A Biotech Business Model That's Investor-Friendly
By Louis Garguilo, Chief Editor, Outsourced Pharma
For biotechs meeting with current and potential investors, says Edward Ahn, CEO, Medipost Inc., “it should be about demonstrating your business continuity more than anything else.”
That’s what he was conveying at the recent JP Morgan Healthcare Conference. Investors know, he says, “any supply chain may be fragile.”
Coming out of COVID, and within our current fluid geopolitical landscape, Ahn says “like anyone who is in operations, we are concerned about overall business continuity, and supply chain. This is the big strategic concern.”
CEOs should be concerned with “redundancy across the board,” and, Ahn adds, “that is a major motivation of business leaders for this growth in outsourced manufacturing.”
Indeed, Ahn’s organization has put in place a progressive business model (my description) to address such concerns.
As reported earlier, MEDIPOST Co., Ltd., is a South Korea-based drug sponsor and manufacturer, concentrating on cell therapies. Medipost, Inc., its U.S. subsidiary, is sponsoring a Phase III trial for its investigational mesenchymal stem cell (MSC) therapy CARTISTEM to treat symptomatic cartilage defects in adults with knee osteoarthritis. Medipost Inc. will work with the FDA for commercial approval in this country. Ahn was named CEO Medipost Inc. in May of 2022.
CARTISTEM was approved commercially in South Korea in 2012, and MEDIPOST is currently seeking approval in other countries, including Japan.
The immediate mission for the erstwhile CDMO is OmniaBio’s preparation for the manufacturing of CARTISTEM, and is part of MEDIPOST’s continuity strategy.
Commercialize, Organize, Outsource Strategically
That strategy has three giant steps:
- Gain commercialization – and revenues, patient data, experience, and credibility – in a (smaller) home market
- Establish U.S.-based operations to see through needed clinical trials and interface directly with the FDA
- “Capture” CDMO capacity for clinical and anticipated commercial manufacture – as a scalable variable expense.
“The thought behind this,” explains Ahn, “starts with the specifics of our cell therapy. I must recognize we need to spend a certain amount of money to manufacture successfully, and so we want to do that as efficiently as possible.”
The question is what is in the best interest of the company in the long term. As Medipost enters Phase III in the U.S., part of that is understanding the Phase III clinical manufacturer will also be the commercial manufacturer.
Ahn explains:
“Having a certain control over manufacturing, with a clear visibility to the costs, is desired as the program matures toward commercialization.
“Somewhat regardless of the final outcome of the Phase III, we decided on this highly strategic relationship with OmniaBio. We were going to have to front some sort of investment of a similar magnitude with any CDMO that we're going to work with, but also understood whoever we ended up contracting with would be in a position of leverage as well.”
“We wanted to avoid such a ‘vendor relationship’ and forge a different kind of partnership. We did that as a key partner-investor – part owner if you want to describe it that way.”
Why is this organization, based in Canada, the best option? Ahn talks more about fit than geography, but obviously this North American location suits the organization’s goals well.
“Relative size was important,” he says. “In effect, we are still ‘outsourcing’ to OmniaBio. If you do something like this, your partner should not be too big, or too small. It has to be the Goldilocks size.”
Goldilocks or not, Ahn understands with a facility big enough to support commercial scale, Medipost would not consume the total manufacturing footprint of the facility.
“To have full access to all the services we need from the perspective of a commercial company, we decided the best way to do that was build out a facility and have it operate as a CDMO.”
That, says Ahn, “was our particular thought process from the start.”
Courageous or Simple Solution
Ahn and company understood, though, that not everyone would have taken this step; they should wait until U.S. trials were concluded before such an early CDMO investment.
MEDIPOST’s ace in the hole was step one in the three-step process above.
“We had the experience,” answers Ahn. “Our product had been on the market for 10 years. We've done a Phase III clinical trial in Korea, and are finishing one in Japan. This is going to be our third. We're realistically confident.”
In 2022, that confidence led to Medipost acquiring shares of OmniaBio for US $21.9 million in cash, and committing an additional $43.8 million investment through a convertible bond acquisition.
And in 2024, that ultimately wound up as the opening of OmniaBio’s new CGT CDMO facility, in Hamilton, Ontario, Canada. The total production space of 11,200 square meters makes it Canada’s largest cell-and-gene-therapy focused CDMO.
Originally, with backing from MEDIPOST, OmniaBio was spun out of the Centre for Commercialization of Regenerative Medicine (CCRM), a public-private partnership headquartered in Canada.
Back To JP Morgan And Continuity
Practice what you preach, they say, and Ahn arrived at JP Morgan this year to do just that. He utilized much of his time in follow-up meetings from the conference last year.
“We told investors we were going to do a number of things last year,” he says. “‘We will raise money; submit an IND amendment; complete our Japanese Phase III trial, and we will execute a Japanese commercial partnership.’”
There was a lot of questioning: ‘That's a long list of big stuff. Are you guys really going to be able to do all of that?’ is what Ahn heard.
He returned to inform investors that MEDIPOST had indeed raised $140 million; submitted an IND amendment and is preparing to treat the first patient in its US Phase III trial; completed the last patient out of their Japanese Phase III trial, and executed a commercial partnership for CARTISTEM in Japan.
“The message to deliver is you know how to get stuff done. It is about establishing a track record and credibility,” Ahn says.
It’s about business continuity.
Try that with your own board, and investors. And you might want to throw in a CDMO if you can.