It’s hard to flawlessly churn out billions of doses of drugs – and we aren’t doing a great job of it. A Midas List VC pulled together a dream team that says it’s come up with a better, faster way.
It’s all come down to Pfizer and Moderna. With Johnson & Johnson’s “one-and-done” shot on pause, America’s race against the virus and its variants now relies on our ability to flawlessly manufacture hundreds of millions of doses of the new mRNA vaccines – at warp speed. And previous quality control issues at a Pfizer plant, on top of Emergent BioSolutions fiasco with the J&J vaccine, are a stark reminder that manufacturing medicine is not easy.
Robert Nelsen, the top biotech investor on our annual Midas List of the best venture capitalists, figures there’s got to be a better way. As numerous companies started developing Covid-19 vaccines last spring, he was worried that they wouldn’t get manufactured fast enough. That meant there would be lots of avoidable death which made him angry (his Twitter bio ends “F—k Covid-19”). And when Bob Nelsen gets mad, he starts a new company. That firm, National Resilience officially, or just Resilience as it’s known, came out of stealth in November with $800 million in funding from Nelsen’s Arch Venture Partners and a who’s who of top-drawer VC firms and pharmaceutical companies.
“I started it because I was pissed off, not because I was particularly visionary,” says Nelsen, who is 57. “I was pissed off that things were taking so long. Why was it taking so long to get masks, to get therapies, to get vaccines? It all seemed like a bit of a shitshow. That was really what was motivating me, I guess. Most of my really good companies have started because I was pissed off at something.”
Making complex biotech medicines has all too often been a scientific, lab-based process. San Diego- and Boston-based Resilience wants to industrialize it, with more efficient, scalable processes that resemble how microchips are made. The precise details are a closely guarded secret, but Nelsen started by hiring an all-star team led by vice chairman Pat Yang and CEO Rahul Singhvi, supported by a board that includes Susan Desmond-Hellmann, the former CEO of the Gates Foundation, Scott Gottlieb, the former FDA commissioner and former Senator Bob Kerrey.
Resilience began by buying existing manufacturing facilities and companies. In February, it acquired an operation near Toronto. In March, it bought a major Sanofi-Genzyme plant in Boston. Then in April, it acquired Alachua, Florida-based Ology Bioservices, a vaccine company with Department of Defense contracts. While Resilience won’t say what it paid for these assets, industry observers say that the startup is acquiring operations on the cheap – often at just one or two times sales. That would mean that Resilience has spent somewhere north of $250 million to date on acquisitions.
It is also building out two facilities from scratch, one in Marlborough, Massachusetts, and the other in Fremont, California. Both will focus on gene therapy, cell therapy and messenger RNA (mRNA). And both are expected to be operational in 2022.
Yang, at 73 a legend in biotech manufacturing, predicts Resilience could reach $500 million in annualized revenue this year. A significant portion of that comes from existing contracts that Resilience acquired but they have ambitions that dwarf existing revenues.
“We’re dealing with 1950s technology, and that’s overstating it,” says Nelsen. He compares what Resilience is doing to Taiwan Semiconductor, Intel and iPhone maker Foxconn, all companies with tens-of-billions of dollars in revenue and global footprints. “We need to make things more systematic, and more decentralized, and more predictable,” he says. “This is the future of American manufacturing.”
“Most of my really good companies have started because I was pissed off at something.”
The chances of a new drug being eventually approved by the FDA are just 10 to 15%. Which means it doesn’t make sense to figure out how to make them at scale while they are still in clinical trials. “We chronically underinvest in manufacturing, and there is no incentive to invest in manufacturing early,” Yang says. Adds Nelsen, “The pharmas view it as a cost center, the biotechs don’t have the money and the universities don’t know how.”
The traditional approach of setting up manufacturing after successful Phase 2 clinical trials worked fine for therapeutics made with simple molecules, but today’s biologics are far more complex. And many newer drugs including ones for cancer as well as the Covid-19 vaccines have far shorter clinical trials. “There is no time for the manufacturing people to catch up to the product, so we would launch the product with laboratory scale processes,” Yang says. That rush makes sense when lives are at stake but creates problems longer term. “Once they launch the product, the process is locked,” he says. “It’s very hard to change manufacturing processes post-approval.”
Nelsen first broached the idea of building a next-gen biotech manufacturing company with Yang at a February 2020 board meeting of Sana Biotechnology, the cell and gene therapy specialist that is another of Nelsen’s companies. Yang, who had worked in operations at Merck and Genentech before becoming executive vice president at Roche, where he oversaw 21 sites and some 15,000 employees, signed on immediately.
Yang quickly brought on Singhvi, a 56-year-old engineer who he’d worked with at Merck. Singhvi grew up in a family of doctors in Jaipur, India, before getting a doctorate in chemical engineering at MIT. At Merck, he focused on vaccine manufacturing, the least sexy part of the industry at a time. “It was the backwater of the pharma industry,” he says. “Nobody paid attention to vaccines, but manufacturing was important there because it’s a low-margin business. It’s the one part of the pharmaceutical business where manufacturing matters.”
The deal for Ology Bioservices exemplifies what Resilience is looking for in acquisitions. Yang says that it had previously been “starved for capital,” and that by investing in it Resilience can not only double its revenue, but also shift production to high-margin therapeutics like viral vectors and mRNA. Resilience has a number of other potential deals in the works, including carve outs from biotech and pharmaceutical companies and joint ventures with academic manufacturing facilities.
Longer term, Resilience plans to layer on cutting-edge technology with the goal of increasing productivity many-fold, for example by using new techniques to create viral vectors, the carriers that deliver genetic material into cells. “It’s not just the facilities, but making these products better,” Singhvi says. “It’s faster, cheaper, better. Customers come to us because we have better recipes; the fact that we can take these recipes and put them in our factory is secondary.”
As one example of how technology could improve biologics manufacturing, Nelsen points to the innovations that spring from universities and small startups like making mRNA on semiconductors. “The next generation in our vision would be chip-based technologies as opposed to stainless steel vessels. On the chip you would do cell assembly. It’s science fiction, totally computer controlled. We have new sensors, and we will use lasers, optical tools, to tweak the cell and manipulate the cell. We will go into the nanoparticle space and perform manufacturing cell by cell instead of with a big bucket of reagent that we used to do.” Yang says. That sci-fi future of making medicines on chips is less than three years away, he says.
Yang figures that if Resilience had existed a year ago, many of the problems of scaling up the Covid-19 vaccines could have been avoided. “We would have done it faster at scale,” he says. “From day one, we would have been able to supply a billion doses around the world.”