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MicroGem Sets Sights on Sample Prep, Forensics Markets After Picking up ZyGem Assets

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NEW YORK (GenomeWeb) – Following a bankruptcy proceeding that began a few years ago, ZyGem has found a home as part of a new UK company that is taking a chance on the firm and its affiliate Microlab, intent on focusing on ZyGem's unique sample-prep capabilities with a longer-term goal of expanding on work toward a platform for the forensics market.

ZyGem and Microlab are now part of MicroGem International, a firm publicly traded in the UK that acquired the assets of ZyGem and MicroLab last year.

"We pumped a couple of mil[lion pounds] in" to salvage the companies, MicroGem and Zygem Chairman and MicroLab President Richard Healey told GenomeWeb in an interview.

ZyGem was shut down in 2013 after a forced bankruptcy, as reported by GenomeWeb. At that time, five petitioners claimed they were owed $1.56 million in unpaid debt for work provided. ZyGem and Microlab were subsequently put in the care of trustees who settled the debts under a court's supervision, Healey explained.

But why would Healey and his business partner, Johnathan Sims, choose to buy the assets of the troubled firm?

"Unlike a lot of biotech companies, it obviously had something that worked. ... It's one of the companies that actually has a product, the product works, and it has an income stream," he said.

New Zealand-based Zygem was originally founded in 1999 based on a collection of about 1,000 extremophile bacteria samples collected on expeditions to the Antarctic. In 2010, it acquired Charlottesville, Virginia-based MicroLab Diagnostics, a firm focused on microfluidics development.

The original extremophile collectors were from "a group of universities, and the culture collection was owned by ZyGem, which was then called PacificGem," Healey explained.

The company sequenced one of the bacteria to discover a "DNA-releasing enzyme," and set out to commercialize that chemical.

"But they were a New Zealand company, they were very limited with cash resources, and they then set up a US company," Healey said. "All the shares of the New Zealand company were then put in the US company. What then happened is the US company saw MicroLab and what it could do [with microfluidics], and the enzyme makes the microfluidcs a lot more straightforward."

MicroLab, meanwhile, was looking for funding, so ZyGem acquired MicroLab, but in doing so, "effectively they overstretched themselves and they ran out of money," said Healey.

When that happened, that "was effectively it — they had trustees appointed to the US operation, and a trustee appointed to MicroLab." The trustee that owned MicroLab was looking to sell, while the one who owned the shares in ZyGem was looking to sell the US affiliate but couldn't get anyone interested in the New Zealand company.

"My colleague spotted it, and we saw that the technology and the patent portfolio of the group was superb," Healey said.

However, "because it was in was in such a mess, it was obvious that the only way we'd sort it out was to buy it, acquire the assets of the trustees, clear debts and so on, put it into a good state of repair, and then when we'd done that we could operate the company," he said.

That process began in December of 2014, Healey said, and the acquisition was completed in August of 2015.

Now, MicroGem owns the assets of all the subsidiaries and has no debt, Healey said. He declined to state the specific terms of the acquisition, but noted that any claims possibly leftover from the bankruptcy would be against the trustees, not against the current company.

Healey's prior work also provided him with the kind of experience needed to take on a project like ZyGem. He was previously chief executive of the international division of Morgan Crucible, a UK company which was worth £2 billion and was restructured in 2013 to become Morgan Advanced Materials. "I've also been employed by banks and financial institutions to sort companies out where they've invested and it has gone sour," he said.

The ZyGem situation was "by no means the worst; it was pretty complex to sort it out, but in terms of the business and the technology, it certainly is streets ahead," Healey said.

One focus of MicroGem is an enzyme called EA1, which was discovered in the collection of cultures from extreme environments in Antarctica. These extremophiles "tend to live in -40 degree [Celsius] temperatures, and they'll survive molten lava," Healey said.

EA1 is a heat-stable protease from a strain of Bacillus discovered during a six-week expedition to Mount Erebus, an active volcano in Antarctica. The area has underground vents, so that in places the underlying soil is warm while the surface remains ice-covered.

The operative range of the EA1 enzyme is 75 to 95 degrees Celsius. "It will release DNA, and it makes the DNA PCR-ready in a matter of minutes," Healey said, noting that this obviates the need for reagent steps, or pipetting.

Forensics focus

The firm also makes a platform called PDQeX, which uses consumable tubes for DNA extraction. "EA1 is put in the tube with the sample, you set the program you want, and in 11 to 15 minutes you've got 24 PCR-ready DNA samples," Healey said.

The PDQeX platform is being tested "in a number of large labs in the US, mainly in the forensic market right now," Healey said, adding that there are also applications for it in the clinical diagnostics and horticultural markets.

For the latter, the firm has a system called PhytoGem, which can perform the DNA preparation "in a greenhouse, because the footprint is about the size of a small laptop, and it stand about 10 inches tall," said Healey.

Previously, ZyGem was developing a sample-in, results-out platform for forensics, akin to the RapidHit ID by IntegenX or the DNAscan platform from partners NetBio and GE Healthcare, which was recently granted National DNA Index System (NDIS) approval from the Federal Bureau of Investigation.

ZyGem also has a machine, "and it works," Healey said, "but quite honestly these machines are $250,000 for starters, and the lowest cost sample available ... is something like $140 per sample, which is a huge amount of money for most labs."

Although the prices may decrease if House Resolution 320 passes, enabling DNA testing in police precincts, Healey is skeptical. "The sample price won't go down, and the machine price won't go down that much because of the complexity of it — you tell me how many police precincts are going to fork out $250,000 for a machine." He further noted that experts have suggested the DNA bill might be as much as two years away from passing.

However, Healey believes that ZyGem's in-house developments "will make the platforms that exist now obsolete in terms of technology and cost," although he did not provide details.

For now, the firm will focus primarily on sample prep in the forensics market. That space has a few major players, but Healey said his firm doesn't consider itself in their realm. "When you look at the range that Qiagen and Promega have, and how successful they've been, I'd be more than happy to be considered in the same ballgame," Healey said. "Unfortunately, we're not. We're quite a minnow, but what we do, we do well," he said. "The technology we have works very well, and that's where we are, we're focusing on our strengths."

The firm also has an ongoing collaboration with Lockheed Martin, which began in 2010, to develop the forensics platform, and it will be exhibiting the PDQeX at the upcoming Forensics Europe Expo in London.

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