18 Oct Proceeding with caution at corner of IT & biotech
Madison, Wis. – Some of the world’s most powerful supercomputers are used for biotechtechnology or pharmaceutical applications, and that comes as little surprise to the Wisconsin companies operating at the intersection of information technology and biotech.
However, while information technology is extremely important in the biotech sector – computers run the instruments for manufacturing and analysis, enterprise resource planning systems track inventory, and laboratory information systems track lab data – not every biotech leverages IT to the same extent.
Of the companies that are both computer science and bio-science sensitive, many are in genomics: OpGen, EraGen, NimbleGen, and even some “non-Gens” like Promega. Their merging of heavy computing and life science is a customer-centric practice.
“Most contemporary genetic companies are multi-disciplined,” noted Joseph Shaw, CEO of OpGen, a Madison biotech known for its optical mapping technology, which is used to reveal the architecture of the human genome. “OpGen has to combine very sophisticated software with very sophisticated electronic engineering with sophisticated micro-fluidics to enable the underlying, patented technology to work effectively in the hands of the user.”
While optical mapping is likely to remain OpGen’s core technology, others are making IT transitions. EraGen Biosciences, which once placed greater emphasis on its Master Catalog system of software and algorithms to mine the genome landscape, now is developing proprietary software to support data analysis for its Multi-Code assays. The panels are designed to rapidly detect respiratory diseases like avian flu.
“We have a chemistry that is mostly instrument agnostic, which is one of our competitive advantages,” said Erik Nielsen, software development group leader for EraGen, “but to be able to sell the chemistry, we need to support the data analysis with software.”
Information “Big Bang”
The link between life science and information technology, which is driving most cancer therapy advances, is undeniable but also problematic. For example, the image-guided radio therapy system developed by Madison’s TomoTherapy is capable of generating one or two gigabytes of information per patient, and the next-generation, which involves real-time tracking and verification, could be even more prolific.
However, in a clinical setting, workers don’t want large tables of data, they want information that can be used to support a medical decision. So part of the challenge will be aggregating the data, and given the sheer volume of bio and medical informatics that will be generated in the next decade, part of the challenge will be keeping pace.
Which begs the following question: Are IT and biotech developing at complementary capacities?
“In my opinion, they are,” said Trevor D’Souza, managing partner of the Milwaukee-based venture capital firm Mason Wells. “I don’t think the biotech industry is pushing IT’s capabilities to the max by any stretch of the imagination. The biotech industry is a big user of IT, but it is not the biggest user.”
The technological solutions are there, agrees Nielsen (EraGen), but not always at the right price. There are high-cost solutions for larger labs, low-cost solutions for smaller labs, but many of the medium-range solutions are “cost prohibitive for small biotechs, so it’s not a matter of capacity so much as a price-point,” Nielsen said.
Do companies that combine science with a heavy dose of computerization have special advantages when it comes to raising venture capital? Is the leveraging of biotech with IT considered such a force multiplier that venture investors can’t resist it?
While scientists approach their value proposition from a technology standpoint, investors have a market perspective.
Mason Wells’ support of OpGen has little to do with its IT component. D’Souza said the fact that OpGen has “a lot of IT” was neither a reason to do the deal, nor a reason not to do the deal. “When we look at investments, we try not to look at the technology as much as we try to look at what is the market problem that we’re solving?” D’Souza said. “And how does the technology apply to that problem?”
D’Souza thinks the involvement of IT takes away some of the risk for investors because there is a distinction to be made between scientific research, where there is more risk, and development, which involves the IT component and carries less risk.
In the final analysis, it was EraGen’s core chemistry technology and its potential impact on diagnostic testing that caught the attention of First Analysis Corp., a Chicago venture capital firm.
Tracy Marshbanks, senior vice president specializing in research and development for First Analysis, said the IT component does not automatically make biotechs an attractive investment target. “It’s not a distinguishing part, it’s a required-to-play part,” he said.
For a biotech company that is developing a drug, Marshbanks said the risk comes in clinical trials, not in a multi-disciplinary nature. To mitigate risk or better manage a company, he said it helps if the organization has a breadth of capabilities. “All functions are becoming important in terms of distinguishing yourself from the pack,” he said.
Shaw, however, believes the multi-disciplinary aspects of OpGen frightened some investors away. He believes it causes investors to pause because they see increased risk with bringing together multiple disciplines, which leaves biotechs with two options.
“If you have unlimited resources like the east coast companies do – $50 million, $60 million – they build their internal infrastructure,” Shaw said. “Because we’re in a place that doesn’t have those kinds of fiscal resources, it necessitates our partnering with companies that have certain expertise, which is often viewed by the investor as an increased risk.
“In my opinion, it decreases the risk because that doesn’t require our building an infrastructure, which is expensive and takes time to build.”
Laboring for biotech
For those worried about the impact of the dotcom bust, outsourcing, and off-shoring, the growth of biotechnology is one factor that has increased the need for information technology professionals.
However, not everyone in biotech believes Wisconsin’s IT industry is as robust as the biotech industry needs it to be. “One of the main problems in the IT industry for biotech is finding qualified people to staff IT projects,” said Nielsen said. “There are many companies to outsource IT work, but this can be cost prohibitive to small biotech companies.”
With such dependence, there is little doubt about the importance of IT in enabling biotech. “I think IT can take the biotech industry to the next level,” D’Souza said. “I don’t think IT is going to be holding back the biotech industry because it’s not a limiting factor. If anything, it’s going to be an enabling factor.”
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• SWIB plans to invest $50m with Mason Wells and Venture Investors