The Life Sciences in New York State

Investment in PCR company

Rochester-based Trillium Group made an investment in Thermal Gradient who is developing a PCR  system  which will be faster and smaller than current techniques.  PCR is a process by which DNA is "amplified", or, a method for making multiple copies of DNA. This is a very important technique for analyzing DNA, since large quantities of DNA may be a challenge to collect. PCR has simply made genetics research possible. Better explanations of PCR can be found here, here, and here.

Thermal Gradient will undoubtedly run into "switching cost" barriers. In my consulting and due diligence work, I have often found that companies marketing tools and techniques based on a "faster and cheaper" value proposition sometime struggle. Why? To make a sweeping generalization, researchers can be a highly conservative bunch. If a system is in place which works well, it is a challenge to ask them to leap into a new system, no matter how similar it is to the old one. The best opportunity for Thermal Gradient initially may be in those areas where PCR could be used, but is not because of a lack of expertise or equipment. Maybe police crime scenes to amplify the DNA from a blood splotch? Then again, once amplified, what can they do with it?  Is this linked with some sort of analyzer? I don't know. I wish their web site had a bit more detail.

Regardless, the PCR market is huge. I could easily imagine an exit opportunity by sale to a company suce as Sigma-Aldrich, Quagen, or Applied Biosystems.

I do find it interesting that the prototyping is being done in nearby Canandaigua. I'm in favor of using local assets for product development whenever possible.

PCR...lab on a chip...prototyping in Canandaigua...seed funding... stuff you don't normally hear coming from "Upstate" New York, yet there it is! Great news, and congratulations to all.

Clarifying a point

Over the past few blogs, I've suggested that it's "good" that 5 new companies presented at RPI last night relative to last year. Why is this "good"? I think a region which is creating this number of start ups in a specific industry year after year in the absence of significant venture capital is positioning itself well for the future. If 3-5 life science companies are being formed per year without significant levels of venture capital, imagine what can be done if we did have significant levels of capital?

Now, the question you may be asking is the definition of "significant"? I think to cover the entire state, you can easily invest a $50-$75 million fund over the course of 3-6 years, of which, say, 20-30% is invested in the Capital region alone? Maybe more?

Now you pessimists may be wondering if the companies which presented last year are actually still around? Are they succeeding? Did they get funded? Good question. I'll dig out the files from last year and discuss this in a future post.

Company comments

Well, I missed the hoe down at RPI tonight, so I decided to perform a little due diligence on the companies scheduled to present there tonight. These comments are expressly my own, and based on about 10 minutes worth of research. Caveat emptor...

Clinomics Biosciences - The web site is a bit difficult to review due to all of the PDFs. They sell a wide assortment of highly characterized human tissue samples, both normal and diseased. This would be handy, for instance, for pathology studies. Not sure what the business model would be here. Their other product is a line of DNA/RNA/Protein from various tissues (and extensive array), which would be a great source of control material for studies. Plus, they have a research services business. Interesting... I'm not sure what the exit scenario would be here, that is, who would acquire this company? Maybe a Sigma-Aldrich?   

Creative Neuroscience Applications - Cannot find information.

Infimed - Company appears to offer hospitals/physician practices the ability to migrate from film to digital systems for radiology, angiography, etc.

Aside: If I ever invest in a company, I'm going to buy copies of Guy Kawasaki's The Art of the Start  for every member of the management team. Not to pick on Infimed, but I think every company website should have a single sentence, in plain English, that says "We do this." We sell software. We sell tissue samples for this or that. Plain and simple. But I digress...

OK, I now see their Syracuse Post-Standard article, and it's clearer to me. Very interesting. I quote:

InfiMed makes cameras and software for X-ray equipment. While it sells products through dealers, much of the 400 units it sells a year goes to other companies that include it in their systems.

InfiMed is growing by bringing foreign work to Central New York, even as other American manufacturers send work to factories overseas where the cost of doing business is lower.

"We're doing a lot of development for companies in Asia. There's actually jobs from Asia coming here," Fleming said.

About 45 percent of the company's sales go overseas, he said.

The company has 4,000 units deployed around the world and has yearly sales in the $15 million to $20 million range.

Sales at the privately held company grew 28 percent in 2004. Fleming predicts they will grow by the same amount in 2005.

This appears, at first glance, to be a very interesting opportunity.

ONTest Corp - OK, see what I mean. A simple sentence to lead their web site off. I know understand exactly what they do, and now I can easily think about markets and revenue potential (although the typos are a distraction). Hmm...new pupillographic tests to detect glaucoma. Here is their presentation PDF. Nicely done. Very simple and clear. How many eye doctor offices are there in the US?  Well, there are about 16,000 office-based ophthalmologists in the US. Let's assume most of those are in partnerships, so let's assume there are ~8,000 offices. If each buys one machine for $5,000 (a number I'm pulling out of this air), that's $40 MM in revenue. Not bad at all...

Senex Biotechnology - No info on the web.

Well, I'm disappointed that I couldn't go. As an investor, Infimed and ONTest look initially interesting. More broadly, these companies did not present last year. This is a good sign. That is, if new companies are being founded (and funded) every year, then I would interpret this as a very positive sign for New York. Awesome!

