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Bought By Utah Rival Tute, Former Genomics High Flyer Knome Bows Out

Xconomy Boston — 

After eight years, more than $20 million raised, and a handful of different business plans, genomics firm Knome has been acquired by tiny Tute Genomics of Provo, UT, for what appears to be a substantial loss.

The parties are not disclosing the purchase price, but it’s likely to be a fraction of what Knome investors put in. Tute, founded in 2012, has only raised $5.4 million to date, most of it in a round announced this summer. Its executives say they have not raised additional capital or taken on debt to help pay for the Knome acquisition.

As consolidation in the genomics space gains momentum, there have been higher-profile deals of late, such as the purchase of DeCode Genetics by Amgen (NASDAQ: AMGN), NextCode Health by WuXi PharmaTech (NYSE: WX), and Roche’s recent spate of acquisitions, including its majority purchase of Foundation Medicine.

But Tute’s buyout of Knome has its own significance. It marks the end of the line as an independent entity for what was once one of the field’s highest-profile startups. Knome, of Waltham, MA, launched in 2007 with the help of Harvard University professor and genetics pioneer George Church, and it set out to sell DNA analysis to rich people, first at $350,000 a pop. Despite an orchestrated publicity plan that included sequencing over-the-hill rocker Ozzy Osbourne’s DNA—as detailed here by the PR firm it hired in 2009—Knome soon had to pivot. The rapidly falling price of sequencing was undercutting its personal genome business. The company was “probably just too early,” Church told Xconomy via e-mail when contacted about the acquisition.

By 2011, Knome was trying to help academic researchers analyze the genomic data they were generating in their labs. In early 2012, Knome brought on a new CEO and announced a deal with Johns Hopkins University to crunch through 1,000 genomes from people with African ancestry to look for variants linked to asthma.

At that time, Knome’s new CEO Martin Tolar told Xconomy he expected 2012 revenue to reach $20 million. It’s unclear if privately-held Knome reached that goal, or what its revenues have been in the years since. Tolar left Knome in 2013 after two years.

Knome’s most recent foray was to meld its genomics software tools into a piece of hardware it called a “lab in a box.” It launched in late 2012. “They tried high-end [personal], research, clinical, and box businesses,” Church said.

The hardware business was a curious move, at a time when massive computing efforts were beginning to move into the cloud—tech-speak for off-site space rented from providers like Amazon.com and Google. “They had feedback that many customers did not want private data to leave the site,” according to Church.

One of Tute’s advantages, say its executives, is its cloud-based service.

Knome management did not respond to requests for comment over the weekend. Xconomy was able to reach Knome board member Paul Enever, who works for the investment advisory firm Canepa Healthcare. Enever joined the board in 2014 to represent a major investor in Knome. He declined to name the investor.

Enever also declined to comment when asked how much funding Knome raised over its lifetime. The figure seems to be at least $23 million, based on securities filings, press releases, and news reports. One known investor is the French life sciences firm BioMerieux. At the time of its $5 million investment in Knome, then-CEO Stephane Bancel joined the Knome board. Bancel has since left BioMerieux to found Moderna Therapeutics. He did not respond to a request for comment.

When asked what Knome could have done to stay independent, Enever wrote, “Your question presumes that remaining independent is a desired outcome for the shareholders of Knome; it is not. This market is highly fragmented and will likely continue to undergo consolidation. We are excited about the acquisition of the Knome software assets by Tute. We believe that Tute is well positioned to take the Knome software forward and combine it into a more attractive and more complete offering for customers.”

Tute CEO Reid Robison also declined to say how much his 16-person firm is spending for Knome, although he did say there are no post-acquisition milestones and confirmed that Tute has only raised $5.4 million in its lifetime, with nothing else in the works to help pay for the Knome acquisition.

Tute has built what Robison and former CSO David Mittelman describe as a “DNA search engine” that compares a snippet of a person’s genome to millions of other samples across a few massive databases, not just to find variations but to help doctors decide whether those variations are relevant to the person’s health. Tute’s focus is on childhood disorders and inherited diseases.

Knome does analysis work, too. Robison says Tute is particularly strong at user interface and experience—the “front end” of the system—so its reports can feed directly into electronic health records, for example. Knome has strengths in the technology under the hood, so to speak, such as the way data are compared.

Robison and Mittelman, the latter of whom is now an advisor to Tute and remains a shareholder, were particularly impressed with Knome’s ability to let users query its data with customized searches, beyond the pre-packaged panels—or sets of genes—associated with various diseases. Customization is an increasingly important function in genomic analysis, as medical research continues to untangle the complex web of genetic factors underpinning many diseases.

Robison says Tute’s main operations will remain in Utah, and that personnel details have yet to be determined.