15 Aug NovaScan decides against tax credits
Milwaukee, Wis. – NovaScan, an early-stage medical imaging company developing what it believes to be a novel tool for early detection of breast cancer, had to bypass angel tax credits from the State of Wisconsin to finance clinical trials for its emerging technology.
The company instead has raised a total of $385,000 from a combination of five investors, a state loan, and grants.
According to CEO Larry Wells, state law prohibits the company from accepting both the angel credits and a $50,000 technology development loan from the Department of Commerce. And since only one of the five investors would have qualified for the tax credits anyway, the company pursued an alternative financing package.
“In our case, they [investors] were interested either way,” Wells said. “Under this scenario, the investor could not qualify for the tax credits due to the loan.”
A credit to medicine
Tax credits are only available for investments made in technology businesses qualified by Commerce. In July of 2005, the department qualified NovaScan for investor tax credits under its Angel Investor and Venture Fund Tax Credit Programs, which are designed to generate more private investment.
Part of Wisconsin Act 255, the programs attempt to stimulate venture financing by encouraging investors, through the incentive of tax credits, to fund the next phase of development in early-stage Wisconsin companies, mostly in life science, medical imaging, and information technology.
The angel investors, including three from out of state and two from Wisconsin, will contribute a total of $285,000, with the state loan and grants accounting for the rest. The loan covers qualified expenses related to the development of the product during clinical trails.
The tests will attempt to validate a prototype imaging device that might be able to distinguish between the electrical properties of healthy tissue and malignant tissue. By identifying the electrical properties of different tissues, including healthy and malignant, the company might be able to promote earlier detection of different cancers.
NovaScan has targeted breast cancer as its initial application, and it might eliminate or reduce the need for expensive and invasive biopsies to confirm the results of a suspicious mammogram. Existing equipment can detect the presence of an unusual mass in a woman’s breast, but it cannot confirm malignancy.
“Eighty percent of them [biopsies] turn out negative, but they are expensive and the scarring can be traumatic for the patient,” Wells explained.
Wells said the intention is to use the device in conjunction with X-ray mammography equipment.
Clinical tests could begin as early as September at a local hospital that Wells declined to identify until their collaboration has been confirmed. The length of the trial could be determined by the availability of willing patients, but NovaScan is looking at a 6- to 9-month window.
“We will need samples of both cancerous and non-cancerous tissue,” he noted.
Following the clinical trials, NovaScan will either conduct another round of testing to “tweak” the technology, or it will proceed directly to Food and Drug Administration testing, which typically is conducted with larger patient counts and at multiple sites, Wells said. At that point, the company will require another round of financing.
The imaging technology has no formal name, other than the generic EPET II (Electronic Property Enhanced Tomography), and someday it will be tested on other cancers, Wells stated.
“It’s reasonable to assume,” he said, “that the principle will be applied to other parts of the body.”
• Winners of past business plan contests secure funding, credibility
• Tom Still: Wisconsin companies on the front lines in the war against cancer
• NovaScan qualifies for investor tax credits
• UW-M engineering dean heads for promising medical business
• Tom Still: Milwaukee research institutions step up the pace for technology transfer