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1、Breaking the Cost Barrier in BiomanufacturingFebruary 2024By Jean-Franois Bobier,Tristan Cerisy,Anne-Douce Coulin,Crystal Bleecher,Victoria Sassoon,and Brentan Alexander 1 BREAKING THE COST BARRIER IN BIOMANUFACTURINGBreaking the Cost Barrier in BiomanufacturingBut in areas other than pharmawhose bu

2、siness models are built on high-margin,low-volume products with low sensitivity to costsinnovations have created only niche markets in enzymes,fragrances,and food and feed supplements.This may be about to change.Demand is solidifying for products that use biological processes and genetically modifie

3、d microorganisms in place of traditional production methods,driven by the need to achieve sustainability in manufacturing while reducing carbon emissions.At COP28,nearly 200 nations signed on to moving away from fossil fuels and,therefore,petrochemicals.More than 4,100 of the worlds largest companie

4、s have established emis-sions-reduction targets,according to the Science Based Targets initiative,with more than 2,600 of them including net zero emissions commitments.In its March 2023 re-port,Bold Goals for US Biotechnology and Biomanufacturing,the White House set a target of producing“at least 30

5、%of the US chemical demand via sustainable and cost-effective biomanufacturing pathways”within 20 years.But for change to happen,costs must come down.Meeting the sustainability and emissions-reduction needs of global industry depends on achieving economically viable preci-sion-fermentation biomanufa

6、cturing at commercial scale and bringing production costs into parity with existing methods.These in turn require construction and optimiza-tion of biofoundrieslarge-scale,standardized biomanu-facturing facilities that can meet industrial-level demandand continued improvements in strain engineering.

7、Participants all along the value chain have important roles to play.Most immediately,corporate customersthe same companies that need to meet sustainability and net zero pledgesmust demonstrate that the demand is real by committing to offtake agreements for future delivery of new ingredients and by a

8、dapting their supply chains and product formulations accordingly.Policy makers and regu-lators can smooth the way by offering incentives and loan guarantees and removing red tape.As demand for new facilities gains traction and financial risks recede,project finance investors can step in with necessa

9、ry capital.As we have seen with other advanced technologies,the result can be a virtuous circle.The first optimized large-scale facilities can lower production costs by as much as 50%on existing strains,enabling some cost parity with incumbent technologies.More and larger facilities,as well as impro

10、ved strains,could reduce production costs by up to 90%,achieving or surpassing price parity with current incumbent methods for most products.(See Exhibit 1.)In fact,we estimate that the market for biomanufactured ingredients in three industriesspecialty chemicals,food,and chemical precursorscould re

11、ach$200 billion by 2040if the manufacturing capacity is there.BCG has been researching and advising clients for years on developments in advanced technologies.Synonym is devel-oping the physical,digital,and financial infrastructure to catalyze a biomanufacturing revolution.Heres our view on how biom

12、anufacturing can finally fulfill its promise of achieving commercial scale.Since the US FDA approved the first biosynthetic drug,insulin,four decades ago,the market for products created through precision fer-mentation and biomanufacturing has grown to$100 billion.The sec-tors success led to predicti

13、ons that precision-fermented bioproducts would disrupt industries from pharmaceuticals to food to chemicals.BOSTON CONSULTING GROUP +SYNONYM 2Boosting Biomanufacturing Supply by Driving Down CostsTwo truths:the range and performance of precision fer-mented products are relevant for almost all manufa

14、cturing companies,and biomanufacturing is a tried and tested technology.The big problemand the reason that preci-sion fermentation remains an underused technology de-spite continuing advances in genome engineering and strain developmentis the high cost of production,which stems from adherence to rig

15、orous standards to ensure high quality.(See Exhibit 2.)Biomanufacturing involves fermentation under optimal conditions(pressure,temperature,pH,and concentration of oxygen and nutrients)in a fermentor purpose-built for aerobic fermentation followed by downstream processing(DSP)to isolate the end prod

