Monday, February 11, 2008

Biomed Notebook

Gates grant grows biotech's reach, but doesn't shift its focus

By Ryan McBride

New technologies can have so many potential uses that startups sometimes have trouble picking one or two on which to focus -- causing some to fall into the trap of spreading their resources thin while chasing too many markets.

Michael Magliochetti, chief executive of Claros Diagnostics Inc., has avoided trying to develop his Woburn startup's technology for multiple uses.

He has instead focused on harnessing the company's technological resources to come up with a single product designed to provide quick diagnosis of prostate cancer inside physicians' offices.

The company's technology could enable doctors to put a finger prick of a patient's blood onto a disposable casette the size of a credit card and load it into a handheld analyzer to diagnose the disease within 15 minutes. This would save patients and doctors from having to wait hours or even days and weeks for such a test to be done in a central lab. Magliochetti has said the company would develop its technology for other diseases once it finishes work on the diagnostic for prostate cancer, still a couple of years away.

Apparently, however, the folks at the Bill & Melinda Gates Foundation didn't want to wait that long. The foundation just awarded a $3 million grant to a new effort to develop the Claros system to diagnose infectious diseases in developing countries.

One of Claros' backers is Commons Capital, a Brookline-based venture firm that invests in companies working to solve social or environmental problems. Commons Capital has joined forces with RTI International, a North Carolina research institute focused on health care, to apply technology from firms in its venture portfolio to benefit countries with limited access to modern medical care.

Commons Capital backed Claros in its $7.8 million Series A financing announced in 2007, which was led by venture firm Oxford Bioscience Partners of Boston and included investments from Cambridge's Bioventures Investors as well as Accelerated Technologies Partners in Hackensack, N.J.

Magliochetti said Claros would retain ownership of any discoveries developed from the Gates-funded effort, and the findings of the project would enhance the startup's previous goal to apply its technology to the infectious diseases market. However, his firm remains focused on developing the technology for prostate cancer while RTI handles the project concerning infectious diseases.

"The program with RTI will provide us with insight into the infectious disease market, where we can utilize our technology to (perform) several ... tests on one disposable cartridge with just a finger stick of ... blood," Magliochetti said in an e-mail last week.

So with the help of a megabucks-backed foundation, Claros gets to explore a far-flung market without giving up its single-product strategy.

Biting the hand?

Late last month, AthenaHealth Inc. chairman and CEO Jonathan Bush entertained an audience at MIT, where as a featured speaker on a panel focused on initial public offerings he bemoaned the slick ways and hefty fees of investment bankers. Investment bankers, of course, profited handsomely in AthenaHealth's September 2007 IPO, in which its common stock jumped from $18 per share to more than $30 per share on its first day of trading.

"They try to snow you at every turn," Bush said during the Jan. 24 MIT Enterprise Forum panel.

Bush, the first cousin of President George W. Bush, also advised audience members to have the investment bankers cover the tab for private jets used for the customary "road shows" companies undertake prior to their IPOs -- and to stay clear of the jets' stocks of quality Scotch. He even noted with tinge of remorse that the bankers reap even more fees when they sell companies on secondary stock offerings soon after the IPO.

Interestingly, Bush's comments came one week before his company, which provides web-based billing software for medical practices, announced on Feb. 1 that it had decided to pull the plug on its own secondary stock sale due to market conditions. The firm made no mention of excessive investment banking fees entering into the decision.