Cell and gene therapy: The next frontier in pharmaceutical services

ElevateBio, a newly launched pharmaceutical services firm near Boston, is not a traditional contract development and manufacturing organization (CDMO) that offers services for hire. It’s more like a biotech incubator. But different.

The Discovery Labs, another new services company, has some similarities to ElevateBio. The Philadelphia-area venture is perhaps more like BioCentriq, a university-based services firm now opening in New Jersey. But there are differences.

These three companies and others like them are directing their services at the burgeoning cell and gene therapy industry. In the process, they are helping create a completely new branch of the pharmaceutical CDMO world. They will be competing with one another and with a handful of giant services firms that are also investing in the cell and gene therapy sector.

The pharmaceutical services sector has existed since the 1970s—ever since, as lore has it, the drug company Smith, Kline & French sought outside help making raw materials for the ulcer pill Tagamet. In the ensuing years, the sector has grown beyond such pharmaceutical chemicals to encompass ingredients for biologic drugs as well as drugs in their finished-dose forms. But the cell and gene therapy services sector has the look and feel of a wholly separate services sector—one serving a market primed for rapid growth.

The US Food and Drug Administration has approved only 7 cell and gene therapy drugs, but the new product pipeline is teeming with approximately 1,200 experimental therapies, more than half in Phase 2 clinical trials. Estimates of annual sales growth are about 15% for cell therapies and nearly 30% for gene therapies. And the number of cell and gene therapy developers is rising rapidly; the Alliance for Regenerative Medicine estimates 1,100 such ventures in 2020, an increase of about 10% over 2019.

Services companies are challenged by the newness of the cell and gene therapy field. They find themselves in the paradoxical position of trying to establish standard processes for research and manufacturing—essential to fast, efficient, low-cost operations—at the same time that they have to bring innovation to a new field.

Moreover, the demand for services currently outstrips supply—supply not only of research and manufacturing capacity but also of an educated, fully trained workforce. Competition for talent, by all accounts, is cutthroat.

“Workforce development is definitely a problem,” says Peter Bigelow, president of xCell Strategic Consulting. “The field is growing so rapidly and is so new that experienced people either don’t exist or are difficult to source.”

The most likely pool for talent is the pharmaceutical industry, Bigelow says. “For instance, people with mammalian cell culture experience can bring important capabilities for cell line development, downstream processing, and analytical methods.” As such, there are clusters of potential good hires in Boston, San Francisco, and Bethesda, Maryland. But these locations are also emerging as hubs for services firms, making competition fierce and staff retention a problem.

Bigelow also notes the challenge of working in an emerging area of science. “Processes are not optimized because they are being developed and installed for the first time,” he says. “There is significant trial and error underway.” He expects regulators will eventually impose a greater sense of order in an industry where, currently, parameters are to some extent set by suppliers of technology and equipment such as single-use bioprocessors.

John Khoury, executive vice president of Project Farma, a consulting firm in the area of emerging medicines, says that innovation hubs, where services firms exist near universities and institutions developing cell and gene therapy science, will expedite technology transfer and commercialization.

But he agrees with Bigelow that the lack of standardization currently hampers efforts. “The fundamental challenge in cell therapy,” Khoury says, “is that you’re building the plane as you fly it.”

Quick starts

The scramble to develop staff and standards reflects the challenge of getting a foothold in a specialized field far more complex than the basic cell line development that characterizes making traditional biologic drugs.

Gene therapy, for example, requires the engineering, growth, and purification of adeno-associated virus (AAV) and lentivirus viral vectors—vehicles used to deliver genetic material into cells. The genetic engineering of chimeric antigen receptor (CAR) T cells is a primary service in cell therapy. And then there’s the need for CRISPR technology–based gene editing.

Aspiring services companies are making aggressive moves to meet the growing demand.

Announcing a $525 million series C financing round in March, ElevateBio described a “disruptive business model” for fostering new cell and gene therapy ventures.

ElevateBio’s model puts what Chief Scientific Officer Mitchell Finer says are the capabilities of a “fully integrated pharmaceutical company” at the service of start-ups that work at ElevateBio’s facilities and use its assets and scientists. The firm also invests in these start-ups. One—AlloVir, a developer of viral-specific T-cell therapies—closed an initial public offering of stock last year. ElevateBio has started other companies, including HighPassBio, an immunotherapy T-cell specialist focused on leukemia.

“There are a lot of smart people out there,” Finer says, “who are either academics or small biotech companies that have gotten started but can’t afford to make investments in process development, manufacturing, and analytics and don’t know how to carefully characterize their products. So we thought we could be an enabler.”

