As part of the Mantell Associates Network podcast earlier this year, CEO Alessandro Mantell spoke with Terry Novak.
As part of the Mantell Associates Network podcast earlier this year, CEO Alessandro Mantell welcomed Terry Novak, CEO of Biologics CDMO start-up, Salubrent Pharma Solutions. In this episode, Alessandro Mantell speaks with Terry Novak about the past year and the challenges in setting up a start-up Biologics CDMO during the global pandemic. Terry also shares his thoughts on the roll-out of the COVID-19 vaccine and the positive effects this will have on the treatment of other diseases, how technology and robotics are revolutionising the world of pharmaceutical manufacturing, and offers advice for other business leaders of start-ups within the industry.
Alessandro Mantell: Thank you very much for joining me for episode number 12 of Mantell Associates Network. I am joined today by Terry Novak who is the CEO of Salubrent Pharma Solutions, a Biologic CDMO start-up which focuses on gene therapy, cell therapy sterile fill and finish and even more. This is a really exciting thing so thank you so much for joining us. I will get straight into it, you set up the company Salubrent straight after COVID. You started talking about setting it up in July 2020 and then you actually set up the company officially in November. It goes without saying , you are going to be able to give a huge amount of insight to a lot of the listeners also setting up a start-up, setting up a CDMO during COVID. How have you found everything and how have you done it?
Terry Novak: Saying it has been a whirlwind is an understatement. I'm lucky to have three other gentlemen actually, four other gentlemen who are working closely with me to kind of take the bits and pieces that we need. I have been in the CDMO business for 20 years, my last stint as President and the CEO of Tedder a small solid oral dose company. I have always had this thing for the sterile injectables. In my days of Patheon as the Head of North America we didn't have any stereo facilities, my counterpart who ran in Europe had all of those so I was always jealous because I had a very beautiful facility when I was at ESM in North Carolina. We were looking through the marketplace to see what was needed out there, we did not look and say oh gosh COVID-19 let's jump on the vaccine bandwagon, that's a big undertaking. We looked and we talked to customers and customers were telling us that there were small biotech's that need a couple hundredvials to a few thousand vials and are waiting 6-12 months to find a CDMO to put them in there filling slot. So the capacity is not there but the demand is intense and it will continue to be. There are 9000 sterile injectable projects in development right now and when you look and break it down, more than half of those are in the early phases. So these companies are going to need this kind of service. The service that we provide will be fill finish including Lyophilization, analytical development, formulation development, method development, stability, all the things you would associate with a full service sterile CDMO. But we will be using technology that is fully automated, fully robotic so that your change over time is very quick to install in the suites. We have a business plan, we want to duplicate this into four part areas of the country. We are going to start in North Carolina, we have a site we're negotiating the letter of intent with. We then want to put three more, the Boston area, Bay area, and the San Diego area for obvious reasons, large concentration of Biotechs and the ability to go after that business.
We are making progress we're talking to lots of potential investors, we're trying to raise money in three different tranches, three million first which gets me the ability to start our separate standalone analytical service business. The reason for that is let's get the company launched with a brand, let's get potential customers in here doing analytical services, stability, form development, all those things. I can have that up and running by June this year. We have the equipment identified, we have a location, we are going to be co-locating with an API manufacturer who is also very technology focused. We will provide them with analytical services on a shared service basis in return for the space but we have other customers in North Carolina that we'll go out and attract for stability things. Stability invisibility chambers is perfect for biologics which gets us set up again for customers to finish so that piece of the business is ramping up, it's getting it’s first three million in the door.
I'm excited, we have purposely not said this is all about you know vaccines and the COVID pandemic because it is and it isn't. It is about the 9,000 sterile injectable products out there that biotech folks need to find a home for so that they can get it quicker to clinic and then eventually quicker to patients. There's a need and we are trying to convince investors that they should be investing in us because we can be up and running. I forgot to mention we have an award-winning facility designer, a gentleman named Herman Bosenhart who is under contract with us. He is doing the design of the facility, we've got two companies ready to go with proposals so as I said it's a matter of somebody coming in giving us that first tranche of money and we can start doing something good.
Alessandro Mantell: It's a really exciting time and I know that you guys have had a large amount of traction and attention on the market from what we've heard and the name for a company of what is now five people. For the name of the business to have come up that many times to us as head hunters is a huge huge thing which means that you guys are doing a phenomenal job. I do firmly believe it's the technology and a robotic part which is making you guys stand out and be attractive to potential investors which is amazing. Something which would be interesting is there'll be a lot of people who will be thinking, how have you done this, how have you gone about setting up the organisation during this time. It would be great if you could kind of paint a picture of how you've gone about getting investment or getting in touch with the right people, how you've got so well connected and also some of the challenges that you face so far.
