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Cellumen Secures Additional VC Cash as New Pseudo-CRO Biz Model Takes Shape

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Cellumen, the high-content screening reagents and "collaborative discovery" firm co-founded by Cellomics founder Lansing Taylor, has secured a first round of financing for an undisclosed amount and signed on an undisclosed pharmaceutical partner, Taylor told CBA News last week.

The company also touted its business model, in which it proposes to engage in collaborative HCS-based drug-discovery programs with customers, and secondarily, out-license key HCS reagents to interested parties once their value has been demonstrated. This business model is relatively novel in the emerging HCS market.

Taylor declined to provide a dollar amount for the Series A financing, which Cellumen expects to officially announce this week. However, he said that Pennsylvania VC fund PA Early Stage Partners was the primary investor.

A PA Early Stage Partner representative also declined to provide the dollar amount of the financing.

The infusion will add to approximately $500,000 in seed funding and private equity Cellumen has obtained since it was founded last year. About $200,000 of this cash came from the Pittsburgh Life Sciences Greenhouse, Taylor said in February (see CBA News, 2/8/2005).

At that time, Taylor also told CBA News that Cellumen's goal was to raise between approximately $500,000 and $1 million more in cash by the end of May. It is unclear whether the company accomplished the financial portion of the goal, but it appears as if Cellumen has at least raised additional cash within the timeline it set.

Last week Taylor added that Cellumen also expects to receive some follow-on funding tied to the PA Early Stage Partners investment, but declined to provide any more details.

Seeking Talent, Developing Tech

Cellumen will use the new cash to hire additional employees and "support the development of a couple of key technologies that we have licensed," Taylor said. These technologies include a positional biosensor licensed from Cellomics, a random siRNA library licensed from the University of Pittsburgh, and a gene-switching technology licensed from RheoGene.

Cellumen has already begun the talent search, as the company is expected this week to announce the hiring of former Eli Lilly researcher Patricia (Kate) Johnston, Taylor said. Johnston is the former head of lead optimization at Eli Lilly's Research Triangle Park facility and will now serve as Cellumen's vice president of collaborative discovery.

Furthermore, Taylor said, Johnston's husband, Paul Johnston — also a former research advisor with Eli Lilly — has taken a job as the associate director of the University of Pittsburgh's academic drug-screening program, and will serve as a senior advisor to Cellumen.

Kate Johnston, who has been conducting screening for pharma and biotech firms for 12 years, will bring with her an extensive list of pharma contacts — and potential Cellumen customers.

Taylor declined to comment whether his new employees' connections with Eli Lilly might net a partnership between Cellumen and the pharma giant.

Regardless, Taylor said that Cellumen has also recently landed its first pharmaceutical customer, adding that he anticipates Cellumen will soon be able to officially disclose the partnership.

The customer will be Cellumen's second; in February, Taylor told CBA News that Cellumen had signed a collaborative discovery agreement with an undisclosed biotech. At the time Taylor said he hoped to publicize that collaboration, but last week he said that the customer still wants to keep things under wraps.

"Because we're doing more things with them, they kind of wanted to keep it under the radar," Taylor said.

Following the Money … as a CRO of Sorts

Last week, Taylor reiterated what he told CBA News in February — that the company would minimize its reliance on VC funding and instead look to research collaborations and reagent sales to generate revenue in the near-term.

"I'm doing this in a very different way than Cellomics, in stages and small amounts of money," Taylor said. "The rules of the 1990s were to raise as much cash as you could and invest in growth — that was the driving force, and that was the way we built Cellomics. We raised a lot of money, and we built a big huge IP portfolio.

"Now there are different economic conditions, and there is much more focus, at least on my part, on building early revenue, and raising money as you need it," Taylor added.

Cellumen will also turn to government funding to support its growth initially. According to Taylor, the company has submitted applications for three Small Business Innovation Research grants from the NIH for various projects. In addition, Cellumen, in collaboration with the University of Pittsburgh, recently received a $120,000-per-year grant for four years from the Pennsylvania Department of Health for developing screens for neurodegenerative diseases.

Finally, Taylor said, Cellumen is collaborating with the Pittsburgh Cancer Institute on a public-private partnership grant from the National Cancer Institute for orphan cancer disease studies.

Cellumen's business model is a relatively new approach to making money in the fast-growing high-content screening arena. While most companies are selling products — such as instrument platforms, reagents, and software — for pharma researchers to use in-house, Cellumen's business model compares more accurately to that of a contract research organization.

"I would say that our main competitors today would be what I would call the generic outsource partners, the CROs," he said. "But we're not a CRO because these are high-level and high-value things we do, and it really does involve the customer. As sophisticated cell-based discovery grows, those CROs are going to have to get into it, so I would call them competitors at this point. But they're also potential customers, because we have the expertise."

Much high-content screening in pharma and biotech is still done by in-house scientists, but possibly not to its fullest potential, according to Johnston, Cellumen's incoming vice president of collaborative discovery.

"A lot of the pharmaceutical companies that have high-content screening are using them as a reader, as a detection instrument without fully leveraging the multi-parameter, multiplexing aspects of the instrumentation," Johnston said.

On the business model front, whether Cellumen's business model can net revenues from pharmaceutical customers remains to be seen. However, Ralph Garippa, research leader for cell-based high throughput screening and automation at Hoffman-La Roche, last week told CBA News that he believed there is.

"I think that there will be a place for that kind of HCS outsource," Garippa said. "It would be for companies that have been slow to adopt HCS, and they would use it as a proof of concept to find out if it has utility.

"The nice part about having an experienced company as an outsource is that you're fairly confident that the assay development would be done right, that they would know all of the available reagents, that they would be using an appropriate imager and interpretive algorithm … and then you'd have someone under contract to go over the nuances of the results with you," he added.

For companies that already practice HCS extensively, Garippa said, there still might be value.

"They might use it for the one-off solution, or things that are beyond their capabilities or scope of the manpower they have in house, or maybe for the more difficult targets," he said. "For example, a company might only have a low-throughput, low-resolution imager, and one might want to use a high-throughput imager available from this outsource service. Or, it might be that the company is doing high-throughput screening, and needs some very defined biology to be elaborated on a sub-cellular level."

At the same time, however, Johnston said that instrumentation platforms for high-content screening "are only now delivering the promise that's really been out there for four or five years, and they're still not plug-and-play. There's a tremendous hurdle not just on the biology side, but on the IT side, and frankly, with the medicinal chemistry interface."

"It is underutilized; we've been saying that for years, although it is growing," Garippa said. "It depends on where you've rolled it out in your company and who's rolling it out. Are they [dedicated] cell biologists, are they assay developers, are they screeners?

"Also, are there people with specific expertise within one therapeutic area?" Garippa asked hypothetically. "If that's the case, you might envision them doing one or two assays really well, but not disseminating the capabilities of HCS to the other therapeutic area members who might be able to adopt it well in their area."

— Ben Butkus ([email protected])

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