Closing Bell - Manifest Space: 3D Printing Human Organs with Redwire CEO Peter Cannito 5/9/24

Episode Date: May 10, 2024

Could microgravity be used to print human organs? Redwire announced this week it had successfully bio-printed the first live human heart tissue sample. CEO Peter Cannito joins Morgan Brennan from Space Symposium in Colorado Springs ahead of the announcement to discuss the technology.

As companies develop commercial space stations and launch experiments in orbit, the most promising markets emerging for microgravity research are in healthcare. The lack of gravity creates an environment in which compounds can form unique crystals, crucial to drug development in the pharmaceutical industry. But it also unlocks possibilities for human organ development. In microgravity, you have the ability to manufacture and 3D print organs in a way where you can actually use the person's own bioprint and stem cells to develop out the organ. And because a lot of terrestrial printing, bioprinting on Earth is affected by gravity,

microgravity has a lot of potential for making that process a lot more successful because we don't have to worry about the organ collapsing on itself while it's being printed. Redwire is on the forefront of this capability. This week, the small-cap space company announced it had successfully 3D bioprinted the first live human heart tissue sample. It did this on board the International Space Station, with the sample now undergoing further testing at its facility in Indiana. It follows previous work by Redwire successfully growing human meniscus,

and the company says its next biofabrication facility mission will focus on printing human blood vessels in space. I sat down with Redwire's CEO, Peter Conito, at last month's Space Symposium in Colorado Springs, prior to the human heart announcement, to discuss the microgravity healthcare opportunity. I'm Morgan Brennan, and this is Manifest Space. Joining me now here at Space Symposium, Peter Canido of Redwire, CEO of Redwire. So great to speak with you. Yeah, you too.

I just want to start like right at the beginning and that is just a little bit about Redwire, what you do and where you're headed. Sure, yeah. Redwire is a space infrastructure company. So if you think about terrestrially, we have infrastructure companies that build things like roads and offices and bridges and things like that. Redwire is essentially the equivalent, but in space. So one of our taglines is build above. things like commercial space stations or increasing the number of satellites out there or international programs like Gateway or ultimately through the Artemis program,

a permanent human presence on the moon, Redwire is there providing the different infrastructure components like power elements, communication elements, navigation elements that underpin or what we call the foundational building blocks for these space missions. Yeah, I mean you have a spaceflight legacy, you have a history, you've been doing this for a long time. Given the fact you do have these different pieces of the portfolio, what's growing the fastest? Yeah, it's interesting. It changes over time and one of the things that we think is a strength of Redwire is our diversity not only in the number of different products that we offer but

also the fact that we work across commercial national security and civil space segments of the market so you know a couple of years ago when there was a lot more access to capital. Commercial was growing really fast due to a number of the geopolitical things that are happening. National security has really started to heat up in space. So, you know, it evolves over time depending on what the hot needs are. In terms of the different products,

solar rays have been really hot for us. We just recently announced a $142 million contract with an undisclosed satellite manufacturer for developing our rollout solar arrays, which their claim to fame is that they're the solar arrays that were deployed on the International Space Station. In this particular case, it's the same rollout solar array technology being applied to satellites. We're seeing this proliferation of satellites across many different fronts. What does that mean in terms of the demand for power?

Yeah, as any amount of infrastructure goes into space, but particularly satellites, as that increases, it directly correlates to the amount of power that you have to deploy. Almost every satellite or really any solution you put out in space, unless it's powered by nuclear, is more than likely going to be powered by the sun. And therefore, the demand for solar array technology, and one of the reasons we identified it as one of the foundational building blocks, significantly increases as more and more

satellites go up. One of the things that I think is really fascinating is Pillbox, because you have this partnership with Eli Lilly, and now number two. Walk me through what Pillbox is, why it was such a milestone with the first one, and how this now plays out with test number two. Yeah, so Pillbox is a pharmaceutical manufacturing capability that we've developed that allows you to take compounds in partnership with a pharmaceutical company that are showing a promising potential in terms of being able to turn into a drug over time. And what we do is we use those compounds to develop crystals. And in the biopharma development value chain, crystals are an important part of ultimately taking those compounds and turning them into drugs that we use for health care.

