SEMESTER IV INDUSTRIAL BIOPROCESSING

MODULE II

MARKET ECONOMICS RELATING TO MODERN INDUSTRIAL

BIOTECHNOLOGY IN INDIA

The biotechnology sector of India is highly innovative and is on a strong growth

trajectory. The sector, with its immense growth potential, will continue to play a significant role
as an innovative manufacturing hub. The sector is one of the most significant sectors in
enhancing India's global profile as well as contributing to the growth of the economy.

India is among the top 12 biotech destinations in the world and ranks third in the Asia-
Pacific region. India has the second-highest number of US Food and Drug Administration
(USFDA)–approved plants, after the USA and is the largest producer of recombinant Hepatitis B
vaccine. Out of the top 10 biotech companies in India (by revenue), seven have expertise in bio-
pharmaceuticals and three specialize in agri-biotech.

India has no dearth of talent in biotechnology, as a number of institutions, both

government and autonomous, provide the necessary opportunities for the students seeking to
obtain a degree in this sector. The Government of India has provided adequate scope to this
sector by providing facilities for Research and Development (R&D) in the field of
biotechnology.

The Indian biotech industry holds about 2 per cent share of the global biotech industry.
The biotechnology industry in India, comprising about 800 companies, is valued at US$ 11
billion and is growing at a Compound Annual Growth Rate (CAGR) of 20 per cent. The
government has to invest US$ 5 billion to develop human capital, infrastructure and research
initiatives. Biopharma is the largest sector contributing about 64 per cent of the total revenue
followed by bioservices (18 per cent), bioagri (14 per cent), bioindustry (3 per cent), and
bioinformatics contributing (1 per cent).

The high demand for different biotech products has also opened up scope for the foreign
companies to set up base in India. India has emerged as a leading destination for clinical trials,
contract research and manufacturing activities owing to the growth in the bioservices sector.

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A Network of Technology Centres and promotion of start-ups by Small Industries

Development Bank of India (SIDBI) are among the steps taken by the Government of India to
promote innovation and entrepreneurship in the agro industry proposed by the Ministry of Micro,
Small & Medium Enterprises (MSME) in a new scheme. The Government of India has taken
several initiatives to improve the biotechnology sector in the country as well as offer enough
scope for research in this field. The Department of Biotechnology (DBT) along with other
government funded institutions such as National Biotechnology Board (NBTB) and many other
autonomous bodies representing the biotechnology sector, are working together in order to
project India as a global hub for biotech research and business excellence. 

With the country offering numerous comparative advantages in terms of R&D facilities,
knowledge, skills, and cost effectiveness, the biotechnology industry in India has immense
potential to emerge as a global key player.

India constitutes around 8 per cent of the total global generics market, by volume,
indicating a huge untapped opportunity in the sector. Outsourcing to India is projected to spike
up after the discovery and manufacture of formulations. Hybrid seeds, including GM seeds,
represent new business opportunities in India based on yield improvement.

India currently has a marginal share in the global market for industrial enzymes. Hence,
there is an opportunity in focused R&D and knowledge-based innovation in the field of industrial
enzymes, which can innovatively replace polluting chemical processes into eco-friendly
processes that also deliver environmental sustainability. Another interesting field of study is the
area of bio-markers and companion diagnostics, which will enable to optimise the benefits of
biotech drugs.

COST ESTIMATES

The decision to invest will be based on cost estimates for the proposed production
process. Without these any rational decision concerning the investment can be taken. The cost
depends on factors such as the scale of the project, the strategic importance of the project, the
split between internal and external expertise used etc.

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There are two main parts to the cost estimate: capital costs and operating costs. The
former covers the fabrication of complete plant, including production unit, buildings, preparing
the land etc. The latter concerns the cost of operating the plant, in terms of man power, raw
materials, utilities (steam, water and electricity) etc. The number of items included in the capital
and operating cost estimates will depend on the method used for the estimate.

CAPITAL COST ESTIMATION

The capital costs are separated into:

 Direct or fixed capital cost – the amount of money required for establishing, building, and
furnishing the plant. It is estimated based on total equipment cost.
 Indirect or working capital cost – the working capital required for constructing the plant
(overheads, transport, engineering, taxes etc)
 Start up and validation cost.
There are many reasons for separating the direct and indirect costs, the most important being tax
and duty and control of finance.

For preliminary cost estimates, the fixed capital investment of a plant is a multiple of its
equipment purchase cost. The equipment purchase cost can be estimated from vendor quotations,
published data, company data compiled from previous projects, and by using process simulators
and other computer aids. Vendor quotations are time-consuming to obtain and are therefore
usually avoided for preliminary cost estimates. Instead, engineers tend to rely on the other three
sources.