Terry Novak: As I mentioned, fortunate have some good folks so there's three other individuals who were part of this initial business plan, one is a young investment banker who will be our Director of Finance. He's been the guy doing the modelling, two other gentlemen were in the CRO Business and they were seeing the same thing I was seeing and they came up with this, why don't we go after this part of the business. They found me because they had no idea about CDMO business, found me started talking to me and I got excited and said all right I'll be the founding CEO. Then from a whole marketing point of view, the marketing agency that I've used, Instigator for 20 years. They have done everything for me they have rebranded DSM for me, rebranded Patheon launched Norwich and all the companies. They are very very exciting people so they've taken a position in the company as well to be that's our marketing arm. It’s interesting, so, how did we start making contact well one of the CRO folks, Stephen Conley, he has a lot of connections in the CRO business, a lot of connections in some of the early you know friends and family office money piece. Myself given what I've done over my career including helping my CEO raise 60 million when we started or took over Fernix. I have a lot of connections because you know we've been looking to make some acquisitions at my last company so I'm a regular attendee at JP Morgan meeting a lot of them.
However, most of my contacts invest in revenue generating companies not free revenue companies. So then it had to be this okay how do I find those folks and again it was kind of weaving through those contacts that I have that said 'Hey let me put you in contact with this, let me put you in contact with that'. We also have a friendly banker at one of the major major banks here in North Carolina who has been just tremendous in helping us find those kinds of folks and he's doing it as a service to his clients so we're looking at strategies as well. I went through and said okay I know companies who are in the bioprocessing business, the CRO business for biologics but they're not in the fill finish business so I reached out to all of those folks through my 20 years in this business. I said hey you know any chance of a partnership, you have customers need Fill finish. Every one of them Alessandro said hey who should I go to for Fill Finish. So three of them have already signed non binding letters of intent with us to say we are going to recommend you primarily to all of our to all of our filters. It has been trying to get that in place.
I know it seems early, we are 18 months away of being finished but if I have non binding letters of intent and I was showing these to a potential investor that makes a big difference. I can say, I have customers lined up that will come into our facility when it is time to go. As I mentioned, we are starting a standalone analytical service business here in the Charlotte, North Carolina area which will be up and running in June. Those customers we can be supplying the method developments, the stability, all of those things that we need. Which will then set them up to be a fill filled customer down the road. So there were a lot of contacts that we made over the years, taking advantage of contacting them. I was a little surprised that the week of Christmas I had 5 investor calls. Normally that week, most of those guys are gone but I think because they had to work from home, the pandemic helped me in that situation where folks were still working and we then were able to send things out, confidential information to a handful of potential companies. Now that everyone is back from holidays, this week I have had 3 or 4 follow up calls to talk about and answer questions so this is the telling week for me its those guys that got the 25 page Sim and are now going to drill down deeper with me and say okay if I give you the 20 million, if I give you the 50 Million I need to know a whole lot more in return. This is the week that I have been losing sleep and holding my breath on when am I going to hear back. Again, we have heard nothing negative in return, everyone loves the idea, loves the robotic approach all the way down to the marketing sales approach, it’s really your pre-revenue. I have had so many people tell me, a year and a half from now call me, I’ll give you anything you want. Which means you can help us jumpstart haha.
Alessandro Mantell: All of this is actually incredible and it has been a crazy crazy time for you. Being the CEO of a start up business where part of your job is dealing with potential sights that you are going to be taking over, finding new technologies, new marketing, finding investment. How have you personally managed all of this with a global pandemic going on?
Terry Novak: Tequila, haha! No, we are organised, that's the best way I can tell you, every Tuesday Morning, I have a call with our team that lasts an hour and we go down and go through the lists and say who’s got this, where are we going with each of these steps. Every Friday morning we have a funding meeting, myself, Stephen who did the bulk of the early raise, I’m doing the rest and then of course our finance director. I’m trying to bring the CFO onboard, I have someone who worked for me a number of years ago who is very very interested, trying to get some friends and family money in so I can at least give him a little taste while we are doing this. That is kind of my last piece of the puzzle that I would be comfortable with moving forwards as we get investors interested. So it has really been organised, it’s a great question because it is not what I’m used to, I have never done a true start. I have come in and been like this business is a mess you have got to fix it, but with a start up it’s different. I’m used to having something there, here you know we have our first calls and everyone is talking at once. There are 10,000 things being thrown out there and we need a time out, we need to prioritise because there are many many things that people are throwing out there and I am like no timeout we stick to the business plan, we do what we have to do. So organising it in the beginning to prioritise what we needed to do.
