[Updated July 23, 2008, see editor’s note below.] Nanostring Technologies, a company born in the lab of biotech pioneer Leroy Hood, has grown up and is starting to sell a product in the real world. The privately-held maker of gene-analysis tools in Seattle has booked the first sale of its commercial product, and is planning to deliver it within weeks.
Nanostring hopes it’s the first step in a plan to shake up the world of genetic analysis with its instrument, called nCounter. The machine is designed to enable large-scale genetic analysis experiments, that might, for example, compare 100 genes from 100 different patients with diabetes to see how the patients respond to treatment. The system, which provides a digital readout that can say precisely how much a given gene is dialled on or off, is meant to compete with Foster City, CA-based Applied Biosystems’ TaqMan 7900 instrument, known in biology lingo as a reverse-transcriptase PCR test.
The market for such RT-PCR machines is worth an estimated $1 billion a year, and is growing at a 20 percent annual clip, says Perry Fell, Nanostring’s CEO, previously a co-founder of Bothell, WA-based Seattle Genetics (NASDAQ: SGEN). So far, Nanostring has booked one order from an unnamed customer for its new system at $235,000, and is doing test runs for many more potentially interested buyers from academia, pharmaceuticals, and diagnostics companies, Fell says.
Even though the machine costs about four times as much as the TaqMan, the disposable component of Nanostring’s device is much cheaper and more automated, saving a bundle on time and labor, Fell says. Like most technologies associated with Hood, who co-founded Applied Biosystems (NYSE: ABI), the Nanostring machine can enable a new kind of audacious experiment, providing a digital readout on many more genes and many more cell samples than was possible before.
Fell used this analogy to compare his company’s machine to the TaqMan, which costs $60,000:
“It’s a bit like asking a farmer to compare the cost of his lawn mower to his tractor,” Fell said in an e-mail. “The 7900 can run a maximum of 1,500 data points a day, whereas the nCounter Analysis System is currently generating over 40,000 data points a day and we expect that to almost double within the next six to nine months.”
So there. The company has gotten a bounce in its step since March, when its machine was featured on the cover of the journal Nature Biotechnology. The article led to numerous requests for test runs from potential customers, Fell says.
The road hasn’t always been so smooth. The company, founded in 2004, has raised about $17 million in venture capital from Kirkland, WA-based OVP Venture Partners and Menlo Park, CA-based Draper Fisher Jurvetson. Some technical snags probably set the company back six to 12 months, including the departure of technical founder Krassen Dimitrov, said Chad Waite, a partner with OVP.
“It definitely set us back, but we’re happy where we are now,” Waite says. “We made the cover of Nature Biotechnology, and not a lot of other companies around here can say that.”
[Editor’s note: After this article appeared, Nanostring technical founder Krassen Dimitrov contacted Xconomy to dispute the company’s assertion that his departure had contributed to a delay in development of a high-throughput screening product. Dimitrov left the company in 2005 and is now working in Australia, but said delays in Nanostring’s product development were caused by the board’s initial opposition to pursuing a high-throughput product. According to Dimitrov, he was fired for advocating such an approach, but continued to advocate for it among the investors even after his termination. (For more on Dimitrov’s point of view, see his comment below.) Nanostring CEO Perry Fell disputes Dimitrov’s contention that prolonged board opposition delayed the high-throughput approach, but declined to comment on the circumstances of Dimitrov’s exit from the company.]
Fell is starting to think about raising a third round of venture funding, of about $15 million to $20 million, which he says will be the last time he seeks capital before the company turns profitable. The cash will be used to build up manufacturing, sales and marketing, and development, he says. The staff will grow from about 41 to 70, so the company is already looking to move from its offices along Elliott Bay to a new building at Fairview and Mercer Streets.
“We are really focused on two things,” Fell said during a visit to his office last week. “Customer satisfaction, making sure our customers are happy. Then getting to profitability. Those are our key goals.”
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