Another factor that affects equipment purchase cost is the material of construction. For
example, a stainless steel chromatography column is more expensive than a plastic one of the
same size. In bioprocessing most of the equipment is made of stainless steel for GMP (good
manufacturing practice) reasons, and selection of materials is less of a problem. Other factors
that affect equipment cost include the finishing of the metal surface and the instrumentation that
is provided with the equipment. This is the major cause for the wide range in prices for
bioreactors.

In addition to direct fixed capital costs, money must also be available to pay for the
following items: 1) raw materials for 1-2 months, 2) labor for 2-3 months, 3) utilities for a

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month, 4) waste treatment/disposal for a month, and 5) other miscellaneous expenses. “Working
capital” accounts for these investments in temporary expenses and consumable materials. The
required amount of working capital for a process is usually 10 to 20% of the DFC.
Startup and validation costs can also represent a significant capital investment for a
biopharmaceutical plant. A value of 5 to 10% of DFC is quite common.

Items included in the capital cost estimates

All pieces of equipment for production, recovery, supply of utilities including spares
Instrumentation
Installation – equipment, instruments, piping
Labour for installation
Land purchases, preparation and building
Supervision
Insurance and tax
Site preparation
Contractors fee
Contingency

OPERATING COST ESTIMATION

The operating or manufacturing cost are simply a measure of how much money you
spend to produce your product, including development work to improve the process as well as
the cost of marketing and selling it. Dividing the annual operating cost by the annual production
rate yields the unit production cost (in $/kg). Biotechnology is a unique industry when it comes
to the range in unit production cost. There are products that cost less than $1.0/kg and others that
cost more than $10,000,000/kg to make. The operating costs are divided into:
 Fixed costs – items that are not related to the volume of production, i.e, taxes,
depreciation, overheads.
 Variable costs – related to output by way of raw materials, labour and energy.

Items typically included in an operating cost estimates

Raw materials Overheads
Utilities Royalties
Waste treatment R&D
Labour (including training) Cost of sales
Supervision Site maintenance
Maintenance Tax and insurance

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All costs are related to an item are included. Thus, the labour cost includes salaries,
overtime, fringe benefits, holidays, training, sick pay etc. It can also include phones, office
supplies, and professional fees. Similarly, raw materials will include all medium ingredients for
all growth stages, chemicals for process monitoring and control, analysis, gas supplies, catalysts
etc.

Raw materials
This accounts for the cost of all fermentation media, recovery chemicals, and cleaning
materials. For commodity biochemicals, such as ethanol, it is mainly the cost of fermentation
media. For high value products, the buffers used for product recovery and equipment cleaning
can be a major part of the materials cost. Note that the price of a raw material can vary widely
depending on its required purity.
Labour costs
This is estimated based on the total number of operators, which in turn is calculated by
summing up the operator requirements of the various operations as a function of time. The labor
requirement in a batch manufacturing facility varies with time. In a single product facility, the
number of operators in each shift must be based on maximum demand during that shift. In multi-
product facilities, each product line can employ a certain number of dedicated operators and
utilize floating operators during periods of peak demand. In general, smaller facilities tend to
utilize a larger number of operators per processing step because they are less automated. For
instance, a small biotech company may utilize 2-3 operators to set up a fermentor, whereas in a
large, highly automated fermentation facility a single operator may remotely handle the setup of
six different fermenters from the control room. In general, a typical biotech company that deals
with high-value products will allocate at least one operator to each processing step, such as
centrifugation, membrane filtration, chromatography, etc. during its operation. The setup of a
step may require multiple operators for a short period.
Consumables
This includes the cost of periodically replacing items that may be used up, fouled, or
otherwise damaged during processing, such as membranes, chromatography resins, activated
carbon, etc. As an examples the high unit cost of chromatography resins and their frequent
replacement can make this item a major component of the operating cost.

