹³:

Figure 1: CGT Hubs Across the United States

¹³ EY. How Ecosystems Can Help Fill the Life Sciences Innovation Gap. https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/life-sciences/life-sciences-pdfs/ey-ls-innovation-deficit-biopharma.pdf

North Carolina's Research Triangle Park (RTP), a key pharmaceutical and biotech hub, spans 7,000 acres, hosts 775 life sciences firms and 2,500 supporting companies, and provides 224,000 jobs state-wide. The entire Raleigh metro attracts major multi-million-dollar development projects for companies such as Eli Lilly, Fuji Diosynth, Thermo Fisher, Jaguar, Cambrex and Amgen. In 2021, Amgen's $550 million, 350,000-square-foot manufacturing facility plans secured substantial grants, including $12.6 million from the state and $22.8 million from local governments. An additional incentive, potentially $11.6 million over 12 years, depends on new tax revenue from Amgen's job creation.

The biopharma industry's transformation from monoclonal antibodies to cell and gene therapy heralds a significant shift in biomanufacturing. The mix of technological advancements and cross-industry collaboration created a landscape where developing more complex real estate enables further innovation. This paradigm shift towards cell and gene therapies signifies not just a clinical revolution but also a substantial demand for state-of-the-art, compliant facilities. The industry's growth amplifies the need for strategic real estate solutions, prompting a surge in demand for purpose-built structures and adaptive conversions. Tailored biotech spaces necessitate intricate collaboration between landlords and tenants, far beyond economic considerations.

This emerging era of biomanufacturing is high-risk and includes many challenges but provides new opportunities for both landlords and tenants. As the biomanufacturing landscape evolves, stakeholders must embrace bold, transformative action to shape its trajectory: leveraging collaborations, optimizing R&D ecosystems and making strategic real estate investments. The industry stands on the cusp of unparalleled growth and innovation. Real estate has an essential role in this new era.