Bioprocessing conference, where we're covering the evolution of the industry from tools to service providers. My name is Matt Hewitt. I'm the life science tools analyst here at Craig-Hallum, and I'm excited to have newly appointed CEO Paul Josephs from Lifecore Biomedical joining us. Good afternoon, Paul.
Good afternoon, Matt. Thanks so much for having us.
I'm excited. At a real high level, though, let's kick this off high level. Where does Lifecore fit within the bioprocessing continuum?
Great question. So Matt, we're a sterile fill finish organization, so think about making the drug product, the liquid that goes into an injectable form, either in a vial or a pre-filled syringe or into a cartridge. We really come to play after the active pharmaceutical ingredient is made. So we're making the actual drug product and then, as I stated, putting it into the final finished dose container.
That's great. And, you know, I know, oftentimes I hear you referenced as a fully integrated CDMO. For those that are maybe still getting up to speed on this sector, what does that mean to be fully integrated?
Yeah. So we're... You know, we characterize ourselves as a contract development and manufacturing organization, and I say with a heavy D. So when you think about us, we're not doing that basic research, but where we come into play is really from a preclinical phase, maybe doing initial lab batches at a very, very small scale for animal-related studies, and then following through the drug continuum, right through, additional preclinical batches, phase one, early stage development, phase two, midstage development, phase three, which is your later stage development, really supporting broader, larger-scale clinical trials on humans, and then commercial manufacturing. and then on beyond that is really the ability to support life cycle management of any product, maybe change in the delivery form, maybe a changes or advancements or tweaks to the active pharmaceutical, sorry, pharmaceutical ingredient or otherwise.
That's really the way we support the customer, and in addition to that, just providing support as it relates to stability studies, ongoing procurement of materials, optimization of, you know, the overall supply chain, is how we consider ourselves a full service CDMO.
Great, thank you. Maybe could you walk us through a program? So a customer calls in and says, "Hey, I wanna work with you." Walk us through how that contract develops from the discovery stage side, all the way through commercialization. How does that customer develop over their lifetime with you?
Yeah, so, and it's not a cookie cutter approach, so I think that even before I joined Lifecore, I love this statement within how we promoted our company: "You define the starting line." So we have customers that have come to us in early stage development, say, preclinical, or we have some customers that come in phase three or a site transfer. So they pick where they start their development program with us, and that usually starts this way. The customer comes to us, in this case, let's just say Hewitt Pharmaceuticals. They come to us and they say, "I have a program that's in phase two.
Here's an overall or higher, a high-level description of the product, what we're trying to fix, solve, and accomplish going forward. We analyze that with regard to our ability to manufacture in a compliant manner, based on, you know, environmental exposure limits, the classification of the drug, the specifics around how it's filled. We'll make an initial determination that we can handle this from a technical perspective. And then there's an ongoing dialogue and discussion with the customer that goes back and forth with some level of conference calls and video calls like this, and then usually followed by an ongoing site visit, quality audit to ensure that from a compliance perspective, we can support them in the markets that they wanna serve.
And then, you know, you have your ongoing proposals that are put forth from a business standpoint, what we call the scope of work. And, then you have your ongoing negotiations, Matt, back and forth, on the details and off and on along with regard to price, and, then you move the deal towards closure.
Fantastic. As I look at your history, obviously, Lifecore is a leading manufacturer of hyaluronic acid. You know, what is that, and what markets do you serve with your HA capabilities?
You know, hyaluronic acid is found throughout your body. Think of it as almost like a lubricant. You know, for us as HA, you know, we manufacture that through a fermentation process. This is really the legacy, and what Lifecore is best known for is the quality of its HA used mostly in sterile injectables. Think of it in the ophthalmic space, think about cataract surgery. It serves as a lubricant or a protective layer against cataract surgery, used in orthopedic uses and sterile injectables, going into potentially your knee or your elbow, et cetera. And then, medical aesthetics injectables as well, and I think that's a potential growth area for us. Certainly, as it relates to ophthalmics, that's a leading area for us.
I think we're well, I'm confident saying we're the dominant player in that injectable market working with leading companies such as Alcon, and so those are the very areas we play in: ophthalmics, the orthopedic market, and then the aesthetic market as it relates to HA.
Got it. And, you know, obviously, that is your core, that's kind of what you're known for, but you also have capabilities beyond that. What are the adjacent markets or the ones that are the, the easiest for you to kind of move into, especially given some of the recent capacity additions?
Yeah, so today we announced that our new five-head Groninger filler is GMP-ready, which really, really allows us to expand or open the aperture into other areas. You know, the sterile injectables I talked about that are HA-based really are your more viscous. Think about Vaseline that could be almost fluid and injected. So those are complex injectables, harder to make. Where we wanna gravitate to, Matt, and as really open the aperture, is into your less viscous programs, your biologics, your more white water-based biologics, monoclonal antibodies. Think about even GLP-1s would be water-based programs, and in delivery forms that are in pre-filled syringes or cartridges. So really see that as a growth area for us going forward, but we wanna continue to dominate the complex market. That's our heritage.