The firm, headquartered in Cambridge, Massachusetts, has most of its production and analytical assets in nearby Waltham where it is starting up cell and gene therapy manufacturing at a 13,000 m² facility that it calls BaseCamp. Full-scale production is expected to begin by year’s end.

Finer arrives as a services sector entrepreneur with a solid resume in cell therapy. He’s the former chief scientific officer of Bluebird Bio, a gene therapy developer, and was head of research at Cell Genesys, where he was involved in putting the first CAR T cells into clinical development in the 1990s.

“Cell and gene therapy is pretty last century. A bunch of people doing work at a lab bench,” Finer says of how R&D and production are often done. “We are investing in manufacturing automation. We’re investing in deep analytics on these viral and cell products.” Standards will emerge for the new methods and technologies as the sector evolves, he says, introducing a level of commoditized service. “Maybe someday Elevate will add a traditional CDMO business.”

The Discovery Labs is embracing some parts of the traditional fee-for-services CDMO model from the start. The firm is starting up a 55,000 m² cell and gene therapy facility near Philadelphia called the Center for Breakthrough Medicines. It’s based at a former GlaxoSmithKline R&D center that the firm acquired in 2018.

The Discovery Labs’ first process development labs opened last month, and manufacturing suites certified to the US Food and Drug Administration’s current good manufacturing practice (CGMP) standard are due to start by early next year, says Audrey Greenberg, the firm’s executive director.

Plans to open a business incubator called Unite IQ were put on hold last year with the onset of the COVID-19 pandemic, Greenberg says. “As the vaccine kicks in and people come back to work, we are going to reimagine how we deploy that at our site,” she says. The Discovery Labs also plans to launch an accelerator, or manufacturing support service, in conjunction with an academic partner.

The focus now is on CDMO services, says Joerg Ahlgrimm, the Discovery Labs’ chief operating officer. “It’s important to know that many biotech companies have one, two, or three assets, and it’s prohibitive to build internal capacity.” Infrastructure is not only expensive but also technically complex, says Ahlgrimm, who formerly headed the pharmaceutical and biotech business at the big Swiss CDMO Lonza.

Like other firms, the Discovery Labs is facing an uphill climb in a competitive market for staffing, Greenberg admits, but it’s also ideally situated. “Philadelphia is really the birthplace of cell and gene therapy,” she says. “We have upward of 20 to 30 cell and gene therapy companies here now.” Greenberg notes that Carl June, a pioneer in CAR T-cell therapy, runs a lab at the University of Pennsylvania, where James Wilson did early work on delivering gene therapies with AAVs.

“There are upwards of 70,000 life science employees in Philadelphia,” she says. “So this is really the perfect place to start a company like this.”

Haro Hartounian, senior vice president and general manager at BioCentriq, would argue that New Jersey is ground zero for cell and gene therapy, given that Novartis’s US headquarters are in East Hanover, New Jersey. The FDA approved the Swiss drugmaker’s spinal muscular atrophy gene therapy, Zolgensma, in 2019. Bristol Myers Squibb, another New Jersey company, won approval last month for Abecma, a CAR T-cell therapy for multiple myeloma.

BioCentriq, which opened on the campus of New Jersey Institute of Technology (NJIT) in Newark, is arguably in the same geographic market for talent as the Discovery Labs. The problem is that even in the New Jersey-Philadelphia corridor, there is a shortage of adequately trained scientists, Hartounian says. Last year, NJIT launched a professional science master’s degree program in cell and gene therapy.

BioCentriq operates a clinical production site and training facility on the Newark campus and a pilot plant in South Brunswick, New Jersey. The company is partly funded by the university, but its staff members are all from industry, Hartounian says.

While BioCentriq promotes itself on its website as a CDMO for cell and gene therapy, Hartounian distinguishes between its approach and that of a traditional CDMO. “If you go to a traditional CDMO, you give them a project, and they work on it using their own resources,” he says, whereas customers work on-site at BioCentriq.

“It’s kind of a hotel type of approach,” he says. “Companies can rent a clean room or even bring their own scientists and engineers and chemists and work with our scientists to develop their product. It’s very attractive for these companies because they have control.”

The company has 12 employees but expects to triple its staff in a matter of months, Hartounian says. In March it announced that it will provide clinical manufacturing of Tevogen Bio’s investigational T-cell-based COVID-19 treatment. “We are conducting aggressive business development, in discussions with many companies,” Hartounian says. “That means we are going to reach capacity.”

Evolution

The Boston area, not surprisingly, is shaping up as another hub of research and manufacturing support for cell and gene therapy companies. One emerging player is the Center for Advanced Biological Innovation and Manufacturing (CABIM), a partnership between Fujifilm Diosynth Biotechnologies, Cytiva, the Massachusetts Institute of Technology, Harvard University, and Alexandria Real Estate Equities.