Fortunately I had a lot of experience in that, our marketing company helped tremendously with that and made it look very nice. We have had great comments that it is the best looking sim, I just want you to tell me it has the best information in it and write me a cheque ahah. We still have these calls, where we get a little bit of track but I say it was just about getting everybody set on the prioritises because you can start talking about when we can put the other 3 sites on board but we have to get this first site up and running before we can even think about the other sites. I had never met any of these folks except my marketing person because I have known him 20 years. So we started this in July, I didn’t meet the team personally until a month and half ago. We said let’s have a face to face meeting in North Carolina where we visited a site where we ended up putting a letter of intent on, let’s meet in North Carolina at the marketing offices. Let’s make sure everyone is safe from a COVID point of view, social distancing, masks and it was the first time that we all met in person. So when you talk about the COVID Pandemic part, you are trying to set up a start up, trying to raise 70 Million Dollars and you are trusting me to be the founding CEO from Stephen who really brainstormed this idea initially. Matt is doing the project management part of it and Joe who is the finance director, they hear me on the phone, they see what my background is but no one had ever met. That really solidified the company, we are going to have some speed bumps and it was at that time actually that we decided we need to create a standalone analytical service business. So the brain storming in person still works better than the zoom, teams, there is just a different dynamic, I mean it could have been the Krispy Kreme doughnuts every morning.
Alessandro Mantell: Haha, it all has an impact. What I was going to say on this was, you’re reminding a lot of, obviously this is completely different business but it’s a start-up and we all go through the same difficulties and different things. For you it’s the manufacturing side and for me it’s an office, it’s different areas but the start-up period demands so much. Learning everything from how to manage, for you, you didn’t have to learn as much as me because you are far more experienced. But for me learning the area of the PNL, learning about getting terms of business set up, hiring, all of the background things. That was massive, working for recruitment and now having to recruit for my own team is completely different. What do you think, from a leadership point of view it takes to do that, the way you are doing it successfully, to juggle all of those different things at once. All of the different stresses, you have the money, he company, the people, you have the CFO to come for hardly any money. What is it in that text, from a leader?
Terry Novak: You hit the nail on the head, you have reminded me how difficult it actually is. Obviously there is the basic stuff, the organisation. I would have to say I have had to focus the team on priorities, I am blessed with having a good team. If I think about my life in business and running some very large companies but also some small companies it really does come down to the team that you surround yourself with. Now I didn’t pick this team, this team kind of chose me because they were like hey, we’ve got this idea and we talked to this one guy at a vaccine company and he said this is the guy you need to talk to to run it. We tweaked the business plan, we did a lot of other things because from my experience, this one was different because I didn’t get to pick the team. I have a BD ready to go and come on board and work for me before. I have the CFO who has worked for me before, I brought the marketing person in. So people who I have built a great relationships with, who trust me and I trust them.
In the beginning Alessandro, it’s that first few months where I’m like okay am I really going to be able to lead these guys who only know me by reputation and they check me out and said yeah we are going to follow him. Then I think what happens is, you deliver, what happens is all of a sudden within the first month of me being the founding CEO, we have a partnership of analytical services in North Carolina, we have NC Biotech involved, we have a site in an area that I know. We have 4 or 5 investment companies that want to talk so all of a sudden those folks go holy crap, it’s really happening. I better get my butt in gear, is the exact words I heard from someone in my team, to make sure that I am doing what he needs us to do. It then became a matter of breaking it down, what I started to do was realising that I have four guys and then broke it down and said we need the model, we need the financial model - Joe run with it. What I had to tell everybody was don’t come to me with every little thing that you are doing, I want you to do the model, then give it to me and then we will go over questions. Don’t do it every step of the way and keep asking me, you don’t have time at the start, let's do it all at once.
