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Bioinformatics Incubator LaunchCyte with $2 Million in Funding Opens in Pittsburgh

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In what may be the first incubator for bioinformatics, LaunchCyte of Pittsburgh has opened for business and completed a $2 million fundraising round from angel investors.

The incubator is focusing on bioinformatics as it is applied to genomics, proteomics, and medical imaging. Tom Petzinger, LaunchCyte chairman and chief executive, said, “The sweetest of our sweet spots would be the genomics and proteomics world because we know that those are going to be heavily data and software driven and heavily algorithmic.”

Petzinger said that LaunchCyte’s primary goal is to form businesses to sell to other companies or to bring them to the public markets through an initial public offering. These start-ups will also look to sell software and products but that will be a secondary objective. The incubator has no deals yet but is in talks to develop relationships with other incubators and university technology transfer offices, such as the one at the University of Pennsylvania.

“The way things work in this space and in the new economy is there’s a lot of value to be created by building a corporation around a technology, demonstrating its value in the marketplace, driving its value higher, and then selling it. Although there’s no reason why we can’t make viable models out of licensing and potentially selling products too,” said Petzinger, who was formerly a journalist at The Wall Street Journal, where he spent 22 years as a reporter, editor, and columnist.

As to why there aren’t more bioinformatics incubators, Petzinger said that people tend to be either biology or information technology specialists and have not acted upon the realization that IT and genomics are converging into a single discipline. He expects to see more such focused incubators in the future.

Low-Hanging Fruit

The company chose Pittsburgh over bioinformatics hotbeds like Cambridge, Mass., San Francisco, and Washington, DC, because of the “low-hanging fruit” that exists in informatics and bioscience at such institutions as Carnegie Mellon University, the University of Pittsburgh, and the Pittsburgh Supercomputing Center, said Petzinger.

However, the company does not plan on limiting itself to the Iron City. It is already looking at technologies in Philadelphia and Seattle and does plan to pursue opportunities overseas. “We mean to put down nodes in other biotechnology capitals so that we can have access to the networks from them,” said Petzinger.

LaunchCyte expects to provide seed capital and strategy, design, recruitment, and development services, as well as laboratory space. The company has acquired a facility that will have 9,000 square feet of molecular biology lab space, which is in short supply in Pittsburgh, said Petzinger.

The company also anticipates establishing formal networking programs to enable companies to “cross-collaborate” in areas such as technology integration and cross licensing.

LaunchCyte plans to work with universities where it will pay the licensing fees and honor the ownership of the intellectual property by an academic institution. “But we’re probably in a better position to build a management team, build a marketing plan, and go out and seek funding than a university is,” Petzinger said.

Part of the reason the company raised funds was to begin cementing legal relationships with academic institutions, he added.

UPenn, for one, thinks that LaunchCyte is picking the right area for such a business. “There’s a definite need for places - probably especially in bioinformatics - for people to come together in a space to make connections that don’t normally get made today,” said Tom Fitzsimons, an official at UPenn’s Center for Technology Transfer. He added that an incubator can bring together academics and commercialize their most promising ideas into products that will be attractive to the pharmaceutical industry.

The company’s fully subscribed first round offering was managed by Berkowitz, Pierchalski, a Pittsburgh-based boutique money management and investment-banking firm. Next, a strategic funding round will be done to offer institutional investors access to early-stage opportunities in bioinformatics.

Presently the company is negotiating with a dotcom incubator for a joint deal on an undisclosed informatics company. More traditional incubators might have more resources but need help evaluating and nurturing bioinformatics companies, Petzinger said.

During the last five months, the company has grown its staff from zero to 12. Besides Petzinger, that includes president and co-founder Babs Carryer, director of science Jonathan Kaufman, and director of process applications Jonathan Bieley. Kaufman, who was formerly employed by the UPenn, will help recruit and review incubation opportunities for LaunchCyte.

Victor Seidel, a doctoral researcher at Stanford University who is co-directing a study on incubation in high tech industries, said that LaunchCyte is part of a trend in which many new incubators are defining narrow niches, rather than going after broad market segments as they tended to do in the past.

“We’re seeing a segmentation of the incubator industry into different industry or market focuses,” said Seidel. This is a way for specialized incubators to bring more value, as long as they have a strong network of contacts and personnel, he added. Seidel and Robert Sutton, a professor of management science and engineering at Stanford, are leading the research project.

—Matthew Dougherty

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