Deerfield vaults to the top of cell and gene therapy CDMO game with $1.1B facility at Philadelphia's newest biopharma hub
Back at the beginning of 2015, Deerfield Management co-led a $10 million Series C for a private gene therapy startup, reshaping the company and bringing in new leaders to pave way for an IPO just a year later.
Fast forward four more years and the startup, AveXis, is now a subsidiary of Novartis marketing the second-ever gene therapy to be approved in the US.
For its part, Deerfield has also grown more comfortable and ambitious about the nascent field. And the investment firm is now putting down its biggest bet yet: a $1.1 billion contract development and manufacturing facility to produce everything one needs for cell and gene therapy — faster and better than how it’s currently done.
“What we saw differently here is not just the obvious — that there’s such a outsized level of demand for the amount of supply — but we also saw the need to create an entire ecosystem” for gene therapy players, Alex Karnal, partner and managing director at Deerfield, told Endpoints News. “This is the first time they’re gonna have a place where they can call home.”
Just how big is the demand? Days ago John Chiminski, who’s leading Catalent in bulking up its own gene therapy unit, told an Endpoints audience that the number of projects in the pipeline is expected to surge from 300 today to 1,100 by 2026 — translating to a volume of 2.5 million to 4 million liters of viral vectors needed. That’s up from 300,000 liters now.
Deerfield is building its new Center for Breakthrough Medicines at a former GlaxoSmithKline campus at King of Prussia, PA, now run by The Discovery Labs. Spanning 680,000 square feet, the site will consist of somewhere between 75 to 100 suites spread around 26 interconnected buildings.
Starting from an old lab space with much of the equipment still intact means the center can hit the ground running, with the site expected to be partially functional by the end of this year and fully up and running in 2021. And doing so on the outskirts of Philadelphia — where some of the earliest work in cell and gene therapy were done by pioneers such as Carl June and Jim Wilson — on a sprawling 1.6 million square feet complex designed to other biotech startups should make it appealing to the 2,000 scientists, manufacturing experts, technicians and support staff Deerfield plans to recruit.
With Tony Khoury, a key consultant for AveXis, on board as a director and Paragon Bio founder Marco Chacón as chair at the Discovery Labs, Karnal feels confident about casting a wide net and training a whole cohort of cell and gene therapy specialists on site. In fact, Deerfield has seen considerable interest in the 24 hours they’ve announced the project.
Which is good, because the King of Prussia site is only step 1. Deerfield is plotting three more across the US.
It’s not just about expanding capacity or even having the first end-to-end production facility. According to Karnal, they will invest in optimizing the process of producing viral vectors — from the most common AAV to lentivirus — to both address the potency and yield.
“The tragedy in the marketplace is that the purification processes are still in their infancy; we’re only getting yields that are 10 to 20% on average from a good run,” he said. “You start with 10 to the X viruses but then after you purify it you lose 70 to 80% of that batch, that’s just — that’s like liquid gold being wasted.”
The hope is to double the current numbers.
Most of the initial setup will be geared towards gene therapy — one out of 26 buildings will be reserved for cell therapy — but Karnal said they can keep it flexible for customers’ needs, regardless of company location, target tissues, or delivery methods. Each suite can produce around 8 to 12 batches every year, and companies will have the option to take one whole building for themselves. The total number of customers will depend on all those variables.
“Generally speaking a batch is pretty consistently priced, what’s not consistent is how many patients you can serve,” he said.
A number of other companies, both drugmakers and contractors, are rushing to serve the same, ever-expanding patient pool. Novartis and Pfizer have committed $500 million and $600 million on their own production capabilities, respectively, and then there’s the CDMOs like Catalent and Thermo Fisher, which have grown their gene therapy teams through billion-dollar acquisitions of Paragon and Brammer Bio. Biotechs big and small are jumping into the game; Pittsburgh-based Krystal Biotech has just broken ground on a second commercial facility in Findley Township near Ohio.
“We want all the players in the marketplace to make it and be wildly successful because the reality of it is even with us and everybody that exists today, the demand far exceeds the supply still,” Karnal said.