A lot of it has been thinking on your feet, it has also been sticking to the business plan, talking to potential investors, strategic partners and sticking to the plan. We needed to make sure that everyone knew their role in the build out part with our facility engineer, Matt. I had Matt saying I need you to be the key point of contact. Yesterday we had a call with a potential construction company, I should be involved in that because I want them to know what I need. This is what is really crazy, three of the four people have other jobs because again this is a start up. So meshing that into to say okay I have time to be able to do this so it has been a lot of late night calls but everybody is on board with it. Then you start to see these little wins come, we had 6 investor calls and they came back and said we are interested, however you need to create revenue, talk to us in a year, or they might be strategic and say we are interested, let's have a board meeting. I am on pins and needles trying to get feedback this week and figure out other ways to raise the funds, like I said we are getting close and the progress we have made in a short period of time is showing investors that this business plan is real. I think one of our key pieces here is let’s get the building, negotiating the letter of intent so let’s get the building so in that way it’s showing that we actually have someone and it’s not just a letter of intent but some assets. This was unique for me in that I inherited the team in a way but it was just getting everybody prioritised, on a list of priorities. I can’t stress enough I always had a Monday morning meetings with direct reports throughout my whole career, one hour, bom bom bom bom bom, I didn’t do it any different with the start-up because it is probably even more important with everything we have.
Alessandro Mantell: Something I love about what you have been saying that is really resonating with me is the organisation, being organised, being structured, keeping everything going. When you are running a start-up or starting to get into creating some revenue for the business and having all of these exciting calls,. You learn so much at once that everything can be chaotic and I found at times that you get through a day and you turn around and think what on earth did I do because it is more chaotic than ever before, that is the reality. But being organised, being structured and being aware of everything, obviously you are juggling people who are in theory part time but also double employed because another commitment, hats off to you and everything that you are doing at Salubrent. I wanted to ask you as well more on the pharmaceutical industry as a whole and taking everything to do with COVID into perspective. What are some of the most exciting changes that you have seen coming in the pharmaceutical space, or ones that can also be linked to Salubrent or things that you have seen other businesses doing as a result maybe of COVID?
Terry Novak: I think first of all, the technological advances, I don’t think companies were forced to do or to look at things that they were already doing, whether it is the messenger RNA or the way they were doing cell and gene therapy. The light speed in which we developed, the way we moved in terms of being able to develop those things. If you think about how quickly we have been able to come up with vaccines, it’s never been done in history. Well now, take that beyond COVID, take that to other diseased states which is tremendously exciting, especially for treating other diseases that are going to need this technology. So to me that has been amazing and then also to me it is further validation of the need for businesses like Salubrent for the small scale catchments that these companies are going to need for these diseases that they are going to treat. I’d say the second thing, it’s kind of bittersweet I would say for the last 8 years, I have been very very vocal on the offshoring and the amount of pharmaceutical products and our reliance on China and India for excipients and raws. I can’t tell you how many talks I have done, I even went back to notes from 8 years ago because I talked to my wife about it and I guess it’s something like this that has had to happen to finally draw people's attention. I thought it would happen after the heparin issue, that contaminated about 7 years ago in China. There was a silver lining here in that all of a sudden people went ‘Holy Crap’, I can’t believe how reliant we are. The DFC and the DPA are trying to onshore more products, partially in the API side is incredibly important here and I think that’s the one thing that really sticks out to me in everything that has happened and what I see. I see great investments from companies in the API business and say yep I’m going to expand my API business here in the states but then the catch-22 is the reason for the off-shore was the pricing. So now what happens is, it is going to be more expensive, now there are some new technologies, the company that we are partnered with in this analytic lab here in North Carolina is a technology based API company that does very complicated API’s at half, at least half of the cost that you can do off-shore. There is a great example and we are partnered with them doing analytical services. So it is happening and I think that is one of the things that has really come out of it and I’m looking forward to is, is having it not being in China or in India.
Alessandro Mantell: Completely agree, it is a positive sign not to rely on other areas as much. Another positive you mentioned, I have not heard this answer before, was about the speed that people have come up with the COVID-19 vaccine. Here in the UK we have been fortunate enough to have this rolled out really quickly, which is exciting. You mentioned that it could now be used for other diseases, do you think they are going to try and do it at that speed? I thought it was always done slower for the health and safety and everything. But now they have proven they can do it quicker. What do you think will happen?
