RESEARCH TRIANGLE PARK- As the cost of prescription drugs eats further into American pockets, Qualyst leaders say they can help.

Formed in 2001 at UNC Chapel Hill as a biotech spin off, Qualyst offers proprietary technology to address ADMET (absorption, distribution, metabolism, excretion, and toxicity) issues then licenses products to drug development firms. To date the firm boasts 4 of the major 5 drug companies as clients.

According to Scott Neuville, company president and CEO, Tufts University Center for the Study of Drug Development reports the overall cost to develop a drug at greater than US$900 million with poor ADMET properties representing 50% of the total failures of drug candidates in development. How can that help reduce drug costs? Qualyst’s solutions can save pharma companies millions of development dollars… we hope they would pass those savings on to patients.

Neuville and Marc Sedam, vice president for corporate development, spoke frankly with LTW about the company’s products, funding and their hopes for the future:

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.

To date we’ve been funded through angel investors and private micro equity funds and have had significant progress in our Series B financing.

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?

Qualyst has a strong management team, revenue, and counts four of the top five pharmaceutical companies among our clients. We’re positioned for strong growth in 2005 and beyond.

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

Qualyst develops proprietary technologies to address ADMET (absorption, distribution, metabolism, excretion, and toxicity) issues and licenses them to drug discovery and development organizations. Qualyst is led by a strong management team, representing over 60 years of experience in discovering, developing, commercializing, licensing, and delivering new technologies in the life sciences industry for rapid growth, major pharmaceutical companies, and biotech companies. The team knows the ADMET space, what products and approaches are needed, and how to ensure exceptional customer service, while maximizing shareholder value.

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

The most recent report from the Tufts University Center for the Study of Drug Development places the overall cost to develop a drug at greater than US$900 million. Poor ADMET properties represent 50% of the total failures of drug candidates in development, so use of Qualyst’s proprietary solutions to select more appropriate lead therapeutic compounds can save our customers millions of dollars over the whole development cycle.

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.

Qualyst’s technologies are based on discoveries by its founders…world leaders in their area of research…all faculty members at the University of North Carolina at Chapel Hill. The proprietary technologies are divided into three product families:

  • B-CLEAR•, a first-in-class in vitro system for the determination of hepatic uptake, biliary excretion, biliary clearance, and drug transport
  • ACCURATE•, breakthrough technologies for the determination of the P450 metabolic stability and inhibition potential of drug candidates
  • ACCUPRO•, a high-throughput, low-cost method for the determination of protein binding

Each product line in Qualyst is covered by broad intellectual property protection. Patents have issued on B-CLEAR• and ACCURATE•, with additional scope-enhancing applications filed.

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?

Qualyst’s product lines are both proprietary and differentiable, providing a significant competitive advantage. Qualyst has already created a partnership with MDS Pharma Services to co-promote B-CLEAR• MDS has the co-exclusive right to sell B-CLEAR• services along with Qualyst, and Qualyst has the right to co-promote MDS Pharma Services’ preclinical drug development technologies and programs.

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

The Company has generated revenue in 2003 and 2004 and projects greater than two million dollars in revenue for 2005. The company projects to be cash flow positive from operations by the end of 2005.

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?

Qualyst’s target market is biotechnology and pharmaceutical companies. The outsourced ADMET screening market is estimated at two billion dollars.

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?

The proceeds of our series B financing will go towards additional working capital (including an enhanced sales and marketing force, and additional hires in R&D), legal fees including intellectual property costs, and capital equipment needs, in that order. Our goal is to develop an additional ADMET technology each year.

What do you want from an investor other than money?

Experience in the drug discovery space, active contacts within the industry, and a reliable and open line of communication regarding execution of the existing business model.

Why will investors be impressed with your management team? Include a brief background about key executives.

Qualyst is led by a strong management team, representing over 60 years of experience in discovering, developing, commercializing, and delivering new technologies in the life sciences industry for rapid growth companies, major pharmaceutical companies, and biotech companies.

  • Scott Neuville, President and CEO- Former CEO of iBiomatics (a SAS Company) and President of the Healthcare America division of STERIS, Inc.
  • Kenneth Brouwer, Vice President of Research and Development-Former Executive Director of DMPK at PPD Discovery USA, and former Director of DMPK, Preclinical Development at GlaxoSmithKline.
  • Marc Sedam, Vice President of Corporate Development-Former Associate Director of UNC-Chapel Hill’s Office of Technology Development (technology transfer).
  • Ian Mehr, Senior Director of Business Development- Former Director of Business Development for Paradigm Genetics, Inc; former Strategic Business Director for Laboratory Corporation of America.
    • Bob St. Claire, Director of Chemistry-Former senior technical leader at Glaxo, Glaxo Wellcome, Triangle Pharmaceuticals, and most recently at Gilead Sciences

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?

Qualyst’s likely exit strategy is through acquisition by a larger drug discovery support company, screening technologies company , or a CRO. However, there are a number of smaller, complementary companies that Qualyst has identified as a future acquisition candidate by Qualyst.

Visit: www.qualyst.com

M.M.