us today at the Craig-Hallum Bioprocessing Conference, where we will be 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 CEO Nick Green and Vice President of Process Development, Prem Patel, joining us from Avid Bioservices. Gentlemen, welcome, and thank you for joining us today. Thanks very much, Craig. Glad to be here. All right, so very high level, where does Avid sit in the bioprocessing continuum? Yeah, let me take this one. So basically, just to get everybody on the same page, if you look at the entire drug development process for any company that is developing a new drug, and if I were to take a 30,000-foot level view of it, I could divide it into three very, very broad buckets. The first, what I call, is discover it, the second is make it, and the third is to prove that it is safe and efficacious, if you will, right? So once a company decides that they're gonna be working on a particular disease model, or it may come out of an academic lab or wherever the case may be, the idea is to find a molecule. It'll be small molecule, it'll be a biopharm, it may be a gene therapy target, whatever the case may be, but the idea would be to discover an agent that will help mediate the progression of the disease that you're looking for. And this involves basically understanding the fundamentals of the disease itself, the molecular mechanisms itself, and trying to understand what agent would be able to affect the course of that disease. And this, to a certain extent, is the holy grail of our industry, as a whole, because it's very difficult to find a molecule that is both safe and efficacious, but that is what it takes to discover a molecule. We are not into that field at all. We fall into the second bucket, that is, make it. And what it is basically to develop a manufacturing process as well as to manufacture it. And I'll spend a little bit extra time on this one because that is where our core competency lies, if you will. And now focusing on the biopharm industry and the biopharmaceuticals as large molecule, because again, that is the focus of Avid, if you will, but happy to expand on any other area, if needed. The process development is rather important because in biopharms, we use biological systems to manufacture the protein of interest that is gonna be used as a therapeutic agent. And as you can imagine, working with any biological system, and this theme I'll keep reiterating all throughout, if you will, because that is the nature of biology. Though we made a lot of progress in understanding the fundamentals of biology, it is still a black box, and we need to make sure that we understand, we develop a process that is highly reliable and robust. Because working with biological systems, there are a lot of things going on all at the same time, and it could affect each process step further downstream because something did not go right at the first step, so that becomes important. Secondly, you want to develop a process that is reliable, robust, and gives you something predictable because otherwise, it becomes extremely difficult to plan your activities. And lastly, we are a highly regulated industry. Rightfully so, we should be highly regulated because we are injecting something into human bodies. So it is important that the regulatory authorities are convinced that we have a process that is able to make the product consistently with the same product quality that was used during the development of that drug itself, and that will be the clinical trials that I will come to. And regulators play a very, very important role in trying to approve these products, and that is called the CMC package, and this is where Avid fits in squarely into the development of the drug substance, as well as the manufacture of the drug substance. The third bucket, which is basically once you have discovered the drug, once you made it to some level of consistency, then what you wanna do is to prove to the regulatory agencies, the health agencies around the world, that it is safe as well as efficacious, and it is doing what it is supposed to do. One of the things that I should have mentioned earlier during the making of the drug substance or drug product is in biopharms, there's an old adage that the process is the product. Because if you do not have a reliable process, you will not have a reliable product, and because you are administering that product into patients, if you change anything in a biological process, it complicates things. Because there's so many things going on in a biological process, that the change that you made, you don't know what other implications it had. So that's where it becomes that the process is the product. So that is where if I were to take an overall view, again, reiterating that it is a three-bucket process. We serve the middle bucket, and what we serve is the small biotech industry, mid-biotech industry, mid-biopharma, but also large, well-established multinational pharma industries for that making... developing the process and making the process. That, that's a great overview and much appreciated. Maybe, and a good segue, you know, I've had the opportunity, obviously, to visit your facilities, both pre and post on the expansion. But there's some pretty unique features to the way that you've built out your new capacity. Could you maybe, from