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Laboratory / QC / QA
This accounts for the cost of off-line analysis, quality control (QC), and quality assurance
(QA) costs. Chemical and biochemical analysis and physical property characterization, from raw
materials to final product, are a vital part of biochemical operations. This cost is usually 10-20%
of the operating labor cost. However, for certain biopharmaceuticals that require a large number
of very expensive assays, this cost can be as high as the operating labor.
Waste Treatment / Disposal
This accounts for the treatment of wastewater and the disposal of solid and hazardous
materials. The amount and composition of the various waste streams is derived from the material
balances. Multiplying the amount by the appropriate unit cost yields the cost of treatment and
disposal. Treatment of low biological oxygen demand (BOD) wastewater (less than 1,000 mg/L)
by a municipal wastewater treatment facility usually costs $0.2-0.5/m 3. This is not a major
expense for most biotech facilities that deal with high value products. Disposal, however, of
contaminated solvents (generated by chromatography steps) and other regulated compounds can
become a major expense because their unit disposal cost is in the range of $2-20/kg (usually
higher that the purchase price of the same chemical).
Utilities
This accounts for heating and cooling utilities as well as electricity. The amounts are
calculated as part of the material and energy balances. Aerobic fermenters are major consumers
of electricity but downstream processing equipment generally does not consume much
electricity. In downstream processing, clean steam is mainly used for sterilizing equipment as
part of equipment cleaning. Another common use is for sterilizing fermentation media. Note that
purified water used for buffer preparation and equipment cleaning is often classified as a utility
and not as a raw material, thus increasing the cost contribution of utilities.
Miscellaneous
This accounts for on-going R&D, process validation and other over head type expenses.
Expenses of this type can be ignored in preliminary cost estimates. Other general expenses of a
corporation include royalties, advertising, and selling. If any part of the process or any
equipment used in the process is covered by a patent not assigned to the corporation undertaking
the new project, permission to use the teachings of the patent must be negotiated, and some form
of royalties is usually required. Advertising and selling covers expenses associated with the
activities of the sales department.

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PROFITABILITY ANALYSIS

The main aim of a business is to earn profits. An analysis of cost and revenue of the
firm which determines whether or not the firm is profiting is known as profitability
analysis.

With estimates of capital investment, operating cost, and revenues of a project, one can
proceed to assess its profitability and attractiveness from an investment point of view. There are
various measures for assessing profitability. The simplest ones include gross margin, return on
investment (ROI), and payback time and they are calculated using the following equations:

Where gross profit is equal to annual revenues minus the annual operating cost and net profit is
equal to gross profit minus income taxes plus depreciation. All variables are averaged over the
lifetime of a project.

Profitability analysis mainly has a focus on four criteria

 Customer profitability analysis (CPA) – Which calculates revenue coming from customers
less all costs
 Customer product profitability analysis – This equation helps calculate the profitability per
product and per customer.
 Increasing company profitability – which increases the competitive advantage of a company
 Implementing TQM – which increases the total quality

Customer Profitability analysis – The customer profitability analysis is bases on activity based
costing and helps in calculating the revenue coming from customers while at the same time

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removing all costs from it thereby calculating the actual profitability per customer. The CPA is a
very important tool for profitability analysis and is frequently used.

Customer product profitability analysis – Firms like HUL and P&G have a wide variety of
product portfolio. This profitability analysis method can be used to find out both – profitable
customer as well as profitable products.

Increasing company profitability – Companies don’t need to produce products with high value
itself, but also products which are competitive in the market because of their pricing. Cost
leadership is one of the leading sustainable competitive advantages a firm can have. Thus a
company has to take care of its cost which will subsequently bring its profitability. Furthermore,
any advantage the firm has should be seen as a customer advantage. Developing on customer
advantages will result in increasing the overall company profitability.

Total Quality Management – Profitability of the firm also depends on its ability to
continuously improve its products and processes. TQM involves everyone and the concept
believes that with involvement of the top management, the workforce, suppliers and even
customers, the overall output of the firm can be increased and thus the firm will always meet
customer’s expectations thereby thoroughly satisfying them and therefore increasing the overall
profitability of the firm.

Thus profitability analysis leads to the firm discovering the areas where it is profitable and where
it is not. It can help the firm decide where it can lower the cost and where it can increase value.
Thus in the end, we come to the point mentioned at the start of the article. The motive of a
business is to earn profits and profitability analysis helps the firm achieve the same aim.

GMP AND cGMP

GOOD MANUFACTURING PRACTICE (GMP)

A GMP is a system for ensuring that products are consistently produced and controlled
according to quality standards. It is designed to minimize the risks involved in any
pharmaceutical production that cannot be eliminated through testing the final product.

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GMP covers all aspects of production from the starting materials, premises and equipment to the
training and personal hygiene of staff. Detailed, written procedures are essential for each process
that could affect the quality of the finished product. There must be systems to provide
documented proof that correct procedures are consistently followed at each step in the
manufacturing process - every time a product is made. 

These regulations, which have the force of law, require that manufacturers, processors,
and packagers of drugs, medical devices, some food, and blood take proactive steps to ensure
that their products are safe, pure, and effective. GMP regulations require a quality approach to
manufacturing, enabling companies to minimize or eliminate instances of contamination,
mixups, and errors.  This in turn, protects the consumer from purchasing a product which is not
effective or even dangerous. Failure of firms to comply with GMP regulations can result in very
serious consequences including recall, seizure, fines, and jail time.

