Part 1 – Building a Biopharmaceutical Industry in NC
Phil Mintz: Bill, can you give us an overview about the biotechnology industry, what it means to the state, and what it is all about? What are life sciences, as opposed to something else, and how is it manufacturing?
Bill Bullock: You know, on the manufacturing focus side, there are a lot of different places one could go but I will talk mostly about pharmaceuticals and what I’ll call biopharmaceutical manufacturing because that’s really what’s exploding right now in North Carolina.
There are certainly lots of other areas of manufacturing around diagnostic products, and companies like LabCorp who are more service-oriented and don’t do a lot of manufacturing.
North Carolina, pre-pandemic, was really putting a stake in the ground globally, becoming probably one of the top five locations in the world for the manufacturing of biological products.
So let me just give you my initial Biology 101 speech. There are two categories to consider. There is the traditional pharmaceutical product for one – so think of a pill, like Tylenol. You know that is a pressed pill. The process of manufacturing is fairly straightforward. You put a bunch of chemicals together and you press them in a pill. I am not doing the process any justice at all, but there is definitely a skill set that’s required for that.
The second category is where you use a living organism to either be the product or make the product. So, you’re dealing with a living system. Just think of making beer – it’s the same process except, instead of the fermentation process converting alcohol and sugars into alcohol, you generally do genetic manipulation of an organism to make it into what you want either some type of protein or other product. Then you purify that product out, not dissimilar to beer manufacturing where you have big fermenters.
With biopharma, you have got some cell type that you’ve developed, and you then crank out a protein product that helps MS or helps Alzheimer’s, and in a best-case scenario, that’s the breakthrough product. So, the skillset to make those products is on another level compared to traditional pharmaceuticals.
North Carolina invested very specifically in these skill sets at the Community College level and at the University level, roughly 20 years ago, not just around pharmaceutical manufacturing, which were good in North Carolina, but also bio-pharmaceutical manufacturing. There is a manufacturing NAICS code classification for this and it is 325414 (biological product manufacturing). If you look up the employment data for that six-digit NAICS code, the state in the US that has the most employees in that area is North Carolina. We are number one in the country in that six-digit classification, and it is exploding.
So, in that space a few years ago, there was a kind of transformational event where the FDA finally approved a whole new class of therapeutic products. Instead of just using a yeast cell or mammalian cell or a bacterial cell to make your product, what we’ve started doing now is taking these monogenic diseases like sickle cell anemia and some of these very rare but very debilitating diseases that just have a very identifiable genetic mutation that’s associated with it and creating a way that you could essentially insert in one application a corrected version of that gene and essentially cure somebody in a one-shot deal. It is not often that you can talk about a magic bullet and science, but this is one if you are a person or have a kid that has one of these diseases.
That technology has been evolving for 50 years, and in 2017, we finally got approval and it’s called gene therapy. You have heard of some of the companies like Novartis Gene Therapies, AskBio, Pfizer, and Adverum. These are all announcements that have been happening over the last two to three years and the reason for that is because they just got approved.
There is a big backlog of these products and there are probably 200 of these different therapies that are in clinical trials right now. This is going to be around for a while, and I just wanted to paint the picture of biologics manufacturing versus pharmaceutical manufacturing.
We are good in both of these sectors, but we are really good at biological manufacturing, and it is because of the investments North Carolina made 20 years ago with building the Biomanufacturing Training and Education Center (BTEC) at NC State, building the Biomanufacturing Research Institute and Technology Enterprise (BRITE) at NCCU, and putting together the Bio- Network with the Community Colleges teaching Bio-work. By doing all these things, North Carolina has just jetted out in front of other states, from a workforce development perspective, and industry understands that.
So, take all of this, and then put a pandemic on top of it, it just exacerbated everything. Coming into the pandemic there was already starting to be a global crunch around manufacturing for biologics. If you went back 25 years and you looked at the top 20 drug pharmaceutical products, they would all be well, maybe one or two of the early biologics but most of them would be small molecules or baby pills. If you look today at the majority of the top 25 drugs being sold by revenue, they are all biologics. They are monoclonal antibodies. They are peptides. They are all these things that require manufacturing.
Because of that trend, there was a capacity crunch pre-pandemic. There were not enough facilities to make products to meet demand. The pandemic hit and you got gene therapy coming into the fray. Then suddenly there is a demand for manufacturing to make vaccines. There is a demand for manufacturing to make Remdesivir. There is just this big crunch. All the companies that are in gene therapy or the kind of emerging space that already were concerned and had funding thought, “oh my God we have got to go out and find a place to build a facility!”
Some of the bigger companies or contract manufacturers, like Fuji or KBI, saw the opportunity but they needed more space. Then, you have got companies that are in the pill finish space, who are just supporting all of this growth.
