Orbiting the Future of Pharma: Varda’s $187M Bet on Drugs Made in Space

In a gleaming lab in El Segundo, California, three scorched capsule shells sit on metal stands, looking a bit like oversized blackened seashells. These are reentry vehicles – each about 3 feet across – that have traveled to space and back as part of a bold experiment. They belong to Varda Space Industries, a startup pursuing what sounds like science fiction: manufacturing new drugs in microgravity and bringing them down to Earth. This month, Varda announced a colossal $187 million Series C funding round, more than doubling its total funding to $329 million. Co-led by venture firms Natural Capital and Shrug Capital, the round included heavyweights like Founders Fund (Peter Thiel), Khosla Ventures, Lux Capital, Caffeinated Capital and others – a who’s who of believers in the commercial space economy. Their bet? That Varda’s orbital labs could revolutionize how certain medicines and materials are made, unlocking novel therapies that can’t be produced in Earth’s gravity.

In plain terms, Varda is building factories in space. The vision is ambitious yet surprisingly concrete. By the end of this decade, CEO Will Bruey said in an interview publish by Payload, “our goal is to have a drug [made in space] in a human body” – in other words, an FDA-approved medicine whose key ingredient was manufactured in orbit. To get there, Varda is ramping up the cadence of its test flights, aiming eventually for one reentry flight per day – a logistical feat more reminiscent of FedEx than NASA. “The key metric of success at Varda is cadence,” Bruey emphasizes. The more frequently they can fly their automated labs, the more production runs (and revenue) they can generate, and the faster they can iterate on products. It’s a far cry from the current norm of space missions as once-a-year spectaculars. Varda envisions a fleet – “an armada, not a Death Star,” Bruey quips, meaning lots of small vehicles rather than one giant station.

Microgravity: The Secret Sauce for Better Drugs?

Why go to space to make drugs at all? The idea has been around for decades: in microgravity, certain physical and chemical processes behave differently – often in ways that can be advantageous for manufacturing high-performance materials or bioproducts. One of the most cited examples is growing protein crystals. In zero-G, crystals can form more perfectly, without settling or convection currents disrupting them. This can yield larger, purer crystals of proteins which are valuable for drug development (e.g., to determine structures for new pharmaceuticals). Another example is forming pharmaceutical compounds that might mix poorly under gravity but coalesce uniformly in space. Varda’s focus has been on pharmaceutical formulations: they believe some drugs or drug intermediates can be made more effectively in orbit, perhaps with higher potency or fewer impurities than on Earth. In their very first mission (codenamed Winnebago 1), which launched in June 2023, Varda manufactured crystals of ritonavir – an HIV medication – in a microwave-sized orbital factory. The goal was to test whether microgravity could produce a superior form of the drug.

But making it in space was only half the battle; the crucial part was bringing it back to Earth intact for analysis. That’s where Varda truly broke new ground. After some bureaucratic nail-biting (more on that later), Winnebago 1’s capsule successfully re-entered the atmosphere and landed in the Utah desert on 21 Feb 2024. It was a historic moment: the first time a private company returned a product made in space to Earth. The technical achievement is enormous. Varda had to design a small heat-shielded capsule capable of withstanding reentry temperatures of ~3,000°F, deploy a parachute, and be recoverable – essentially a mini SpaceX Dragon, but one that could fly cheaply and often. They did it. Footage shows the capsule’s fiery descent and parachute landing, delivering a few grams of space-made ritonavir for lab analysis. Early signs indicated the mission worked as intended, though the ultimate measure will be whether the space-made crystals show improved properties in testing.

With that proof-of-concept, Varda’s fresh $187 million injection is earmarked to scale up from experiment to enterprise. “This round is really about scaling up what we’ve already done – more space flights and more drugs on board,” Bruey says. Part of the money is going into a new pharmaceutical lab facility on Earth, where Varda’s team will screen and prep drug formulations designed for microgravity. Essentially, they are building a pipeline: identify candidate drugs that could benefit from being made in space, formulate them accordingly, send them up, manufacture and crystallize, bring them down, then integrate into final drug products. It’s a hybrid of a space company and a pharma company. Bruey notes that much of the timeline is still standard drug development – which can take a decade or more – and the “space step” doesn’t radically change that, it just adds a novel intermediate stage. That’s important: they’re not imagining astronauts mixing pills by hand, but rather automating the critical part that gravity hampers, and slotting it into the normal pharma R&D and regulatory process.

