In another step in its transformation toward becoming exclusively a proteomics biomarker-discovery and -validation services firm, NextGen Sciences this week announced it had divested its automation and software business for an undisclosed amount.
The deal involves the licensing of the expressionfactory, expressionworkstation, and the controlling software suite orchestratorIMS to eXeTek, a NextGen spinout headed by former employees Stephen Woodall and Stuart Hill.
In addition, the company in February will close its UK facility, where it currently has six employees, and move its headquarters to Ann Arbor, Mich., the former headquarters of Proteomic Research Services, which NextGen acquired in 2006 [See PM 11/09/06], NextGen CEO Mike Pisano told ProteoMonitor this week. He was the co-founder and CEO of PRS.
As part of the deal NextGen retains a 24-percent stake in eXeTek and will receive a 5 percent royalty on sales for three years. No further financial terms were disclosed.
Stock of NextGen will continue trading on the London Stock Exchange’s Alternative Investment Market.
The Ann Arbor facility, which houses NextGen’s biomarker services, called biomarkerexpress, currently has 18 employees, 10 more than a year ago, Pisano said.
The divestiture of the automation and software business is the latest move by NextGen as it shifts away from technology development to eventually focus exclusively on protein biomarker-discovery and -validation services, a move initiated a little more than a year ago when Pisano became CEO.
At the time, the company had its toes in three different pools: electrophoresis, automation and software, and recombinant protein expression services. Shortly after Pisano’s arrival, NextGen started a protein biomarker-discovery service [See PM 11/15/07].
But as a small company with limited resources, “it was crazy to try to keep those four pieces of the business and do any one of them well,” Pisano said. “We just found that it was difficult to focus, and anytime we did some fundraising, or there was some cash to invest, we struggled [with whether] to split it across all four, or just put it into one, or whatever.”
“Particularly for the protein biomarker piece, we’re finding that outsourcing is the way they plan to do this. We see this as a growing part [of NextGen’s business], particularly as companies shrink their headcount.”
He and his board decided that in order to best use the company’s resources, it needed to concentrate only on one business.
While its protein biomarker segment was the newest part of the company, it also generated the most cash. The potential of that business was further borne out in discussions with pharmaceutical and biotechnology companies, the US Food and Drug Administration, those working in translational medicine, and others during which a need was repeatedly expressed for biomarker services, Pisano said.
“Because of the potential requirements coming down the pike, the recommendations from the FDA that [drug makers] need to have biomarker programs with all of [their] drug-development programs, we realized that that’s going to be a serious market for us,” he said.” And having the techniques and technologies and expertise in the areas that we did, we realized that we could put together a nice program.”
While the automation and software business posted $1.2 million in revenue for 2008, its divestiture is expected to save NextGen about $600,000 next year, Pisano estimated.
NextGen had already earlier shut down its recombinant protein-expression operations and sold its assets, and is in discussions with an undisclosed party interested in buying the electrophoresis business, though Pisano declined to elaborate. Pisano said he hopes the restructuring of the company, which would save NextGen $850,000 in 2009, will be completed before the end of this year.
The services encompassing biomarkerexpress include biomarker discovery, testing, and assay development. PRS had already been doing work in the first two areas as part of its proteomics services. Assay development was added to the portfolio when NextGen started its biomarker services business.
NextGen has indices of body fluids including human plasma, human cerebrospinal fluid, and human urine. For each fluid, the company has between 400 and 900 proteins from which it has developed assays, Pisano said.
“We’ve delivered on multiple projects where people have come to us and said, ‘Here’s a list of putative markers. I want you to develop an assay.’ And that assay is an MRM assay, which can be either relative or be an absolute quantitation of those proteins,” Pisano said. “We’ve developed assays from as few as three proteins all the way up to as many as 30 proteins in a single assay. And these are validated assays … that have actually followed the FDA guidelines for assays to be used with data submissions.”
NextGen’s customers include top-10 drug firms as well as mid-tier biotechs, though Pisano declined to identify them. Its projects have looked at Alzheimer’s disease, cancer, schizophrenia, and depression, Pisano said.
“Folks are coming to us with lists of markers or even … to do the discovery work, and then we’re utilizing the assays and the information that we get from our discovery work to develop those assays against a large number of proteins,” he said. “If you have a list of 100 putative markers … you can go very quickly to confirmation and validation before you spend an awful lot of money and time developing an immuno-based assay that may not work at the end, or may not carry the same multiplexing capabilities, or that biomarker may fall out.”
Numerous biomarker-discovery firms and proteomics service companies have disappeared in recent years, but Pisano said that he views the field as a growing one. The failure of past biomarker-discovery businesses was that validation and confirmation often did not follow the initial discovery work. The difference with NextGen, he said, is the company’s assay development component.
The downturn in the economy is also proving to be a boon to NextGen, he added. With pharmas slashing their budgets and cutting back on spending, more and more of their work once done in-house is being outsourced to contract research organizations.
“Particularly for the protein biomarker piece, we’re finding that outsourcing is the way they plan to do this,” he said. “We see this as a growing part [of NextGen’s business], particularly as companies shrink their headcount.”
During the first half of 2008, the company posted revenue of £1.03 million ($1.5 million), down 4 percent from £1.07 million during the first half of 2008. Its net loss was £1.3 million, up 2 percent from a year ago.
Pisano said he expects the company to be profitable in the second half of 2009, based on demand for its services and negotiations with potential clients it is currently conducting.