The Price Is… Almost Right: mRNA Edition! COGS Reduction Strategies

By Anna Rose Welch, Editorial & Community Director, Advancing RNA

Here at Advancing RNA, I’m afforded a variety of different opportunities to discover “treasures” (a.k.a. valuable industry insights) that I just cannot keep to myself.  

I was gifted a number of these intellectual “treasures” during the two days I spent at the Hanson Wade mRNA Therapeutics Summit in July, and I have several LinkedIn posts to prove it. (ICYMI, here they are: Post 1; Post 2; Post 3; Post 4; & Post 5.)

But there was one presentation that I enjoyed quite a bit — first and foremost for its relevance and utility to the broader mRNA space. We all know the importance of reducing COGS for our mRNA products. This is why I particularly appreciated Kernal Biologics’ Joe Parrella’s case study on how he and his colleagues improved raw material usage and streamlined DS manufacturing operations.

The following article will outline the current state of COGS in the mRNA industry and the work he and his colleagues undertook to more effectively utilize raw materials. (FYI, Post 5 linked above features a handful of his key slides.)

But heaven forbid this be your normal conference panel write-up.

No, below I share Parrella’s insights, but in the form of a never-before released episode of The Price is Right…or, perhaps more fittingly given the state of the industry today, this spectacle is more aptly titled: The Price is…Sort Of, Almost, Not Quite Right!

LIGHTS! CAMERA! ACTION

Announcer: Here it is, ladies and gentlemen — the first big game show on television dedicated to the most important strides being made in pharma! The Fabulous, the Novel: The Price is… Sort Of, Almost, Not Quite Right!

Tonight, the RNA industry takes the stage to win the prize of a lifetime: A more cost-effective drug substance manufacturing paradigm!

And now, here’s the star of our show — the phenomenal, the legendary: Joe Parrella, VP, CMC of Kernal Bio!

[Cue audience: unrestrained applause and several standing ovations]

Parrella: Well, thank you very much! We’re very happy to have you all here with us. If you like things that are just different, well, do we have the show for you.

Tell me, folks: What do we say to our industry contestants AND our COGS?”

[Cue audience: Come on down!]

HOT SEAT: THE ASSUMPTIONS

Parrella: Now, Tina: As we know, a COGS model is only as good as its assumptions.

Here on stage, we have our hot seat. The hot seat is going to stop in front of each of the following 6 assumptions, and we need you to press the blue button if it’s a reasonable assumption for an mRNA COGS model, or red if it’s not.

• Assumption #1: This model assumes we are relying on the scale-up of typical mRNA & LNP processes/platforms
• Assumption #2: This model is based on cost estimates for expected commercial scale production, utilizing single use materials & cleaning/reusing chromatography columns and TFF filters
• Assumption #3: This model was a source of inspiration for Taylor Swift’s hot single, Champagne Problems
• Assumption #4: This model uses estimated commercial scale pricing for critical raw materials (pDNA, ionizable lipids, and targeting moieties)
• Assumption #5: This model was based on single use component flow diagrams (e.g., raw material, consumable, and process time/cleanroom time estimates)
• Assumption #6: This model assumes we are relying on CDMOs for manufacturing & QC

[After much deliberation and audience feedback, Tina correctly presses the blue button for Assumptions 1,2, 4, 5, & 6.]

Parrella: Now Tina, you’re not quite done yet. We need you to tell us whether these estimates are higher or lower: The mRNA drug substance accounts for 50 percent of our overall drug product COGS.    

[Audience starts shouting and Tina votes Higher]

Parrella: That’s right! mRNA drug substance production actually accounts for 80 percent of our overall mRNA drug product COGS.

Tina, tell us: Do raw materials actually account for higher or lower than 70 percent of drug substance production COGS?

[Tina votes Higher]

Parrella: Right again — raw materials account for a whopping 90 percent of our mRNA drug substance COGS. So based on this model and its estimates, it makes the most sense we should start this pricing reduction game off by tackling our raw material COGS.

SHOWCASE SHOWDOWN: THE BIG WHEEL OF RAW MATERIALS

Parrella: Now we’ve got three contestants here who are each going to get a chance to spin the raw materials wheel in this Showcase Showdown. The lucky winner will be the contestant who spins the wheel and has it land on the costliest raw material impacting our COGS today. Now Samuel, are you ready to spin that wheel?

[Samuel fervently nods and spins the wheel, which lands on “Enzymes”]

Parrella: Oh, I’m sorry, that’s only the third highest-cost ingredient in our DS material costs. There’s still one ingredient on this wheel that takes the cake as the most expensive.

Veronica, step right on over here and give the raw materials wheel a spin to see if you can land on the highest-cost raw material!

[Veronica spins the wheel, which lands on NTPs]

Parrella: Even closer still, but no cigar! That accounts for the second highest percentage of our raw material costs overall.

Paul, we’re counting on you — step right on over here.

[Paul takes out a handkerchief to dab his forehead before spinning the wheel, which lands on “capping reagent.” The audience erupts.]

Parrella: And you’ve got it! Paul is really having fun now on the Price is Sort of, Almost, Not Quite Right!

Cap analog accounts for >70 % of mRNA material costs — though, if we consider high-volume bulk pricing, this percentage might be slightly biased; it’s probably closer to >50% of material costs overall. But unlike our NTPs, the vast majority of which are consumed during the IVT reaction, less than 1% of our capping reagent is consumed.

[Cue Audience: Rampant booing]

Parrella: I know, I know! As an industry, we must figure out a way to more effectively utilize our capping reagent so we’re not dumping upwards of ~50 percent of our raw material value down the drain following purification.

How are we going to do that, folks? Well now, we’re going to find out —

PUNCH A BUNCH: KNOCKING DOWN RAW MATERIAL COSTS WITH SEMI-CONTINUOUS IVT

Parrella: Here we have our famous punchboard. And competing for the chance to win a clinical supply of capping reagent from our partners at TriLink, we have Carol!

Now Carol, punch wisely: Hidden inside each of these holes is a single, possible strategy to reduce COGS. You want to select the strategy that will most meaningfully reduce our IVT COGS, with cost reductions ranging from 0x-6x.

Parrella: What do you say to that, folks? [Cue audience: We love it!]

[Carol punches the board; Parella pulls out the slip which reads: PANIC. 0x Cost-Reduction potential.

[Carol leaves the stage, bereft.]

[New contestant Dave comes to stage and punches the board.]

Parrella: I’ll pull out that slip of paper, and… lo and behold, we have found our solution here — Oh, yes!

Supplement our IVT: a 6x cost reduction potential!

[Cue audience: A collective gasp]

This works, ladies and gentlemen, I can attest to this. At Kernal we implemented bolus additions of the reagents that were consumed during the IVT reaction (e.g., magnesium & NTPs).

The frequency at which we replenished these materials was unique depending on the RNA. But by monitoring reaction composition to figure out which materials had been depleted, we found that supplementing reagents every 15 minutes reduced IVT COGS up to 6x for both reporter and therapeutic RNAs without sacrificing product quality.  

Even better yet, using this strategy, we were able to reduce our usage of plasmid DNA and T7 polymerase, as well, which ultimately contributed to a ~4x reduction in overall COGS.

[Cue audience: Scattered whooping]

[Dave runs off stage waving his coupon for free capping reagent as mRNA-shaped confetti falls from the ceiling.]

Parrella: And that’s our show ladies and gentlemen! I’m Joe Parrella, reminding you to help control the COGS for your mRNA products. Try your hand at some of these tips and tricks and, as always, don’t be afraid to play the cost-reduction game.

[Cue audience: Feverish applause/cheers]