Skip to main content
Premium Trial:

Request an Annual Quote

Pathwork Will Use $20M VC Investment to Expand Sales, Marketing, and Tech Support

Premium
Pathwork Diagnostics last week raised $20 million in a second round of private-equity financing, the largest amount of funding the array-based test maker has raised to date.
 
The Sunnyvale, Calif.-based company said it will use the bulk of the funds to make what it calls key hires, and pay for investments in its sales, marketing, and technical support infrastructure that will support the launch of its Tissue of Origin, which recently received US Food Administration 510(k) clearance (see BAN 8/5/2008).
 
That test, which runs on Affymetrix’s GCS3000Dx diagnostic platform, determines what type of cancer cells are present in a malignant tumor by comparing the expression of more than 1,500 genes from the tumor against genes from 15 known tissues. These tissues represent more than 60 morphologies, and Pathwork claims the test can provide an objective, probability-based score for each potential tissue.
 
Pathwork originally launched the TOO test in April as a homebrew through its Clinical Laboratory Improvement Acts-compliant lab. The 510(k) clearance, however, enables the firm to sell a kit version of the test to clinical laboratories in the US.
 
“This is a company moving out of the start-up stage, increasing its number of employees, and trying to grow the expanse of its business,” Fletcher Payne, Pathwork’s chief financial officer, told BioArray News this week. He added that Pathwork needed the recent venture capital to “get the commercialization stage up and running.”
 
“This is a fairly nominal amount of money for where we are at,” Payne said. “If you think about the money that we have put into the company so far, it has not been significant. But we have the 510(k) approval and the CLIA lab running, so $20 million will help get us pretty far down the commercialization path.”
 
David Craford, Pathwork’s director of commercial operations, told BioArray News this week that the firm currently employs 30 people, and has its “basic” marketing, sales, and customer-service groups in place. He also said that the new funding will help the company grow these groups, and incrementally add some field-based technical support. He declined to discuss how many personnel Pathwork ultimately intends to add.
 
Craford, who held sales positions at Affymetrix for 13 years before joining Pathwork last year, said that the commercialization efforts of an array-based diagnostics shop like Pathwork aren’t likely to differ significantly from the sales and marketing approaches of a research-oriented array firm like Affymetrix.
 
“I am pretty familiar with how to support arrays in the field,” Craford said. “I suspect doing it at Pathwork will be somewhat similar, except our response time will have to be quicker than that for a research setting.
 
“Instead of responding within a day or two, we’ll have to respond within 24 hours to meet customer requirements,” he added. “It may be more straightforward, though, because the configurations are minimized, so you can lock in and go deeper with that level of clinical support.”
 

“If you think about the money that we have put into the company so far, it has not been significant.”

How Pathwork sells and markets its product could serve as a roadmap for other diagnostics companies planning to launch Affymetrix-manufactured tests in coming years. For instance, firms like UK-based Almac Diagnostics and the Netherlands’ Skyline Ventures may also benefit from the availability of a ready-to-go sales and marketing force trained by earlier stints at array companies. According to Craford, Pathwork intends to hire its new sales, marketing, and tech support people from the array industry.
 
“There are obviously [experienced sales and marketing] people at Illumina, Affy, and Agilent, so the talent pool has been built on commercial side,” said Craford. “There are also people in the field from, for example, clinical research labs who have worked with currently available arrays. So the talent pool has developed over the past 12 years, and it won’t be hard to develop clinical support.”
 
Craford noted that Affy will support its own instrumentation, and that Pathwork will mostly support the molecular biology of its assay and its informatics package.
 
Pathwork’s initial focus for the test will be in the US, where it is available as an in vitro diagnostic and a homebrew. However, Craford said the company expects to begin selling outside the US sometime in 2009, though he declined to elaborate. In the US, its sales will be direct; the company may hire a distributor for international sales, Craford said.
 
If Pathwork expands into Europe, its test will compete directly with CupPrint, a diagnostic for cancer-of-unknown primary sold by Agendia, based in the Netherlands. Agendia’s cancer test similarly uses a gene-expression signature to identify the tissue of origin. However, Agendia’s array is manufactured by Agilent, and Agendia has said numerous times that it does not plan to submit CupPrint for FDA clearance, although the company’s MammaPrint test for breast cancer recurrence won clearance in the US in 2007 (see BAN 2/13/2007).
 
Fresh Capital
 
Pathwork’s recent VC round was led by London-based Abingworth, with additional funds coming from Propsect Venture Partners, Advent Venture Partners, Novus Ventures, Venrock, and Versant Ventures. Payne said it closed “very smoothly,” but he acknowledged that companies like Pathwork are facing a “difficult financial environment.”
 
“Investors are digging deeper [than they had in the past] into companies that they make investments in, and being appropriately cautious,” he said.
 
For lead investor Abingworth, the decision to invest in Pathwork came mainly out of the firm’s recent interest in the diagnostics space.
 
Because “therapeutics, which is our traditional bread and butter, are becoming more cash intensive and even harder to get through the FDA, we are looking to not move out of that space, but to look at areas within life sciences that seem to be more capitally efficient and areas where the FDA seems to be more friendly,” said Ken Haas, a venture partner at Abingworth.
 
“We have been looking at pure molecular diagnostics plays for the last 12-24 months,” said Haas, who was given a seat on the company’s board. “Pathwork was the one that really jumped out at us.”
 
Like other VC shops, Abingworth typically looks at a company’s management, its technology, its clinical and regulatory outlooks, as well as reimbursement strategies, before making an investment, said Haas.
 
He said that Pathwork’s management team is “strong and mature, the technology looks proven, and the clinical regulatory path looks like it’s behind them.” Pathwork’s remaining risks are market adoption and reimbursement, but Haas believes that the recent round could “probably get them to break even and, if necessary, Abingworth would be willing to provide additional financing.
 
“Clearly, venture capitalists are in the business of trying to pick winners,” said Haas. “We became convinced that Pathwork, by already being in the market with a CLIA test and an IVD test, has a significant-enough lead on competition and a strong-enough team and relationship with Affy. They stood out to us as a clear leader and as having a clear opportunity to be one of the winners in this space,” he said. “It felt like, at least to us, that they have a 2- 3-year lead.”
 
Haas said that Abingworth has made its investment in companies developing array-based diagnostics for cancer indications, although the firm is open to making investments in other array-based tests, as long as they do not compete with Pathwork’s pipeline.

The Scan

For Better Odds

Bloomberg reports that a child has been born following polygenic risk score screening as an embryo.

Booster Decision Expected

The New York Times reports the US Food and Drug Administration is expected to authorize a booster dose of the Pfizer-BioNTech SARS-CoV-2 vaccine this week for individuals over 65 or at high risk.

Snipping HIV Out

The Philadelphia Inquirer reports Temple University researchers are to test a gene-editing approach for treating HIV.

PLOS Papers on Cancer Risk Scores, Typhoid Fever in Colombia, Streptococcus Protection

In PLOS this week: application of cancer polygenic risk scores across ancestries, genetic diversity of typhoid fever-causing Salmonella, and more.