New biologics manufacturing facility aims to capture investment in Canadian biotech

QSV Biologics

Edmonton is home to Alberta’s first dedicated biologics manufacturing facility with the opening of QSV Biologics Ltd. QSV purchased an existing facility last year for $7 million from UK-based Xenova Group plc, giving QSV instant manufacturing capacity and a staff of 30. It also secured a manufacturing and supply contract with Xenova for TransMIDTM, currently in Phase III clinical trials and most advanced compound in the firm’s pipeline.

Acquisition of the Xenova facility capped a hectic but fruitful year for QSV and its president and CEO, Dr Graeme Macaloney. After founding QSV (an acronym for quality, speed and value) in 2002, Macaloney spent two years seeking financial backing and a suitable facility to realize his long-standing ambition to establish a fee-for-service, GMP biopharmaceutical manufacturing plant.

Prior to the acquisition, Xenova had completed extensive upgrading and expansion of the 10-year-old facility, including new fermentation and purification suites and overhauled laboratory space. QSV will target Canadian firms requiring cell banking, process and analytical development, scale-up and pre-clinical manufacturing up through Phase III trials.

“If we are going to realize the economic and societal benefits from the biotechnology sector, we have to capture the manufacturing,” says Macaloney, who previously managed the Protein Engineering Network of Centres of Excellence (PENCE). “There’s a huge pipeline of drugs and lots of R&D companies who should be devoting their expertise to drug development and outsourcing the manufacturing. It costs $50-100 million to build a plant and you need a three-year lead time to build and validate a facility.”

To finance the Xenova plant acquisition, QSV secured a $4.8-million equity investment from a venture capital (VC) syndicate led by ALMASA Capital Inc. Concurrent to the VC financing, QSV completed a private offering memorandum through a group of high net worth Alberta investors. ALMASA is now a controlling shareholder of QSV.

In his quest for financing, Macaloney approached Deal Generator, a screening and matchmaking initiative launched in 2001 by the Edmonton Economic Development Corp. Deal Generator brought QSV to the attention of several serious investors, resulting in the ALMASA and private offering financings.

Macaloney says the funding will take QSV to a break-even position — a status he says is imminent. Plans are already being formulated to expand the current facility.

“Biologics manufacturing is a high-revenue, high-volume business,” he says. “The key is to keep the technological level high to avoid the commoditization of the industry like chemical manufacturing. You need to have a for-profit model to maintain the infrastructure.”

Macaloey sees QSV as an important component of a larger strategy to capture Canada’s research capacity by build domestic biological manufacturing capacity. He’s supportive of the proposed Canadian Bioprocessing Initiative, a $450-million national biopharmaceutical manufacturing strategy that includes manufacturing, the training of personnel and regulatory foresighting (R$, July 29/04).

“We could be part of that model. We’d also like to develop partnerships locally to gain access to highly qualified personnel and develop novel manufacturing technologies,” he says. “We can do this by collaborating with colleges and universities but we’ll also be looking for municipal, regional, provincial and federal support. There’s a dearth of venture capital and the size of the financings are small. We need to overcome that. Government needs to be proactive in helping venture capital. There are opportunities to establish a vibrant industry but we must overcome the barriers of financing and have a strategy for building manufacturing infrastructure.”

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