The Next Generation of Pharmaceutical Manufacturing is Here

by Scott Alexander

As you read this, a U.S. company is developing living nanomachines engineered to produce life-saving medicines faster and at lower cost than ever thought possible. You can be forgiven if that sounds like the plot of a sci-fi blockbuster, but this is what’s actually happening at the San Diego headquarters of Pfenex Inc. (NYSE MKT: PFNX).

Pfenex is a different kind of pharmaceutical manufacturer. So different, in fact, that the approval path for the medicines they are working on was not even defined in the U.S. until 2010. Pfenex makes so-called “biosimilars,” compounds that are highly similar to other, previously approved biologic drugs. Because of their lower cost, it’s thought that biosimilars will create significant savings for the U.S. health-care system, and address concerns about steadily rising drug prices. Biosimilar drugs have been approved for sale in European Union countries for almost a decade. Pfenex’s biosimilars harness the natural creative capacity of bacteria to build highly complex molecules. Using the company’s proprietary genetic toolbox, Pfenex’s scientists modify the expression of a particular bacterium (P. fluorescens), turning the tiny critters into microscopic factories that produce medicine instead of mold.

Pfenex and the next generation of pharmaceutical manufacturing

As you might imagine, modifying the genetic code of bacteria is an unpredictable business. Pfenex’s scientists understand the approximate modifications they should be making, but once they get close to their goal, they typically need to try out thousands of potential candidates to find their optimal strains. “We’ll create thousands of different strains, all with the same target gene of interest,” explains Paul Wagner, Pfenex’s CFO, a chemistry Ph.D. who spent a decade and a half at the pharma investing desks of Lehman Brothers and Allianz Global Investors. “Some strains will produce the target protein well, others may not produce it at all. We’re not trying to predict the combination of genetic elements and strains that will produce the highest amount of active soluble protein; we’re letting the biology tell us the right answer.”

Evaluating this many separate strains has necessitated an entirely new approach to lab testing. The end result is Pfenex’s high-throughput screening process. “Using traditional techniques, each test might take a few days,” says Wagner, which would push testing time for a single drug out to more than half a decade. But, he continues, “with our robotically enabled high-throughput screening process, we can test many thousands of these strains simultaneously to see which ones produce the highest amount of active soluble protein. Once we have a handful of candidates, we advance those through into the next stage of fermentation optimization.” Thanks to Pfenex’s patented techniques, the process of identifying the most promising strains of drug-producing bacteria can be accomplished in a matter of weeks.

But while all that might sound difficult, getting the right bacteria to produce the right drug is only half the battle. Generic drugs are molecularly identical to their brand-name progenitors and thus provide a relatively airtight path to approval. Because they are produced by living organisms, biosimilars have far more complex structures that can be challenging to verify. All of which makes approval much trickier. “It’s not enough to be able to make the compound; you also need to be able to rigorously characterize it to confirm that the protein is in fact highly similar to the reference drug,” says Wagner. The good news is that while the U.S. was slower to approve biosimilars, the approval path and guidance the FDA has put in place paves the way for companies to get their products to market very efficiently. That applies particularly to the kinds of biosimilars that Pfenex specializes in, proteins that do not have sugars attached. While still challenging to make, these kinds of proteins are typically more straightforward to characterize, which can give them a more streamlined route through the regulatory path.

Pfenex's Paul Wagner in Pfenex

Pfenex was spun out of the Dow Chemical Co. (NYSE: DOW) in 2009, predicated on the proprietary protein expression technology Dow received in its 1998 acquisition of agricultural sciences company Mycogen. Dow improved upon the expression technology following the acquisition, and since the Dow spinout Pfenex has found ways to further improve the capabilities of its platform. In 2014 Pfenex raised funds with an IPO to advance its broad pipeline of biosimilar proteins. Thus, when the most recent FDA guidelines came through, they were received by a company that had been working on its facilities, talent, technology and product pipelines for more than a decade and a half.

In March 2015, the first biosimilar drug was approved for use in the U.S., and last September Allied Market Research estimated that the market for biosimilar drugs was set to grow rapidly between 2015 and 2020. Pfenex, for its part, has eight different biosimilar drugs in its pipeline, used to treat everything from Crohn’s disease to viral infection. Pfenex has always looked to the future. Now they’re just waiting for the rest of us to catch up.