GMP regulations address issues including recordkeeping, personnel qualifications,

sanitation, cleanliness, equipment verification, process validation, and complaint handling. Most
GMP requirements are very general and open-ended, allowing each manufacturer to decide
individually how to best implement the necessary controls. This provides much flexibility, but
also requires that the manufacturer interpret the requirements in a manner which makes sense for
each individual business.

All guidelines follow a few basic principles:

 Manufacturing facilities must maintain a clean and hygienic manufacturing area.

 Controlled environmental conditions in order to prevent cross contamination of food or drug

product from adulterants that may render the product unsafe for human consumption.

 Manufacturing processes are clearly defined and controlled. All critical processes
are validated to ensure consistency and compliance with specifications.

 Manufacturing processes are controlled, and any changes to the process are evaluated.
Changes that affect the quality of the drug are validated as necessary.

 Instructions and procedures are written in clear and unambiguous language. (Good
Documentation Practices)

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 Operators are trained to carry out and document procedures.

 Cross contamination with unlabelled major allergens is prevented.

 Records are made, manually or by instruments, during manufacture that demonstrate that all
the steps required by the defined procedures and instructions were in fact taken and that the
quantity and quality of the food or drug was as expected. Deviations are investigated and
documented.

 Records of manufacture (including distribution) that enable the complete history of a batch
to be traced are retained in a comprehensible and accessible form.

 The distribution of the food or drugs minimizes any risk to their quality.

 A system is available for recalling any batch from sale or supply.

 Complaints about marketed products are examined, the causes of quality defects are
investigated, and appropriate measures are taken with respect to the defective products and to
prevent recurrence.

GMP guidelines are not prescriptive instructions on how to manufacture products. They
are a series of general principles that must be observed during manufacturing. When a company
is setting up its quality program and manufacturing process, there may be many ways it can fulfil
GMP requirements. It is the company's responsibility to determine the most effective and
efficient quality process.The quality is built into the product and GMP is the most essential part
of ensuring this product quality.

CURRENT GOOD MANUFACTURING PRACTICE (cGMP)

GMP is also sometimes referred to as "cGMP". The "c" stands for "current," reminding
manufacturers that they must employ technologies and systems which are up-to-date in order to
comply with the regulation. Systems and equipment used to prevent contamination, mixups, and
errors, which may have been "top-of-the-line" 20 years ago, may be less than adequate by today's
standards.

cGMPs are followed by pharmaceutical and biotechnology companies to ensure that their

items are manufactured to specific requirements including identity, strength, quality, and purity.
There are a number of federal regulations that relate to cGMP which, if not followed, can lead to

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criminal penalties. There are two specific regulations that relate to pharmaceutical
manufacturers, one for biological products, and a regulation that regulates electronic records and
electronic signatures.

UTILITIES IN A BIOPROCESS PLANT

Utility systems are capital-intensive, have long lead times, and are not value-additive, but
they do provide critical support for the process and operations. The vast majority of utility
demand in a traditional biotech facility comes from the water systems and plant steam / clean
steam systems required for washing, cleaning, flushing, and sterilization.

Electrical Power: Although it is obvious that power grids will be extensive, it is important to
note that most new facilities are incorporating some features of LEED (Leadership in Energy &
Environmental Design), energy conservation, and self-generation to lower costs, garner tax
incentives, and to be more responsible to the local environment.

Inert Gases: Clearly, there is a need to continue and potentially expand the role of inert gasses.
The only real challenge here is correctly calculating the use and sizing of the storage vessel.

Clean in Place (CIP): CIP will generally disappear with the use of disposables; however, there
may still be the need for parts washers. These can be outfitted with their own water generation
systems, provided power and potable water are supplied.

Clean Steam: The need for clean steam becomes very limited in the design of a new biotech
plant. The product manager and the designer should explore the options of product campaigning
to acquire pre-sterilized components before the batches. Use of clean steam for humidification
can be replaced with DI water/plant steam exchangers.

One large biotech firm built a decontamination autoclave (dedicated clean steam generator) and
padded the design by quadrupling the size for surge capacity. They realized after startup they
would only need to use the unit once a month for 10 liters of lab waste and once a quarter for one
20 liter bag of process waste. The decontamination could have been done with a simple bottle of

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bleach. Capacity planning and practicality is more important than doing what the legacy facilities
have done.

Chilled Water: A chilled water plant will always be needed to drive the HVAC and process
cooling systems. However, in the world of SUS, the energy load is radically reduced without the
traditional CIP/SIP operations.