So Pillbox was very successful in doing this and and it's fundamentally based on the fact that in crystal development the formation of crystals is highly affected by gravity and so when you look at the future potential of manufacturing in space what I like to say to people is any manufacturing process that occurs on Earth that could be negatively impacted by the effect of gravity has huge potential for being manufactured in microgravity. And so of course using pillbox you can grow these crystals that are very important to the pharmaceutical industry in a more pure and also a larger way because you don't have the effect of gravity

on the crystal formation. So Eli Lilly was excited enough about the results from the first mission that we flew and the crystals for the compounds that they provided us that were developed. And now they've come back and asked for a second one. This is really exciting to us because as we talk about manufacturing in space, really at the end of the day, it's about the end users. It's about the industries and whether it's important to them. So they have to see the potential. We're space people. Of course, we're excited about the potential of manufacturing in space, but you have to demonstrate results that you couldn't achieve on Earth. So we see it as a really good sign that

they've come back for a second pillbox mission and that it will ultimately lead to many future missions. So what's implied there is that the first mission demonstrated results that we didn't see on Earth. Is that the way to think about that? I think that's fair to say. I don't want to speak for Eli Lilly, but if they came back and asked for another one, I think they see the potential and that the results that they saw got them excited enough to continue the missions. I just want to take a step back on this

and sort of dig a little deeper into that opportunity around pharma, around healthcare, where microgravity is concerned. Because it does seem to, it's a topic that's coming up in a number of my conversations, both here at the Space Symposium and just in general recently with different folks from the space industry. And that is how big that opportunity could be and why microgravity is so important to this equation.

Is it a production thing? Is it an R&D thing? Is it a little bit of everything? I guess when you think about that market, how do you see it? So if you think, I think it's a little bit of everything to start, and then certain use cases that show extraordinary potential, like pharmaceutical development, are going to be the ones that will ultimately take off and it will become full-rate production. And there's a number of different aspects

that make the juice worth the squeeze when you talk about manufacturing something in space. For instance, it has to be economically viable. The cost, like any manufacturing facility, has to be at a level that justifies all of this to be for the business case to close, for instance, right? So pharmaceuticals is one that you actually don't have to create a lot of crystals for. You're just creating the seed crystals that they use in the lab. So that obviously doesn't require a lot of down mass

in order to have a really high impact. So that's an example of an area that can really pay off. Now when you talk about what's the potential market, well, if you can revolutionize the way we do pharmaceutical development to identify compounds that otherwise in you might not have been able to identify because you're taking advantage of microgravity and the development process that's huge for the biopharma industry so I like to think about a day where nobody even

knows or cares that it was manufactured in space. They just know that they have a better process for doing this. So it could revolutionize the way we create drugs. Another area that's showing tremendous potential is the ability to do bioprinting. So we obviously have, tragically, a shortfall of the number of organs for people who are waiting sometimes many years on organ donor lists. And in microgravity,

you have the ability to manufacture and 3D print organs in a way where you can actually use the person's own bioprint and stem cells to develop out the organ. And because a lot of terrestrial printing of bioprinting on Earth is affected by gravity, microgravity has a lot of potential for making that process a lot more successful because we don't have to worry about the organ collapsing on itself while it's being printed.

So those are just a couple examples of things, but the markets for if we can solve those problems would just be incredible. And you've demonstrated bioprinting in microgravity as well. That's correct, yes. Remember the last time you and I sat down, we talked about this. Yeah, yeah, we recently printed a human meniscus on orbit.

And there's a number of other really exciting use cases as well. So if I continue to shift gears here, because you do have a diverse portfolio, Blue Origins here at Space Symposium, what was it, a year ago, they announced Blue Ring. Speaking of in-space activity, you're involved in that project as well, the development of that spacecraft as well. I mean, it really speaks to this, I guess, next emerging space economy or piece of the space economy that we are seeing that as the cost of launch has gone down the cost of hardware has gone down now all of a sudden it's enabling more activity in space for space. Yeah that's correct and we announced with Blue Origin that we provide the solar arrays so again back to power for Blue Ring.

We're really excited about that. They recognize the differentiation in our rollout solar array capability. So that was a key part of it. We also provide them with other components for their spacecraft. It just underscores the fact that there's so many ways to use space and so much infrastructure that's being built out as we continue to push out further and further into space, whether it be establishing capabilities in Cislunar or putting a permanent presence on the moon or even going to deep space. All of these capabilities depend on what we call fundamental building blocks, power being one of them.

