MatriCal (drug-discovery tools) not settling in Spokane yet citing lack of Venture Capital Availability

Maker of drug-discovery tools plans two new products, but might not stay

MatriCal Inc., the young Spokane maker of devices used in pharmaceutical research, expects to launch at least two new products next year, while also further ramping up production of its big, robotically controlled, chemical-compound storage devices.

Whether the high-tech company—which moved here from Pennsylvania earlier this year—stays in Spokane, however, is unclear.

By Paul Read Spokane Journal of Business

MatriCal’s two owners, Kevin Oldenburg and Dan Roark, say they like living in Spokane and are satisfied with the company’s temporary facilities, inside the Spokane Intercollegiate Research and Technology Institute, but are realistic about Spokane’s shortage of venture capital. They say that they’re nearing the time when they’ll have to find larger manufacturing quarters to meet growing demand for MatriCal’s products, and already are being wooed by communities elsewhere in the country—and by venture capitalists that would demand they move.

“We haven’t made any decisions” about where the company ultimately will be located, says Oldenburg, a biochemist and former director of biomolecular screening and leads discovery at what was then called DuPont Pharmaceuticals.

MatriCal currently is considering how it will finance its growth in coming years. One funding source, he adds, already has expressed interest in investing in MatriCal, but would require that the promising young company move to Wisconsin, which happens to be Oldenburg’s native state. He says, though, that the company, which is seeking between $1.5 million and $5 million in capital, could decide against an investment by a venture-capital firm and instead raise the funds it needs in smaller, $500,000 bites from individual investors, or even choose to fund its growth through cash flows.

“It would be nice to (grow the company) here,” says Roark, “but we’re keeping our options open.”

Roark and Oldenburg say that some of Spokane’s familiar advantages, including cheap industrial space and easy commuting, have been minimized over the past year or so as other, more high-tech markets have suffered economic woes. Now, they say, lease rates in some high-tech havens have fallen to the point they’re closer to those in Spokane, and the freeways in those locales are much less busy than they used to be.

Roark, a biochemist and engineer who grew up in Spokane and attended both Whitworth College and Washington State University before building a career elsewhere in the country, says that whatever decision he and Oldenburg make will be based mainly on economics, though lifestyle will be a factor. When that decision will come also isn’t clear.

“Right now, we’re just concentrating on doing business and getting our products to the market,” he says.

Drug-discovery tools

MatriCal, which Oldenburg and Roark founded in 2000, makes products used in drug discovery by pharmaceutical companies. One product line consists of what are called assay microplates, which are small plastic trays that have been molded to include as many as 1,534 tiny “wells” in which chemical compounds are placed for testing drug theories.

The plates, generally about the size of a thin paperback book, have been around since the 1960s, though manufacturers such as MatriCal in recent years have been improving them dramatically. Today’s plates have smaller wells and more of them, providing a higher volume of screening and use of smaller quantities of chemical reagents, which can be very expensive, Oldenburg says.

High-volume screening, adds Roark, is a big driver for drug companies, which now test literally millions of chemical compound variations to find one that could lead to a new drug.

“It’s like the lottery,” he says. “The more tickets you buy the better chance you have of winning.”

MatriCal manufactures its microplates at a small injection-molding operation it has in Milton, Del., which has five contract workers.

The company employs nine people in Spokane, all of whom are scientists, engineers, or programmers, and a salesperson based in San Diego. It uses three distributors in the U.S. to market its products, and one in the United Kingdom.

The disposable plates, says Roark, are MatriCal’s “consumable” that provides an ongoing revenue stream for the company, as ink cartridges do for computer printer makers.

Variations of MatriCal’s assay plates are used in conjunction with the Spokane company’s other main product line, which consists of storage management systems for the plates.

Those systems are available in various sizes, up to a room-sized device that uses a computer-controlled robot to organize, store, and retrieve up to 11 million chemical compound samples. MatriCal shipped such a product to a Pfizer Inc. research campus in Groton, Conn., this fall—MatriCal’s first device made here—and is finishing up another, larger one now for a French dermatological drug maker called Galderma. It will be shipped to France during the first quarter of next year.

The bigger storage devices sell for between $750,000 and $1.5 million, but smaller versions sell for as little as $250,000 each, Old-enburg says.

He says the company assembles the devices at its SIRTI lab, using components bought mostly from Spokane-area vendors and precision machine shops. He says that as MatriCal ramps up production, it likely will make between four and 10 of those devices annually.

The next product MatriCal plans to introduce, which is expected to hit the market during the first quarter of next year, is called the MatriCycler, and is what’s known as a high-throughput thermal cycler. In simplest terms, the desktop device replicates strands of DNA for genome research. Oldenburg says DNA sequencing requires “lots and lots” of copies of each DNA, and thermal cyclers produce them as a copier machine makes paper copies.

He asserts that the MatriCycler, however, will do that task faster and with more DNA at a time, giving it a “20-fold” advantage over other machines on the market. The new product currently is in beta testing at the Washington University Genomics Center in St. Louis.

The international market for thermal cyclers is about 45,000 units a year, says Oldenburg, and about 15,000 of them use microwell plates, as the MatriCycler does.

“We want a small percentage of that market,” he says.

The devices likely will sell for about $30,000 each. MatriCal hopes to sell several hundred of them a year, and might choose to join forces with another company that would market them.

The company’s other new product, which could begin beta testing by the end of the year, will be what’s called a sonicator. That device could have a number of uses, but initially will be intended to solve a problem that drug discovery labs regularly face. That problem arises when a chemical compound that’s intended to be screened as a possible new component ends up outside of the solution that contains it before it’s tested, usually because it’s been frozen and then thawed, as such compounds are. In those cases, the testing process produces a “false negative,” which can waste a drug company’s time and money.

Because the compounds are held in tiny wells in a microplate, they can’t very well be stirred or mixed back into their solutions. So MatriCal came up with a device that subjects the microplates to high-frequency, ultrasonic vibrations, which create a vortex in each well to mix the compounds.

The new product will be available as a bench-top unit, but likely will be integrated into another larger machine so that the process can be automated. It is expected to be ready for market by mid-2003, Oldenburg says.

Growing slowly

When MatriCal arrived in Spokane earlier this year, its coming was heralded by the Spokane Area Economic Development Council, which helped to bring it to Spokane. At the time, the company was said to be expecting to bring 100 new jobs here.

That will take some time, says Roark, who predicts that the company will employ about 24 people here within the next two years and have annual sales by that time of about $5 million.

He says, though, that the hires MatriCal will make will be highly paid, including product managers, biochemists, engineers, and programmers. Because the company relies heavily on outside vendors for components, growth in assembly jobs will be minimal, he says.

Oldenburg and Roark met in 1995, when Oldenburg, then working for DuPont, was looking for a specific piece of automation equipment that a company Roark owned at the time could provide. The two hit it off, Oldenburg says, and later decided that with his biochemistry experience and Roark’s engineering and sales experience, they together could make some money by finding niches in equipment design.

“There are holes that nobody has ever filled, and the question is why aren’t they filled?” Oldenburg says.

He says the company has the potential to come up with a lot of ideas, and won’t be shy about broadening its product lines. Then, he says, “We’ll cherry pick the ones we really want to work on,” and find partners to take on the others.

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