The Business Model(s): Hypersonic Side Hustles and Drug Royalties

Investors often ask: how do you make money off this, especially in the near term? Varda has a clever multi-pronged business model:

1. Pharmaceutical Manufacturing & Royalties (Long-term): For drugs that Varda helps develop or manufacture in space, the company aims to earn royalties or revenue per dose once those drugs reach market. Essentially, Varda would partner with or become the pharma developer, and if a “space-made” drug gets approved, Varda shares in the profits. This is potentially huge but also far on the horizon – it requires not just successful space manufacturing but successful clinical trials and regulatory approval of a novel therapy. We are talking second half of the 2020s for first products, if not later.
2. Hypersonic Testing (Immediate term): Varda realized its reentry capsules themselves have another valuable use: as hypersonic flight test platforms. There’s intense demand, especially from defense and aerospace companies, to test materials and systems in actual hypersonic conditions (Mach 5+ speeds) for things like missile tech or heat shields. Varda’s reentry vehicles naturally achieve hypersonic velocities on the way down, and they can instrument them to gather data. So, they’ve been selling flight opportunities to the U.S. military and others who want to try experiments in those extreme conditions. Bruey confirms hypersonic testing is a revenue stream on a per-flight basis today, whereas the pharma payoff is later. This is smart: it brings in cash and helps subsidize the frequent flights needed for the core mission. It’s akin to a rideshare – every Varda capsule might carry both pharma payloads and some instruments for a defense customer testing, say, a new heat-resistant material. The U.S. Air Force is reportedly interested – they even considered letting Varda land at a military range (more on that below).
3. Microgravity R&D Services (Short-to-mid term): In addition to making its own drugs, Varda can act as a research platform for others – similar to how companies or universities send experiments to the International Space Station. Bruey mentions they can host any microgravity research that one might do on ISS, but without needing humans in space, making it cheaper and more flexible. Think of biotech companies that want to see how their cell cultures grow in microgravity, or materials firms that want to test 3D-printing a polymer in space. Varda can be a commercial alternative to ISS or upcoming stations, with the advantage of quick turnaround (since they bring payloads back frequently). In a sense, Varda’s approach of small, returnable capsules is complementary to big space stations – they focus on return logistics for material, which stations lack.

With these revenue streams, Varda can sustain itself while chasing the moonshot of a space-manufactured drug. It’s a bit reminiscent of SpaceX launching satellites for others while developing its Mars ambitions. Notably, Varda already has U.S. government interest: It won a contract from the U.S. Air Force to use its reentry vehicles for testing hypersonic technologies, and it’s likely working closely with the Department of Defense given the use of the Utah Test and Training Range for landings.

Trailblazing Through Red Tape: Varda vs. the Regulators

Varda’s journey hasn’t been all smooth sailing or rather smooth reentry. It made headlines in late 2023 when its first mission got stuck in orbit for months due to regulatory hurdles. The company launched Winnebago 1 in June 2023 expecting to bring it down in early September. But the FAA denied Varda’s reentry license application on Sept 6, 2023, citing that Varda “did not demonstrate compliance with regulatory requirements, including not having an authorized landing location”. Essentially, Varda had not fully convinced the FAA that the capsule could land without undue risk to people or property, and the Air Force had not yet granted final permission to use the Utah range. It was a bureaucratic nail-biter: a private satellite, finished with its mission, literally waiting on a green light to come home. Varda had to work intensively with the FAA and Department of Defense to address concerns, running extensive simulations and safety analyses.

This period was a test of the broader system’s readiness for commercial reentry. Thousands of commercial satellites go up; virtually none come down intact (they typically burn up). Varda was the first-ever private entity to seek a reentry license for a space-made product, making them a guinea pig for regulations. There was no playbook. The FAA had to consider various worst-case scenarios: what if the capsule’s trajectory misfired and it fell towards a populated area? What if it broke apart mid-air? Varda’s analyses showed the risk of human casualty from a mishap was 1 in 14,600 – well within NASA’s accepted risk threshold of 1 in 10,000. But getting every agency comfortable took time.

Finally, in early 2024, approvals came through. The FAA granted a reentry license in February, and Winnebago 1 made its safe landing on Feb 21. In the end, Varda not only proved its tech, but also pioneered the legal and safety framework for commercial reentries. “We are absolutely trailblazers here,” Delian Asparouhov, Varda’s co-founder, said during the saga. The success was as much regulatory as technical. This clearance will presumably make it easier (though not trivial) for their subsequent missions – they already have “Winnebago 2” and “W-3” lined up, using identical designs to streamline approvals.

Nonetheless, Varda will need to navigate public and political perceptions carefully. The notion of “drug factories in space” could draw skepticism or even sci-fi-fueled concern. The company will also have to satisfy the FDA down the road: any drug produced in space still needs to meet strict quality and consistency standards. Varda’s in-house lab will be key in demonstrating that space-made compounds are stable, safe, and effective. They’ll likely have to show that their microgravity-made crystals or formulations have a real advantage over earth-made ones – say, a pill that dissolves more efficiently or a biologic with higher purity. Only then will pharmaceutical partners and regulators buy in fully.

The New Space Race: Factories, Not Just Tourism

Varda is at the forefront of a nascent space manufacturing industry that could redefine the economics of low Earth orbit. It’s no coincidence others are following. Startups like ATMOS Space Cargo, The Exploration Company (Europe), and Outpost Space are developing their own reentry vehicles and orbital platforms. Even established players like Axiom Space (building a commercial space station) plan to offer manufacturing capabilities. Varda’s edge, Bruey argues, is that they’ve actually flown hardware and returned it, whereas others are still on the drawing board. That first-mover advantage is critical in winning trust from both investors and potential customers. It’s one thing to claim you can do space pharma; it’s another to show a charred capsule and vials of a drug that survived the trip.

The sheer scale of Varda’s Series C raise – $187 million – suggests investors see a potentially massive market if this works. Consider high-value drugs like certain cancer therapies or vaccines: if making them in microgravity yields even a slight efficacy or safety improvement, it could translate into significant health outcomes (and financial returns). Varda’s concept could also apply beyond drugs. There’s interest in fiber optics (like ultra-pure ZBLAN fiber made in microgravity), novel alloys, or even organs-on-chips for biotech research. The startup’s focus is pharma for now, but Bruey hints at a broader ambition: “microgravity is a commodity”, he says, implying once access is routine, many industries will use it. Varda wants to be the go-to shuttle service and factory for that off-world manufacturing.

Global competition looms. China is heavily investing in space station experiments and has openly talked about space-based manufacturing as part of their space station mission. Europe has its contenders as noted. It’s a bit like the early days of the aviation industry – many trying, likely some will fail, a few will prove it out. Varda’s success to date positions the U.S. to lead in this new arena, but policy support will matter. If regulatory hurdles had stymied their first mission indefinitely, it would send a chilling signal. Instead, now we have an example of the system adapting (albeit slowly) to enable such innovation.

For sophisticated tech investors and founders, Varda’s story is a case study in marrying two very different worlds: space engineering and pharmaceutical development. Each is challenging on its own; together, it’s a moonshot. The company had to hire not only aerospace engineers but also medicinal chemists and biotech PhDs. They established cleanroom labs alongside rocket assembly areas. It’s a startup culture collision: iterate fast, break things (the Silicon Valley way) versus meticulous, don’t-break-anything mindset of pharma. Bruey’s team seems to embrace both: move quickly in building and flying hardware, but rigorously test and analyze the products like a pharma company would.

Looking forward, the next milestones will be telling. Will Varda’s second and third missions actually manufacture something with clear advantages? Perhaps they will announce results like “a microgravity-grown monoclonal antibody that is 3x more potent” or “a space-crystallized protein that led to a new drug target discovery.” Those are hypothetical, but that’s the kind of breakthrough that will justify the hype and investment. And crucially, will any drug companies sign on in partnership? A logical next step would be Varda partnering with a big pharmaceutical firm to co-develop a pipeline candidate that leverages space manufacturing. That could validate the model and even bring pharma money into the mix.

In the meantime, Varda’s shiny burnt capsules stand as symbols of a new chapter in the space economy. Not just satellites beaming data, or billionaires joyriding to orbit, but industry – literally making tangible products in orbit and bringing them to our doorstep. It’s the stuff of speculative fiction novels, yet here it is in prototype form. If Varda and its backers are right, the 2020s could see the dawn of microgravity manufacturing as a viable sector. The investability comes down to a classic risk-reward: enormous technical and market risk, but if it works, the creation of a near-monopoly on a new category of high-margin products. It’s that prospect that has Thiel, Khosla, and others writing big checks. As one investor commentary put it, the Series C is “not just a vote of confidence—it’s a clear signal” that space manufacturing has moved from pipe dream to serious endeavor.

From this vantage, one can imagine a future where life-saving drugs indeed roll off microgravity production lines above Earth. Patients might not care where their cure was made – only that it works. But the journey to that future is being charted now by companies like Varda, who are literally launching a new industry. In doing so, they’re blurring the lines between aerospace and biotech in a way that makes the term “rocket science” only half of the equation.