How Emerald BioStructures Escaped deCode’s Bankruptcy With Help From Boston VCs

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a research assistant professor at the University of Washington, specializing in structural biology at Wim Hol’s lab. Stewart liked the work, but he wasn’t on the tenure track, and he saw more of a future in business than academia. The dot-com boom was in full flower, and venture capitalists were chasing genomics dreams.

“I figured it would be easier to get money for a company than for an academic lab,” Stewart says.

The key skill Stewart and Kim had to offer was with X-ray crystallography. This is basically a way of taking high-resolution snapshots of proteins. It can be time-consuming, difficult work, and sometimes biologists throw up their hands and say a structure can’t be precisely determined. But for those who are good at this line of work, it can be extremely valuable for drugmakers. That’s because they want to design small molecule compounds with just the right binding properties for a target.

While many labs around the world were racing to sequence the genome as fast as possible in the early 2000s, the world soon learned that a lot more information was needed before this could translate into new drugs. Those genes provide instructions for making proteins, but proteins express themselves in the body in a variety of ways, and drugmakers often need detailed snapshots from X-ray crystallography to serve as a guide for how the drug binds with the target, and how it functions in the body. It’s really about making the leap “from gene to structure,” in Emerald lingo.

Neither Stewart nor his co-founder had any experience in business at the time. (Stewart later got an executive MBA from UW in 2003.) But back in 1998, Emerald got going with a modest $70,000 investment from friends and family, and a $100,000 Small Business Innovation Research grant via the NIH. When Stewart started looking around for lab space, there wasn’t any available in Seattle in those boom times. So the company ended up in some inexpensive light manufacturing space on Bainbridge.

Naïve as Stewart may have been about business then, he found financial support for Emerald’s work. The original company was acquired in May 2000 by MediChem Life Sciences, a Chicago-area contract research firm that specialized in synthesizing new drug candidates. “They said, ‘We’ll do the chemistry for drug discovery, and you can do the structural biology,'” Stewart says. “It was a good match.”

Then came Stewart’s first education in business. The air was popping out of the dot-com and genomics bubble. MediChem Life Sciences decided to go public anyway, in October 2000. “It was the last life sciences IPO for about two years. That will tell you something,” Stewart says.

While investors began to realize genomics was overhyped, the chemistry business at MediChem also started facing tough, low-cost competition from outsourced chemistry labs in China and India. MediChem’s hot technology at the time, combinatorial chemistry that rapidly synthesized lots of new molecules, suddenly started showing warts. Shares of the new public company tanked.

Then along came deCode.

DeCode Genetics was founded in 1996 by Stefansson, a charismatic neuroscientist from Iceland. During the genomic wave, he capitalized on … Next Page »

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