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Pocketing $4.1M in Financing, Gene-IT Plans To Roll Out Search Tools for RNAi, Diagnostics

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Gene-IT plans to use $4.1 million in first-round financing to launch several new applications within three to six months for its flagship GenomeQuest sequence search product, company officials told BioInform last week.

Ronald Ranauro, CEO of Gene-IT, said that the company plans to use the funds from the Series A round — led by Cross Atlantic Partners and Milestone Venture Partners with reinvestment from Société Générale Asset Management Alternative Investments — to build out its product platform and its sales and marketing force.

Gene-IT released GenomeQuest in early 2004 with the goal of targeting its specialized DNA and protein sequence search technology toward the needs of intellectual property professionals. The first customer for GenomeQuest was the European Patent Office [BioInform 02-09-04], and the software has since been adopted by more than 40 organizations, the company said.

Ranauro said that Gene-IT has identified several promising new markets for sequence search — namely RNA interference and diagnostic biomarkers — and that the funding will help it launch new applications in those areas within the next three to six months.

"We see a huge opportunity in RNAi as well as diagnostics," Ranauro said. "Determining which sequence probes are best to either silence a gene or detect a gene requires manipulation of massive data sets, and it's also pretty big IP creation for the people who can do it well, so we think we're actually at an intersection of two pretty important areas of genomics research."


"If it acts like a duck and walks like a duck, you can call it a duck, but we never really presented this company as a bioinformatics company, even though that's the technology that we deploy."

The firm will also ramp up its sales and marketing effort. While Ranauro declined to disclose Gene-IT's current staffing level or specific hiring plans, he said the company will be placing new account representatives in "major markets" that have yet to be determined, as well as new reps in California and the Boston area where the company already has a presence. Gene-IT is headquartered in Worcester, Mass., and has offices near Paris.

Ranauro said that while the funding cycle itself took around six months, it was a long-term endeavor for the company. "When I came to Gene-IT in 2002, the goal then was to position the company to become funded, and the real way to do that was to create an underlying business that has customers that are getting tremendous value from the offering, and investors are pretty receptive to the customers. So in a sense, it's been a three-year journey to this milestone."

The deal makes Gene-IT the fourth bioinformatics firm to announce VC financing agreements in 2005: GenoLogics closed a $5 million Series A round in February, Geospiza raised $1 million in May, and Teranode secured $9.5 million in Series B financing in September.

It doesn't appear that investors are rushing into the bioinformatics sector, however. Last year, following a two-year VC drought, five informatics firms secured a total of $37.5 million in financing: Biomax raised €2.3 million ($3.1 million), Aureus Pharma raised €3 million, Teranode raised $2.6 million, Integrated Genomics raised $1 million, and Inpharmatica raised £13.9 million.

By comparison, the $19.6 million raised by informatics companies so far this year appears to be a step backwards.

Ranauro credited Gene-IT's focus on building a strong customer base in the IP user market for its success in attracting investors — along with a reluctance to adopt the "bioinformatics" label. "If it acts like a duck and walks like a duck, you can call it a duck, but we never really presented this company as a bioinformatics company, even though that's the technology that we deploy," he said. "I think the difference between what Gene-IT is doing and what our predecessors have done is we've really focused on the consumer of the information."

Sandra Panem, general partner of Cross Atlantic Partners, said that that Gene-IT presented "a compelling business proposition."

"Having looked at a lot of properties in the sector, we think that this is a company whose product matches with a market need, which is being able to make sense of increasingly large databases of information, and to correlate it with text information in order to have rational understanding," she said.

Panem said that customer feedback was also important, and that Gene-IT's users "have increasingly found it a tool to make timely business decisions, and we think that's what you want in an informatics company — which is to say information that you get using a good bioinformatics tool is one that allows you to make a decision on a go-forward basis for your business."

Ranauro said that Gene-IT intends to continue on the path that led to its VC funding. Unlike most bioinformatics companies who try to set themselves apart in the marketplace based on their technology, he said the company will stay focused on the needs of its primary user base. "That's where the innovation lies — balancing what could be done in the computer against what kinds of questions do people really want to ask?" he said.

"As opposed to really trying to create the next generation of bioinformatics, we're trying to enable the current generation of users to benefit from the information that's already available," he said.

As for Cross Atlantic Partners, Panem said that Gene-IT may not be the firm's last investment in a bioinformatics company. "Were we to identify other companies where we felt that the product offering met the market need and served as the basis for rapidly growing, profitable companies, we would of course consider additional investments," she said.

— Bernadette Toner ([email protected])

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