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Friday, Sep 30, 2022

A Winning Contract

Avid Bioservices Inc. earlier this month said it’s investing up to $75 million in a “world-class” manufacturing plant at a Costa Mesa building next to John Wayne Airport to enter the cell and gene therapy market.

It’s the latest sign of growth from the Tustin-based drug manufacturer (Nasdaq: CDMO), which in the last four years has rebranded, shifted its business focus, hired new executives and extensively renovated its existing operations on Myford Avenue, near the Santa Ana (5) Freeway.

“It’s an evolving story, one step at a time,” Chief Executive Nick Green told the Business Journal during an hour-long tour of its existing facilities, about 5 miles away from the new Costa Mesa site.

“As we say around here, ‘we’re only as good as our last batch.’”

Once built out, Avid Bioservices estimates it will have about $450 million worth of equipment in its Orange County facilities.

Wall Street has validated the company’s pivot from a cancer drug developer to a contract manufacturer; its shares have skyrocketed eightfold from about $3.15 each 18 months ago to $26.61 and a $1.6 billion market cap at press time.

After sales grew 61% to $96 million in fiscal 2021, analysts are expecting 22% growth this fiscal year to $116.4 million and accelerating 34% to $156 million in fiscal 2023.

The executives are prepping for growth to explode in the coming years, predicting it will top $350 million annually.

“We will have doubled the size of this company in the last two years, and this investment will allow us to double it going forward again,” Green said.

On the Business Journal’s latest list of fastest-growing publicly traded companies, Avid ranks No. 7 on the midsize company list, with two-year growth of 80% (see Special Report, starting on page 25).

High-Quality Operation

Avid is a contract development and manufacturing organization (CDMO) that manufactures injectable biologics for pharmaceutical companies in more than 90 countries.

A majority of its products are derived from CHO cells, or Chinese hamster ovary cells, which are commonly used in therapy and oncology settings.

In the company’s 28 years of biologics and 16 years of contract manufacturing, it’s earned regulatory compliance from the FDA, Canadian Health Authority, and the Australian Department of Health, among others.

“You’re talking about a high-quality operation and a relatively rare commodity in the marketplace today,” Green said.

While Avid may have about a dozen competitors around the world—from Fujifilm Pharmaceuticals and Thermo Fisher Scientific, to Lonza in Switzerland—it’s the only publicly quoted, pure-play biologics CDMO in North America, according to Green.


A Broadscale Shift

Avid wasn’t always a CDMO.

The firm has its origins in the early 1980s, when it was a drugmaker called Techniclone International Corp.

In 2000, it changed its name to Peregrine Pharmaceuticals.

Peregrine’s main focus was drug development; however, its drugs didn’t work as well as promised and its stock floundered.

In 2018, it made a broadscale transformation from developing drugs to becoming a pure CDMO.

With the transformation also came the corporate name change to Avid.

The company has hired several executives, including Green about 15 months ago (see next week’s Business Journal’s print edition for more). Chief Financial Officer Daniel Hart, who has worked at several publicly traded companies, joined Avid in 2018.

Earlier this month, Matthew Kwietniak, who recently served as head of drug sales in North America at Thermo Fisher Scientific, joined Avid as chief commercial officer.

Kwietniak’s “ability to lead successful sales teams and drive sustained revenue growth will serve the company well as we continue to increase capacity through multiple facility expansion projects,” Green said.


Proactive Developments

In its first-quarter results released in September, the company disclosed its revenue backlog increased 83% to $110 million from the same period a year ago.

The biologics sector is experiencing a simultaneous shortage of capacity while demand is booming, according to Green.

Avid in 2019 embarked on the construction of new “state-of-the-art” laboratories at its multi-building campus in Tustin.

“One of the things Avid has done particularly well is putting capacity ahead of demand,” Green said. “A critical success factor for any drug development is how quickly you can get your products into the clinic.”

In 2020, it embarked on an additional two-phase expansion to boost both production and capacity within its Tustin facilities.

Phase I saw the fourfold expansion of the company’s process development laboratory and the addition of 24 industrial-grade, cell-growing devices known as bioreactors. It also added a second downstream processing suite to the one of its existing facilities.

A larger, second phase of expansion was initiated during the fourth quarter, and will build out additional upstream and downstream processing suites.

One of the reasons for higher demand is because COVID-19 has caused pharmaceutical companies to realize that making drugs in China has many risks and they want to be closer to their manufacturers in the U.S., Green said.


Viral Vectors

The just-announced new Costa Mesa plant will support yet another first for Avid: the expansion into cell and gene therapy, a market that’s expected to grow more than 18% annually through 2028.

The $65 million to $75 million buildout is expected to take 18 months and encompass 53,000 square feet at 3030 Airway Avenue.

The company’s existing facilities in Tustin ran about 158,000 square feet as of earlier this year, according to regulatory filings.

The Costa Mesa facility, once used by apparel company Rip Curl, will manufacture viral vectors, which are non-replicating viruses used to deliver genetic material into cells. They have a variety of applications, from vaccine development to cancer treatment.

“It’s a very safe process, but one that’s extremely powerful because the virus is well-trained to transfer DNA to host cells, whether inside or outside of the body,” said Drew Brennan, who was recently appointed as general manager of Avid’s viral vector technologies.

Brennan has a long history in CDMO business development; he previously spent over a decade in senior positions at France-based CDMO Novasep.

Officials expect the new facility will eventually generate an additional $80 million in annual revenue.

“I’ve been involved in the gene therapy market for the past 12 plus years and have seen an absolute explosion in the market in the last eight years,” Brennan added.

“There’s an opportunity here. There’s so much good Avid can do with its strong quality and regulatory track record, bringing this over into the world of cell and gene therapy, I think is a potentially winning combination. It puts us in a strong position to succeed.” 

Audrey Kemp
Audrey Kemp
Audrey Kemp is a staff reporter and occasional photojournalist for the Orange County Business Journal. Her beats include — but are not limited to — healthcare, startups, and education. While pursuing her bachelors in literary journalism at UC Irvine, she interned for New York-based magazine Narratively Inc., wrote for Costa Mesa-based lifestyle magazine Locale, and covered the underground music scene for two SoCal-based music publications. She is an unwavering defendant of the emdash and the Oxford comma.

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