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Microarray, Gene-Expression Start-Ups Attracting Venture Capital Funding

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While the public financial markets continue to be a difficult place for small microarray players to attract investors, several firms in the gene-expression instrumentation field were able to raise a fairly significant amount of venture capital over the past few months.

Among the firms that have been able to bring in private cash to support commercialization and/or R&D efforts are NimbleGen, Genospectra, and Solexa. All three firms have received funding from several well-known venture capital firms, and together raised more than $43 million between September and November. (see table, p. 4).

Another common trait among the firms is that they all have products either already on the market or expect to commercialize instrumentation in the near future.

Madison, Wis.-based NimbleGen, which makes custom microarrays based on its maskless array synthesis technology, raised $12.75 million in a series F private financing announced on Nov. 1. The round was led by Baird Venture Partners and Venture Investors, and among several other funds that participated in the round was Cargill Ventures, the Minneapolis, Minn.-based venture capital group of food and agricultural products firm Cargill.

NimbleGen recently launched custom services utilizing its ENCODE array. The chip is based on data generated by the NHGRI-funded Encyclopedia of DNA Elements project, and is the second chip from the project made available to researchers, following the launch of Affymetrix's ENCODE chip last month (see BAN 10/27/2004).

Although NimbleGen President and CEO Stan Rose declined to discuss market expectations for the ENCODE array, he told BioArray News, "We have a broad range of collaborations with a number of laboratories that are involved in the ENCODE consortium, and a signif-icant number are planning on using the array in their studies. In that respect, I expect it's going to have a significant impact."

He said the commercial impact of the project would likely be further down the line. "The significant commercial impact comes from hopefully successfully developing a tool that will be used widely when the large-scale analysis part of the project comes in," said Rose.

In addition to the ENCODE microarray launch, NimbleGen is expected to benefit from Affymetrix's recent announcement that it has introduced 179 NimbleExpress prokaryotic array designs. The arrays are manufactured by NimbleGen for Affymetrix under a pact signed earlier this year that will enable researchers to study the whole-genome expression of many pathogenic organisms such as Bacillus anthracis, Haemophilus influenzae, and Mycobacterium tuberculosis.

"It's an event we're very excited about," Rose said of the NimbleExpress launch. "It's another step forward in this partnership. It brings a new capability to all the folks who own Affymetrix instrument systems, [and] they are part of the largest and most active installed base of microarray users."

With the most recent round of funding, NimbleGen has brought its total private funding to roughly $41 million. Rose said that the most recent cash infusion would support the firm's commercial capabilities. "The company over the past year has made a fundamental transition from being primarily a technology-development organization to a much more commercially oriented company," Rose said.

NimbleGen believes it is well-positioned to develop new products for emerging applications in the array field. "I think the opportunities for us go way beyond expression analysis in all the organisms for which there are not catalog arrays -- and that was really our thinking a year ago," said Rose.

"Now, we're looking at a whole variety of new approaches to studying genetic variation, including copy number polymorphisms, looking at promoter binding sites, looking at methylation on a genome-wide basis, [and] the fine-level resequencing of targeted regions in any genome. That's something where we can develop new designs in an incredibly short time and have them available and ready for analysis. Nobody else has that type of capability, and we think demand is going to keep growing and growing."

Genospectra

Fremont, California-based Genospectra raised $16.4 million in a series C financing in September. The firm is backed by several well-known venture-capital firms, but also counts among its investors Affymetrix, Agilent, and Alex Zaffaroni -- who has founded or co-founded several successful biotech firms including Affymax, Affymetrix, and Alza.

Although the firm was initially founded to build a system for high-throughput microarray printing, it has since reorganized and focused on cell-based RNA-profiling methods. "We think that has incredible value for a number of applications, and we're focusing on areas such as RNAi, predictive toxicology, and archived tissue [such as cancer]," said Melanie Mahtani, Genospectra's vice president of business development.

The firm, which has raised nearly $50 million since its inception in April 2000, also has a second development program in cell-based assays, as well as development work on biosensor dyes. "We're not focusing on having a single technology drive everything," Mahtani told BioArray News.

She noted that GenoSpectra recently launched a controllable siRNA product line and a multiplex gene-expression system. "We think we're really complementary to microarrays as a downstream anal-ysis tool, because the method is so quantitative," she said.

"We can detect the difference in 5, 10, 15 percent of gene-expression change. If you can detect the change, you could do follow-on studies and do fine-detail studies with [our] Quantigene or Quantigene Plex," she added.

Genospectra recently licensed some patents from Affymetrix, but Mahtani declined to provide any details of the license.

Solexa

In the midst of merger discussions with Lynx Therapeutics, Essex, UK-based Solexa lined up a few high-profile venture capitalists to fund its operations. On Sept. 28, the day that the privately held firm announced it had signed a definitive merger pact with Lynx, it also announced it had raised $14.4 million in a series B round of financing (see BAN 10/6/2004).

The round was led by Amadeus Capital Partners and included funding from previous Solexa investors Abingworth Management, Schroder Ventures Life Sciences, and Oxford Bioscience Partners. Representatives of each of the venture-capital firms have been nominated to serve on the board of the combined company, which does not yet have a name but will trade publicly under the "LYNX" ticker symbol. Since its inception in 1998 as a spin-off from the University of Cambridge, Solexa has raised nearly $38 million.

The financing is crucial to Solexa -- whether or not the merger with Lynx is completed -- as it will provide the firm with the funds necessary to continue development of the DNA cluster technology it jointly purchased with Lynx earlier this year. The technology is the cornerstone of its plans to launch its first commercial instrument for whole-genome resequencing and for gene-expression analysis by sequencing next year.

Under an amended agreement signed in late October, if the merger is not completed, Lynx would transfer all rights to the cluster technology to Solexa. In exchange, Lynx would get a worldwide, perpetual and non-exclusive license to the technology (see BAN 11/3/2004).

The merger is currently scheduled for completion in the first quarter of 2005.

NanoString

Seattle-based start-up Nano-String raised $4.3 million in late summer, which will be used to develop its gene-analysis tool. Early development of the molecular bar-coding system was conducted in the lab of Leroy Hood at the Institute of Systems Biology, which granted NanoString exclusive rights to the technology (see BAN 9/1/2004).

Kirkland, Wash.-based OVP Venture Partners and Draper Fisher Jurvetson of Menlo Park, Calif., provided the recent funding. Each of the venture capital firms also placed a representative on NanoString's board of directors.

In mid-November, OVP teamed with Amgen Ventures to add $11.8 million to the pool of funding available to Accelerator, a biotechnology incubator affiliated with the Institute for Systems Biology. OVP said it plans to work with Accelerator to support a range of life science technologies, including "advancements aimed at reducing costs in the array analysis of gene expression."

-- EW

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