Gentris, a 2001 biotechnology startup focused on reducing the number of deaths caused by adverse drug reactions, is one of 23 companies preparing for presentations at Venture 2003, the Council for Entrepreneurial Development’s 20th annual venture capital event.

As it did a year ago, Local Tech Wire is featuring in-depth profiles of presenting firms built around a Q&A with a company executive as well as a Fact Box of important information. One profile will appear each day.

LTW put together a Q&A designed to not only produce facts about the presenters but also to give each a chance to state the case for venture capitalists to invest.

Fourth in the series is from Gary M. Pace, Ph.D., vice president of corporate development and legal affairs for Gentris.

Venture 2003 is set for April 22-23 in Chapel Hill.

Times are tough. If you had only one chance and one paragraph to convince an investor, how would you answer this question: “Why should an investor choose your company?”

Gentris Corporation provides products and services that address the fourth leading cause of death in the US — adverse drug reactions.
Drug tolerance has an established genetic component, and in a relatively short time Gentris has emerged as a leading provider of clinical pharmacogenomic products and services to the pharmaceutical industry that allow the identification of individuals who are at risk for intolerance to certain classes of drugs. Gentris is now rapidly expanding its revenue stream and product offering to include vital testing for physicians and patients who will benefit from potentially life-saving information needed to prescribe many approved medications.

What is the “pain point” (or points) you address for your customers?

Gentris’ products and services address the problem of high cost ($400 million to 800 million per drug) and low efficiency (1 in 10 candidates survive clinical trials) in drug development today. By taking into account the genetic basis for drug metabolism and tolerance in clinical development, efficiency is increased and costs can be reduced.

What makes your company unique? Do you have a proprietary and/or a patented technology? Please explain why it is unique and what the status is of any patent filings.

The Company is unique in having the expertise to design, validate, and commercialize diagnostic tests for predictive drug-response genes, both novel and public domain, and to navigate the necessary regulatory hurdles in order to obtain approval for clinical diagnostic products. The Company’s proprietary market position is based on its expertise, combined with the intellectual property embedded in the control materials, primers, protocol, and proprietary methods at the heart of every diagnostic test kit.

Gentris’ intellectual property is also based on its know-how and expertise in the selection of the appropriate genetic mutations needed to give pharmaceutical companies and physicians the proper prognosis concerning patient response to drug therapy. In focusing on product development inventions, Gentris intends to strategically patent those pharmacogenetic products that have achieved proof-of-concept in a diagnostics setting, which can form the basis for GLP-compliant and FDA-approved tests, and where the value in the marketplace is more predictable. The Company is currently filing provisional patents on specific products embodied in Gentris’ kits.

Gentris also possesses proprietary know-how and trade secrets which it intends to keep confidential. Embodied by its collection of SOPs, this “Core Technology” will remain confidential and proprietary to Gentris. While the diagnostic tests themselves, the actual methods and compositions for the detection of allelic variation, is expected to form an important element of Gentris’ patent estate, Gentris’ Core Technology makes a substantial contribution to its reputation as an established provider of reliable and accurate pharmacogenetic testing. Some of this Core Technology will either not be patentable, or patents will not be sought, as this would be outside Gentris’ strategic concept regarding patent protection.

What makes your product(s) and/or services unique vs. your competition? (Who is your competition, and what do they offer?) If you have no competition, why not?

Most companies in the pharmacogenomic “industry” are focused on research and discovery of genetic markers (an identifiable physical location on a chromosome with a known inherited mutation). Gentris operates in the applied clinical and diagnostic markets and has significant advantages over its closest competitors for clinical pharmacogenomic applications. Unlike Gentris, the majority of pharmacogenomics competitors do not offer clinical or diagnostic genetic testing, which, compared to research, requires significantly higher levels of accuracy and reproducibility in a highly regulated environment. On the product side, analyte specific reagents will be marketed to clinical development laboratories wishing to expand by entering the pharmacogenomic testing market. These companies rarely perform assay and product development in-house, but instead prefer to buy turnkey high quality products.

In addition, Gentris will provide FDA approved point-of-care pharmacogenomic testing kits to clinical diagnostic laboratories. Regulatory groups are encouraging clinical laboratories to move away from so called “home-brew” testing by purchasing and using only FDA-approved clinical diagnostic products. At the same time, automated platform technology companies are encouraging their customers to adopt approved kits so that laboratories can focus on their expertise on production. Gentris’ competitors are companies such as Orchid or Lab Corp in clinical services and Celera Diagnostics or Third Wave Technology in diagnostic products.

Does your company already generate revenue? If so, how much? Are you cash flow positive?

Yes. Gentris generated $288,000 in revenue for 2002, with an operating loss of $819,000. Gentris was cash flow positive in January, 2003, due to a robust month for accounts receivable. Despite predicted variability through 2003, the Company expects it will be cash flow positive for the year.

What is your target market? What is the size of that market in terms of dollars? What share of that market do you believe you can win?

Gentris participates in three distinct sectors within the pharmacogenomic industry; testing services, investigational diagnostics for drug development, and point-of-care physician referred diagnostic products (including automated platform, detection and reporting technologies). Independent market research conducted by Front Line, The Boston Consulting Group, AdvanceTech Monitor, The Lewin Group and others estimates that by 2010, these markets will reach $1.4 billion, $14billion and $12 billion respectively. Gentris expects to exceed $ 90 million annually in revenue from these sectors beginning in 2006.

What will you do with the invested funds? What is the timeline for product delivery? If you have existing products and services, how will additional funding help you expand your company, if that is the intention, or will you develop new products?

Develop and commercialize FDA-approved clinical diagnostic test kits based on the company’s current GLP and CLIA compliant testing assays and protocols. Gentris expects FDA approval of its first product in Q4 of 2003, with market launch in Q1, 2004. The funds will supplement current revenues generated by the Laboratory Services business unit, and will be used for product development, infrastructure expansion, beta testing, clinical studies, submissions to the FDA, required staffing, and international growth of services.

What do you want from an investor other than money?

Strategic business advice.

Why will investors be impressed with your management team?

Gentris’ management team has close to 100 years of experience in the relevant industries and technologies. This is combined with extensive industry recognition of the management team as leaders in the application of pharmacogenomics to drug development and therapy.

What is the exit strategy for the investor from your company? Are there potential strategic alliances with larger companies? Do you wish to take the company public? Or do you wish to grow the company and either sell it or acquire other companies?

The Company expects to expand through acquisition, strategic alliances and internal growth. Gentris does not at present plan to go public, and any exit strategy is likely to be based on M&A activity.

Fact box: