Athens maker of deep freezers for COVID vaccines agrees to acquisition

Katy Smith
The Columbus Dispatch
Technicians assemble ultra-low temperature freezers at Stirling Ultracold's manufacturing facility in Athens.

“Cold-chain storage” came into the public’s lexicon a few months after “coronavirus” and “COVID-19.” In the past six months, it has played a crucial role in saving hundreds of millions of people from potentially dying of COVID-19.

Deep freezers necessary to store COVID-19 vaccines are made in Athens by Stirling Ultracold, which is being acquired in a $258 million deal set to close by May 1.

Bothell, Washington-based BioLife Solutions has agreed to acquire Stirling for 6.6 million shares of its stock, or about 20% of its outstanding shares. The late Monday news sent shares up about 9%, to $42, by noon Tuesday.

Revenue for the combined company this year is expected to exceed $100 million. BioLife had 2020 revenue of $48 million, up 76% over 2019, and Sterling’s sales were $39 million, up from $35 million in 2019.

Bill Baumel, managing director of the Ohio Innovation Fund, left, tours the Stirling Ultracold facility in Athens with Stirling CEO Dusty Tenney.

“With this transaction, we continue to execute our M&A strategy to consolidate the bioproduction tools and services space by adding novel and disruptive technologies to our portfolio,” Mike Rice, BioLife Solutions' CEO, said during Monday’s earnings call.

The Athens company brings with it 80 patents for freezers in high demand.

“Our longer-term outlook for Stirling is bullish, as the total addressable market for ultra-low temperature freezers in the U.S. alone is estimated to reach nearly $800 million by 2027,” Rice said.

Stirling and its 150 employees will become a subsidiary of BioLife, and its operations will remain in Athens.

Stirling CEO Dusty Tenney will become president and chief operating officer of the combined company, with operations, research and development, engineering, sales, marketing, manufacturing and information technology reporting to him. He brings 20 years’ experience in sciences businesses, including time as president of the life sciences business at Chelmsford, Massachusetts-based Brooks Automation, where he grew revenue to $335 million from $60 million over five years.

Stirling’s energy-efficient freezers are in use around the world, with Walgreen’s and UPS as major customers.

COVID-19 vaccine manufacturers, including Pfizer and Moderna, don’t have the ultra-cold storage capacity to hold all of the vaccines before they are sent to health care providers. So logistics companies such as UPS have created "freezer farms," like the one at its Louisville, Kentucky, hub.

The farms feature hundreds of upright freezers lined back to back, each filled with vials containing 300,000 doses of vaccine, held at minus-112 Fahrenheit. Standard compressor-based freezers that cycle on and off consume significant power and can be loud. Stirling says freezers running on its engine use a quarter of the electricity and emit only a low hum.

Hunker down or thrive

Tenney joined Stirling Ultracold in March 2020, when he was brought in by a board of directors and investors who charged him with transforming a business that had seen slow growth over its 20 years.

The timing, at first, seemed unfortunate. The onset of the coronavirus pandemic was deeply concerning, and clients such as Harvard University and California Institute of Technology pulled back as academia shut down. Stirling staff took temporary pay cuts, and the business sought and received a Paycheck Protection Program loan. But as talk of the need for ultra-cold storage for COVID vaccines began circulating, Tenney saw opportunity.

“There were two groups of thought. One was hunker down and survive. Another was to step up to the moment and thrive,” said Bill Baumel, managing director of Ohio Innovation Fund, an investor in Stirling that has guided the company since 2017 through a series of steps intended to grow its business.

Stirling Ultracold's low-temperature freezers, made in Athens, became in high demand during the pandemic.

Pfizer, Moderna and other pharmaceutical giants developing COVID vaccines have done so at a speed that has required them to bypass full stability testing in favor of getting shots into arms. That necessitated ultra-low temperature storage — Moderna at minus-4 degrees and Pfizer at -112, Tenney said.

“We then had a very unique offering in the marketplace that we could span that entire temperature range in one single ultra-low temperature freezer, which is the only system in the world that can do that,” he said.

The company’s value as a supplier was quickly realized: In 2020, it added 600 new customers, an increase of 60%, and grew sales 250% from the first quarter to the fourth quarter. Staff roughly doubled to 150, and production output zoomed 250% as it added tools and equipment with support from the state of Ohio.

Boss on the floor

Tenney, a mechanical engineer, has worked alongside staff on the production line to better understand what equipment or operations adjustments could make the job easier or more efficient. He even delivered a freezer to a health clinic near Athens so it could begin vaccinating people against COVID-19 as soon as possible.

“It was 8 or 9 o'clock on a Friday, and I called him, and I could hear he was somewhere a little bit loud,” Baumel said. “And this was after the lockdown was over. So I said, 'Oh, are you out on a restaurant patio?' ”

Tenney said no — he was still on the factory floor, working.

“That to me is just amazing,” Baumel said. “Everyone at Stirling Ultracold, from those in charge of testing, to packing, to assembly to making the engines all the way to CEO, were there on the floor, making it happen.”

That dedication in a time of crisis represented a sea change for the company. Stirling was a company that had developed advanced technology that met a market need, yet it had grown to barely $10 million in revenue during its first 20 years, shied away from distribution partnerships and spent just 1% of revenue on research and development, while a typical firm would spend 10% to 15%. And it had not sought outside financing.

Technicians assemble low-temperature freezers at Stirling Ultracold's manufacturing facility in Athens.

Baumel, a Cincinnati native and venture capitalist, left Silicon Valley in 2016 to run the new Ohio Innovation Fund, whose primary investors are Ohio State University, Ohio University and Kent State University. Stirling’s acquisition by BioLife Solutions is the fund’s first major liquidity event, and its portfolio is stocked with promising startups in the cybersecurity and med-tech space, including Columbus-based Aware and ScriptDrop. Baumel did not reveal the details of its equity investment in Stirling.

After becoming an investor, Ohio Innovation Fund worked with Stirling to develop a product roadmap, increase R&D spending, grow supplier relationships and turn its basic plant into an advanced manufacturing facility offering high-paying skilled jobs. Then it brought in Tenney as CEO to take the company to the next level.

“In Silicon Valley, there are a lot of experienced entrepreneurs, and even if they're not experienced, their mom, their dad, their brother, their sister, the roommate, their best friend, the guy they used to play basketball with — they’re all in startups,” Baumel said. “So everyone kind of understands that world —you put money into a company, you serve on the board, they call on you to open some doors, and that's your job.

“Here, it's very different. (People tend to) think an order of magnitude smaller. (Stirling Ultracold) just shows you that when you put your mind to it, you can build world-class companies here in Ohio.”