16、uct via separation and purifi-cation steps such as filtration and spray drying.Advances to date have been driven primarily by pharmaceutical standards.Contract manufacturing organizations(CMOs),which serve the pharmaceuticals industry,have small scale,high production costs,and unprofitable unit econ

17、om-ics for most nonpharma bioproduct companies.In addi-tion,customers must invest a significant amount of up-front capital to fund DSP,making the economics even more unfavorable.Only a handful of CMOs have available capacity of more than 100,000 liters.Source:BCG analysis.Exhibit 1-The Three Keys to

18、 Achieving Biomanufacturings PotentialDemandStrainsScaleNiche markets(hundreds of tons)Mass market(million of tons)Many,designed for labFew,designed for scalePharma scale(2 million liters Large-scale production Non-pharma requirements$300 million$400 million 60 monthsUsageCapex and build timeIndustr

19、ial scale100,000 liters Commercial production Continuous improvement$200 million 3060 months(bespoke facility built in-house)Lab scale20,000 liters Proof of concept Fundamental research$1 million$5 million 6 months(depending on research laboratories and university availability)Pilot/demo scale20,000

20、100,000 liters Scalability demonstration Process and yield refinement$5 million$50 million(equipment upgrades)312 months(depending on CMO availability and equipment requirements)11 BREAKING THE COST BARRIER IN BIOMANUFACTURINGEthanol,which in the US is made primarily from corn and blended up to 10%w

21、ith gasoline,has been used as a gaso-line blend-in ingredient or alternative since the earliest days of the automotive industry.Henry Ford designed the 1908 Model T to run on ethanol as well as gas.Demand for ethanol in the US took off in the 1990s,spurred by govern-ment policy and regulation in the

22、 form of the Clean Air Act of 1992,and sustained later by the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007.In just six years,demand more than tripledfrom 4 billion gallons in 2005 to 13 billion gallons in 2010.In 2021,US production of ethanol neared 21 billion gallo

23、ns.Today,some 200 ethanol plants operate in the US.The engineering firm ICM designed about 100 of them,the construction company Fagen Inc.built about 75,and POET about 34.By standardizing facility designs,including offer-ing two size options(50 million gallons per year and 100 million gallons per ye

24、ar),these companies lowered the cost of the facilities and shortened their construction times.At the peak of construction demand,the companies were building more than 30 plants a year in the US.Early facili-ties(built in the early 2000s)were much smaller,but the average size increased over time,from

25、 about 35 million gallons per year in 1999 to about 75 million gallons per year in 2011.During the same period,capital costs dropped by 30%,from$2.07 per annual gallon to$1.25 to$1.50 per annual gallon.The Corn Ethanol Growth WaveBOSTON CONSULTING GROUP +SYNONYM 12The ability to produce bioproducts

26、at projected demand levels depends on constructing sufficient new pur-pose-built capacity,which in turn requires substantial capital investment.Large,non-pharmaceutical-grade facili-ties permit economies of scale that make microbial fer-mentation and biomanufacturing competitive with many legacy pro

27、duction methods.Companies can build facilities today to produce the strains of tomorrow,and standardiza-tion and replicable designs can reduce capex and construc-tion timelines.Biomanufacturing is an emerging asset class that will provide critical infrastructure for the overall energy transi-tion.As

28、 a standalone asset class,it will rely on project finance to build assets.This will separate the credit quality of a durable asset from the credit quality of its sponsor,and will facilitate involvement by investors who accept lower returns as the price for removal of the risk associated with the com

29、pany itself.These investors give up potential business upside in return for downside protection in the form of contracted revenues and low customer churn that the facility provides.A high-level snapshot of a well-structured investment from an infrastructure investor at present might look like this:w

30、ith capex of$350 million and a long-term tenant product margin of more than 10%,a project finance equity investor can expect to see an internal rate of return in excess of 20%and to achieve breakeven after four to five years of facility operation.Capitalizing on advances in biomanufacturing and a fo

31、cus on nonpharma bioproducts,Synonym has designed a highly standardized facility for which 80%to 90%of the capex goes to facility elements that are applicable across many precision-fermented products.Only 10%to 20%is for molecule-specific equipment.(See the exhibit.)As a result,investors and funds t