Terry Novak: I think the agencies like your agency, our agency, I think they have looked at this and said you can do some of this in parallel. They are doing phase 2, phase 3 in parallel, why not. You are still holding them to the same safety requirements, the ethicacy requirements but it can be done. I see a change in the CRO industry and the way they are operating. I see a change in the way some of these companies are operating their clinical trials. The one piece of this I think that I’m not sure is, they also started manufacturing at risk , they started manufacturing these vaccines when they were in phase 3, for commercial use. You rarely see that done, however they were funded by the government, the government were giving them billions of dollars to go yep we are going to let you do that. Will companies do that on there own you know, that is the one big question, maybe, maybe not. But I think the big changes are going to be how the CRO’s are looking and running the trials and the sponsors really buying and them saying yep you can run them both in parallel. Again, you are looking at the same outcome and the same endpoint. It’s just getting these things out there quicker. I think the whole technology has been validated in a bigger way now with the two vaccines that are out there, of course the J and J vaccine is going to be a little different. It’s a bit more standard with the way they have done it. It has made people think in a different way, I am hoping that translates in the way they produce not just the way they are developed, tested and clinically tried but also looking at our stuff that we will be doing and say this is a great way to work with the CMO and our robotic technologies. There are a couple of companies that are doing this but it has really grabbed so we are excited to work with the companies manufacturing needs in the market. I am excited to get this thing of the ground, the more I talk to people about it the more i’m like oh my gosh I need to get this going.
Alessandro Mantell: We are close. It seems like a great time based on what you said for the pharmaceutical industry as a whole. It seems like a great time for entrepreneurs, I mentioned to you off camera that there are going to be some organisations that I will be able to contact you with and no doubt they are going to take an interest. By the way, more companies are acquiring other businesses than I have ever seen before, more companies are investing in businesses. You have done this at the right time, even though there is so much doom and gloom there is so much positivity. I will leave you with one final question and this is going to be big for a lot of people. What advice would you give to other start-up business leaders right now, who are in similar shoes to you, they have just got their investor, maybe they are looking to get an investor. Maybe they are just starting up, sitting in an office like I was when I first set up and you have a light bulb that doesn't work ahah. What would your advice be to start-up leaders right now?
Terry Novak: Don’t panic. Take a deep breath, resist the temptation to make changes to our plan just because you had one, two, three or four little comments that you picked up. Believe in the plan because I can’t tell you how many Tuesday morning calls that was like, well why don’t we add and I said wait a minute, we put this plan together we have got a financial motto that supports the plan. We have the market that supports the plan, 9,000 sterile injections. If you truly put this business plan together and truly believe in the marketing data you have brought in and the financial data that you have put together, resist the temptation to go of course too much. You are of course going to have to put little tweaks in, let's face it. I found that in the beginning, we would get on these calls and everybody was talking at once. You really need to go back and see why you put the plan together, there was a belief in this business plan and stay committed to that. You are going to have some investors give you some feedback that you may need to do a little tweak. I think that is the biggest thing that I have learnt, that there are highs and lows. You can ask my wife, I come out of the office to have a cocktail before dinner and she can tell what kind of day it has been. But I really think that is the key Alessandro is really truly believing in your plan and resist the temptation that when you get one bit of negative feedback from a potential client or investor, don’t right away be like I need to change that. Step back, take a deep breath and go well it was good advice but our plans are still right. That’s the thing that I have had to make sure that I really understand and go through is, I get the highs and lows and you bounce back. Folks know my name so that has helped get some credibility and get the call. It has been a learning experience for me as well.
Alessandro Mantell: It is exciting times and very positive. I like what you said, stay calm, don’t panic, relax and believe in the plan. There is a saying ‘make Plan A so good that you don’t need a Plan B’ so don’t think about anything else. What I took from the second part of what you were saying was you are so aligned with even if people do come along and say ‘I like it but you need to do this’ that’s fine and that is your opinion but we have our plan and our strategy. We know it is going to be successful , it’s just a matter of time so don’t panic.
Terry Novak: Definitely, you set these key milestones and when you hit one of those, celebrate it. When I look at what we have accomplished in a short period of time, I’m like we don’t have the bulk of the money we need. But we do have a partnership, an API company, we have this and that, a letter of intent. This key milestones, celebrate them, no matter how small they are but make sure you have a list of what they are. That is what makes you focus and helps you go here are our milestones, this is what we are focusing on. This helps us prioritise as well.
Alessandro Mantell: Absolutely, my last podcast was with the CEO of Fertin Pharma a CDMO based out in Copenhagen and he said the same things, Peter, he said you need to celebrate the small wins and always focus on the little wins and learn to enjoy them. It might be a while but look at it and enjoy it in the moment no matter how small it might be, how big it is. Make sure you enjoy that success, I listen to what you are saying and what he is saying and it is two great leaders saying the same thing. Absolutely love it, Terry I have loved having you on today, it has been a pleasure talking to you. We will be in touch, very very soon! Look forward to working with you! Thank you.
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