IPO-bound NimbleGen traveling in fast company

IPO-bound NimbleGen traveling in fast company

Madison, Wis. – It has yet to turn a profit, and it operates in a biotech space where the competition is global in scope, but the decision by Madison research tool manufacturer NimbleGen Systems to file an initial public offering and raise up to $75 million is the latest bit of evidence that the Wisconsin biotech company is going places.
The IPO filing continues a pattern of growth and visibility for NimbleGen, which saw its revenues grow to $13.5 million in 2006, triple the $4.5 million reported just two years earlier.
NimbleGen, which develops DNA microarray technology that enable researchers to examine entire genomes in a single experiment, is limited by law in what it can say about the IPO, which was announced late on Friday. Company executives also have been quiet about its most recent $12.5 million round of venture capital, but recent moves provide evidence of its global sales direction.
While one reason for the IPO would be to provide a return to investors who have stepped up with more than $60 million in venture funding, it could also be used to support the company’s efforts to expand globally as the DNA chip market grows worldwide.
UW tech transfer
NimbleGen, founded in 1999, was spun out of University of Wisconsin-Madison research. The market differentiating characteristics of its array synthesis technology, which has produced several applications and is licensed through the Wisconsin Alumni Research Foundation, is that it allows scientists to obtain complex genetic data sets that previously were not available, resulting in a clearer understanding of genomics.
That market distinction has led to global collaborations. In January, NimbleGen announced it would have its scientific research tools sold worldwide as the result of licensing and supply agreements with Oxford Gene Technology, a microarray consultancy service headquartered in Oxford, England. Under the terms of the supply agreement, the British firm will obtain NimbleGen’s DNA microarrays, which are chips used to analyze genes at the molecular level.
Oxford Gene Technology was founded in 1995 by Sir Edwin Southern. The company is developing a family of prokaryotic chips for use in life-science research.
The Oxford deals followed the acquisition of intellectual property rights from the Santa Clara, Calif.-based Affymetrix, Inc., which should enable NimbleGen to extend its reach in the growing microarray market. In what NimbleGen president and CEO Stan Rose called “a major milestone,” the licensing agreement allows NimbleGen to commercialize products, including technology used to study the relationships between genes and health, that are covered by Affymetrix patents.
The transaction has significant market access implications because it helps NimbleGen overcome intellectual property constraints. NimbleGen can now manufacture and sell arrays to scientists for use in their own laboratories, whereas in the past, if those scientists wanted access to NimbleGen technology, their only option was to send in samples for analysis at NimbleGen’s service laboratory in Reykjavik, Iceland.
Research institutions
Research institutions also view NimbleGen as a worthy collaboration partner, in part because its research products have offered new insights into genomic disease.
NimbleGen’s research tools were given partial credit for expediting research into the genetic causes of mental retardation discovered by researchers at University of Washington and the Howard Hughes Medical Institute. Dr. Andrew Sharp, a senior fellow of the University of Washington, said NimbleGen’s high-density arrays, which were targeted to specific chromosomal regions, provided in a single experiment what would have taken months to discover using conventional methods.
The company has entered into a number of limited-access partnerships, opening the door for organizations like Yale University, the University of California-Davis, and UC-San Diego to work with NimbleGen chromatin arrays, which offer more than two million probes per array. This enables scientists to reduce the number of arrays used in whole-genome scans from 38 to about 7, reducing costs to researchers.
NimbleGen also pulled a management coup this week when Dr. Leroy Hood, a prominent molecular biologist and genomics researcher, joined NimbleGen’s board of directors. Hood, who is co-founder and president of the Seattle-based Institute for Systems Biology, gained notoriety by helping to create a DNA sequencer to map the human genome.
Hood, who will serve as chairman of NimbleGen’s scientific advisory board, is about to be inducted into the National Inventor’s Hall of Fame.
Venture support
Even before NimbleGen’s most recent round of venture financing raised $12.5 million, it was one of the most capitalized biotechnology companies in Wisconsin. Both Baird Venture Partners and Venture Investors, two of the most prominent venture capital firms in Wisconsin, count NimbleGen among their portfolio companies, and both organizations are branching out to expand their circle of investor connections.
Baird Venture Partners, which already has a presence in China, has decided to partner with the Indian investment and advisory firm Tholons, Inc. to serve portfolio companies as they establish a foothold in the Indian market.
Venture Investors, in a move that could bring additional investment partners to Wisconsin deals, recently announced it would open an office in Ann Arbor, Mich. after receiving money from a Michigan venture fund.
Prospectus
Perhaps mindful of recent shareholder lawsuits, NimbleGen, which reported a $6.8 million net loss in 2006, was upfront in its SEC filing about its future expectations and risks. The company said that net losses may continue for the next several years as it pursues the expansion of the business, and noted that it has incurred net losses since its inception. The filing indicates that its total deficit is approximately $44.5 million.
NimbleGen listed as risk factors its limited experience in sales, marketing, and field support, and its dependence of distributor sales, which accounted for 20 percent of its 2006 revenue, in key geographic markets.
According to the filing, NimbleGen had $19 million in cash and cash equivalents on hand at the end of 2006, including $10.3 million of working capital.
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