So, in my opinion, what happened was they all looked around and said, “it’s a speed-to-market issue now.” The old, traditional building site selection process that involved starting with fifteen sites in the selection pool, taking it down to ten, then seven, then three and then to two. Now they were just calling us (NC) and two other places. They did not have time. There was no capacity in the market to sit around and try to figure this out. It was a risk mitigation and speed to market issue.
The interesting thing is a lot of the people that run these kinds of facilities, there are not 20,000 of these facilities across the globe, there are 400 of them. Many of these people know each other and a lot of those people have started going through North Carolina. There is a reputation in a small group of people who know how to do this, and North Carolina has a phenomenal reputation in that.
So, all of that has gotten us to today where we have just seen this unprecedented level of growth around pharma and biopharma manufacturing and North Carolina continues to win those projects. It is creating some challenges in meeting some demands, a little bit around infrastructure and certainly around talent.
John Loyack: Let me add something to that, because this is not something that we all see on a daily basis. All those companies that Bill just mentioned, most of them are in Durham County and Wake County. We are seeing lots of opportunities there. There are still opportunities to do something in northern Durham or in RTP. Also, in the Holly Springs area. But those are places where investments have been made and the infrastructure is there.
Phil Mintz: It sounds like quite a specialized workforce involved here, and so, what are the challenges? I know you say that we have a good infrastructure for training, but are we getting the amount of people that we need through the system?
Bill Bullock: I have been through a few inflections of this, you know the early versions go back a long time. Probably back to when Burroughs Wellcome came, and even though Burroughs Wellcome was not doing manufacturing, it really put North Carolina on the map around this. I have tried to trace this back. I think there was Cutter in Johnston County at a facility way back in the day, and then that became Bayer Biological Products, then Talecris acquired, and now it is Grifols.
Because of this, and inherently having a great Community College system, was the ‘ace in the hole’ that started all of this. We just have a bigger and more robust Community College system than most folks. As the Cutters came and then Wyeth came to Sanford and a few others came, the Community College responded pretty well. I think what has happened is as business inflections companies will come, then they started competing for employees. Then the state responds a little bit and they are good.
Then about 15-20 years ago, there was a big inflection point because Biogen was here, and you were starting to see some companies coming in and they had the same issue again. Like “hey, you guys are doing a good job, but we need more specialized training.” So Phil, to your point, this is very specialized. Yes, I can hire a biology graduate from NC State, but I have to train them for six months, and soon as I do, somebody at Merck steals them from me. So, the investment the State made, and all that infrastructure 15 years ago did a really good job to meet the demand until now.
The Biotech Center surveyed industry and produced something called the Window on the Workplace, about two years ago. In 2019, we essentially articulated what we thought would be a need for 5000 new employees in this Biopharma space between 2019 and 2025.
So here we are, coming up on mid-2021, where we have barely started that five-year cycle between 2020 and 2025 and there’s already been 5000 jobs announced. So, we have already hit that threshold.
I think we are right there again. I think companies are starting to get concerned. In fact, I know they are getting concerned, because I talk to them every week and I am sure John talks to them as well, about where we are going to find our folks. It is making its way into the site selection community. There are a lot of the site selectors who are locating these new projects. They know us as there are ten of them that do these projects in Life Sciences. They are starting to ask this when they show up in North Carolina. The question is not, can you build a training infrastructure, it’s where do I find my people?
What is exciting to me about that is, it creates a massive opportunity for North Carolina to really double back down in this space if we do this well and we do it right. I am a science guy by training, so I appreciate the global value of whoever does this. It is important to do because you are making products that are saving people’s lives. Part of me wants to just make sure, for humanity, we figure this out. But I get paid through the legislature, so my job is to make sure as much of that is happening in North Carolina as possible and that we are hiring people here.
We have a really big opportunity to do that, but it is going to take some work, and I’ll tell you why we built the infrastructure. We have the basic infrastructure, and we are way ahead of everybody else in that regard. It is strange because we need some more equipment, more space, and more instructors. I think just the sheer magnitude of the growth right now is straining the system, as good as it is.
What I am realizing, and you all probably knew at the beginning is to bring somebody into the community who’s a displaced worker or somebody who never even thought about the idea that they could work in a biopharma industry, it can sound like rocket science to them. However, they can do it. There are a lot of different jobs for people, for example, operators can be high school graduates with a certificate. There is a lot of upscaling that I think we have to do if we want to meet those folks where they are and get them on a pathway where they can get in and do a certificate program or take a bio program. We have the programs. We just need to expand the capacity of the Community Colleges to offer them and work with some of the partners in the State to provide that upscaling and build awareness.
