Monday, January 29, 2007

Xcellerex gets $20M, shifts model

By Ryan McBride

After using its "disposable" manufacturing technology to make cell-based drugs for contract clients at its facility in Marlborough, Xcellerex Inc. has closed a $20 million Series B round to begin selling the equipment to other companies as products.

Investors say the company's "FlexFactory" technology provides makers of biotherapeutics and vaccines the ability to make multiple products in a single facility, without the pricey infrastructure required in traditional plants to sterilize equipment between batches.

The round was led by a small group of New York-based angel investors along with Silicon Valley venture giant Kleiner Perkins Caulfield & Byers.

Thomas Monath, a Massachusetts-based partner at Kleiner Perkins, has gained a seat on the Xcellerex board of directors.

"The important aspect here was to invest in a truly novel and disruptive way to manufacture biotherapeutics," said Monath. He said the technology enables biotherapeutics plants to be built in about a year -- less than half the time needed to erect a typical facility and at about half the cost.

The company's lead product in the FlexFactory line is a disposable bioreactor. The product consists of a plastic bag in which initial cell production for the biotherapeutics takes place. It fits into traditional steel bioreactors and has internal propellers with magnetic strips that follow the motion of the propellers in the steel tank, the company's CEO, Mike Masterson, explained.

Yet the company is not alone in the business of disposable bioreactors. Somerset, N.J.-based Wave Biotech LLC markets the Wave Bioreactor, which is made in sizes of up to 500-liter bags. (Masterson noted that Xcellerex offers disposable bioreactors that can hold up to 1,000 liters). Also, larger companies such as Billerica-based Millipore Corp. and Waltham's Thermo Fisher Scientific Inc. market disposable bioreactors.

Masterson said this latest venture capital round provides the funding needed to build an inventory of the company's disposable bioreactors and to secure a sales-and-distribution network to market the product. More funding would be needed to commercialize other components of the FlexFactory line, including its disposable mixers and purification units, he said.

The manufacturing system has been under development at the company since 2002, when founder and chief technology officer Parrish Galliher started Xcellerex with technology licensed from Cambridge's Millennium Pharmaceuticals Inc., where he headed biologics manufacturing.

Monath estimated that Xcellerex could in the next couple of years gain a $40 million to $80 million share of the multibillion-dollar market for biomanufacturing equipment.