Beverly, MA-based Enzymatics has grown into a 100-employee company in seven years thanks to the rapidly evolving use of DNA sequencing machines. Now, it’s taking some of the cash it has hoarded away to make its first acquisition: a nine-month-old startup named ArcherDx.
Enzymatics is announcing today that it has snapped up the Boulder, CO-based company in a deal potentially worth up to $50 million. ArcherDx will get cash, Enzymatics stock, and potential milestone payments tied to revenue targets the combined company must hit over the next three years. That represents a big haul for ArcherDx, which its CEO, Jason Myers, says was founded just nine months ago with the help of less than $1 million in angel funding. Myers, a former scientist at Ion Torrent Systems, will become Enzymatics’ chief scientific officer as part of the buyout. He says that the combined company will keep ArcherDx’s R&D site in Boulder up and running with a staff of about 15 to 20 people.
The deal is meant to ultimately turn Enzymatics into a company that makes diagnostic tests based on certain genetic mutations. Today, it makes most of its money by supplying chemical reagents to big DNA instrument companies like Illumina (NASDAQ: [[ticker:ILMN]]).
“Now we have the ability to move up the value chain, where we’re not just providing raw tools,” says Enzymatics president and CEO Jonathan DiVencenzo.
Enzymatics was co-founded in 2006 by Stephen Picone and Cristopher Benoit, two scientists with two decades of experience manufacturing enzymes. Their idea was to craft an efficient, cheap process for producing the enzymes that are used to help researchers prepare the biological samples that are analyzed by genomic sequencing machines. Enzymatics’s selling point was to make enzymes that are cheaper, and deliver them with a higher degree of purity. By producing enzymes that are cleaner—free of contaminating DNA that can muck up the biological sample—sequencers can avoid generating false results.
“Traditionally, companies providing enzymes were not really looking for this level of purity,” DiVincenzo says.
So far, Enzymatics has found enough believers to make it work. According to DiVincenzo, Enzymatics raised just over $1 million from a group of angel investors led by Keswick Ventures upon its founding in 2006, became cash flow positive in its first year, and has been able to fund its operations with its own cash flow ever since. It booked $25 million in revenue in 2012, and expects to bring in more than $30 million this year, DiVincenzo says. About 80 percent of all DNA sequencing that occurs in academic and industrial labs today utilizes the company’s reagents, DiVincenzo says. Enzymatics sells its reagents to companies like Illumina and Life Technologies, research institutions such as Harvard University, and other entities that incorporate those reagents into their own assays.
That growth has freed up Enzymatics to buy ArcherDx, which is developing assays for specific genetic mutations—initially, those implicated in lung cancer, according to Myers. The idea is to use the reagents made by Enzymatics to create assays that are cheaper, produce results quicker than the ones on the market today, and present the results—either the patient has a genetic mutation or not—clearly.
“Physicians don’t want to be down in the weeds of all the data, they want to say does this patient have a particular mutation, and if so how do I treat it,” he says.
Enzymatics plans to sell those kits to anyone with a DNA sequencer—big companies, research institutions, and others—to drive down their costs. But it has some work to do to make this happen. ArcherDx was just formed in January by Myers and scientists at Massachusetts General Hospital—it’s going to release its first beta version of a reagent kit at certain sites later in the fall, and will begin selling it to researchers early next year. The company estimates it’ll take a few more years after that to build up the credibility to have a fully validated companion diagnostic. And it knows given the size of the players in the market, and how fast it’s evolving, every second counts if it’s really going to make an impact.
“Speed to market is paramount,” DiVincenzo says.
