10 Dec Battelle Ventures confirms $3 million investment in CDI Bioscience
Madison, Wis. – The investment was first reported in a PriceWaterhouseCoopers MoneyTree report earlier this year, but Battelle Ventures and its affiliate fund, Innovation Valley Partners, have formally announced a $3 million round of venture funding for the Madison-based CDI Bioscience.
CDI is a biopharmaceutical technology company with a patented process to increase the productivity of cells in the manufacture of therapeutic proteins. The company will use the financing to commercialize a new production method that could move the pharmaceutical industry away from chemical-based therapeutic drugs to protein-based drugs. The infusion of capital will enable CDI to hire more research biologists, purchase new lab equipment, and expand sales and marketing.
Mort Collins, general partner for Battelle Ventures, now chairs CDI’s board of directors. Collins said Battelle Ventures, a $220 million national fund that invests in early-stage technology businesses, studied 14 companies that focus on cell reproduction. It concluded that CDI’s patented RP Shift technology is the best solution for enhanced cell production, whereas others were merely supplemental or additive technologies.
With the RP Shift process, Collins said a drug producer can simultaneously produce “vastly more protein” and save up to 40 percent on manufacturing costs. For a typical blockbuster drug, he estimates that CDI could save a pharmaceutical manufacturer hundreds of millions of dollars in production costs at a time when more drugs are in demand for treatment of cancer, arthritis, and multiple sclerosis.
“The RP Shift technology of CDI has the ability to just save hundreds of millions of dollars, and that’s an unusual situation,” Collins said. “Most of the things we invest in can make an order of magnitude or two orders of magnitude difference, but to be able to have the impact that this can have is truly unusual.”
Battelle Ventures, based in Princeton, N.J., has established an investment strategy to support companies that develop technologies that could solve fundamental problems in markets with inadequate solutions. According to Collins, some proteins have not been produced in sufficient amounts, and others have not gone into commercial production because of the cost and inefficiencies of producing them.
CDI’s technology is designed to address the inherent difficulty of manufacturing protein-based therapies, which must be taken in larger doses. By increasing the secretion of protein, the technology encourages cells to routinely produce three to seven times more therapeutic protein than they normally would.
CDI engineers cells to make them “competent” for the RP Shift process, essentially shifting cells from replication into production, according to Dr. Thomas Primiano, co-founder and CEO of the Madison biopharmaceutical technology company. Once shifted, the cells don’t waste energy dividing and they channel their resources into protein production.
Cell metabolism is controlled by the process, which increases cell stability and produces three to seven times more proteins than other processes, and is easily scalable, Primiano explained.
Primiano said the company’s target market is comprised of biopharmaceutical companies that produce therapeutic monoclonal antibodies. In this market segment, it generally takes a lot more product than a typical kind of drug to get an effective therapy, and since there are a lot of monoclonal antibodies that soon will come onto the market, there is a tremendous crunch on capacity in the production of therapeutic products.
“Our technology will accommodate therapeutic production and reduce their costs,” Primiano said.
CDI has 10 existing or successfully completed contracts, including several with large pharmaceutical companies. CDI now is involved in feasibility trials with a number of the existing companies. They send CDI their cell lines, the company introduces the RP Shift system into the cells, and then returns them.
The infusion of capital will enable CDI to hire more research biologists, purchase new lab equipment, and expand sales and marketing. The company, which employs five senior employees, all beyond the PhD level, already has a couple of experienced cell engineers to help introduce its technology into customers cells, and it has purchased equipment that streamlines its production process.
CDI, whose business model does not require much labor, is looking to double in size over the next year.
Collins has spent most of his career making early-stage, high-technology investments in a variety of industries. He said Battelle Ventures believes that CDI can ease the “marketplace pain” caused by protein production challenges.
“I’ve always looked at what I call pain in the market place,” he said. “What is the problem that this technology can have an economic impact on? That’s sort of the question that we try to answer for ourselves or our firm when we’re looking for some new idea.
“If you’re a technologist like I am, you get enamored sometimes of technology, but that doesn’t mean the moneyed world will trade money for them.”
Battelle also was attracted to what Collins called CDI’s “self-sustaining” business model. The company generates revenue from research licensing and commercial royalties for the use of RP Shift, and it receives escalating license fees and milestone payments as a drug proceeds from preclinical research to the Food and Drug Administration’s clinical trial.
In characterizing CDI as a winning combination with a lot of upside, Collins also cited the company’s limited capital requirements and its singular focus on cell reproduction.
Battelle Ventures’ portfolio companies in the health and life sciences sectors include companies like BioVigilant Systems, a developer of optical biodetectors for critical applications in pharmaceutical clean-room manufacturing; Endovalve, a cardiovascular device company; and Panomics, a life sciences tools provider developing new reagents to improve the understanding of biological pathways. Its affiliate, the Knoxville, Tenn.-based Innovation Valley Partners, is a $35 million fund.
CDI has yet to determine what its exit strategy will be, Primiano said, but the pace of commercialization is in much clearer focus.
“We expect our current contracts to mature over the next year,” he said, “and we’re looking out to about 2010 to have products on the market that were produced by us.”
• Early-Stage Symposium measures Wisconsin’s entrepreneurial climate
• Tom Still: Early-stage activity is a good sign for Wisconsin’s economy
• New Platypus Technologies CEO ready for key product launch
• Michael Rosen: Venture capital flows to Midwest life sciences at record rate