(Updated) Angel investors and biotech companies don’t usually mix. Most biotech startups begin with university research, and embark on a decade-long quest of product development, all while inhaling several hundred million dollars of capital, and carrying the burden of a 90 percent failure rate. This is where deep-pocketed, risk-seeking venture capitalists and public equity investors tread, not angels who are long on experience and short on dough.
So I was curious why, in the teeth of a recession, and as many biotech companies are facing extinction, the Seattle-based Zino Society chose to organize its first Life Sciences Investment Forum. This event, held yesterday at the Pan Pacific Hotel in Seattle, drew 12 determined startup companies from around the country, developing drugs, diagnostics, or medical devices. They all lined up to make their best 7-minute pitch to attract angel investment bucks.
The event drew some of the pioneers of Seattle biotech, including Bruce Montgomery of Gilead Sciences, Bruce Carter, the former CEO of ZymoGenetics, and H. Stewart Parker, formerly the CEO of Targeted Genetics. They were there to listen and to offer advice to the entrepreneurs, and maybe more than anything, provide a pep talk for people willing to try to do this innovative work. In his keynote, Montgomery outlined four ways he sees businesses have historically made money in the past. The first was centralization of small businesses like coffee (Starbucks); second was becoming the low-cost provider (Wal-Mart); third was leveraging or securitizing assets (Wall Street); and fourth is through innovation. Guess which one he believes has a future?
“Innovation is the only way to have a true win-win for our society and make us competitive with foreign competitors,” Montgomery said. “Innovation still actually has a chance.”
Zino Society did its best to make this a bit fun, and a bit competitive, with awards. The award for best presenter, as voted by the audience of about 100 Seattle-area angel investors, was given to Douglas Turnquist of Salt Lake City-based ThermImage. The prize for best investment opportunity went to Malvern, PA-based Carbon Nanoprobes. One big winner will be selected in coming weeks by the Zino Society for a $50,000 investment, and the right to make a presentation next month on a bigger stage at Invest Northwest, the regional life sciences investing conference.
So what were some of these innovative companies about? Here were a few of the highlights:
—Carbon Nanoprobes CEO Brian Ruby had one of the best opening gambits in his presentation. “We take pictures of tiny things. We’re like the paparazzi of atoms and molecules,” he said. Essentially, his company’s nanotech materials are used to provide high-resolution images for customers who need to look at small things in the semiconductor, basic research, and biomedical research businesses. It has raised almost $1 million from about 30 investors in Seattle, and is moving into manufacturing its disposable product before the end of March. He said the company has sales leads from big-name customers like IBM, Intel, and Harvard University, among others, although I didn’t hear him say he had booked sales or delivered any just yet. “People are lining up to buy the product before it’s off production line,” Ruby said.
—Oasis Diagnostics. This Vancouver, WA-based company is attempting to develop precise diagnostic tests that extract tiny bits of DNA from saliva, instead of blood. CEO Paul Slowey showed a picture of a young girl grimacing after getting stuck with a needle, stacked next to a photo of her smiling while sticking what looks like a power toothbrush inside her cheek. “A picture paints a thousand words,” Slowey says.
OK, but he had more than just fluff in his quick talk. The saliva diagnostics technology has improved enough in recent years that it can detect minute amounts of a foreign invader, like HIV virus, which has 1,400 times less concentration in saliva than in blood. The company is developing tests for tuberculosis, anthrax immunity, diabetes, and breast cancer. Slowey has experience at two other saliva diagnostics companies, Saliva Diagnostic Systems and OraSure Technologies.
—Calcionics. This Seattle-based company, which spun out of technology developed at the University of Washington, is aiming to develop a drug to prevent and treat cardiovascular disease, particularly hardening of the arteries. CEO Chip Jacob is working with Cecilia Giachelli of the UW, who discovered osteopontin, a naturally occurring protein that breaks down calcified tissue that makes arteries harden. “It’s the body’s natural response to hardening of arteries, we augment it,” Jacob says. This drug has a long way to go through animal and human clinical trials, but Calcionics has no intention of commercializing it alone.
It plans to raise $35 million in three investment rounds over the next five years, and then cash out through getting acquired by a larger drug company for around $350 million. It would be tempting to scoff at this idea in the downturn, but Jacob pointed out it’s been done, and not long ago. Santa Clara, CA-based Ilypsa, which developed a phosphate binding drug for kidney-dialysis patients, raised $45 million before it was sold to Amgen for $420 million in 2007.
What Jacob didn’t mention is that when Amgen took the drug into further clinical trials, it failed. But that’s life in biotech—I’m pretty sure the people at Ilypsa were pretty happy with the returns, and willing to do it again, regardless of whether the drug ever made it on the market.
(Update: The original version of this story left out one of the finalists for the $50,000 investment prize, Inson Medical Systems. The finalists were Oasis Diagnostics, Calcionics, and Inson. Here’s a glimpse of what Inson had to say.)
—Inson Medical Systems, a Bellevue, WA-based is developing polymer-based materials from the lab of UW bioengineering professor Buddy Ratner. As CEO Tracy Klein explained, these materials are supposed to allow a constant dose of a drug over time. The first product is being developed as an eye implant to treat cataracts in animals.
Inson is going after the veterinary market before humans, because it’s easier and faster, Klein says. But that doesn’t mean Inson has written off the human market. About 14.6 million people worldwide have cataract surgeries each year, and Inson says its technique could help many of them avoid infection, inflammation, and secondary cataracts that can crop up after surgery. If it can capture any significant piece of that market in the next few years, I’m sure this is a story we’ll hear more about.
