This government-supported startup is addressing blood shortages by producing blood.

• Safi Biotherapeutics is working to manufacture inexpensive red blood cells at scale.
• On Wednesday, the company announced a $5 million seed round led by J2 Ventures, in addition to the more than $16 million it has already received from the U.S. Department of Defense.
• FDA approval for Safi is still pending, and it must undergo extensive testing before it can be approved.

In July, the American Red Cross experienced a more than 25% drop in its national blood supply, prompting an emergency declaration. One possible solution to this issue is lab-grown blood.

Blood transfusions are a critical medical procedure, and when supplies are low, doctors must make difficult decisions about who gets them. The American Red Cross is responsible for collecting and distributing about 40% of the U.S.' blood supply, and they are urging more people to donate.

If Doug McConnell succeeds, hospitals and clinics won't have to rely on donations forever. McConnell is CEO of a four-year-old startup called Safi Biotherapeutics, which is working to manufacture inexpensive red blood cells at scale.

Although scientists have found a way to produce red blood cells from stem cells, the process is expensive and complicated, resulting in small yields. In November 2022, researchers in the U.K. transfused one or two teaspoons of manufactured blood into people as part of a clinical trial.

Safi aims to expand upon these advancements and generate significant amounts of blood that could potentially be utilized for commercial purposes to assist patients and prevent blood shortages.

"McConnell stated in an interview with CNBC that although people have attempted to achieve this technology, it has advanced and we are now on the correct path. While it has transitioned from science fiction to science, there is still much work to be done."

Safi has received more than $16 million from the U.S. Department of Defense and could receive an additional $5 million by the end of the year, bringing the total to $20 million. The company also recently received $5 million in seed funding led by J2 Ventures. McConnell stated that this combined financing will aid the company in working with regulators from the U.S. Food and Drug Administration.

Safi's technology has not been approved by the FDA, and the company must undergo years of rigorous testing to prove its red blood cells are functional and safe. Additionally, the company must demonstrate that its manufacturing process meets the FDA's standards.

"To demonstrate their safety and effectiveness, it is necessary to show that they function similarly to donor red blood cells in delivering oxygen and circulating," McConnell stated.

This month, Safi started collaborating with the Advanced Regenerative Manufacturing Institute (ARMI) in Manchester, New Hampshire, to optimize its manufacturing process. McConnell stated that ARMI is part of an initiative receiving government funding to develop biomanufacturing capabilities in the U.S.

Safi begins its manufacturing process with a "founder" cell, which is a versatile cell capable of transforming into various cell types. These founder cells are derived from stem cells found within bone marrow, and Safi converts them into red blood cells.

McConnell stated that preparing red blood cells is similar to making a stew because it involves combining various ingredients. However, the challenge lies in determining the most cost-effective and efficient recipe, as well as when to stir or agitate the stew and which ingredients can be substituted with cheaper alternatives.

The company is developing customized blood recipes for certain patient groups, including those with chronic transfusions who require blood free of specific antigens.

When cells are put through a bioreactor, they grow by dividing or "doubling." McConnell stated that Safi focuses on the number of doublings achieved during bioreactor runs as an indicator of efficiency in producing cells. After filtering, Safi is left with units or bags of blood that resemble donor blood.

Safi aims to reduce the cost of producing one unit of blood to under $500 or even $300, which is comparable to the price of donor blood, McConnell stated.

In 2021, the median cost that U.S. hospitals paid for a single unit of donated red blood cells was $214, as reported by Statista.

McConnell stated that currently, Safi can utilize a 10-liter bioreactor to produce approximately one unit of blood per run. In approximately eight to nine years, the company aims to employ larger tanks capable of generating around 100 units of blood per run. As a result, a single stem cell donation could potentially yield hundreds of bags of blood.

McConnell stated that it exceeds what a single individual can contribute in their entire lifetime.

Safi has a long road ahead to make large-scale production a reality. McConnell stated that the company's first launch is likely six or seven years away due to its target of producing around 100,000 units during the initial launch year. Safi aims to continue scaling up until it manufactures more than 1 million units annually, as added by McConnell.

McConnell stated that he does not want doctors or patients to be concerned about blood access, and he believes Safi can assist in addressing those shortages.

"Honestly, one of the solutions is to build our own supply chain," he said, "It's kind of crazy that we're still tolerating this."