32、hat specialize in infrastructure invest-ments can approach biofoundries as a single asset class in which each project has similar specifications and require-ments:An Emerging Infrastructure Asset ClassSources:Synonym analysis;BCG analysis.About 90%of the$300 Million to$400 Million Capex for a Protei

33、n Biofoundry Goes to Standardized Construction Illustrative:food-grade protein processInfrastructureSite and buildingNon-molecule-specific capexMolecule-type-specific capexMolecule-specific capexProductionPurificationDryingPercentage of total capex35%45%10%10%Highly standardizedfacilityModerately st

34、andardizedfacilityMolecule-specificequipment13 BREAKING THE COST BARRIER IN BIOMANUFACTURING Enhanced Repurposing.Standardizing biomanufac-turing facilities addresses underutilization and market changes.Accelerated Commercialization.Standardized facili-ties support cost-effective growth for startups

35、.Future-Proof Performance.Flexible designs are crucial for preventing stranded assets as technologies evolves.Innovation Promotion.Standardized facilities simplify investing in biomanufacturing,and their flexible,cost-ef-fective infrastructure fosters innovation and entrepre-neurship.Given that we a

36、re still in the early days of the industry,the biomanufacturing asset class presents a near-term oppor-tunity for investors to capture higher returns.Over time,as facilities become cheaper to finance and build,risk will recede and returns will fall accordingly.One key risk in securing financing toda

37、y is product offtake:we can project large and diverse demand,but long-term contracts are not yet common.As more biofoundries are built and more long-term con-tracts with customers are executed,the asset class will become commoditized,depressing yields.Standardization and replicable design will progr

38、essively reduce capex by about 30%and construction timelines to two to three years for subsequent facilities.Other once-new infrastructure asset classessuch as solar,cell towers,and data cen-tersevidenced this pattern as they proceeded down the risk-return spectrum.BOSTON CONSULTING GROUP +SYNONYM 1

39、4In some respects,Europe is currently better positioned than other regions for this kind of infrastructure scale-up.Europe has approximately twice the precision fermentation capacity of the US,for example.On the other hand,several roadblocks could limit future development.(See Exhibit 10.)On paper a

40、t least,the US enjoys a number of advan-tages that make it attractive:plentiful feedstock in the form of corn,cheap energy(relative to much of the world),and a pool of some of the largest potential offtake buyers.Investment has been slow,but we expect this to change as US companies realize that biop

41、roducts represent their most expeditious path to meeting their climate commit-ments.Improvements in Strain Engineering and Other TechnologiesTo reach their full potential,biofoundries need to work with new strains engineered with large-scale manufacturing and other technologies in mind to sustain th

42、e scale curve.Strain engineering has been well financed to date,and its track record of advances in terms of new molecules has been impressive.Recent technological breakthroughs have improved facilities ability to manipulate biological systems at scale.These include:DNA synthesis Development of new

43、genetic engineering tools Adaptive laboratory evolution Development and analysis of data from various“-omics”technologies(genomics,transcriptomics,metagenomics,proteomics,and metabolomics)High-throughput enzyme screening Protein design Use of industrial or wild strains in place of conventional strai

44、ns(with scale in mind)Sources:Synonym analysis;BCG analysis.Note:CAP=common agricultural policy.Exhibit 10-Feedstock,Energy,and Leasing Costs Jeopardize Europes Ability to CompeteLease/amortizationcostsEurope has more constraining permitting laws and higher construction costsFeedstock costs in Europ

45、e are twice the global average per kg,owing to CAP regulations on sugar and lower availabilityEnergy costs per megawatt in Europe are twice the global average%30251598733FeedstockFixed and people costsConsumables and causticMediaEnergyWaterSG&A expenses15 BREAKING THE COST BARRIER IN BIOMANUFACTURIN

46、GCompanies can now combine these technologies with data-driven and AI methodologies to discern which strains,metabolic pathways,and enzymes are most likely to excel in large-scale manufacturing conditionsa capability that could reduce cost and time-to-market.Moreover,these technologies can use maste

