In a departure from its core business, BioMachines has entered into a deal with the University of Massachusetts Proteomic Fractionation Group to form a new division offering protein analysis services.
For BioMachines, based in Research Triangle Park, NC, the agreement is significant because it marks a new business model incorporating a revenue source other than equipment design and manufacturing.
The deal also bucks a recent trend within the industry, which has seen numerous proteomic service companies shutter their doors or dramatically rejigger their business models to stay afloat.
For UMass, the deal could enable it to attract a new breed of proteomic customer for its year-old Proteomics Consortium.
BioMachines’ foray into the protein analysis business comes on the heel of a major shakeup at the company. Since the company opened its doors in April 2001, it has specialized in designing and manufacturing equipment to support drug discovery such as gel electrophoresis processing systems and nano-liquid handling systems. The US government is one customer.
In December, Clearview Limited, a Raleigh-based consulting and advisory firm, bought a majority stake in the company and brought with it its own ideas on how to grow the company. Since Clearview’s arrival, BioMachines has entered into distribution agreements for its gel-processing products with Paris-based Disruptive Technologies and Beijing-based Capital Bio, as well as kicking off its nascent services business..
“Part of the vision of the company is to increase the breadth of our capability and be more of a solutions provider so we can not only provide the equipment but begin to provide the protocols and the services that people need to get further along in drug discovery and hopefully be more successful and do it more efficiently,” said Tom Larrichio, CEO of BioMachines.
Larrichio and an official from the University of Massachusetts Medical School declined to disclose terms of their deal, but Larrichio clearly has high goals for the new division, called Applied Proteomics Services, saying that in five years he expects the group to generate half of all BioMachines’ revenue. He added that BioMachines has signed on a client for its protein analysis service but declined to identify the customer.
Protein analysis services were once seen as a potential cash cow, and even before the Human Genome Project was completed three years ago, companies such as Geneva Proteomics, MDS Proteomics, and Oxford GlycoSciences began springing up at a ferocious pace to offer proteomic services and collaborations in expectations of a financial bonanza.
“Part of the vision of the company is to increase the breadth of our capability and be more of a solutions provider.”
But more recently, those visions collided with the realities of a complex science and the difficulties of commercially applying that science. The result is that many proteomic services companies collapsed. Large drug companies and biotech firms similarly pulled back on their proteomic ambitions, further eroding the market.
“Everybody jumped in without knowing what they were doing,” said Michael Pisano, president and co-founder of Proteomic Research Services, a five-year old firm based in Ann Arbor, Mich., that provides proteomic services such as identification of proteins separated by electrophoresis.
Among the companies that closed was Charles River Proteomic Services, whose assets UMMS purchased last year when the school started its Proteomics Consortium (See PM 06/03/05). The deal with BioMachines will enable UMMS to expand its services options and attract clients that it would not have had access to otherwise, said Sunny Tam, an associate professor at the Proteomic Consortium and operations director of BioMachines’ Applied Proteomics Services.
Those proteomic service firms that managed to stay afloat have done so by offering multiple platforms, said Pisano of Proteomic Research Services.
“We want to make sure that we offer everything that’s available,” Pisano added. “No single platform is going to give you all the answers you need.”
As a result of its approach, privately held Proteomic Research Services has seen consistent annual revenue growth of 10 to 15 percent, Pisano said. Last year the company posted $1.2 million in revenue.
Signs of Life
Despite the bursting of the proteomic services bubble, many still believe it is only a matter of time before the demand for such services return. BioMachines’ Larrichio said there are signs of such a rebirth.
“It’s beginning to grow again as it’s becoming a good approach to helping drug discovery and development,” he said.
Tam added that demand will sharply rise if and when the US Food and Drug Administration issues guidelines for voluntary submission of proteomic data for new drug applications [See PM 06/29/06].
While many large drug companies and biotech firms have maintained in-house proteomic labs, those in the services industry say outsourcing at least some proteomic research makes sense. For example, even the largest drug firms may be unwilling to spend the money to purchase new equipment that may be seldom used, Larrichio said. A client looking to buy one of the tissue MALDI machines designed and manufactured by BioMachines would pay about $75,000. A multi-functional spotter would cost about $50,000.
Proteomics is “such a diverse field and new field, no one has all the tools,” Tam said.