12 Sep OpGen's $23.6M venture capital score could transform hospital care
Madison, Wis. – Another Wisconsin technology company has secured a major venture capital commitment, this time almost entirely from investment funds outside the state.
Right on the heels of a $21 million commitment to Virent Energy Systems, Madison’s OpGen,Inc., has announced that it has raised $23.6 million in equity financing in a round led by CHL Medical Partners, Highland Capital Partners, and Versant Venture. Each organization has been involved in commercializing technologies for diagnostic and research applications, and their funding will finance a new application for OpGen’s “optical mapping” technology.
Mason Wells, a previous lead investor whose initial funding helped commercialize OpGens’s technology and spin it out of the University of Wisconsin-Madison, also participated in the most recent round.
Mason Wells also played a lead role in developing a new business model that could transform clinical microbiology and meet a critical unmet need in the healthcare industry.
“The funding represents a great next step for OpGen,” said Trevor D’Souza, managing director of Mason Wells Venture Funds.
OpGen’s optical mapping technology is used to identify microorganisms by analyzing DNA extracted directly from the microbial cells. It has allowed researchers to conduct comparative genomic analysis of organisms that impact human health, including work to trace the origins of food-poisoning cases such as the recent outbreak linked to contaminated spinach.
With this new financing, Op-Gen will develop commercial instrumentation systems for the clinical microbiology market. Clinical microbiology laboratories now depend on isolating and growing microorganisms from clinical samples, which is a lengthy process and provides very simple taxonomic identification. According to Ron Lennox of CHL Medical Partners, the results are rarely timely enough to influence choice of therapy, and they can lead to excessive use of “expensive, broad-spectrum” antibiotics.
In contrast, OpGen’s technology can produce data that is capable of identifying bacteria down to the strain level, and it can do so within a few hours on a single work shift.Corey Mulloy, general partner for Highland Capital Partners, cited a large unmet need for systems to rapidly and accurately diagnose clinical infections and to control “nosocomial” infections – those that are a result of treatment in a hospital or a healthcare service unit, but secondary to the patient’s original condition. “We believe that OpGen’s technology is uniquely placed to meet this need and to transform clinical microbiology,” Mulloy said in a release.
It was nosocomial infections that Mason Wells eventually identified as a new target for OpGen. This was done with input from Lennox, who is familiar with unmet needs in the biomedical industry. As a result of this exploration into new applications, OpGen has developed an new instrument with Optical Mapping as the underlying technology.
The original business model focused on providing genome mapping services, while the new model involves developing an instrument that enables customers to do the mapping themselves.
“VCs are constantly kicking around ideas for business models,” D’Souza said. “About two years ago, we developed new models around building an instrument and targeting a few problems to tackle first.”
As Lennox got other investors involved, those plans were further refined to first tackle one problem in particular – nosocomial infections.
“I think we will revolutionize the way microbiology labs work,” D’Souza said.
Colin Dykes, chief scientific officer for OpGen, said the funding commitment and the new application for optimal mapping represents an opportunity to “grow and expand our operations.” The company is about two years away from a commercial launch of the new instrument, and the venture funding is being used to develop the current benchtop device into an automated, stand-alone product.
OpGen, which announced layoffs earlier this year, now is in a position to expand its senior management team. The company still is looking to replace former chief executive officer Joseph Shaw, and a retained search for a new CEO is under way.
In conjunction with the funding commitment, Lennox will become chairman of OpGen’s Board of Directors. He will be joined on the board by Corey Mulloy and Bijan Salehizadeh both of Highland Capital Partners, and Versant Venture’s Brian Atwood.
Salehizadeh said the current market size for microbiological automation is roughly $500 million, but a rapid test potentially could push that to $1 billion, especially with government reluctance to reimburse hospitals for nosocomial infections and with bacterial resistance to antibiotics. The latter, he said, is “one of the top five public health emergencies in the world.”
OpGen’s overall staff size is back to where it was before the job cutbacks, and it probably will have to increase staff by another 50 percent within the next year, Dykes said. As it moves forward, the company will be looking to add software engineers, people with bioinformatics capabilities, and (as it gets closer to product launch) sales and marketing professionals.
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