47、red metabolic pathways to reduce R&D effort(time and money)for other molecules of the same family.For instance,Amyris has achieved scientific success in improving a strain to produce a molecule from the terpenoid class of organic chemical compounds(which are used to prevent and treat multiple diseas

48、es,including malaria and cancer).Because it builds on previous work,the improved strain requires much less R&D time and money to optimize,potentially for produc-tion of up to 80,000 known terpenoids.Other synthetic biology companies are adopting this approach as well,using previous work for one mole

49、cule to accelerate the development of molecules of the same family.This strate-gy could quickly unlock numerous other molecules at industrial scale in the coming years.Efforts of this kind can yield multiple benefits:high-perfor-mance strains that maximize production rates,robust strains that minimi

50、ze failed batches,and selective strains that reduce DSP complexity,all of which can significantly reduce the overall cost of production.Improvement should be continuous:customers of early biofoundries will reap the benefits of subsequent develop-ments that emerge from the same facilities.We estimate

51、 that producing strains optimized for large-scale manufac-turing in optimized large-scale biofoundries can bring costs down by 90%.(See Exhibit 11.)In addition to being suitable for genetically modified strains,versatile biomanufacturing facilities will accommo-date newly discovered wild-type(or nat

52、ural)strains or microbial communities with new properties,thanks to the latest-omics technologies.Other fundamental feedstock developments can reduce manufacturing costs,too.Sugar,known in the industry as a Gen 1 feedstock,is the primary precision fermentation feedstock today.Two future generations

53、of feedstocks are expected to reduce costs and facilitate increasing scale,although they may take at least a decade to mature.Gen 2 feedstocks consist of nonedible materials such as wood and recycled biowaste.Gen 3 feedstocks use CO2 and photosynthesis,and they require far less land for the initial

54、production stage.Using these upcycled waste streamssuch as food waste,gas fermentation(CO2 or CH4),cellu-losic materials,and glycerol(waste steam from biodies-el)as carbon sources has the potential to reduce production costs and shrink the facilitys carbon footprint.Sources:Synonym analysis(alternat

55、ive protein example);BCG analysis.Note:Percentages shown are averages;levers may vary depending on the location,feedstock,type of products,strain,etc.14x increase.2Increased facility utilization and DSP yield,biomass valorization,and decreased tank turnaround time.3Yield of feedstock and titer;ferme

56、ntation time.4Reduced schedule,engineering,and contingency costs.Exhibit 11-Combining Strains Engineered for Scale with Biofoundry Manufacturing Could Reduce Costs by 90%23%24%36%10%As-isunit costScale1Modern facilityoptimization2 Strainimprovement3 Standardization490%differenceRepresentative precis

57、ionprotein processTargetunit costBOSTON CONSULTING GROUP +SYNONYM 16Another anticipated technological advance,continuous fermentation,can significantly increase biomanufacturing production rates.The process entails spending less time growing the cells and cleaning and sterilizing the fermen-tors,so

58、the same infrastructure can produce more product.But continuous fermentation is not yet viable at commer-cial scale other than for biofuels.Major challenges include reducing contamination and constraining genetic drift.Advancing on both of these fronts will require developing or optimizing strains a

59、dapted for new bioprocesses,build-ing new continuous fermentor systems with adapted up-stream equipment,and installing larger DSP equipment that can handle higher volumes of material.One additional promising technology on the horizon is cell-free production,which uses enzymes from precision fermen-t

60、ation to perform biocatalysis or green chemistry.This tech-nology is complementary to precision fermentation;in combination,they can unlock lower production costs.Corporations and Governments Must Step UpIn large capital-intensive projects,demand typically antici-pates supply through contracted offt

61、ake agreements.These agreements,which are common practice in chemicals and specialty chemicals,are likely a prerequisite for investors to finance facilities and production line setups.We expect the bioproducts market to develop in three phases,and we see support from corporate-customer and governmen

62、ts are critical for the first two.(See Exhibit 12.)The phases are as follows:Emerging Market.Manufacturers use government grants and government-backed loans to build the first facilities and demonstrate feasibility.Early adopter corporations should support the market with targeted offtake agreements

