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Promega spins off RFID 'smart appliance' company

Image courtesy Promega
Fitchburg, Wis. - Life science company Promega has spun off its division that sells and services small storage units that utilize radio frequency identification (RFID) and the Internet to track inventory.

Terso Solutions Inc., was conceived in May 2005 and formally launched this week. The company will leverage the PromegaExpress technology, developed in 2002. Promega has already deployed the technology, which is embedded in "smart" laboratory storage cabinets, to securely track, monitor, and bill for use of its products.

Sanjay Tripathi has been appointed as Terso's chief executive officer. Previously he was of chief operating officer at Imago Scientific Instruments, a nanotechnology firm. In addition to his work with Imago, Tripathi was project manager of the Intel core team that helped create the first commercial Pentium chip-set and was a member of the management consulting firm McKinsey and Co.

Promega will be Terso's initial primary customer and will finance the new company for the first three to four years. Terso will be headquartered in Promega's new 84,000-square-foot office building that is under construction in Fitchburg, scheduled for completion in September 2006. Terso, which is named after the Italian and Spanish word for "clear," is currently operating in Promega's existing facilities.

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The storage units, or "smart appliances" as Terso refers to them, are one of the only RFID solutions designed to tag individual units instead of pallets. RFID tags and related software record changes in the contents of the magnetically locked freezers.

New applications beyond life sciences

Terso plans to further develop the technology and offer new applications and solutions beyond the life science industry. For example, RFID tags could be placed on medical devices and tools inside an operating room, with biological agents studied in military labs, and with drugs stored in remote areas such as aircraft carriers and submarines. The technology could also be used in hotel mini-bars or to monitor service parts flow for copy machines.

"In short, any situation where knowledge of inventory, and who has accessed that inventory, is considered important and could be a business opportunity," said Promega founder and chief executive officer Bill Linton. "Distribution of products in the life sciences represents maybe 10 percent of the market potential for the RFID solution that we have created."

Paper-based problem fueled innovation

The concept for Terso's technology was conceived in 1998, when Linton applied for one of Mobil Gas's SpeedPasses, an RFID device that automatically charges users for fuel with the use of a credit card. Surprised by how much RFID had streamlined the simple task of filling a gas tank, Linton began brainstorming how RFID could modify Promega's business relationship with labs it supplied.

"The idea six years ago was to use the 'Speed Pass' concept, but apply it to our life sciences industry, and to be the first company to introduce a fully automated system for inventory and transaction management," Linton said.

Automation would be a definite improvement over the way Promega usually handled its transactions - an "honor system" Linton likened to a hotel mini-bar. Under such a paper-based method, scientists fill out a form on the side of the freezer with their identification codes and whatever they removed, and sales representatives restock based on those forms.

But paper-based systems are prone to error, such as scientists entering the wrong data on the forms or simply forgetting to fill them out. Additionally, the paper forms provide no information privacy. Anyone with access to the storage room, including sales representatives from other companies, could see what was being used and who was using it.

"It’s an inefficient system that has issues with shrinkage, inventory not being stocked, and expired products, as well as wasted sales professionals' time checking inventory," Tripathi said. "For 26 years, we had a system where we did not know exactly who bought what, where and when."

Right chips, right network, accessible anywhere

Promega recognized that fixing the system could give it an edge over competitors, and began developing the system in 2000, before Wal-Mart brought wide attention to RFID technology when it mandated that suppliers tag every pallet shipped with RFID.

Fixing the system was a challenge for Promega, however - the appliances had a long list of prerequisites that often clashed with the limitations of RFID. Promega had to design chips that could work in enclosed spaces and handle temperatures as low as -20 degrees Celsius, and make sure the frequency was strong enough to read through metals and liquid.

"The RFID chips that could provide the appropriate information in a simultaneous 'read' were still under development by a couple of companies, both using a different technical approach in chip design," Linton said. "Since we were early in the development of this application, we worked through the early stages of product evaluation - successes and failures - with these companies."

Following hardware development, the next challenge was to develop a Web-based software system that could store all product information on a database, updated whenever something was removed from the appliance. Promega had to develop specific processes to integrate those systems together, filing 10 patent applications to keep the functions' information secure.

Tripathi said the primary system goal was to make the content information available over any connection, with users accessing the information based on their clearance levels.

"If you just have a Web browser and a connection to the network, you can be sitting anywhere and just log onto the software and look at inventory everywhere," Tripathi said.

Promega currently uses the network to evaluate when it needs to restock its sales freezers. Outside of Promega, users have a perfect record of what is removed from the appliance and can use that information to learn what the most popular contents are.

"They keep track of that, to see how much of that is in use and what they need to restock," said Sylvia Warner, a support technician for the Sam Noble Foundation. The foundation has used the appliances for plant biology research since 2002.

Fitting into the RFID universe

Although Terso is just beginning to integrate its solution into other fields, company representatives are confident about fitting into the RFID marketplace, predicted by analysts to reach $30 billion by 2010. According to a recent industry study by Fast Track Technologies, RFID and related technologies in the hospital area are expected to make up $8.8 billion of that market - a huge jump from 2004 when it was placed at $1.49 billion.

Of that $8.8 billion, $1.3 billion is expected to be spent on hardware and software integration, another $1.3 billion for infrastructure support and wireless networks, $1.4 billion for enterprise-related software, and $4.8 million for hospital connectivity.

Tripathi and the Terso team are confident the technology will be able to claim a part of that market, largely because it is based on the already successful PromegaExpress platform. Unlike other emerging RFID technologies, PromegaExpress has demonstrated a positive rate of interest and customers easily see return on investment, the company said.

Reik Read, an analyst with Robert W. Baird and Co., said getting down to the item level with RFID is an approach that will make the solution a popular choice for suppliers and a springboard to move into other industries. Smart appliances "are a perfect example of the types of application RFID can bring to healthcare that would be very difficult to bring to other areas," Read said.

Customers already appreciate the Promega system. Sylvia Thomas, floor manager at the University of Texas Southwestern Medical Center, whose department of cardiology beta tested Promega’s proprietary RFID technology, said placing all the information in one place makes storage far easier. Administrators are now kept in the inventory loop via confirmation e-mails on removed items, and the digital storage of information heavily limits security concerns.

The system's perks have been noticed by more than just the university - representatives from Invitrogen, ISP BioExpress and Roche, who works with the University of Texas, have all expressed interest in adopting the technology.

"It's like the difference between not having and having a cell phone," Thomas said. "The end user doesn't have to remember the number, fill out paperwork or anything like that."

As it continues to expand into new markets, Terso intends to keep driving on its founding principle: simplifying the way business is done. Tripathi said that the new company intends to keep the solution simple as possible, making sure customers can use the system almost immediately after purchase.

"Our strength lies in our ability to apply RFID technology to drive measurable results," Tripathi said. "The initial launch of the product within the life sciences industries has been remarkably successful, and the company plans to build on this momentum as it continues to expand its presence within this market and other vertical markets."

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Promega, founded in 1978, is a worldwide supplier of reagents and enzymes with patents in nucleic acid purification, human identification, bioluminescence, coupled in vitro transcription and translation and cell biology. The company has more than 750 employees, including more than 500 in Fitchburg. It serves more than 90 countries and has annual sales of more than $170 million.

Mike Klein is WTN’s editorial director and can be reached at mike@wistechnology.com.

Les Chappell is a writer for WTN in Madison. He can be reached at les@wistechnology.com.

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