a high level, you don't need to get too deep into the weeds, but from a high level, could you walk us through a typical manufacturing process for one of your customers? Sure. So again, I'll focus on the biopharm industry. As you know, in the pharma industry, there are multiple modalities, and I'm happy to talk about the other modalities itself, but I'll focus on the biopharm industry. The biopharm industry basically consists of proteins are the molecules of interest. These are the drugs that we are gonna make. And though we can make it in vitro, in test tubes, or whatever the case may be, as, as proteins, we still have not mastered the art of making a protein as well as a biological cell itself. Biological cell, through its evolutionary history, has mastered the process of making a product, so why not use a biological cell to make the protein of your choice? Basically, the first idea would be to start working with a cell that we insert the DNA sequence, which is the blueprint of the protein or the instructions of how to make that protein, into that cell, and then let the cell make that protein. That process we call a cell line development or developing the cell line that is gonna be a crown jewel, that is gonna be used to manufacture our protein. That is like now a mini factory that is making your protein. Our next job is to just basically replicate that factory and make, you know, hundreds and thousands and millions of that factory, secreting or making that product, and that is what we do in what we call as the cell culturing process, where we take that cell and start growing it systematically and methodically to greater and greater volumes, to inoculate or to introduce it into the production bioreactor. The production bioreactor can range from, you know, 100 L to 20,000 L. My contention is that the sweet spot for our industry right now is a 2,000 L, and this is where Avid excels at, but that is the scales that we are working with. In the production bioreactor, we provide the cells with the right kind of media, the right kind of conditions, the right kind of growth conditions for the cells to grow and to thrive and make the protein. It makes the protein along with all of its other constituents and all of that stuff, and the waste product, and things like that. Now, the job is to purify that protein of interest that we introduced the gene in the first place. We purify that protein using several techniques, some very simple and basic techniques, such as filtration and centrifugation, and some we call as, you know, complex chromatographic techniques, which is basically uses the biochemical properties of your protein, the protein of interest, the biophysical properties of your protein, that is, you know, the size and the charge and all of that stuff, to purify it away from the rest of the protein. The analogy that I give is a little child's first toy. If you can imagine that, anybody who has had children, the first toy is basically a box with several different holes in there, are shaped like a triangle or a square or a circle, and different colors. You basically sort those, you know, different objects into either based on color, based on size, or based on shape. That is what we are doing. We are using the biochemical, biophysical properties to separate out the proteins from the rest of the cellular protein or the rest of the metabolites and the waste metabolism, all of that stuff, and that is what we call as drug substance. This drug substance is then formulated into its final form, which is either a pre-filled syringe or a vial or an injector device. Whatever the case may be, it is filled into that as a drug product manufacturing process. And as my friend Nick likes to call it, we make the Coca-Cola, we don't bottle the Coca-Cola at Avid. But that's the idea behind it. That's fantastic, and a good analogy. Prem, as you think back maybe a decade ago, or maybe even longer, but how has that manufacturing process changed? You know, one of the unique features, I know I call it unique, but one of the things that I noticed about your facilities is you're almost exclusively single-use. Yeah. So how has the manufacturing process changed, and do you feel like it's going more and more towards single use, and why, quite frankly? Absolutely. And I'm old enough to say that I've started with the industry itself, and I know when insulin was first approved, if you will. Basically, our industry, if you count insulin approval in 1982, we are about a 40-year-old industry. And over those 40 years, our industry has matured dramatically and improved dramatically in several different ways and formats, if you will, right? What I like to call is, first thing first, we've transitioned from an art form to a science, literally, almost a science. Though there's still a lot of work to be done, and still we don't understand every aspect of it, because again, we are dealing with biology and biological systems, and there's still a lot to be learned, but we've gone from an art form to a science form, where it is a lot more reliable, lot more predictable, and lot more what I would call, where you can apply scientific and engineering principles up to a certain point, if you will, right?... We've increased dramatically in productivity. If we, again, use just monoclonal antibodies, which is more 30 years in the industry or something like that, if you use just monoclonal antibodies, we used to be happy if we had a process that was about eight, you know, 100 mg/L-200 mg/L of culture broth that I'm talking about, of the production bioreactor. 