Announced in November 2019, the center recently leased a 3,700 m² facility at the Arsenal on Charles research park in Watertown, Massachusetts. CABIM will operate as an incubator, but for cell and gene therapy process development researchers rather than for start-up companies, according to Daniel DeVido, director of business development at Fujifilm Diosynth.

CABIM teams Fujifilm Diosynth, the biologics unit of Japan’s Fujifilm, with Cytiva, a supplier of single-use cell manufacturing equipment, in facilitating research at the two universities. Other leading Boston-area institutions are also clients, including Massachusetts General Hospital, Brigham and Women’s Hospital, and the Dana-Farber Cancer Institute.

DeVido describes Fujifilm’s move into cell and gene therapy as beginning with its 2011 acquisition of Diosynth, a biologic-drug CDMO in North Carolina. “What better way to understand biologics than to acquire a CDMO and sort of see what the universe of biologics looks like?” says DeVido, who joined the company in 2012.

The Diosynth acquisition led to the 2014 purchase of Kalon Biotherapeutics, a manufacturer of vaccines made in mammalian cell culture, from the State of Texas and Texas A&M University. “But it became obvious that gene therapy was going to be the big use for viral vector production, whether as products or lentivirus vectors that are used to edit cells,” DeVido says. “The business evolved.”

The Texas operation’s grounding in biologics and vaccines directed that evolution. “We had a couple of really top-notch virologists, but from a process standpoint, we are borrowing a lot from all our experience in biologics.” There are basic similarities between growing cells to produce and isolate proteins and growing cells to produce and isolate viruses as viral vectors. “It’s not apples and oranges,” DeVido says. “We were able to bank on a lot of our experience.”

Pharmaceutical services for cell and gene therapy will likely remain mostly separate from the traditional CDMO market, DeVido says. But that isn’t stopping other large pharmaceutical services firms from moving into the field.

Lonza, one of the largest CDMOs and a pioneer in both small- and large-molecule services, is an example.

“Typically, Lonza is forward looking, and through its history, there have been unnoticed acquisitions of pioneering technologies or companies, acquisitions of relatively small size that would not make it into the headlines,” says Alberto Santagostino, senior vice president of the firm’s cell and gene therapy business unit.

One such acquisition was the 2010 purchase of Vivante GMP Solutions in Pearland, Texas. The biologics services operation grew organically into a dedicated cell and gene therapy facility that Lonza inaugurated in 2018. Today the company provides related services in Portsmouth, New Hampshire; the Netherlands; and Singapore.

Big spenders

Other big pharma services firms entered the arena more precipitously with headline-making acquisitions.

Catalent paid $1.2 billion for Paragon Bioservices in 2019, getting two Baltimore-area facilities making AAV and lentivirus vectors. The company has since added production of plasmid DNA (pDNA), a building block for cell and gene therapy-based vaccines. An $18 million deal in 2019 to acquire viral vector sites from Novavax in Gaithersburg and Rockville, Maryland, filled out the company’s regional presence.

In Europe, Catalent paid $315 million to acquire the Belgian firm MaSTherCell, a clinical-scale cell therapy manufacturing specialist, in 2020 and an undisclosed amount earlier this year to buy Delphi Genetics, a pDNA specialist also in Belgium. Catalent purchased the production assets of the cell therapy firm Bone Therapeutics, which is on the same industrial campus as MaSTherCell, last year. The purchase gives Catalent accesses to large-scale manufacturing pending the opening of a new facility at MaSTherCell next year.

Catalent, a diverse CDMO to start with, has taken on something fundamentally new with cell therapy, says Colleen Floreck, a former Paragon employee who is now vice president of marketing and strategy for Catalent’s cell and gene therapy business.

“I think it was a decent-size pivot for Catalent when they purchased Paragon,” Floreck says. “What made the marriage work is that Catalent is a very established player in biologics scale-up and manufacturing. There are quite a few similarities.” Cell growth and development, for example, are fundamental to both biologics and cell therapy.

“But then there are significant differences,” she says. The cell therapy market is “100% emerging,” whereas the biologics market is relatively mature. “Then you couple that with the level of innovation,” Floreck says, plus the relative lack of standards, and the contrasts become formidable.

“In the biologics business, there are only so many processes that are optimized for producing a protein. You are not going to make new ones when there are gold standards on the market,” Floreck says. “For gene and cell therapy, these magic bullets don’t exist, or at least not yet. That’s what everybody is trying to develop.”

Catalent’s approach to such challenges has been to embed the cell and gene therapy unit in its biologics business, where it has access to support in the areas of quality and regulatory control, supply chain management, and overall infrastructure.

