Articles
Frozen Assets
ValueRichSummer 2005
By Liza Grant Smith
Anyone who has ever received a package that looks as if it was used in an impromptu soccer demonstration knows that successful shipping isn’t just about getting things there on time, it’s also about their condition upon delivery. It’s true for a batch of Grandma’s oatmeal raisin cookies, but when the package contains biological materials, the concept of “handle with care” needs to be taken to a whole different level.
Temperature-sensitive biological materials require specific conditions to maintain their viability during shipping. Currently, the pharmaceutical and biotech markets primarily utilize dry ice packaging equipment to serve these needs. The results achieved when using dry ice as a shipping and preserving medium are far from groundbreaking, but despite being both inadequate and inefficient, this type of packaging remains the ubiquitous standard.
So, what do you do when the standard is faulty? If you are cryogenic innovator CryoPort, Inc. (Ticker: CYRX), you set out to redefine the standard. Scheduled to officially debut later this year, the Company’s new one-way low-temperature cryogenic shipper, which can be thought of as a cryogenic FedEx box of sorts, is poised to revolutionize the pharmaceutical packing industry and vault CryoPort past both its dry ice and cryogenic competitors.
The effectiveness of a product is often determined by how it answers several key questions. In the case of shipping containers for temperature-sensitive biological materials, these questions center around how reliably a shipper can maintain the appropriate temperature and for what period of time.
When is cold not cold enough?
Despite an unbelievably low temperature of -78°C, dry ice is still not cold enough to reach cryogenic temperature standards of less than -150°C. Therefore, shipping or preserving specimens in dry ice limits their viability to 40-60 percent under ideal conditions. This loss of viability ultimately costs the pharmaceutical and biotech markets hundreds of millions of dollars per year as a result of a delayed time to market for drugs in clinical trials and an increase in the number of patients per trial.
Even in situations where a cryogenic temperature is not required, the use of dry ice can be ineffective due to the nature of the substance. Manufactured in blocks, dry ice is heavy and, more detrimentally, sublimes back to a gas in about 48 hours. Therefore, there is a limited time to ship before having to re-ice, which is why many companies utilizing dry ice will ship only on Monday, Tuesday or Wednesday. In addition, void spaces in the dry ice immediately upon shipment mean that the specimen is not really holding dry ice temperatures and thus has a greater chance of deterioration.
Cryogen liquid nitrogen shippers provide an attractive alternative to dry ice. In addition to achieving cryogenic temperatures, the shippers offer reliable temperature maintenance over a period of 10-15 days.
The use and benefits of cryogenic temperatures for biological material storage and shipping have been well established and commercialized over the past 50 years. What is new, however, is the current focus of Brea, California-based CryoPort, Inc.
Saving Cold Hard Cash
Cryogenic shippers on the market today are intended for multiple uses over a period of years and are therefore manufactured from substantial and expensive materials such as stainless steel or aluminum. CryoPort is finalizing its development of a one-way low-temperature cryogenic shipper — an innovative concept in the industry. The product could revolutionize the way industries deliver drugs to the market and handle specimens in clinical trials as a result of its highly efficient design, proprietary technology, ease of use and significant user cost savings.
In the words of President and CEO Peter Berry, CryoPort is “simply bringing the technology of cryogenics to low-cost effective packaging.”
While the concept may be simple, the execution of the idea is far more complex. The development of its one-way shipper required CryoPort to do considerable work on unconventional materials of construction, such as molded metals and plastic polymers, not typically used in the cryogenic world.
Manufacturing also presented a challenge. Cryogenic manufacturers of the reusable products typically build 40,000 to 50,000 units a year, in batches. CryoPort’s one-way shippers require mass manufacturing more along the lines of 50,000 units a month. This shift to a mass manufacturing process, coupled with the intense anticipated demand, led CryoPort management to make a strategic decision.
“We fully understand that we cannot keep up with the demand
as this market develops as a single company,” says Berry. “We
believe the way to dominate the space and set the new standard in
the industry is by selecting manufacturing license partners.”
By licensing manufacturing, CryoPort can expand rapidly.
The company has already chosen two partners for production later
this year and early next year. The first, one of the largest dry
ice manufacturing companies in the industry, was drawn to CryoPort
due to the inevitability of cryogenic shippers invading the dry
ice space. By partnering with CryoPort, the company can offer a
complete product array in the segment of temperature-sensitive material
shipping. The second partner is a cryogenic company in Europe. With
its ability to manufacture other cryogenic equipment and deliver
liquid nitrogen worldwide, this company brings to the table additional
value related to other customer needs.
Using only the pharmaceutical and biotech industries as a benchmark, the estimated potential market opportunity for CryoPort’s one-way shipper totals $3.3 billion. Currently, 99.5 percent of these markets are served by inefficient and expensive dry ice products.
CryoPort has initially chosen to target biotech companies, specifically those in life stage clinical trials with materials that need to be cryopreserved. Berry calls it a sea-level approach. “Instead of selling to the end-users, the millions and millions and people in laboratories around the world, we want a very targeted, specific approach,” he says. “It isn’t just about the customer shipper, but about all the other costs the industry tolerates today. We feel [the product] is a very well-packaged economic sale. That’s why we’re focusing on the top of these companies.”
With no competitors currently targeting the one-way shipping niche, CryoPort sits in an enviable position. Established cryogenic equipment manufacturers remain focused on the traditional reproduction and cryobiology markets, while dry ice equipment manufacturers lack cryogenic manufacturing capacity. Both competitors, in turn, lack mass manufacturing experience and current practice.
Because of their work in ultimate material selection and mass manufacturing capabilities achieved through select partners, management believes that CryoPort will be able to secure an early leadership position and has a jump of a year or two on any potential market segment entrants.
With a minimum of 20 million frozen shipments made per year worldwide — an average of 76,900 per business day — CryoPort’s new one-way shipper promises to be not only a revenue boon for the Company but also an opportunity for many of the major pharmaceutical and biotech companies to secure a more competitive market position through reduced costs. With such an attractive package, it isn’t likely that many of CryoPort’s potential customers will have cold feet.