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Nothing Ventured - Michael Greeley

By Michael A. Greeley

January 12, 2004 | THE TRANSITION FROM analog to digital will allow systems biology to reach its full potential. Newly introduced imaging systems and analytical tools are able to generate quantitative histomorphometric data, capable of identifying high-quality and relevant target genes in certain disease states.

Peter Johnson, CEO of TissueInformatics, a provider of hyperquantitative tissue analysis software, predicts that "the market for tissue analysis software in drug discovery, investigative toxicology, and drug safety will represent a greater than $1-billion opportunity, driven by the penetration into the clinic."

The venture community appears to be enamored with the next great "molecule" company, and may be shunning companies developing enabling platform technologies. 
While that's quite promising, venture investors are focused now on the adoption and acceptance rates of these solutions in the clinic.

"One of the critical drivers [has been] automation and the development of instrumentation capable of processing hundreds of specimens simultaneously," says Joe Brown, CEO of LifeSpan Biosciences, a molecular pathology company. Advances in robotic digital microscopy have enabled improved detection of stained tissue. An essential component of these new robotic systems is the software to identify and classify the images in a hierarchical framework that can be stored, manipulated, and analyzed.

As promising as these advances are, Bob Curtis, CEO of Histometrix, a Yale University spinoff developing advanced imaging technology for tissue proteomics, cautions that "as an industry, we need to still prove the value-add of these products." One of his main concerns is that the cost of these systems may be too daunting for small to medium-sized pharmas, which cannot "amortize these million-dollar investments across enough discovery programs."

This is a central concern for the venture capital community. The bio-IT landscape is littered with pioneering technologies. Vendors must be creative in how their products or services are priced and delivered. Of note, Histometrix has developed a service model that both lowers the "barriers to purchase" for pharma, while also generating cash flow so that the company can continue to develop novel reagents and molecular biomarkers for its own research.

The experience of the early bioinformatics companies sheds some light on how these technologies should develop. It is critical that the pioneers convert customer interest into paid orders. The value of the data must be demonstrated. As Curtis points out, "entrepreneurs will need to focus on demand creation and customer pull-through." He cautions that "tools companies with enabling technologies are out of favor right now in the venture community."

The venture community appears to be enamored with the next great "molecule" company, and may be shunning companies developing enabling platform technologies. Those trying to raise venture capital must know if the firm they are approaching has an appetite for tools companies.

Rich Fisler, a consultant for the life science industry with North Star Business Partners, suggests a solution that might break the logjam. Fisler has developed a product roadmap that calls for the "standardization of pathology data sets, which will allow users to recognize patterns and perform higher-level data analysis ... A database that can be retrospectively mined will offer more data on specific compounds than was ever possible before with these imaging technologies."

Such a model has venture capitalists excited in other industries, and augurs well for bio-IT. As these new systems can capture, store, and sort digital data and not just "fuzzy" unstructured data, the clarity of the analysis becomes that much more compelling. More intelligent image analysis will allow for even more compelling algorithms — and more compelling business models.

Michael A. Greeley is managing general partner of IDG Ventures, a global family of funds operating in North America, Europe, and Asia, with approximately $600 million under management. He can be reached at 

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