NanoString Chairman Bill Young Scopes Out Diagnostic Future, Considers Bay Area Expansion

Xconomy Seattle — 

Big decisions about the future of NanoString Technologies are in the works. The Seattle-based maker of genetic analysis tools is crafting a strategy to enter the clinical diagnostics market, it expects to hire a permanent CEO within a couple months, and it may establish its headquarters to the San Francisco Bay Area to get the right leader, according to new executive chairman Bill Young.

I met with Young while he was visiting NanoString offices in Seattle’s South Lake Union neighborhood, getting to know some of the management and staff. Young is a big name in the biotech world, as the chairman of Cambridge, MA-based Biogen Idec (NASDAQ: BIIB), the former CEO of Monogram Biosciences, and chief operating officer of Genentech. Young was introduced to NanoString by a former Genentech colleague, Nick Simon, who’s now a partner with Boston’s Clarus Ventures, which led a $30 million investment in NanoString last June.

NanoString, founded in 2004 on technology from the Institute for Systems Biology in Seattle, is now selling a tool to help biologists examine the extent to which genes are dialed on or off in a tissue sample—what’s known as gene expression analysis. The product hit the market in July 2008, and now has customers at the Broad Institute of MIT and Harvard, the National Cancer Institute, Caltech, and the University of Washington. While that may be an encouraging start, NanoString sells an expensive piece of new equipment (about $250,000), is up against some well-entrenched competitors, and has been operating without a CEO since Perry Fell resigned almost a year ago.

The top priority now, Young says, is finding permanent new leadership.

Bill Young

Bill Young

“There are some very good people in this company, very smart, very dedicated, intense people. One of the things they need is consistent leadership that can take the company to the next level,” Young says.

Quite a few candidates have been interviewed, and a few more still need to go through the process, Young says. He hopes to have an announcement of who the new CEO will be in 60 days. And while the decision hasn’t been made, Young says it’s possible that the new leader might be based in the San Francisco Bay Area, along with a portion of NanoString to support him or her. The company is looking for a rare blend of skills, in someone familiar with science and commercialization, in not just scientific instruments, but also in clinical diagnostics.

“We may keep some of the science operations, the manufacturing operations here, but have some of the company in the Bay Area. We’re open to that when we select the person,” Young says. When I followed up with NanoString’s interim CEO, Wayne Burns, he wanted to clarify that the company is “not moving headquarters, but building out commercial operations centered out of the Bay Area. We are building a distributed organization as this is necessary for our goal to build a very large company.”

NanoString at this point is still really a tool company. As I described in a November feature, the basic idea is to allow researchers to look at a large number of genes, with digital precision, to see the extent to which they are turned on or off in a given sample. It’s the sort of technology that’s supposed to help researchers do a new kind of large-scale genetic experiment, where they might, for example, compare 100 genes or more from 100 different patients with diabetes to see how they respond to certain therapies. In the $1 billion market for gene expression instruments, the NanoString technology is made to compete with real-time polymerase chain reaction machines from big players like Carlsbad, CA-based Life Technologies (NASDAQ: LIFE), San Diego-based Illumina (NASDAQ: ILMN), and Switzerland-based Roche.

NanoString claims it has a competitive edge because it is digital; it doesn’t require complicated sample preparation steps that make other tools difficult to use for all but the most skilled technicians; and it is good at multiplexed experiments, in which a researcher can look at expression of as many as 700 to 900 genes at once, Young says. This kind of capability is becoming increasingly valuable as researchers study complex diseases driven by multiple genetic factors—like cancer, diabetes, or autoimmune diseases. And Young stressed that the NanoString technology is simple enough to be used in hospitals, and possibly even doctors’ offices someday.

NanoString, being privately held, doesn’t disclose details on its financial performance. But the company has only captured “a small percentage” of the potential market among academic researchers who might use a tool like this, Young says. It has even more work to do to grab market share among scientists at Big Pharma companies like Merck or Pfizer, he adds.

“When you’re selling equipment and reagents for researchers, there are always people who will adapt to new technologies quickly and will become your allies, and we have those in the current installed base,” Young says. “The issue is how you get to the next level for the rest of the scientific community? It’s usually one by one, each researcher and institution, working on their specific project. We provide them data to show what the technology can do, to close the sale. I think we’re at that point, and can push through that barrier.”

Winning converts in the scientific community is one of the main goals of 2010, but Young also put a lot of emphasis on the new frontier of clinical diagnostics. This is something close to his core expertise. At Monogram, a company he sold to LabCorp of America last year for $107 million, he oversaw development of a companion diagnostic called Trofile that helped doctors determine whether patients were likely to respond to Pfizer’s maraviroc (Selzentry), for HIV.

Obviously, there are a ton of hard questions to consider if NanoString is serious about getting into the diagnostics business. Should it go it alone, or find a marketing partner? Which particular disease indications should be the top priorities? Who are the right academic collaborators to help gather the proof that this can be valuable, and maybe help evangelize about it among their peers? Who can help navigate the changing regulatory standards? In an era of cost-containment, how will the NanoString diagnostic test prove it isn’t just effective, but that the improvement in patient outcomes justifies the added expense? How to do you find a niche so that you don’t spread a team of 55 employees too thin?

It’s unlikely that NanoString will have a commercially available diagnostic test ready this year, Young says. Instead, tThis year will be about working out the strategy with the new CEO, and the board. But despite all the challenges and risks, Young sounded like the potential reward is worth it.

“The technology base is so profoundly exciting, and frankly, the world is still looking for the ideal technology that can pair drugs and outcomes. That potential is immense,” Young says. “We all know that the world of personalized medicine is the direction we have to go. Just in the area of oncology, for example, we have good targeted drugs now. The problem is, we don’t know how to use them in combinations, and we don’t know which patients we should be treating, and at what stage. In the field of oncology alone, there is unbelievable potential to match patients and drugs much more readily to get better patient outcomes.”

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2 responses to “NanoString Chairman Bill Young Scopes Out Diagnostic Future, Considers Bay Area Expansion”

  1. “There are some very good people in this company, very smart, very dedicated, intense people. One of the things they need is consistent leadership that can take the company to the next level,” Young says.

    Hear, hear…
    There are great people at Nanostring, and the technology is super; it’s been the Board/leadership that’s been holding us back.
    I don’t know Mr Young but have spoken to colleagues who have worked with him and they are very very positive about him. Hopefully this thing will get it going now and we will get some value.
    Founder, Nanostring Tech