63、.Growth Market.Governments provide support for the market via bio-friendly regulations and continued finan-cial support.Corporate buyers commit to larger volumes,and institutional private investors begin to step in,with proof of feasibility established.Mass or Mature Market.In a demonstrated and pre

64、dictable market,banks can fund most facilities via project financing,leveraging full offtake agreements to build the business case.Precision fermentation has demonstrated its potential time and again.The key question now is whether bio-manufacturing can overcome the cost-scale conundrum and support

65、a broad-based shift to more sustainable alter-native processes to unlock new products and markets.With proven technology and a vast range of potential bioproduct applications,biomanufacturing is at a commer-cialization tipping point.Infrastructure can be built today for the strains of tomorrow.Large

66、 companies looking to meet their sustainability goals should act now to transform their supply chains by committing to purchase from bio-manufacturing companies.Far-sighted investors with a focus on infrastructure should evaluate the emerging asset class and be ready to commit capital to attractive

67、projects.Source:BCG research.Note:POCs=proofs of concept.Exhibit 12-The Three Phases of Market DevelopmentEmerging marketIndustrial-scale factories(PoCs)123Growth marketCommercial developmentMass/mature marketBroad adoptionDemonstrate an achievable cost decrease on a large-scale facilityHeavy public

68、 institutions support(grants,government-backed loans,tax incentives,etc.)Offtake agreements from corporations and governmentVenture capital investmentPrivate equity investmentsGovernment-backed loansOfftake agreements with incentivized corporationsTraditional project financing with banks and offtake

69、 agreementsInstitutional investors(real estate/private equity funds)Confirm demand attractiveness and build a track recordSecure a large footprint to win market share17 BREAKING THE COST BARRIER IN BIOMANUFACTURINGAbout the Authors Jean-Franois Bobier is a partner and vice president,deep tech,in the

70、 Paris office of Boston Consulting Group.You may contact him by email at bobier.jean-.Anne-Douce Coulin is a senior product manager,deep tech,in BCGs Paris office.You may contact her by email at coulin.anne-.Victoria Sassoon is the Associate Director of Capital Markets at Synonym,responsible for the

71、 financing strategy of biomanufacturing facilities as an emerging asset class.You may contact her by email at victoriasynonym.bio.Tristan Cerisy is a lead knowledge analyst,deep tech,focusing on synthetic biology and biomanufacturing,in BCGs Paris office.You may contact him by email at .Crystal Blee

72、cher is the Vice President of Engineering at Synonym,spearheading the companys biomanufacturing facility design and techno-economic modeling output.You may contact her by email at crystalsynonym.bio.Brentan Alexander is the Chief Investment Officer at Synonym,and leads the companys capital markets s

73、trategy.You may contact him by email at brentansynonym.bio.For Further ContactIf you would like to discuss this report,please contact the authors.AcknowledgmentsThe authors would like to thank Nicolas Goeldel and Max Richly of BCG,Joshua Lachter of Synonym,Per Falholt of 21st.BIO,Gwenal Servant of A

74、bolis,and Cline Crusson-Rubio of SICOS for their contributions to this publication.SynonymSynonym enables the commercialization and manufacture of bioproducts,accelerating the worlds transition to better,more sustainable materials.We believe that bioproducts created using biology represent a key par

75、t of our future industrial base and will transform crucial elements of supply chains across multiple sectors while helping to catalyze a decarbonized future.Synonym works with companies building these next-generation bioproducts to expand and scale seamlessly becoming their strategic biomanufacturin

76、g partner.We have also launched two,free online tools to help companies on their paths toward commercialization:Capacitor,the worlds most comprehensive directory of available biomanufacturing infrastructure Scaler,a techno-economic analysis(TEA)and life-cycle assessment(LCA)calculator that generates

77、 insights designed to help companies optimize their paths to market.Learn more about us at www.synonym.bio or follow us on LinkedIn for the latest on the biomanufacturing revolution.Boston Consulting Group 2024.All rights reserved.2/24 For information or permission to reprint,please contact BCG at .

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