UK Genotyping Startup Eschews Market Riffraff and Goes Haute
A trio of UK-based AstraZeneca veterans, armed with severance pay and a genotyping technology bought on the cheap from their former employer, have struck out into the fertile valley of high-end SNP-genotyping.
The company they founded two years ago, DxS, is banking that the quality of the genotypes is so good it can avoid the cutthroat — and cut-rate — high-throughput market and make a tidy profit by selling their SNP for as much as $20 a pop.
Company co-founder David Whitcombe co-developed the technology, called Scorpions, in 1998 while still a researcher in AstraZeneca’s diagnostics division. “When AstraZeneca focused away from diagnostics we took the opportunity to … buy the technology” and start DxS, Whitcombe told SNPtech Reporter.
“We see that quality is where our technology scores highly, and we can get very good discrimination,” Whitcombe said. “We believe in our results. So the more regulation and the higher the quality requirements, the better for us. Which is why most of our work is to support clinical trials.”
Scorpions is a homogenous fluorescence nucleic acid-detecting technology that allows researchers to make probes “significantly shorter” and with greater hybridization. And though the company never expected to license its core technology — it originally set out to sell its genotyping services — DxS today allows four companies to manufacture Scorpion molecules.
“So that’s an unlooked-for upside that we’re happy now to exploit further,” said Whitcombe.
According to Whitcombe, around half the company’s revenues come from licensing deals, but that number is expected to fall off as DxS’s core fee-for-service business grows.
“We like licensing because it’s high margin and good money,” he said. “But what we started the business to do was the fee-for-service, and we do see that growing quite substantially”over the next several years.
“We see the SNP-genotyping market growing but we are very clear we don’t want to be in the commodity end of the market,” said Whitcombe. He stressed he doesn’t want DxS to be producing genotypes for $.10 apiece. “We want to do it for $10 per genotype. And clearly it’s not the cost of the reagents, it’s not the cost of performing the test. It’s all the quality systems and validation” that adds value to the raw data.
And what about the market that has been demanding increasingly cheaper per-genotype costs? “I guess we can do [cheaper genotypes] too, but the margins are small and you need to get large numbers of genotypes … to get any one to pay.
“So we see that clinical trial-support work — where the numbers of any study are relatively small, but the budgets can be quite high — actually stacks up quite high for us as a business,” Whitcombe said.
“Mind you, we wouldn’t turn away what we call research genotyping, what we see as the domain of Orchid and Sequenom,” said Whitcombe. “But we really don’t want to get into a fight with those guys because they’re bigger than us, and have a market position which is more established.”
With $2M secured, Interleukin Genetics Flirts With Amway Kin for Life Support
A sister company to consumer-products giant Amway extended Interleukin Genetics’ lifespan by around 30 days last week when it gave the pharmacogenomics firm the last quarter of $2 million in interim financing.
Interleukin Genetics is also in discussions with the company, Pyxis Innovations, for a broader collaboration or “strategic alliance,” and hopes to finalize a deal within three months, IG said last week.
The $500,000 promissory note by Pyxis follows three others sold last fall. Each note, which accrues interest at the rate of 15 percent per year, will mature on Dec. 31.
Interleukin Genetics has been struggling to bring in enough cash to stay afloat. The company reported $80,000 in revenues and a $1.4 million net loss for the third quarter of 2002, and held only $508,000 in cash and cash equivalents at the end of September last year. It was delisted from Nasdaq in December 2002.
The company hopes Pyxis will keep it going. “We are in discussions with this firm for a strategic alliance,” IG CFO Fenel Eloi said. “While we are in discussions with them, we are using them as a source of capital.
“It doesn’t take a genius to figure out we are out of cash, and we have to continue to survive as a company” for the alliance to succeed, he told SNPtech Reporter.
The two companies signed a letter of intent about a potential licensing deal or JV last September. Interleukin Genetics now said it has enough cash to keep its doors open until at least March. Eloi said the company hopes to ink a deal with Pyxis within the next three months.
Pyxis Innovations, a division of Alticor, develops nutrition, beauty, and wellness products for Alticor, the parent company of Amway.