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Nothing Ventured - Michael Greeley

Sept 16, 2004 | Many valuable computational tools were created in the past decade to sort and analyze the flood of genomic data. Are we now about to witness another step function in improvement and sensitivity in the platform technologies to better direct future scientific efforts?

The venture capital industry, while generally awakening from three years of a tortuous slumber, has been slow to embrace new platform and tools companies. Investor interest in the next great blockbuster drug has been blistering hot; Phase II and Phase III compound companies are being funded at a near record-breaking pace now that the IPO window seems to be slightly open (although the valuations continue to disappoint, at least some liquidity is back in the system).

Many entrepreneurs have returned to the market to develop solutions to a vexing, unmet need: being able to more accurately measure gene-expression responses in cells. To more adequately understand the cellular kinetics, and therefore design more relevant and focused experiments, platforms need to be created to allow better quantification of these cellular pathways.

“Informatics will really kick in, and better decisions will be made when the underlying data sets improve,” says Frank Whitney, CEO of Genospectra, a company developing products to facilitate systems biology and drug discovery programs. But Jake Leschley, CEO of Ingenuity Systems, a company developing pathway analysis software, counters that “the data are plenty good today to determine mechanisms of action to allow pharma to make better biological decisions.” Leschley says, “Scientists today are so starved for tools to understand what the data mean.”

“Scientists today are so starved for tools to understand what the data mean.”
Jake Leschley, Ingenuity Systems
The 1990s brought the advent of high-throughput genome sequencing. In this decade, systems biology has become the focus of research. The complexity of cellular pathways demands another iteration of the technologies to understand them. At the beginning of this decade, a number of predictive modeling companies were funded. Most of them developed compelling tools but struggled to generate meaningful and predictable revenue streams, in large measure due to the inherently unpredictable nature of these pathways.

“Analytical assays need to be developed, so we can study surrogate or direct biomarkers to see disease progressions,” observes Jonathan Lee, director of Eli Lilly’s Lead Optimization Biology Group. What becomes most important is the transferability of the assay data from preclinical to clinical applications. Traditional methods of investigation are proving to be limited, certainly in light of the complexity of the data generated.

Lee says that “the in silico toxicity tools must be used hand in hand with new measurement and assaying technologies when formulating hypotheses and designing experiments.” Traditional methodologies were either not sensitive enough or provided only static perspectives of compound interactions with cellular pathways. Pharma is eager to push the utilization of biomarker assays earlier into the drug discovery process so as to avoid failure later, which can become quite expensive.

Therefore, the challenge for platform companies becomes how to most effectively sell into the pharma and biotech industries. “You need to perform ‘pain assessments’ for the bench scientists, so you can answer the question of how what you are developing makes their lives better,” says Mike Deines, vice president of sales and marketing at Dharmacon, a provider of RNA interference technologies. Deines says often new technologies fail to be adopted by the market if the end-user perceives there is a steep learning curve or that “novel data will make getting scientific papers reviewed more difficult or hinder grant applications.”

Venture capitalists are watching this situation closely. Entrepreneurs who want to sell to users in R&D must articulate reasonable product development and commercialization timelines. And they need to clearly understand how end-users are going to evaluate and incorporate new technologies into their workflow and decision-making processes. The promise of novel measurement and quantification technologies is not enough to ensure that venture capitalists will fund your company.

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. E-mail: 

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