Thermo Fisher Scientific, on a track nearly parallel to Catalent’s, plunged into cell and gene therapy in 2019 with the $1.7 billion purchase of Brammer Bio, a contract manufacturer of viral vectors. The company subsequently acquired Novasep’s viral vector business in Belgium. Like Catalent, it is growing its cell and gene therapy CDMO business unit as part of a larger biologics business.

Brammer’s headquarters in Gainesville, Florida, are the locus of viral vector development and analytics for Thermo Fisher. But two-thirds of the company’s US workforce for viral vectors is in Massachusetts, where it operates several sites, including a manufacturing facility in Cambridge that Brammer acquired from Biogen in 2017 and a viral vector production site that Brammer built in Lexington.

Thermo Fisher recently acquired a building in Plainville, about a 45 min drive from Boston, where it will bring more viral vector production on line next year.

Thermo Fisher continues to invest in the Florida operations, where it focuses on developing processes and analytics, says Christopher Murphy, vice president and general manager of viral vector services. “We want to expand there to help smaller companies just starting with their molecules to get going in their clinical trials and then, if their product matures, move up to one of our commercial manufacturing sites.”

WuXi AppTec, another large CDMO, offers cell and gene therapy services in China and in the Philadelphia Navy Yard, where it began cell therapy manufacturing in 2004 and gene therapy in 2014. Last month, the Chinese firm announced the acquisition of Oxgene, a UK-based specialist in cell and gene therapies, for a reported $135 million.

David Chang, CEO of WuXi Advanced Therapies, a division of WuXi AppTec, says the company’s expertise in cell and gene therapy has grown from an early emphasis on biologics testing, which it began in Philadelphia 15 years ago. That emphasis is reflected in the firm’s addition of a T to what it describes as a CTDMO approach, Chang says. The company began adding process development and manufacturing services 8 years ago.

Oxgene, an innovator in AAV and lentiviral vector manufacturing, adds a European site, but it also adds capabilities, Chang says. “Oxgene allows us to go into early-stage plasma design, viral vector development, and cell line development,” he says. “We are striving to provide a comprehensive service to our clients, but more importantly, we want to ready ourselves to provide the next generation of revolutionary platforms.”

Pharmaron, another China-based CDMO, has invested internally and through acquisition to add cell and gene therapy to a business that began in small-molecule services.

In November, Pharmaron acquired Absorption Systems, a US firm offering cell and gene therapy services from sites in San Diego, Philadelphia, and Boston. This year, Pharmaron agreed to acquire a multipurpose biologics facility featuring cell and gene therapy capabilities from AbbVie in Liverpool, England, for $119 million.

Fast-forward

The run of investment in cell and gene therapies is likely to continue, sources agree. Some even predict another large CDMO acquisition in the months ahead.

Aldevron, a company whose growth anticipates a booming market, is investing heavily in expansion. Based in Fargo, North Dakota, the producer of pDNA, messenger RNA, protein and enzyme starting materials for cell and gene therapies, and vaccines plans to more than triple capacity this year with the addition of an 18,000 m² facility to its current 6,500 m² operation, according to Vijay Surapaneni, executive vice president of global operations and supply chain.

And at least one manufacturing technology specialist has made a move into services. Univercells, the developer of a single-use bioreactor technology called Scale-X, launched a CDMO, Exothera, a year ago.

“We started by setting up a development team, not a manufacturing team,” says Thibault Jonckheere, deputy CEO of Exothera. “We believe that through our ability to use the best technologies and do data-driven process optimization, we can really improve the processes used in gene therapy.” And that includes technology beyond what its parent company offers.

This year, Exothera is expanding into CGMP manufacturing, building two sites near Brussels. The larger, a 13,000 m² facility on the Univercells campus, will be ready to go by the end of the year, Jonckheere says. The firm employs 70 and plans to double that this year.

Jonckheere says Exothera is entering a services sector with a flexible business model unlike that of a traditional CDMO. “You are less likely to strike 10-year contracts,” he says. And that flexibility extends to the lab and the plant, where processes are manual and routines are in flux.

“As a manufacturer, I don’t like that,” Jonckheere says. “Because you want things to be reproducible and standardized. It shows you mastered what you are doing. But with cell and gene therapies, there are a lot of complex mechanisms at play, so we are not there yet.”

Other executives share Jonckheere’s unease about the wide-open, scientifically challenging sector. But like him, they also feel a sense of competitive exhilaration.

“You have to be willing to be on the ride that is this market—make the smart decisions, have the right people in place, recruit the proper talent, and stay on top of the innovation,” Catalent’s Floreck says. “And stay right on track with your customers, because they are on this ride too.”