100 mg- 200 mg of the product made, we were at the cutting edge of the state-of-the-art processes at that time, about 30 years ago. Today, we are talking about 10 g/L of process, processes yielding 10 g/L. So that has become rather dramatically, you know, increase in productivity has an impact on cost of goods and, accessibility to the drugs and all of that stuff, so that has become, tremendously powerful. Our operations have become routine and predictable, where, you know, equipment has been developed, purpose-built for, biopharm industry over the years. So that has become made the operations a lot more predictable, if you will. And fourthly, regulatory expectations. It was, very honestly, both we as well as the regulatory authorities, were trying to feel our way out as we were developing the biopharm industry. Now we all understand what the regulatory expectations are, and we understand what will be expected to get a drug across the finish line. Previously, many years ago, if you had to go to different countries, each country had a different sets of regulation on that. They still do, but the formation of that ICH, International Council for Harmonisation, where, all the major health regulatory agencies got together with industry and academia and came up with a set of principles, what they call as ICH Guidelines, that has made our industry extremely predictable to be able to go into all those different directions. So that has helped. And then finally, coming to your question about what is Avid and single-use part of it. I still don't believe it, but people who know better than me have told me that single-use is much more environmentally friendly and sustainable, more so from a water impact and things like that. People who know a lot more about sustainability and carbon footprint tell me that single-use systems are a lot more environmentally friendly. Honestly, as I said, I cannot wrap my head around that concept, but I believe what they're saying. We at Avid adopted very early on. We went to single-use. We were at the cutting edge of single-use, and we have seen the benefit of it, that it does. Obviously, concerned about the environment, the sustainability part of it, and we definitely wanna be part of it. But also from changeover, you know, changing from one product to the other product, you are basically throwing everything away and putting in a new set of equipment. So there is safety concerns are not there, that you're not contaminating one batch of a previous drug with this new batch, and all of those other advantages that come into play. It, it has helped us scheduling of our batches, our production schedule and all that, so, so, so tremendously helpful. But the industry has really, really evolved dramatically over the years, and I see it growing still considerably, many more decades of growth expected. That, that's great, and I guess one of the other, advantages to single use, I would think, is on the regulatory side. From when the FDA comes in to do an inspection, and they wanna see your processes and your maintenance and all that, it's a lot easier to just say, "Well, we're single use. Yes. As Nick... Go ahead, Nick. You say it as you like to say. Go ahead. Well, yeah, I mean, it's not often you say no to the FDA, as I say, but when they ask for your cleaning validation, the answer is no, 'cause we don't do any. It is nice to avoid the potential for growth that you can find in more fixed systems if you haven't cleaned them out, and microbes like to have an amazing ability to find any little hole or deposit where they might sit and come up, and then you get things like biofilms. So those of us who've been in the industry a long time have almost certainly seen it somewhere at some point in our careers, and it's something that you don't want to see if you can help it. The disposable systems eradicate a large proportion of any of that potential, for sure. Well, that's great. And then, I guess maybe a little bit higher level, but what gives you confidence? I mean, if you could manufacture small molecule, you know, biologics, what gives you the confidence that you've chosen the right markets with large molecule biologics and now more recently, selling gene therapy? Yeah, I think I'll take that one, but I mean, there are good segments of this market across the spectrum, for sure. I started my career off in small molecules and then saw it around the turn of the century that things started to move towards biologics, and today they represent almost 50% of the sales in pharma, so being part and parcel of that as the sort of core of the business, as it were, at this moment in time, I think is a super place to be. I think, you know, there's something about biologics, which is just, at the end of the day, your body isn't used to having small molecule chemicals running around it. It's usually proteins that it's using to regulate its systems and what have you. So I think we're in the biologics sphere, we're getting much more, much closer to the way that nature has tried to do it. And then