Editor’s note: This is the second in a series of stories profiling companies presenting at the 2005 CED Venture Capital Conference.

MORRISVILLE,Gentris, one of the 33 companies selected to present at the Council for Entrepreneurial Development’s upcoming venture conference in April, will have a compelling case to present to potential investors.

Gentris has already raised more than $3 million in venture capital, has generated more than $3 million in revenue, has secured enough business and partners in Japan that Michael Murphy, its chief executive officer, is a frequent traveler there, and has several drug testing kits in the pipeline.

Gentris has developed technology for use in genetic-linked testing for drug developments to help reduse severe adverse drug reactions. It has one diagnostic kit advancing toward governmental approval and four additional ones in development.

In the second of a series of company profiles in advance of the venture conference on April 26-27 in Pinehurst, Murphy and Gentris management talk about their company, why investors should be interested, and the state of venture investing.

The momentum has picked up over the past year in many segments of venture capital. Are you finding more interest among potential investors? Please explain why or why not.

Yes, we are finding more interest among potential investors, particularly for emerging growth companies like Gentris. Venture capital companies are still looking for fairly low risk, stable companies with a realistic possible exit strategy.

Even in a better investment climate, VCs are more demanding than ever in terms of due diligence. Why should investors be interested in your firm?

The market in which Gentris competes will grow significantly in the next two to five years as drug companies determine when and how…not if…pharmacogenomics fits into the research and development pipeline. Key drivers include additional regulatory guidance from the FDA, aversion to risk of drug withdrawals from pharmaceutical and biotech companies, intolerance of escalating drug costs by insurers’ and payers’, and patient demand for drugs with greater efficacy and fewer side effects.

Gentris has been able to raise $3.1 million in early-stage financing and has generated $3.1 million in revenue through 2004. We are now in the process of raising $5 — 10 million in order to fund new product launches, infrastructure and sales force expansion, and penetration into the Japanese market. We have a comprehensive plan for approval and commercialization of our first diagnostic kit…four additional products are planned for FDA submission during 2006.

What’s your “elevator pitch” in a paragraph or a few sentences?

Gentris Corporation is a leading global provider of applied clinical pharmacogenomic services and diagnostic product solutions. As pioneers in the field of pharmacogenomics, Gentris helps pharmaceutical companies and clinical research organizations effectively integrate pharmacogenomics into their drug development programs to deliver safer, more effective compounds to the market more quickly. Gentris is developing diagnostic test kits and validated reference controls that will bring the promise of personalized medicine to physicians and patients, which will enhance patient management, improve response to therapy, and revolutionize medicine through pharmacogenomics.

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

Gentris’ technology allows pharmaceutical companies to understand potential drug safety and efficacy early in the drug development cycle, thereby reducing the risk of late stage failures. It now costs companies on average $800 million to get one drug through the approval process. Being able to understand potential genetic factors that may affect how patients respond to drug treatment can be instrumental in choosing the right drug and the best dose.

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.

Gentris is one the few pharmacogenomics companies to have a scalable services and products business model for essential clinical applications of drug development. Gentris is compliant with Good Laboratory Practice (GLP) and has over 400 standard operating procedures or SOPs that insure rigor and reproducibility in genetic testing, product manufacturing, and proprietary processes. Gentris has remained flexible in platform selection rather than constraining our company to a particular technology. In the future, Gentris will strategically align itself with market leaders in technology as the services and products markets evolve.

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.

Currently, there are only a few companies offering practical application services and products to drug development companies and specialty laboratories. Few can conduct pharmacogenomic testing in a highly regulated environment that ensures quality, reliability, and consistency. Gentris is one of those companies.

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

Gentris has been generating revenue since 2002 and was cash flow positive in 2004. Last year revenue was close to $2.3 million.

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 has two primary business units…clinical genetics services and diagnostic product solutions. The clinical genetics business provides services for pharmaceutical and biotech clients who are interested in including genotyping as part of drug development programs. The diagnostics products will help physicians determine whether patients have an inherited genetic risk for developing an adverse drug reaction (ADR) prior to prescribing a specific medication. The target customers for these products are clinical diagnostic and reference laboratories such as LabCorp and Quest.

The market size for incorporation of pharmacogenomics in drug development and clinical products is estimated to reach $14 billion and $12 billion, respectively, by 2010.

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?

Gentris plans to use invested funds in four primary areas. The first area is to support the launch of our diagnostic kit solutions. We anticipate the launch of the initial product in the second half of 2005 with four additional launches in 2006. The second area is infrastructure expansion and we are planning to double space later this year. The additional space will be used for kit production and assembly, new laboratory equipment and offices. One of the most exciting opportunities is to use investor funds to expand internationally, in Japan and Europe. Gentris plans to form strategic partnerships to facilitate entry and accelerate uptake in these markets in the next twelve to eighteen months.

What do you want from an investor other than money?

Gentris views investor representatives who participate on our board of directors as strategic advisors in the management of the business. We look to them to share their experience and provide guidance in order to build and sustain a best practice approach to business. We do expect investors to have a fundamental understanding of the technologies and the market dynamics of our business, and possibly act as a vehicle to other strategic partnership opportunities. Gentris also communicates regularly with investors through a quarterly newsletter that highlights major business activities, new initiatives, and key accomplishments.

Why will investors be impressed with your management team?

The management team is a highly talented group handpicked by the President and CEO, Michael Murphy, and the board of directors. The selection process is rigorous and comprehensive. Each manager has demonstrated significant accomplishments in past work environments and a track record of success whether that success is in scientific endeavors or commercializing healthcare products and services. All have an entrepreneurial spirit focused on building Gentris business and sustaining market leadership in the pharmacogenomic arena.

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?

As part of the next phase of growth, Gentris will expand strategic partnerships with companies who can offer complementary technology platforms and channels of distribution for our services and products. We look to partners to provide reliable, user-friendly platforms that can stand the test of regulatory approval, facilitate expanded reach into new geographic markets, and increase Gentris and partner value.

At this time, we have no plans to take the company public. Instead, we will continue to pursue an approach which enables us to increase market value with the hope that we may combine resources with a larger company sometime in the future. This strategy will keep us on the right path for our investors and for potential partners in the future.

Just the Facts about Gentris: www.localtechwire.com/article.cfm?u=11016