And so that's very exciting for Redwire because for us, the more space infrastructure that's being put out into space, the more opportunities for us to sell the critical capabilities that underpinned all these different exciting systems. And of course, your top line is growing double digits. You've got a backlog that's been growing as well. Paths to profitability, how do you get

there? What does that look like? Yeah, so we're EBITDA positive. So I guess there's a number of different measures for profitability. So we did $15 million in EBITDA in 2023. I think it's scale. When you start looking at the costs associated with being a public company and then you look at the cost of building the platform over time as you scale your production and you're going to be able to do it in a nonlinear way where you're going to get more and more or better gross margins on each incremental unit of output that you're going to do. So for 2024, we have four growth principles that we're focused on. Number one is protecting the core. Like you said, we had a great 2023, so let's not screw up what we've already been successful at, and let's keep doing that effectively. Number two is to increase our production to move from really what is low rate production, for instance, one to eight solar arrays for the International Space Station and move more into larger constellations for things like our power components, things like our antennas

and things like that. So growing with our customers. I hope Blue Origin sells many, many Blue Rings because each time they do, of course, that's an opportunity for Redwire as well. So scaling productions, I think, is key to ultimately achieving that profitability. Our third principle is moving up the value chain. That can take a lot of different forms. For us right now, for instance, we provide antennas. We're looking at providing full communications payload. We recently, in our last earnings call, announced a VLEO platform design. We're not going out there and building another satellite bus. There's plenty of companies that are doing that in the marketplace and doing it very well. But there's an opportunity for some white space for a leap ahead technology for a

satellite that operates in very low Earth orbit, that has environmental constraints that you have to design to. There's a lot more friction. It's less of a frictionless environment in VLEO than it is in LEO. So you have to take that account. So that would be moving up the value chain in terms of not just being components, but actually building spacecraft themselves. So that's an example. And then the last one is this idea of venture optionality. We're early days in some of these things like space biotech, but as these things start to

catch fire and you see more and more demand and more and more successes, that of course will help us scale as well. I want to go back to VLEO for a minute because I haven't heard very much about this. What are the types of missions, what are the types of use cases and capabilities that VLEO is going to enable or going to manifest there? Yeah, so it's very exciting actually. The simplest way that I like to put it is a VLEO spacecraft is somewhere between a drone that operates obviously inside of our atmosphere that I think most people are familiar with now and a LEO satellite. So when you think about, well, why

would I use a drone versus a LEO satellite, it's usually proximity to Earth. So if you can start putting satellites capable of, say, Earth observation in VLEO, you can either use the same cameras and get higher fidelity data because you're closer to Earth by operating in VLEO, or you could use less expensive cameras and get the same fidelity that you would get in LEO at a lower cost. So it's really about another area of operation somewhere between something you would do with

an unmanned aerial system or what some people call drones and a traditional satellite in low Earth orbit. So it's a time where we're talking more about activity in the stratosphere. This is sort of the in-between with low Earth orbit and... That's correct. Somewhere between low Earth orbit and our... It's like a tiramisu of layers here. And it really is. An untapped potential. Yeah, yeah, yeah. And it really is, right?

An untapped potential. Yeah, yeah, exactly. Exactly. It's just about being able to operate in that space between what our traditional aircraft operate and where traditional low Earth orbit satellites operate and taking advantage of that space because, again, each each area if you will or

if each orbit has something to offer. Going back to the fact that you are a publicly traded company have been for a couple of years now do you feel like investors fully appreciate everything that's going on at Redwire and even more broadly within this space economy? I think the smart ones do. You know, I think certainly investors appreciate the fact that we have really strong revenue. I certainly think that the investors recognize and appreciate that we have positive EBITDA and that we achieve a positive operating cash flow. So in that regard, I think that's really exciting

because I think the majority of investors think of space companies as losing large amounts of money on the promise that someday there's going to be some sort of transformational business model. And I do believe there are space companies that are like that. But to demonstrate that you can have a space company that is currently operating in space now, and driving revenue, and positive EBITDA, and positive operating cash flow by delivering solutions on orbit now

is really exciting to a lot of investors, because it's just not more of a venture-oriented investment. I think that over time everybody's getting to know space in the investment community. It's been very dynamic. It's early days. One of the things that I'm most excited about being in the space industry is we're just getting started in terms of what's possible in terms of the different business models that are out there. So we're in a fast growing and emerging industry from a

commercial perspective. And I think the investors that are looking long term recognize that. And there's a lot of data out there published by various consulting or banking companies out there that talk about space being a multi-trillion dollar industry by 2030 or whatever date they use and to be at the ground floor of that is one of the few pure play public companies out there is really exciting for Redwire. Alright, Peter Conito, CEO of Redwire, It's great to speak with you. Thank you for joining me. You too. Thanks for having me. That does it for this episode of Manifest Space. Make sure you never miss a launch by following

us wherever you get your podcasts and by watching our coverage on Closing Bell Overtime. I'm Morgan Brennan.