obviously, you know, our whole being is dictated by our DNA, and, you know, as complex as it is, there are always transcription issues and what have you, and that creates a whole host of issues that are borne out in the medical field. And the fact that we could actually genetically modify things and cure people rather than treat people, to me, is, you know... Incredible, and the stories that you see in, of patients being cured of things that they would never have hoped to be cured for, or even as simple as hemophiliacs, you know, that may get a gene therapy that stops them having to be injected once a month for their whole life and running out of insurance or what have you, and the inconvenience of that. I mean, I had a cousin who was a hemophiliac at five years of age, and, you know, they... five-year-old boys bounce around off everything, but if you're a hemophiliac, life's not quite so much fun because of the bleeds that can occur internally and all the rest. But absolutely transformational in my opinion, and there is no way on earth as humans that we will give up on that ability to cure ailments. You know, I'm not gonna suggest for a minute that the small molecule market isn't interesting and has a future. It does. But I do think that we're going along a progression, and biologics is a super solid, really robust part of the industry. Still very complex and still learning a lot, and then the next cutting edge is coming into the gene therapy area, and I'm sure we'll see lots of exciting things. Roads will be bumpy, but I think we're in the right area. On top of that, you know, as a company, in terms of the disposable component that Prem just talked about, you know, we are seeing the disposable bioreactors increase in size. You know, there's a 5,000 L disposable bioreactor today, which is an enormous bag. But we've, you know, we've been moving up that continuum for over the last couple of decades. So we're seeing larger volume bioreactors. I think Prem also talked about titers increasing. If you go back to the turn of the century, it was less than 1 g/L, where now we're seeing over 10 g/L. So, you know, you just sort of correlate that to bioreactor size. What was a 20,000 L reactor becomes a 2,000 L bioreactor. And then, you also then look at other areas that I know Prem's working on in our operations, like N-1 process intensification. You know, I think you talked about the cell concentration, improving the cell concentration, it reduces and you improve the amount you produce, but it also reduces the cycle time. I think, if I'm not mistaken, and you'll correct me if I'm wrong, Prem, but you talked about those little cells being each one of them a little production factory. But I think we've seen cell masses of almost 40 million in a bioreactor. Exactly. Easily. So 40 million of those cells in a bioreactor- Per mil. Per mil. Per milliliter, and then 20,000 L. Then 20,000 L. So that blows my mind, that you've got 40,000 cells in 1 mL, and you've got a 2,000 L bioreactor, or in the stainless, at 20,000. So that kind of gives you a feel for what's going on. And then the other side of it is that, you know, indications are becoming more tailored, and personal medications or smaller groups and rare diseases, and so that the that you've got a reduction in the volume of the product, and you've got an increase in the productivity, which kind of brings you into that 2,000 L platform, as Prem alluded to, as being a really solid workhorse. And then being in that disposable field, you know, on top of that, we're in the United States, which, yeah, I think is a great place to be. I think it's the most innovative country in the world, and it's the most developed, pharmaceutical, market in the world. And then we get even luckier because, as a Yorkshireman who's used to rain and not much sunshine, being in Southern California, it doesn't get much better than this. The California coast, the innovation, and then just the ability to come into work and see the sun every day is kind of, a great place to be. I think we're in a really, solid place. We've got a phenomenal facility as well. We kind of like where we are. Yeah. And actually, I'll add a couple of points to what Nick mentioned, more so from a biopharm industry point of view. Yeah, I still see a tremendous growth potential for the biopharm industry. I looked up between 2010 and 2020, FDA-approved new molecular entities, NMEs, as they call them. 75% were still small molecules, 25% were only biopharms, if you will. So from my point of view, that is glass half full or maybe glass 1/4 full and 3/4 for ability to grow. And biopharm industry, just building on what Nick said, that biopharm is a much more friendlier to the human body as a treatment as opposed to a small molecule, less toxicology effects and all that stuff. With the advent of bioinformatics and the advances in biology and understanding of biology and gene, basically transcriptomics, if you will, if I may go into the bioinformatics section, the field is wide open with respect to the kind of therapies and unmet medical needs that we are able to tackle today. With the pharma, you know, small molecule industry, for over 120-year industry history, has not been able to tackle some unmet medical needs, which biopharm industry will be able to tackle. That's, that's