Acceleron Pharma Invests in Bricks & Mortar When Virtual is In Vogue

Xconomy Boston — 

Acceleron Pharma had to be kidding, I figured, when it scheduled me to visit their labs and offices a few weeks ago in Cambridge, MA. They insisted that I take a walking tour of their biotech drug factory.

Why is that unusual? Quite a few biotech startups are pinching pennies, and operating in a “virtual” mode where they hire a skeleton crew of senior managers and outsource darn near everything else. Drug development is so expensive and risky, it doesn’t make sense for most biotechs to invest in infrastructure when they can hire someone else who already has. That means there isn’t much to show off at the head office, like there may be at an established player like Biogen Idec or Genzyme.

But Acceleron, which is developing genetically engineered drugs to treat anemia, bone loss, and other conditions, is doing things differently than most startup biotechs in town. The company, founded in 2004, announced back in May it was adding 20,000 square feet of lab, office, and manufacturing space on Sidney Street, where ImmunoGen used to be before it moved to the suburbs. While others have been cutting jobs, Acceleron has been hiring to build a staff of 155 people. It has secured a big partnership with Summit, NJ-based Celgene (NASDAQ: CELG), and it has raised $87 million from a syndicate that includes Advanced Technology Ventures, Bessemer Venture Partners, Flagship Ventures, MPM Capital, OrbiMed Advisors, Polaris Venture Partners, Sutter Hill Ventures, and Venrock Associates.

But even though the company has cash, that doesn’t necessarily explain why they should spend it on manufacturing. So I put on the blue plastic booties and white lab coat required for a walking tour of Acceleron’s space to see what this was all about. Steven Ertel, the company’s vice president of corporate development, and Mauricio Barazza, a manufacturing manager, showed me around.

First off, Acceleron isn’t saying how much this space cost, but Ertel characterized it as a “meaningful” investment that’s comparable to what some companies spend on a Phase II clinical trial. This isn’t a huge facility: it has room to make biotech drugs in a 1,000 liter vat, and just a handful of employees managing the processes. Without knowing much about the capital and operating costs, it’s hard to say how this pencils out financially, but Ertel did explain why Acceleron considers this a practical use of its investors’ money.

For one thing, small biotech companies often face delays when dealing with contract manufacturers, who aren’t always so nimble, and have a lot of other clients to take care of. A contract manufacturer can’t just snap its fingers and start making new drug at a moment’s notice for a biotech company, and stop making another.

“You don’t have as much flexibility with a contract manufacturer,” Ertel says. “Part of the whole point of being a biotech company is that we are supposed to have speed and agility.”

New equipment has also made it possible to grow the cells that pump out Acceleron’s protein drugs in disposable plastic bags that can be kept in a controlled environment with just the right temperature, oxygen, and acidity levels. Getting all these manufacturing parameters just right is one of the key pieces of value Acceleron sees in its products, and it would like to keep that part proprietary, and in-house, Ertel says.

The advances in manufacturing, which some other bigger biotechs are also using, make it far cheaper to build and operate this sort of facility than the traditional stainless-steel vats you’ll see at facilities like those from Amgen and Biogen. These sometimes can be as big 10,000 liters, with the extensive piping systems necessary to keep them properly supplied.

While making this bet on manufacturing, Acceleron plans to fully exploit it. The company doesn’t plan to make just one drug, but it has a pipeline of five treatments it wants to make for clinical trials. With that many projects to juggle simultaneously, Acceleron wants the flexibility and control over its own production schedule, Ertel says. If one drug fails, all the investment in infrastructure won’t go down the drain.

“It only makes sense to do this if you have multiple products,” Ertel says.

This isn’t to say that Acceleron will never use contractors. It is likely to turn in that direction if and when it ever develops an FDA-approved product that will require larger scale production than it can handle alone. But if Acceleron ends up developing products for small patient populations, it’s possible it could meet demand from its own facility. “It’s not inconceivable,” Ertel says.

So what does Acceleron really want to make? The lead product candidate in clinical trials, ACE-011, is being developed with Celgene as a treatment for bone loss and, surprisingly, anemia, which I wrote about back in September. The second, ACE-031, is for increasing muscle mass and decreasing fat mass. The third, ACE-041, is designed to block the formation of new blood vessels in tumors (and is supposed to work differently than other drugs in the class).

Plus, just last week, Cambridge, MA-based Alkermes said it agreed to pay $2 million upfront and invest $8 million in Acceleron for the right to co-develop a longer-lasting drug for rheumatoid arthritis that could compete with Amgen’s blockbuster, etanercept (Enbrel). That drug is slated to enter clinical trials in 2010.

Most biotechs have plenty to worry about with getting the science right, raising enough capital, and running clinical trials that are good enough to convince the FDA and physicians that they have a product worth prescribing to patients. Manufacturing often gets short shrift until later in the game. In the case of etanercept, that drug was such a huge hit that the company that created it, Seattle-based Immunex, failed to manufacture enough of it in its early years on the market. That failure to invest big enough, and early enough, in manufacturing is the main reason why that company got taken over by Amgen in 2002.

But given the difficulty of convincing investors to spend money on brick and mortar, the Immunex lesson is one that a few companies seem to take to heart.

“We want to control our own destiny. Part of that is producing our own drugs,” Ertel says.

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