We think we have a great opportunity to continue to do that, but really to maximize the opportunity that's in front of us, I really do believe that we now need to gravitate into, from a manufacturing perspective, what is easier, and leverage the new capabilities that we've added.
That's great. And you mentioned the new five-head filler released this morning. What does that bring your current capacity to versus, you know, versus where it was yesterday?
It's a little over doubles our capacity, you know, depending on the product, exact product that you're making and the process, et cetera, but I think directionally we can say that, you know, it doubles our current capacity, and again, opens up the market to a greater and broader spectrum of customers. We now have isolator filler technology, which is newer, advanced technology, which helps better ensure sterility in injectable programs, and it's really what the next wave of technology is in manufacturing, which heretofore we did not have, so I really believe it opens up a whole new customer base for us, and, you know, I've been having a number of conversation with large multinational pharmaceutical companies who've been waiting to see that this line is ready to go.
That's great, and kind of extrapolating on this a little bit, but, with... You touched on the GLP-1s and kind of getting beyond the HA market opportunity, but as you look at that market, the sterile injectable market over the last couple of years with the explosion of the GLP-1 therapeutic area, are there have become some pinch points or some bottlenecks to that market? Is that, I guess what I'm getting at is, has that created an opportunity for you, given that you do have excess capacity or new online capacity?
Absolutely. So I'll answer it this way. So if you think about what we went through since 2020 to 2023, or let's say 2023 with Covid and vaccinations or Covid vaccines, well, the traditional vial, there's probably ample or reasonable capacity for your traditional vial. But with the advent and explosion of pre-filled syringes related to the GLP-1s, that is a pinch point for the market with regard to capacity. We see what Novo did with a potential acquisition of the three Catalent facilities. We know what's going on, recently announced what Lilly is making an investment, I think of $1.8 billion. I can't remember the exact number.
So there's significant opportunity there for us, not only as it relates to GLP-1s, but potentially, you know, there are other programs under development that go into pre-filled syringes. So, yeah, I just think just in general, the majority of programs under development now are sterile injectables. People having the capability to have a wide range of capabilities to fill vials, pre-fills, and syringes and cartridges are positioned for success over the long term.
That, that's fantastic. And, you know, kind of talking about maybe another pinch point or headwind, you know, this past week, the U.S. House passed the BIOSECURE Act. It's likely, or it seems likely that that's gonna pass from the Senate and ultimately become law. Does that create an opportunity for Lifecore, and how are you positioned to benefit from that?
I believe it does. It'll prove itself out over the long haul. I think the law goes into an act in 2032. The way I sort of think about this initially is that our opportunities on new development programs, it should grow at some rate because you will no longer be looking to work with a potential Chinese CDMO. As it relates to any potential site transfers, I think you have time, because a current sponsor who's working with a Chinese organization, if it's 2032, it's gonna be enacted, they have time to work with them before transferring to potentially a U.S. manufacturer. So, you know, that may, you know, may not manifest itself in incremental opportunities as it relates to commercial transfers till late 20, the late 2020s.
But certainly from a development program standpoint, for domestic manufacturers, it should mean a greater bolus of opportunities to compete on.
That's great. And maybe one last question here, but you recently joined the company after, you know, you've already had a successful career, but you joined Lifecore. What has you most excited about the opportunity at Lifecore over, say, the next three to five years and made you wanna, you know, jump in with both feet?
Yeah. Matt, I think I mentioned this before when we've talked, I wasn't looking for a new role, but then the opportunity to sit down and speak with our new Chair, Kate Howe, and other board member, Chris Kiper, originally, I really got intrigued. First of all, it's a great asset. Lifecore is a great asset, maybe a noisy past, as it relates to some divestitures of the food businesses and some issues we've had with regard to, you know, restatements of financials, but it's a great asset, the business itself. We have tremendous technical capabilities. We have the requisite capacity.
In a nutshell, the company was at an inflection point in a high-growth market area, which I believe, based on my experience in the industry, I was very excited about the ability to maximize the opportunity, not only for our shareholders, but for our employees, our customers, and their patients, so yeah, I get excited about building things and challenges and growing and making something special, and nothing that has transpired in the past 100 days has changed my thesis going in, and the team has welcomed me and made me feel part of the team, and they've been open to my ideas and changes, and I couldn't be more excited going forward.
That's fantastic. Thank you very much for your participation this afternoon, and we wish you much success on this new endeavor at Lifecore.
Thanks so much, Matt. I enjoyed it, and look forward to working with you down the road. Take care.
Thank you.
Bye-bye.