 

Let me make it up to you

Well, my plans to go to RPI today were a bust. The weather was awful, plus I'm swamped with work. So, in a potentially vain attempt to make it up to you, my dear reader [sic.], I instead point you towards the January issue of the Tech Valley Times. For those of you unfamiliar with this monthly newspaper, TVT covers all things "tech" in the Tech Valley, which runs roughly North South in Eastern New York, from Plattsburgh to, let's say, Dutchess County. The most recent issue discusses the bold strategy of the Albany College of Pharmacy to migrate from a pure pharmacy school to one performing drug discovery and development research. The article may be found here. I am a proud alum of ACP (Class of 1990), and I vividly recall discussions occurring in the late 80s around how to broaden ACPs offerings. Back then, research seemed impossible, as the "campus" was limited to two buildings, and one of them was a dorm (loosely defined). Today, ACP is a multi-building campus, and critically, has attracted scientists like Dr. Shaker Mousa to really drive the process.

Think about the possibilities. You have great drug discovery chemistry already taking place at RPI and UAlbany. Let's marry this with the experts in drug development at ACP! Let's run the clinical trials at local hospitals such as the Albany Medical Center. Venture capitalists would be smart to take a close look at the emerging assets in the Albany area.

And another...

BioAdvance announced investments of up to $500,000 in 7 (seven) life science companies in the Philadelphia-area. Press releases are here. These companies range from diagnostics to cancer therapeutics to drug delivery. This is yet another example of what other areas are doing to help their life science companies. Yet I firmly believe we can do this in New York as well. I (and others) will continue to work to make this happen in New York.

Showcase at RPI

On Wednesday, I'll be at RPI in Troy attending their annual Showcase of of Regional Life Science Companies. A description may be found here. I attended this last year, and I find it interesting that these are five new companies compared to last year. Are these new companies? i don't know, but I hope so.

If they can do it...

The Vectis Life Science Fund announced their first closing today. They say this is the first closing of a planned $81.5 MM fund, which admittedly is an odd quantity for a fund. My guess is that they are targeting $100 million, but "settled" on $81.5 million to get going. Regardless, this is yet another fund which folks in the St. Louis area have raised over the past few years, as discussed here.

What does this have to do with New York?  The commonalities are interesting.

Fly Over Phenomenon - As with St, Louis, Upstate New York has historically been a "fly over" state for VCs traveling from Boston, New York City, Chicago, and the West Coast. Yet, the universities (Cornell, Syracuse, SUNY-Buffalo, SUNY-Albany) have for years been cranking out innovative, patentable research.

Out of Town $ - While a number of local funds have emerged, momentum really started to build when funds from outside the St. Louis area began to successfully invest in companies such as Metaphore. This is just beginning to happen in New York State, but we need more of it.

Incubators - External capital was attracted to St. Louis because start ups had incubator space in which to work. Fortunately, in New York, we have a number of incubators available and in development. The New York Biotechnology Association has a list of them here.

What the St. Louis model shows is that there is a logical list of 'ingredients" for developing a life sciences industry in a region which is attractive to external and internal (local) venture capital. Do we have what it takes in New York? We have the incubators, the schools, the metropolitan areas (four of them in New York, no less), the technology transfer offices, and a nascent group of internal (domiciled in New York State) VCs looking for life science deals. What we really need is a few successful  investments by external funds, coupled with a focused fund dedicated to investing in the life sciences in New York. I wrote about this last year (Volume Two, Quarter Four), but the conditions in New York are much better today than they were a year ago.

Why Blog?

Fred Wilson this morning addressed this question in his own special way. Indeed, part of the reason I enjoy reading his blog is due to the blend of topics he discusses intelligently, from venture investing to music to family. For me, I'm really looking at his fourth and fifth reasons as drivers for this blog:

Rant and Rave - I believe I have something to say about the life sciences in New York, and a blog is the perfect medium for this. I can write what I believe, and hope others will read and comment (and correct me!!). No other medium to date enables this spontaneous commentary and feedback. Indeed, Dan Gillmor discusses this a lot on his blog and his excellent  book.

Blog as Lab - I have ideas for how New York can grow its homegrown life sciences industry. The critical missing element is focused risk capital with the tolerance and patience to invest in these technologies, plus the industry contacts to help companies along the product development, commercialization, and fund raising process. I will have a lot more to say about this in future postings, but for now, check out this piece from The Scientist.

One BILLION dollars...

Earlier this week, State Democratic leader David A. Paterson proposed spending one billion dollars (yes, folks, that's billion with a B) to fund an institute dedicated to stem cell research. The arguments for this initiative are:

Competitive - Without this funding, stem cell scientists already in New York will move to California, where $3 billion was approved last year for stem cell research

Jobs - The creation of such an institute will result in the discovery of new technologies which, in turn, will result in the creation of companies and jobs

I'm all for funding the life sciences in New York. Indeed, the lack of early stage capital is a huge unmet need, especially Upstate. However, why spend one BILLION dollars on a single institute? Especially to one where the science is so speculative relative to other areas such as cancer, and infectious diseases? Why not distribute this more equitably to faculty to create new companies based on research already being conducted at the universities in New York? Why not take those funds and invest them with professional venture capitalists with a mandate to invest in companies domiciled in New York?

I'm all for investing in the life sciences in New York, but this seems a bit too political and impractical to me.

UPDATE: The Scientist has a brief discussion on this issue here.

Greetings!

Well, I decided to finally bite the proverbial bullet and start a blog. I've developed a strong interest in the life science across my home state of New York. So, I've decided to share my thoughts and ideas with all who will read this blog.

Aside: I realize it's presumptuous to think that anyone will actually read this, but I'll force my wife to read it, and of course I'll read it, so that's two readers...

Over these initial postings, I'll describe a bit more about the WHY of this blog...why start this blog? Why do we need a blog about the life sciences in New York? What are the life sciences, anyway?

Anyway, hopefully somebody out there will actually read this bog and join in the conversation.

Let's go!