Cytovance Biologics plays a behind-the-scenes role in developing lifesaving drugs
When Dr. William Canfield founded Cytovance Biologics 12 years ago, he did so with the needs of small biotech companies in mind; Canfield knew firsthand how scientists often struggle to bring good ideas to market due to a lack of money for high-tech labs and manufacturing space. While Cytovance has expanded significantly since then, its focus on serving these innovative companies has not wavered.
“(Cytovance) has been based on what the customer needs and how we can take advantage of that,” Darren Head, the firm’s CEO of seven years, says of his company’s stellar growth and expansion. “Being diversified has been key to this growth ... we are very flexible and reliable.”
These days, Cytovance—which assists drug companies with “soup to nuts” development, from helping to identify target molecules and turning those into drugs to providing samples for clinical trials—has clients of all sizes. But its mainstay business is still small- and medium-sized biotech firms.
Oklahoma City-based Cytovance is known in the industry as a contract manufacturing organization, or CMO. According to Head, Canfield identified the opportunity to open a CMO catering to scientists’ needs while working on a therapy to treat Pompe disease, after he was approached by a father of two children suffering from the then-fatal neuromuscular disorder. His story is the premise behind the 2010 Hollywood film “Extraordinary Measures” starring Harrison Ford. Canfield had a great idea, but lacked the resources to bring it through FDA trials and ultimately, to commercialize it.
Spoiler alert (but a good one) —“They saved the kids’ lives,” Head says. “That is the basis of why we are here.”
It’s sometimes hard for a layperson to understand what goes into accomplishing that goal. In basic terms, Cytovance teams up with biotechnology firms to manipulate living cells and produce proteins and antibodies that (hopefully) become therapies for cancer, arthritis and any number of other afflictions, or are essential for vaccines and other uses.
What is clear is that aiding the development of these drugs represents a $2.6 billion market, according to 2010 figures—a competitive field but one also wrapping up a phase of consolidation. Cytovance racked up revenue of $51 million last year, just a fraction of the overall market but a share that is growing. The company’s annual growth rate for the past three years has averaged 48 percent, significantly higher than the industry average of 20 percent, according to Great Point Partners, Cytovance’s primary investor.
Cytovance can’t talk about specific therapies in its labs because of strict confidentiality agreements. And while the variety is vast, ranging from treatments for autoimmune disorders to arthritis, and involves some interesting new vaccine platforms, the majority are targeted at cancer.
“The days of going out and finding a plant in the rainforest to cure these diseases are screeching to a halt,” Head says. “Now it’s biologics, and the CMO market is really driving this.”
Enter Great Point Partners
The investors at Great Point Partners, a private and public equity fund focused exclusively on health care, couldn’t agree more. Great Point took notice of the company’s management team and its alignment with the needs of pharmaceutical and biotech companies, leading to an investment of $10.2 million in 2011.
“We wanted to invest in a company that was going to benefit from the increased number of biologic drugs in the pipeline,” says Jeffrey Jay, managing director of Great Point. “Not the drugs themselves, but the companies that provide supplies, infrastructure and services.”
Betting on drugs alone is very risky, both Jay and Head point out.
Less than 10 percent or so of all biologics in the initial phase of clinical testing get the green light from the U.S. Food and Drug Administration for commercialization, but many are navigated through the discovery and early trial phases.
Cytovance has helped clients through all three phases of clinical trials needed for FDA approval, and executives expect the first FDA sanction of a drug developed in their facilities later this year.
“In 2008, for example, there were about 100 (drugs) in Phase III, and only one was approved,” Head says. “But still, everybody had to go through Phase I.”
These companies, as Canfield found out during his fight to find a treatment for Pompe disease, cannot afford or don’t want to risk the money needed to set up their own facilities. Even the simplest manufacturing plant costs about $50 million to develop, Jay says—lost money if the drug does not reach market.
That’s where Cytovance comes in. It runs high-tech labs that help transform living mammalian and bacterial cells into pure proteins or antibodies. Its “clean rooms” offer hyper-controlled levels of air contaminators; they require special equipment and suits to maintain stable environments. The company also has bioreactors and fermenters where cells are grown and harvested, as well as equipment and facilities to complete the purification process.
