Allied Process Company
UCD spinout Applied Process Company has been a remarkable success for founders Mark Barrett and Brian Glennon, writes Gerry Byrne
The UCD pharma services spinout has been a lucrative success for founders Mark Barrett and Brian Glennon
One of Mark Barrett’s proudest boasts is the fact that he and his partner, UCD professor Brian Glennon, were able to set up Applied Process Company (APC) with virtually no capital. It has also grown substantially since forming in 2011. In 2018 the pharma process optimisation business reported turnover of c.€19m and an operating profit of €5.4m.
The founders remain the only two shareholders and have yet to entertain the possibility of an IPO. They have also just landed a plum contract from Australian bio-pharma major Vaxine to devise a way of making its Covid-19 vaccine candidate.
“We were born out of the last recession. There wasn’t a lot of funding around so we had to ask some of our first clients to pay upfront for some contracts to be conducted and that gave us the working capital to get going,” says Barrett.
So what is APC offering that convinced some of the toughest names in pharmaceuticals to pony up their cash in advance? One of the greatest difficulties faced by pharma giants is not so much the invention of a new compound but learning how to make it. This is especially true in the newer biologics sector, where medicines are often produced from living and potentially evolving organisms. The days of shovelling chemicals into a vat and stirring it are long over.
More critically, drug makers are unlikely to get the final nod of approval for new drugs from the FDA and other regulators, unless they can convincingly demonstrate beforehand in minute detail how they intend to produce a drug in bulk.
This is where Mark Barrett (37) and Brian Glennon (55) come in. They are both products of UCD’s highly regarded school of chemical engineering (now more grandly named the School of Chemical and Bioprocess Engineering). Migrating concepts from the test tube to the factory is second nature to them.
Glennon had been Barrett’s PhD supervisor and both men had previously taken time out from academia to work in drug manufacturing. Barrett is possibly being diplomatically coy when he recalls his and Glennon’s corporate experiences. “They were hugely successful companies but perhaps their agility around innovation wasn’t always prevalent and that’s why we both left,” he says.
The two men realised they often better understood what went on inside the increasingly complex drugmaking process than the big pharma companies themselves, so they applied themselves to turning that knowledge into a commercial advantage.
Much of it is concentrated in a software application called
Mark Barrett is one of UCD’s most successful spinout entrepreneurs
Bio-ACHIEVE, which encapsulated much of their techniques. But they also needed like-minded people, and over the years have recruited more than 100 PhD-wielding scientists and chemical engineers.
Barrett refers to them as his “technical horsepower”. “There is nothing like us anywhere else on the planet. Our approach is structured around a framework of process control, artificial intelligence and advanced modelling. It allows us to scientifically figure out these complex processes as fast as possible,” he explains.
One of APC’s early successes was devising a manufacturing system for a new drug to treat schizophrenia. Not only were they able to dramatically accelerate the time it took to get into volume production, but they slashed the anticipated manufacturing costs by two-thirds.
“We also worked on a first-in-class type of cervical cancer therapy that we brought from concept to patient within 18 months,” says Barrett. “We have to generate and bring drugs to market in a one- to three-year time frame, whereas typically it takes five to seven years. Often we have to halve the time to market.”
APC has also designed production systems for drugs to treat various cancers, including leukaemia, and is now working on drugs for other cancers, Alzheimer’s, Multiple Sclerosis, heart disease and respiratory diseases, among others. In many cases, a miniature chemical factory tailored to a client’s needs is built at APC, where the drug-making process can be tweaked under close examination.
“We are working at present on about 20 really different medicines across many different areas,” says Barrett. Apart from cutting production costs, APC is proving invaluable for many drug manufacturers because getting to market earlier is as good as extending a drug’s patent expiration date.
“Time to market extends the value proposition to the pharma company, as they essentially extend the time period during which their intellectual property and revenue is protected.”
Barrett has also been asked to come up with a cheaper way of making drugs already in production for several years. “Companies may heavily invest in a second or even a third generation process to make the medicine. This can lead to further intellectual property protection,” he explains.
“It can also lead to significant reductions in cost to make the medicine, providing a competitive advantage when the medicine comes off patent and is open to generic competition.” In other words, a generic competitor is confined to using older, possibly more expensive, manufacturing processes.
It hasn’t all been straightforward for APC — legal squabbles with UCD were a bitter pill for the founders to swallow. In December 2017, UCD hauled the company before the High Court seeking a 15% shareholding in the venture on the grounds that APC was a campus company exploiting discoveries made on UCD’s behalf. The case was settled, and an APC accounts filing discloses a legal settlement amounting to €3.5m, paid over ten years.
“It was all a misunderstanding — it’s all good now,” says Barrett, adding that Glennon retains his full-time professorship at the college while Barrett is adjunct professor in the same department.
The founders drew down €2.6m dividends in 2018, after €1m the year before. However, in previous years most profits were re-invested, with fixed assets valued at €12m in the December 2018 balance sheet.
Borrowings are not insignificant either and in 2018 hovered around the €11m mark. Leverage could increase further as Barrett leads the company on an expansion plan to reach revenues of €50m by 2025. “I would say there are opportunities for APC to generate revenues of hundreds of millions based on our strategy and technologies,” he says.
The founder dismisses the idea that the time might be right for the company to consider an IPO to fund further expansion. “We are happy with our corporate financing strategy to achieve these growth plans. It focuses our governance structure and ambition on scientific disruption and the development of a new outsourcing market in pharmaceutical research. That focus and freedom allows us to be unique.”
Barrett may have a point. One specialist pharmaceutical investor points out that while APC is a topnotch consultancy style company, designing pharma plants is not scalable at the same level as something like a new drug might be. Growth will always be incremental, not exponential.
Barrett is not entirely in accord with that argument. He reasons that while the processes APC devises become the intellectual property of its clients, the company’s ability to make technological breakthroughs improves with each development and so becomes quite scalable.