RainDance Secures $20M, and a Believer in Myriad Genetics

Xconomy Boston — 

RainDance Technologies always thought its droplet technology platform had the potential to attract the powerhouses of the world of genomic research. Three years after introducing its first commercial product, it has now found the big-name ally with a big sales force to support that thesis—Myriad Genetics (NASDAQ: MYGN).

The Lexington, MA-based company today not only secured a $20 million Series E financing from its existing venture investors, but also added Myriad—an entity which has a 75 percent market share of all the breast and ovarian cancer testing in the U.S.—to its stable of stockholders. Myriad participated in the round, which included previous RainDance backers Mohr Davidow Ventures, Quaker BioVentures, Alloy Ventures, Acadia Woods Partners and Sectoral Asset Management. And Myriad has done so just two weeks after signing a multi-year supply deal to use RainDance’s technology to enhance its product that takes deep-dive looks at certain regions of the genome, to find hereditary abnormalities that lead to cancer. RainDance will provide Myriad with its ThunderStorm systems, reagents, gene panels, and consumable chemicals.

“It’s a transformational deal for us,” says Roopom Banerjee, RainDance’s CEO, of Myriad’s involvement. “The fact that they selected us speaks volumes to the validation of our technology.”

That technology is a system through which RainDance first separates patient samples that come in the form of blood or urine, and breaks them down into millions of micro-droplets, each containing a DNA sample. It then merges each droplet with another containing a reagent, essentially creating millions of ultra-tiny test tubes for researchers to use to perform diagnostic tests. RainDance’s technology can generate, for example, 20 million to 100 million droplets out of a single milliliter of blood, according to Banerjee.

Roopom Banerjee, CEO of RainDance Technologies

Samples are precious in the diagnostics world, and that efficiency caught the eye of Myriad. While the supply agreement and financing deal appear to give Myriad on the inside track towards a buyout of RainDance, Banerjee insists that Myriad hasn’t secured any acquisition-related rights or liens of any kind on the company’s technology.

“RainDance will continue to be an independent company,” he says. “We are free and clear to work with any customer in any field as we continue to grow our business.”

That isn’t to say, of course, that RainDance or its investors, who have now poured about $100 million into the company since its inception in 2004, don’t have an exit in mind—be it through an acquisition, IPO, or otherwise. Banerjee notes, for example, RainDance has been approached in the past regarding either partnerships or an acquisition. But RainDance refused to bite, feeling it had the cash, the investor support, and the business plan to build its value beyond what a few early buyout dollars would bring.

“We’re not in a hurry to sub-optimize the business,” he says.

Instead, RainDance is aggressively going after the opportunity it sees as a standalone company.

Banerjee notes that every single one of RainDance’s longtime investors participated in the financing and supports the company’s plans. The financing deal, for example, includes only equity, and it doesn’t need to hit any specific milestones to get the full funding amount.

That’s because, Banerjee asserts, RainDance is now on the precipice of its big move, which would drive its valuation upward significantly and make the eventual returns for investors worthwhile. RainDance, for example, will use the latest round of cash to expand its manufacturing and marketing capabilities, scale itself up to meet growing demand, and to make strategic investments to transform its business into the area of clinical diagnostics.

“We’re in the very early innings of a very big growth story,” Banerjee said. “We’re just entering the inflection point of that significant growth. So it’s an exciting time.”

Indeed, since mid-2010, when Xconomy last profiled RainDance, Banerjee says the company has increased its size and scale ten-fold, and expanded its customer base from fewer than 10 to more than 70. It has begun marketing two new systems, among them the ThunderStorm in October 2011, and will hit an annualized run rate of $20 million in sales in 2013 (RainDance generated sales in the “low single digits [in millions]” two years ago).

Customers last year ran over 20,000 DNA samples, a figure that Banerjee estimates will jump 50,000 this year, 100,000 next year, and then head into the millions as RainDance uses it technology in more applications.

When RainDance does achieve its growth goals, Banerjee is “agnostic” to which approach the company uses to pay its investors back, believing the company has the capability to either go public or sell itself.

“That said, do we feel we could fit well within any of the large usual suspects’ portfolios? Yes,” he says. “We’re an excellent fit in some very exciting markets with unique differentiated technology and a great team, and great IP.”