In the world of pharmaceuticals, companies aim to operate under GMP guidelines — a set of production and manufacturing measures to assure standards for medicinal products. But too often, the reality is anything but that.
“Officially, GMP stands for ‘Good Manufacturing Practices,’” said Dr. David Schneider, the founder and CEO of Qualifyze. “But people joke that it actually stands for ‘Give Me Paper,’ because everything is paper-based in the pharma industry.”
The term and the sardonic joke underscore the problem in the pharmaceutical industry, as well as Schneider’s efforts to fix it through Qualifyze.
The Frankfurt-based startup has built a network of quality assurance experts as well as a large database of suppliers and buyers to help companies track how their supply chain operates, and how it meets the industry’s fragmented standards (these include GxP, ESG, ISO, CAPA follow-ups and more).
Now, it is announcing a milestone in those efforts: It has raised a $54 million Series B round that it will use to grow, specifically in the U.S., and expand its products with more analytics and AI.
Insight Partners is leading the round, with existing investors HV Capital, HarbourVest Partners, H14 and Cherry Ventures participating. The company didn’t disclose its valuation, but Schneider said it has raised $84 million to date, and its valuation is “significantly higher” than the $100 million post-money it commanded previously.
At a time when later-stage startups are finding it challenging to raise money, Qualifyze likely stood out because of its traction. Its customer list includes Merck, Moehs, DSM, Olon, Siegfried, Teva, CordenPharma, Cipla, Dr. Reddy’s Laboratories, Sun Pharmaceuticals, Sandoz and Mallinckrodt Pharmaceuticals, among others.
The pharmaceutical industry is made up of long supply chains that extends from the companies making chemicals to those that make those chemicals into ingredients that then go into drugs. Then you have the actual drug manufacturers, companies that package them, and those who transport all of it — unfinished and finished drugs, or ingredients — from one place or another.
All of this is also very costly, especially if something goes wrong. As Schneider described it, pharmaceuticals are so expensive not (only?) because pharmaceutical companies are greedy, but because the price of making drugs is high because of those supply chains. One report estimated that mistakes in supply chains can result in costs of up to 20% of the final amount of the product.
Qualifyze works with a network of 250 auditors who make regular checks and reports on a database of about 3,000 suppliers to 1,200 customers to assure that they are meeting compliance standards set by both regulators and companies.
You could say that Qualifyze practices what it preaches: Some of those auditors are part of Qualifyze itself, but others are contractors, so it’s had to build its own training and vetting process to assure the quality of its own supply chain.
That means Qualifyze’s business model is fundamentally still anchored around people — even though it uses technology to manage information, run analytics and pick up data on manufacturing processes.
Schneider, you might notice above, is a doctor, but not of medicine nor of pharmaceuticals — he specializes in strategy and management. Before Qualifyze, he was working for McKinsey as a consultant, where he saw how inefficient things were at some of his pharma clients.
His original idea was to build a B2B marketplace to help companies procure ingredients and other supply chain products and services for drug development. A little while into the enterprise, however, the startup pivoted to what it focuses on today.
“The challenge was not so much finding who the suppliers are, but actually understanding whether those suppliers meet your quality and regulatory requirements. That’s more the difficult piece. Getting the right price is just a matter of an email,” he said.
It’s a no-brainer that investors are attracted to the company. It’s current client list and tech-first approach is good enough, but the pharmaceutical industry is also enormous, estimated to clock revenue of about $1.15 trillion this year, and projected to grow to $1.5 trillion by 2029.
And there is more to come, said Ryan Hinkle, MD at Insight Partners who led the investment for the firm: “We see opportunity for Qualifyze to deepen its offering for the life sciences by building on top of the proprietary data they have collected over years, enabling use cases from predictive risk management to procurement. We also see lots of opportunity in the U.S., where Qualifyze already has clients but will be leaning into even more.”
