Richmond startup awarded $354 million federal contract to make ingredients for COVID-19 drugs

Richmond startup awarded $354 million federal contract to make ingredients for COVID-19 drugs

A new Richmond-based pharmaceutical manufacturing company has received a $354 million federal contract to help build a strategic, national reserve of essential medications and to make active ingredients for more than a dozen medicines used to treat patients with COVID-19.

And the ingredients will be made at a pharmaceutical plant in Petersburg, which could create about 350 jobs.

Phlow Corp., led by a doctor trained at Virginia Commonwealth University and working with the Medicines for All Institute at VCU’s College of Engineering, will develop a domestic supply of pharmaceutical ingredients by using advanced manufacturing processes that it says also will lower drug costs.

Phlow, based in the Virginia Bio+Tech Park in downtown Richmond, was co-founded by CEO Eric Edwards, who also was a co-founder of Kaléo, another Richmond-based pharmaceutical development company. VCU professor Frank Gupton is Phlow’s other founder.

“Phlow Corp.’s mission is to provide high-quality, low-cost, essential pharmaceuticals and their key ingredients through state-of-the-art, U.S.-based advanced manufacturing,” Edwards said in an interview Tuesday.

The federal contract is “important for the Richmond area, Virginia, and the nation,” Edwards said.

The company’s partners also include AMPAC Fine Chemicals, a California-based manufacturer that has a plant in Petersburg, and Civica Rx, a nonprofit established in 2018 that works to provide a stable supply of generic medications. Civica Rx has about 50 health systems as members.

“It’s a great story for the U.S., it’s a great story for Virginia, and it’s a great, great story for Petersburg,” Secretary of Commerce and Trade Brian Ball said Tuesday.

AMPAC will make some of the pharmaceutical ingredients at its Petersburg plant, which will be expanded, Edwards said. That plant reopened in 2019. It previously had been owned by Boehringer Ingelheim Chemicals Inc., which closed it in 2014.

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The nation’s first strategic active pharmaceutical ingredient reserve will be produced by the organizations working together, Edwards said.

The coronavirus pandemic has focused attention on the risks to the nation’s pharmaceuticals supply, Edwards said. About 80% of active ingredients for drugs are produced overseas.

“What has happened is the threat of pandemics like COVID-19 have exposed the heavy reliance on foreign manufacturing,” Edwards said.

For instance, India — a key global supplier of generic pharmaceuticals — announced in March that it was restricting the export of 26 active pharmaceutical ingredients.

“We are not saying you do not need a global supply chain for pharmaceuticals in this country,” Edwards said. “We are saying it is critical that the United States protect and secure domestic manufacturing for the most critical pharmaceuticals in case something disrupts our supply chain.”

That could include trade disputes, natural disasters and pandemics such as COVID-19, he said.

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The four-year contract has a value up to $812 million, including $458 million in potential options.

It was awarded by the Biomedical Advanced Research and Development Authority under the assistant secretary for preparedness and response at the U.S. Department of Health and Human Services.

The Biomedical Advanced Research and Development Authority “has long focused on expanding pharmaceutical manufacturing infrastructure in the United Sates, not only to develop and produce vaccines, but also for essential medicines, and their key ingredients to make these drugs,” said Dr. Gary Disbrow, acting director of the authority, in an announcement of the contract on Tuesday.

“I think we are a real Virginia success story,” said Barbara Boyan, dean of the VCU College of Engineering, established in 1996.

With grants from the Department of Defense and the Bill and Melinda Gates Foundation, the Medicines for All Institute at the VCU College of Engineering has been working to develop continuous manufacturing processes for active pharmaceutical ingredients that can reduce waste and cost of production.

Gupton, Phlow’s co-founder, said the technology is not new but is not widely used in the pharmaceutical industry, in which most products are made in a batch process.

“We are interested in it so we can create a more competitive playing field with companies in India and China where labor costs are lower,” said Gupton, who is CEO of the Medicines for All Institute and chairman of the VCU Department of Chemical and Life Science Engineering. He has been at VCU since 2007 after retiring from a more than 30-year career in both the pharmaceutical and chemicals industries.

Phlow will work with manufacturers such as AMPAC and the Civica Rx network to scale up production using the processes developed at VCU.

“We believe this work can revolutionize America’s generic drug manufacturing model by enabling Phlow to produce affordable ingredients used to manufacture essential medicines in the U.S.,” Gupton said.

Edwards said that under the terms of the contract, the companies cannot comment on the specific names of medicines that will be produced, but he said they will include medicines for patients who need to be placed on ventilators, as well as medicines used for blood pressure control, and antibiotics.

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Edwards and Gupton started working more than a year ago on creating Phlow as a startup business to produce generic drugs, not long after Edwards departed Kaléo.

“We never anticipated that COVID-19 would hit,” Edwards said. “It immediately exposed the supply chain risks.”

In March, the company responded to an open request for proposals from the Biomedical Advanced Research and Development Authority. “We applied for this RFP and everything became greatly accelerated,” he said.

The company already has produced more than 1.6 million doses of generic drugs that are used to help COVID-19 patients.

Phlow was incorporated as a public benefits corporation, or B Corp., a type of company that adopts a social responsibility mission. “It means we are committed to social impact,” Edwards said. “It means putting people, patients and the planet over profit.”

Edwards received his medical degree, a doctoral degree in pharmaceutical science and an undergraduate degree in biology at VCU.

He and his twin brother, Evan, both of whom grew up in the Richmond area, founded Kaléo, which they initially called Intelliject, in 2004. Kaléo’s has a product, called Auvi-Q, that automatically injects medication to treat anaphylaxis, or severe, life-threatening allergic reactions. It also makes the Evzio injector for naloxone, which is used to reverse opioid overdoses.

Both brothers departed the company more than a year ago to pursue other interests.

The chief of staff at Phlow is Robby Demeria, who recently joined the company after serving as deputy secretary of commerce and trade for technology and innovation under Gov. Ralph Northam. He was instrumental in legislation adopted by the General Assembly this year to create the Virginia Innovation Partnership Authority. He formerly was executive director of RVATech, the Richmond Technology Council.

The chief financial officer at Phlow is Robert “Bob” Mooney, a co-founder and co-partner at the Richmond-based venture capital firm NRV who formerly served as CFO and senior vice president at Ethyl Corp.

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The awarding of a major contract and the new jobs at the AMPAC plant “validates what we say on a day-to-day basis: We are a manufacturing region,” said Keith Boswell, president and chief executive officer of Virginia’s Gateway Region, an economic development organization that serves the cities of Colonial Heights, Hopewell and Petersburg, and the counties of Chesterfield, Dinwiddie, Prince George, Surry and Sussex.

Boswell noted that the region has a long history as a home to pharmaceuticals and chemical manufacturers. “We have the talent in the manufacturing sector,” he said.

Several politicians including U.S. Sen. Mark Warner, D-Va., and Rep. Abigail Spanberger, D-7th, applauded the contract award on Tuesday, saying that the pandemic has highlighted the nation’s reliance on medical supplies and drugs from abroad.

“I raised this concern with the Secretary of Health and Human Services after we saw the impact COVID-19 had on China, one of our country’s biggest suppliers, which was forced to shut down factories in an effort to mitigate the spread of the virus,” Warner said in a statement.

With the award announcement, “Virginia will be better equipped to lead the production of these vital medical resources here in the U.S.,” Warner said.

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