That is the other thing. I think everybody believes that you must have a four-year degree from NC State to work in this, and while they certainly hire every single four-year degree person that comes out of BTEC, that’s only 200 people. We have to hire 10,000 of them in the next five years, so we have to figure out a way to bring more folks in.
Jeff DeBellis: Bill, where do you see the strength in North Carolina around this? Is it more manufacturing and infrastructure we have created around the actual manufacturing of biologics and pharmaceuticals, in general, or is it more on the research side? I am sure you will have a combination of both and that’s what really gets us an advantage, but what is our core strength?
Bill Bullock: All the university people will yell at me, but let me put it this way Jeff, there is not a demand for 10,000 people in research and development right now. We are really good at all of it and that is one of the beauties of it, but we are still competing. Take some of the companies – Grail, Audentes, Adverum – these companies are all headquartered in the Bay area, where they do their research and development. They’re not bringing their R&D to North Carolina; they are bringing their manufacturing to North Carolina. We’re good at innovation, but we don’t have a reputation like some other locations do in research and development.
Now we do better in the agriculture space, but that’s a little different beast. So, if you break this up into three buckets: research and development (when I say development that’s kind of early development), and then the next section, which is kind of product evolution. How do you, if you are on the ag side, how do you perform field trials and get it to an application for approval? If you are on the human health side, how do you do human clinical trials and then do a biological license application (that’s middle development), and then manufacturing? North Carolina is good in the R&D stage, but we are not a leader. In that middle section of development, we are huge in clinical research for clinical development and in contract manufacturing. I lump into that medical and diagnostic testing (the LabCorps, the Q2s, the Grails). We are really good at that and we are really good at manufacturing.
Right now, the growth is happening in R&D really on a more of a “grow your own” basis other than ag and ag is a little stagnant right now, because it is just a totally different conversation than this one. The middle development stage – clinical development, medical and diagnostic testing, digital health – all that stuff is booming in North Carolina and manufacturing is booming. If you made me pick one, I would pick manufacturing, no question. That is what is exploding right now, it is manufacturing.
Jeff DeBellis: I know, the biologics, that’s really kind of expanding and there have been a lot of technological advancements in that space, and you see that as being a real leader for North Carolina in the near term. But for the pharmaceutical industry, we had a rough patch. What I’m kind of curious about is if there is something new, with the biologics that we really see a long-term growth trajectory or are we going to see some expansions and then kind of leveling out in maturity of that where there’s going to be more efficiencies.
My understanding is that there are around 40,000 nationally for this industry. It’s great that we are a leader in anything, and we certainly have thousands of jobs here, but it’s not huge like some of the other industries that we compete in. So, is this an area where we really can see some long-term and sustainable growth potential, or are we seeing a real step up in the short- term, and then you think we will probably level off?
Bill Bullock: That is a great question, Jeff. There are some different competing things going on here. There is this little bubble in gene cell therapy, and I think it will be here for a while. With these rare diseases where you don’t have a solution, and suddenly, you have one, you could run up two batches and meet the world demand for a rare disease. As soon as you get that product approved and you make it, you are going to meet all the backlog demand, and then the next year you are just meeting the new demand.
I do think there are people out there who are questioning the long-term sustainability of this gene therapy bubble for manufacturing. I think that bubble is going to be here for at least 10 years because it’s brand new technology and there are so many unmet needs. The other thing is this will start to address not just the tons of monogenic diseases that can be addressed, but also the big ones like sickle cell. So, there is a relatively big unmet need, but it’s the transformation of the whole pharma industry, I think, except for some really big areas like Alzheimer’s and Parkinson’s, where there are massive unmet medical needs.
Precision Health is moving into healthcare and it is moving into the pharmaceutical industry, so I think we are seeing a new dynamic period. I thought the days of the big billion-dollar projects were gone. I thought they were going to be the Bluebird Bios of the world to come in and open a gene therapy facility in North Carolina, hire 75 people and do single-use bioreactor kind of stuff.
That is all happening, but I think the thing that is catalyzing it now is the pandemic. We are one variant away from going through this all again. Even though we are cranking a lot of vaccines out, I think pandemic preparedness is something that will be with us for a while.
There is some growth potential in that. There are already some challenges in regular traditional medicinal product limitations, so it’s hard to say. Every time I think we have topped out, there is a new technology, there is a new approval, and then there is a new wave. I don’t think everybody is going to get to play in this space. I think the rich are going to get richer in this space and we are one of those people if we continue to meet the demand.
Is this a transformational area for the whole state of North Carolina? No, I do not think so because we have a demand for 10,000 new people in the next five years. But I think North Carolina will be a leader in this if we continue to do what we have been doing. We will be capturing a lot of those jobs going forward.
William O. Bullock, MBA
Senior Vice President, Economic Development and Statewide Operations
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