Will $28M in Debt Financing Push Good Start Genetics to Big Finish?

5/8/13Follow @benthefidler

Six years ago, Good Start Genetics was just an idea in the genetics research labs of Harvard. Today, it is a full-fledged company with more than 85 employees, a diagnostic testing system on the market, and now another $28 million in its pocket to continue growing.

Capital Royalty, a Houston, TX-based investment firm that works with biopharmaceutical and medical technology companies, has given Cambridge, MA-based Good Start a $28 million loan that will help the company continue to roll out GoodStart Select, a system that couples can use to get screened for genetic diseases before they decide to have children.

The financing brings the total Good Start has raised to date to $60 million since its inception in 2007. It raised $18 million through a Series A round in 2010 backed by OrbiMed Advisors, Safeguard Scientifics, and SV Life Sciences, and followed that up with a $14 million Series B round from the same group in April 2012, the same month it officially began selling GoodStart Select to fertility clinics in the U.S.

Good Start CEO Don Hardison says that the company hasn’t worked its way through all of its venture cash just yet, but was able to go the debt route this time because the company now has a track record of selling products, expects to be profitable around August or September, and to break even on operating cash flow before the end of 2013—roughly three years after raising its first round. Good Start is on a run rate this year of about $25 million, he says.

“Because we were on a good path to profitability, some of the debt providers came to us and said we’d be interested in this and we can offer very flexible terms for a company such as your own,” Hardison says of choosing a loan over an equity financing package. “We would not have been in a position to do something like this a year ago.”

Good Start will use the cash for three key initiatives: to continue research projects that could ultimately expand the number of diseases it can screen for; to get its foot in the door in other settings such as OB/GYN offices, as well as select international markets (likely through partnerships); and to use its system for other applications, such as pre-natal or newborn screenings.

Part of that process of scaling up the business will be hiring people for its R&D staff, boosting its sales force as it makes its way into New York (Good Start has applied for a license to sell its tests in New York, but hasn’t received clearance as of yet), and adding genetic counselors as its client base increases.

What happens after that—including finding a finish line for Good Start’s investors—isn’t what Hardison is focused on.

“I think companies can … Next Page »

Ben Fidler is Xconomy's Deputy Biotechnology Editor. You can e-mail him at bfidler@xconomy.com Follow @benthefidler

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  • Klay Timba

    Counsyl is systematically crushing Good Start. Good Start will be toast inside of 18 months because they are unable to get traction with physicians. GSG’s testing is being offered by 100 physicians. Counsyl’s test is already being offered by over 12,000.

    • Equally Ridic

      This is an inaccurate statement posted under a false name by a Counsyl staffer.

      • Health Ventures associate

        We actually met with the GSG team when they were raising this new round of capital (I’m an associate at a VC firm). The first commenter is actually pretty accurate – the big concern we had was that Counsyl was so entrenched in the market that GSG has no shot. One of Hardison’s big selling points was GSG’s sequencing test vs. Counsyl’s genotyping test. The problem with this is that Counsyl just launched a sequencing test and it’s coverage is so much better than what GSG is offering that we equated making this investment in GSG to throwing money down a hole. Smart guys, just two years too late, and they just don’t have the CS chops that the Stanford guys do.

      • Bing Bong Kong

        Is Goodstart Genetics currently under bankruptcy protection? I heard they filed Chapter 11.