Computational biology startup, NanoString Technologies has excited backers and receives funding from OVP – NanoString CEO says its technology could change research

OVP Venture Partners is placing another bet in the field of computational biology.

The Kirkland venture capital firm, which was an early backer of Rosetta Inpharmatics, has made a commitment to invest in NanoString Technologies.

By JOHN COOK
SEATTLE POST-INTELLIGENCER REPORTER

http://seattlepi.nwsource.com/business/170949_nanostring28.html

An early-stage Seattle company that was formed at Leroy Hood’s Institute for Systems Biology, NanoString is currently looking to raise $8 million in venture capital.

OVP managing director Chad Waite, who plans to lead the investment, is taking an active role in the company’s financing efforts by rounding up other investors. Waite also helped recruit H. Perry Fell, the 46-year-old former Seattle Genetics chairman who took over the chief executive post of the startup earlier this month. In 1998, OVP provided startup capital to Seattle Genetics.

"I think it is an incredible opportunity," Waite said. "There are competitive efforts going on to approach this problem in different ways, but I think this one is elegant, very flexible and very powerful."

Although OVP curtailed investments in biotechnology and medical device companies two years ago, the venture capital firm’s involvement with NanoString is not a total surprise. Waite maintains a curiosity in the intersection of computers and medicine, sometimes referred to as computational biology.

"What doesn’t interest me is spending $200 million to take a drug to the FDA or the $40 million that it takes to build the next catheter. Those are the kinds of deals I don’t like," he said. "The economics of this company and the investment profile looks considerably more like a software company than a biopharmaceutical company."

Waite should know.

The venture capitalist was one of the earliest investors in Rosetta Inpharmatics, a Seattle company that was sold to Merck & Co. for $540 million in 2001. Rosetta, which developed a tool to analyze complex genetic information, was co-founded by Hood, the former University of Washington professor who now runs the Institute for Systems Biology.

Like Rosetta, NanoString’s technology is designed to help drug researchers better analyze biological information. Waite calls NanoString a high-speed single molecule quantification and identification tool.

"That is what we were attempting to do with Rosetta, but the technology was too crude," Waite said. "Crude is a relative word. Rosetta was an advance that was far beyond anything anyone was able to do 10 years ago. This is really the next generation."

The year-old company, which won the top prize at the University of Washington Business Plan Competition last year, describes its technology as a "biological operating system" that can identify multiple genes or molecules in 30 minutes or less. It does this by affixing a bar code, or "NanoString," to each molecule and then setting up an inventory system that can quickly count the molecules. That could have wide-ranging implications in drug discovery, clinical testing, food safety, bioterrorism and other areas. For example, water samples from a city’s aquifer could be quickly analyzed for pathogens or multiple blood samples could be checked for diseases.

"It is significantly faster and easier" than current micro array technologies, Waite said.

The company was co-founded by Amber Ratcliffe, Krassen Dimitrov and Dwayne Dunaway — entrepreneurs in their late 20s and 30s who worked together at the Institute for Systems Biology. Patents are pending on the technology, which was developed in the laboratory of genomics expert Hood. Nano String holds an exclusive license on the technology.

NanoString is still very much an early-stage company. The three co-founders and Fell work from their homes and under the roof of The Institute for Systems Biology. A final product — consisting of a scanner with disposable NanoString cartridges — will not be available for at least 18 months. And the company’s bare bones Web site offers only a few paragraphs of information.

But the recruitment of Fell — a well-respected scientist — and involvement of OVP — one of the region’s oldest venture capital firms — is grabbing some attention. The start-up was recently featured in a Fortune magazine article. In that story, Fell compared the company to Microsoft.

"That was not just drawn out of the sky," Fell said. "The reason I am saying that is because these bar codes could be the operating system for all biological assays."

Although NanoString struggled to attract financing in its first year, Waite expressed confidence that the deal will close now that experienced management is involved. Talks are occurring with venture capital firms in Seattle, Silicon Valley and on the East Coast.

Fell, who believes the technology could change the face of biological research, thinks the investment will come once the right group of investors are located. The opportunity is too big to ignore, he said.

"We are going to make it happen, absolutely," Fell said. "It is the most exciting technology I have come around in some time."
P-I reporter John Cook can be reached at 206-448-8075 or [email protected]