TAI Diagnostics Hires CEO, Nabs $8.3M to Push Post-Transplant Test

Xconomy Wisconsin — 

Five months removed from raising $6 million from investors, TAI Diagnostics has upped the ante.

Last week the Milwaukee-area startup, which is seeking to commercialize a non-invasive test to monitor the health of heart transplant recipients, said the value of its Series A round has climbed to $8.3 million. The company also said it hired a CEO: Frank Langley, who spoke with Xconomy Wednesday about the latest financing and TAI’s road ahead.

In a press release announcing the round, TAI said Madison, WI-based Venture Investors participated, along with “other private investors.” Langley declined to name other funds or investors who took part.

Langley says TAI—which stands for “Transplant and Immunology” and is pronounced “tie”—will use the Series A money to continue developing its test. The assay measures levels of cell-free DNA, genetic material discharged by the patient’s new heart that enters the bloodstream, to determine whether the person is in danger of rejecting the organ.

A simple blood draw is all that’s required for the test, which would be a big improvement over current practice. For a heart transplant recipient, an invasive biopsy procedure involves inserting a wire in the neck, running it down the body through a vein, and collecting tiny pieces of the heart.

The company could bring the test to market in one to two years, Langley says, and it may prove flexible enough to use on patients who have received other types of organs, such as kidneys and lungs.

Langley says that while biopsies remain the “gold standard” for monitoring organ acceptance, they have numerous drawbacks. “It’s expensive for patients and their insurers, there’s a risk of infection, and biopsies can be a late indicator of the beginning of an organ failure,” he says.

TAI will also use the new financing to add staff. Langley declined to share the current headcount, saying only that the startup plans to hire “scientists and lab technologists.”

The funding will also support construction of a laboratory where TAI will analyze blood samples and prepare reports to send back to physicians who order the test.

The lab will be located close to TAI’s offices on the University of Wisconsin-Milwaukee’s Innovation Campus in Wauwatosa, WI. The campus is near a healthcare cluster that includes Children’s Hospital of Wisconsin, Froedtert Hospital, and the Medical College of Wisconsin (MCW). Aoy Tomita-Mitchell and Michael Mitchell, a married couple who launched TAI earlier this year, are both faculty members at MCW. (She is an associate professor and research scientist at the college; he’s an associate professor there, as well as a pediatric cardiothoracic surgeon at Children’s Hospital of Wisconsin.)

One of their previous ventures was Ariosa Diagnostics, which developed a blood-based prenatal screening test for expectant mothers. A woman who has the test performed on her can learn the baby’s gender and determine if she’s at risk for fetal chromosome abnormalities, which could result in her child having a genetic disorder like Down syndrome.

Like the heart test TAI is developing, Ariosa’s test marked a switch from invasive to non-invasive. Previously, the most popular way of identifying chromosomal irregularities in a fetus was through amniocentesis, a procedure in which a needle is inserted into the uterus to sample amniotic fluid.

The Mitchells began the research that led to Ariosa while working at the University of Louisville. In 2006, they moved to the Milwaukee area, where they’ve lived ever since. However, they believed investments would be easier to come by in California than in Kentucky or Wisconsin, so they picked San Jose, CA, for Ariosa’s headquarters. In December, Swiss pharmaceutical giant Roche acquired Ariosa. According to Roche’s most recent annual report, the purchase price was $400 million in cash and up to $225 million more in incentives.

This time, the Mitchells are keeping their startup closer to home. This appears to have had little to no effect on their ability to raise capital.

Another step toward commercialization is generating more patient data, says TAI CEO Langley, and the NIH wants to help. In 2013, the government research agency awarded MCW and its collaborators, which include TAI, a five-year, $3.2 million grant to determine whether the encouraging results of a previous 50-patient study could be observed across a larger population.

“The data from the first phase looks very promising,” Langley says. “We’re still recruiting patients for the next phase of the study, which [involves collecting] deeper clinical information.”

TAI is racing its competitors, one of whom has already reached the market. Langley says AlloMap, from Brisbane, CA-based biotech CareDx (NASDAQ: CDNA), is the first blood-based cardiac transplant monitoring product to become widely available. In May, the company announced it had enrolled the first cohort of patients in a study on organ rejection in kidney transplant recipients.

“CareDx is our primary competitor,” Langley says.

TAI could start generating revenue once its reference laboratory receives accreditation and the startup persuades providers its assay is worth ordering. Langley says initially, TAI would handle testing the same way it does today for patients in studies: Samples are shipped from draw sites to the lab for analysis, and TAI sends a report back to the patient’s health system. Several years down the road, Langley says, the company could shift from this centralized, service-based model to a kit-based one. With that approach, TAI would essentially put its technology in a box with instructions, allowing providers to examine samples themselves.

“That’s always a big strategic question for companies like us,” Langley says. “Do we want to be in the service business? Or do we want to be in the manufacturing business?”

Langley has over 30 years’ experience in the life sciences industry. Most recently, he served as vice president and general manager of transplant diagnostics at Immucor, a Norcross, GA-based medical device maker. Before that, he spent more than eight years at Pel-Freez Clinical Systems, which develops molecular and serologic diagnostic products for organ transplantation. While working for Pel-Freez, Langley was based in Brown Deer, WI, meaning his joining TAI marks a return to the Badger State.