In some cases, Cytovance simply provides those capabilities. But most often, clients take advantage of its in-house product development team to develop the therapy.
“They come to us with the DNA sequence, and we actually make the drug,” Head says.
Of 164 employees, 25 have Ph.D.s—a ratio Head says is the highest in the field.
And while some CMOs charge royalties, Cytovance does not; the CEO says its choice to charge only for services is a main reason the company is taking market share.
Microbial and Mamalian Sectors
Cytovance gets paid by its clients even if a drug does not turn out to be effective, but investor involvement is allowing for rapid growth, according to Donald Wuchterl, Cytovance’s chief operating officer.
In both the microbial and mammalian sectors, the company is set to increase capacity five-fold, in addition to earlier expansion.
For proteins and antibodies derived using cells from mammals (Cytovance uses cells extracted from the ovaries of a Chinese breed of hamster), the company is developing a 5,000-liter bioreactor that will be ready in 2016. That’s on top of doubling its manufacturing capability to 1,000 liters, a project completed in 2013.
In the case of therapies derived from microbial cells— Cytovance usually starts with E. coli—the company is increasing capacity from 200 liters to 1,000 liters. In fact, it is about to open a new 30,000-square-foot facility, which will include the new fermenter, as well as operations to fill and finish vials and store them in high-tech warehouses.
Flexibility remains the dominant theme. The company recently opened “flex suite manufacturing” facilities— enabling customers requiring clean room capabilities to share the same space with other development platforms, a feature Wuchterl and Head say sets the company apart.
Much of the capacity expansion will meet the needs of existing clients as they move into more advanced clinical trials, requiring many more patients and, consequently, many more vials of the test drugs.
“We are just starting to realize some of the benefits of the influx of capital,” Wuchterl adds. “We have gone from the typical company getting its wheels going to one now with an incredible amount of momentum.”
According to Kalorama Information, a research firm, the biopharmaceutical and vaccine production market was estimated to reach $41 billion last year and continue to grow at double-digit rates for the next five years. Even more important, the CMO industry, which supports the development of biopharmaceuticals, is nearing full use. Capacity utilization for integrated biopharmaceutical manufacturers and large CMOs was estimated last year at 81 percent for microbial fermentation and 71 percent for mammalian cell culture, according to Kalorama.
It’s About the People
Accelerated expansion has prompted operational changes at Cytovance. Since last November, Wuchterl has led a wider operations group that includes all manufacturing, R&D, manufacturing science and technology, facilities and engineering, program management, and materials management. In 2008, when Head took over as CEO, head count stood at 38. It is expected to top 200 by year-end.
“We are a small company and need to be lean,” Wuchterl says, adding that the new structure removes silos that had unintentionally formed. “We need people and functions that can reach across other functions.”
The Cytovance team stresses that its people set the company apart. The company’s central U.S. location, far away from biotech hubs on the coasts, was initially considered to present a hiring hurdle but has proved to be the opposite. Top talent, once settled in the low-cost region, doesn’t tend to be lured away by the competition.
“We have an amazing team of engineers and scientists, and a very low rate of attrition,” says Jesse McCool, vice president of research and development services. “There is a lot of institutional knowledge here that we get to keep for a long time.”
No Early Exit
Great Point stays close to the Cytovance management team, but its partners don’t micromanage, Head and others say. Investors hold weekly calls with management; Great Point’s Bernhard Hampl, who has led a successful career in Big Pharma, co-chairs the board, along with Canfield.
Great Point entered the investment with a five-to-eight- year plan, and even with the robust growth posted since the 2011 capital infusion, the firm is not planning on exiting early, Jay says.
“We want to see (Cytovance) become a major force in this field,” he says. “It’s a $50 million business now, growing at roughly 50 percent a year; you can imagine how much value is being created.”
Susan Nadeau is a business writer who splits her time between Hartford, Wisconsin, and Thessaloniki, Greece.
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