fantastic. Real high level, just kind of as you think about it, what are the two or three top attributes of Avid? When you think about your peers in the industry, what are the two or three things that make a pharma company call you versus somebody else? ... Yeah, I mean, we have a few little sayings in Avid. One of them is, you know, the three most important things in biomanufacturing are quality, quality, and quality. And, you know, we've got a 21-year regulatory track record at Avid. We get audited by the FDA on a very regular basis. And we really do pay a lot of attention to quality, so it's built into our facilities. It's operated through a quality management system that's got 21 years of practice effectively and refinement. And then on top of that, we layer the culture of the organization, and probably the most important part, to be frank. We don't think we're perfect. We still find areas of improvement, but it's a fundamental, and I think that's one of the reasons why Avid gets viewed very much for the later phase and commercial opportunities that we do. Our size and our capabilities, the breadth of capabilities, but also the size, you know. We We have another saying, "We're big enough to matter but still small enough to care." It doesn't take a lot to navigate Avid, even though we're not necessarily a small company, but in terms of feel and location, we're all in the same location. So it has a really reactive, flexible, very customer-centric approach to it. I think the culture, again, comes into that as well, because people really care about getting together and working out problems and finding solutions. Whether it's your problem or somebody else's, we all seem to get together and try to sort them out. The experience of 30 years of doing this is it brings an incredible amount of knowledge and know-how, and I never seem to fail to be impressed by how they solve problems that other customers. They even sit down with customers before they've described their product in too much detail and tell them where their problems are because they've seen that type of thing before, and that resonates extraordinarily well. And then on top of that, you know, we've got a brand-new facility, and again, back to location again, I mean, it's nice when you don't have to travel around the world, when you can come back into your own backyard and find the capabilities. Those are some of the key attributes that I think. You know, you look at some of the tenure in Prem's team. I think the average tenure is what. At least, over a decade- Over a decade. ... in Avid, working at Avid. Yeah. So actually, there are two parts to that. The top technical staff, the technical leads, actually my direct reports as well as my peers. All of them have at least 25 years of experience in the industry as a whole, but many of them, I mean, have had experience at Avid of 10, 12, 15, 20 years, if you will. So it's a very stable environment with a lot of experience that is brought together in one place. So that is really, really nice. And I cannot. I mean, I'm relatively new. I'm a relatively new member at Avid, but I am amazed at the culture, what Nick has said. The culture is just unbelievable. It is very family-oriented, and it is very customer-centric. We bend over backwards to help our customers to, you know, really, really help their product come along. That's fantastic. Well, I've got one last question that I'll hit you with, and then I can let you hop. But I'd be remiss if I didn't ask about the BIOSECURE Act. Obviously, it passed by the House last week. Expectations are that it'll pass the Senate, ultimately get signed into law. What could that mean for your business from an opportunity perspective? I don't believe you have any customers in China, but what could that mean as far as everybody else looking for a new home? You know, WuXi, first of all, a very capable operation, there's no question about that, and always have been, both in small molecule and large molecule, for that matter. They're, but they are a very big player in the disposable platform, there's no question, both in clinical and commercial. So there, there's a large pent-up capacity there that would need to find another home if if. My understanding is 60% of their business is U.S.-based. So, you know, we're very much watching what's going on. I think people are already taking action, clearly, because, you know, you've spent a lot of money and a lot of time getting your drug to the various stages that they're at, and people wanna make sure they've got a supply. So people are already looking at alternatives, talking to us. I know we signed some business in quarter one that was related to that. So it could have a very significant impact, for sure. I try to not get too far over our skis, Matt, as you know. I mean, it's early days yet. But I think it's safe to say that, you know, it would be a positive tailwind on Avid's business, for sure. That's fantastic. It's been nice to see the progress here as you guys have grown over the last couple of years that I've covered you, and good luck with more success. Thank you. Thank you. Appreciate your support for all these years, and look forward to continuing with you, Matt. Thanks very much. All right. Thank you. Thanks, guys. Enjoy your day. Thank you. Thanks. Bye-bye.