Plant Steam: If local power costs are high and fuel costs are low, plant steam can provide a
means to both meet facility heating demand and generate clean steam.

CDA (Clean Dry Air): A common supply system with local filtration and pressure regulation can
serve both instrumentation users and process users, allowing this critical utility to be driven by
the automation needs rather than process needs. The one important issue is to recognize the need
for CDA if using air-driven agitators or pumps. Air-driven equipment is required in Class I,
Division 1 or 2 areas where solvents or explosive dusts are present.

Drain Systems: Drains are the forgotten utility. However, they can create runaway costs in the
absence of critical thinking and consolidation (e.g., in-situ neutralization and decontamination
for on-the-floor activities).

Process Thermal Control Units (TCUs) / Hot Water Systems: Hot water grids have slowly
disappeared over the last several years; however, elevated temperature is still needed for process
reactors. The easiest solution is wheeled (mobile) electrically powered TCUs, which provides hot
water from a potable water or chilled water source, have onboard temperature controls, and can
interface to  programmable logic controllers (PLCs) or distributed control systems (DCSs) for
remote control. These are cost-effective, multipurpose systems that can be cleaned and moved
around a production floor or mechanical chase for plug-and-play applications.

Sterilizing Gas Systems: The primary gases / sterilizing agents used are VHP (vaporized
hydrogen peroxide), iHP (ionized hydrogen peroxide), chlorine dioxide, and nitrogen dioxide.
Although VHP has been the industry’s dominant agent, the dawn of ultra-low potency products
and highly sensitive biologicals has challenged this dominance. VHP forces firms and designers
to choose materials, hoses, and tubing that do not attract and retain HP; build in ultra-long

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degassing cycles in isolators; and struggle with temperature and relative humidity (RH) to
promote the kill cycle, eliminate condensation, and ensure complete aeration.

ENERGY CONSERVATION AND AUDIT IN A BIOPROCESS PLANT

An industrial energy audit is a process that facilities energy usage patterns, equipment
efficiency, and overall building efficiency are determined in order to propose energy efficiency
measures. The result of a successful energy audit is decreased energy consumption, reduced raw
material usage and increased quality of the end product. The data collected by an energy auditor
is the basis on which the energy efficiency suggestions will be created. The implementation of
these measures will reduce manufacturing costs and also the negative effects on the environment.
It makes it possible to save raw materials, energy, optimizing the manufacturing process or
raising the company's profits and increase competitiveness. The industrial energy audit consists
of the following steps,

Step 1. Data collection:

 The presentation of the process or stage:- The first task of the energy audit is getting
acquainted with the entire production process or stage. What is produced, which inputs
are used? How much water is supplied, the amount of energy used, characteristics and
quantity of raw materials used and other specific information that can be useful in the
audit process, for example waste treatment.
 The principal scheme:- it includes all of the energy flows and process relationships.
 Data collection:- Collection of data on the entire production process and a specific period
is one of the main steps of the energy audit.
 The benchmark:- The collected data are compared with the data from similar companies.
 Defining the problem:- After comparison of the consumption problematic systems,
systems with relatively high energy usage can be defined.

Step 2 Data processing:

 Creating a team of specialists:- After defining the problem, the specialists from the
appropriate fields are incorporated into the audit process.

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 Necessary calculations:- Calculations are carried out for all of the manufacturing steps,
and the possible energy efficiency improvements are identified.
 Accurate scheme for the production of energy and raw material flows:- A pre-established
production scheme is improved, supplemented with information acquired in the energy
audit process.

Step 3 Analysis of results:

 The most appropriate solutions are identified and justified.

 Exact energy efficiency suggestions are presented:- The goal of the suggestions is
improving the manufacturing process and decreasing energy and raw material
consumption.
 All of the suggested improvements are integrated in an overall process diagram or
scheme in order to obtain a better understanding on how these changes will affect the
overall manufacturing process.
 Selection of an appropriate solution based on the potential savings, the impact on
production processes and technologies, as well as potential investments are selected for
energy efficiency measures to be economically justified.

Step 4 Recommendations for improvement:

 Proposed technology integration in the scheme:- Improvements are included in the

scheme in a way to better understand how it will affect the entire process.
 The choice of the right solution:- Based upon the potential savings, the impact on
production processes and technologies, as well as potential investments and ROI, energy
efficiency measures are selected.

Step 5 Economic foundations:

 All of the energy efficiency suggestions are justified for their economic benefit. Measures
considered most often: pay-back time and ability to attract structural funds.
 Choosing economically reasonable energy efficiency measures. After an economical
analysis, the most advantageous measures are chosen. Pay off times and capital costs are
considered.

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