Baird Venture Partners Pushes Ahead With Molecular Imaging Research Reboot

6/7/11Follow @xconomy

There’s luck. And then there’s pure serendipity.

About a year ago, Baird Venture Partners (BVP) in Chicago had an idea. With Big Pharma increasingly parceling out drug development work to outside firms, the time seemed right for a startup that would offer specialized imaging services to companies who needed to test their therapies on small animals.

BVP searched for such a startup and ultimately recruited an experienced executive to lead one in California. But the venture firm soon realized that the startup would require lots of money and time to bulk up the business.

“One thing that I didn’t fully appreciate is the reality that there is a big barrier to starting a company like this,” BVP partner Peter Shagory recently told Xconomy. “It’s going to be challenging to crank out this space quickly.”

Venture capitalists are looking to “take a lot of risk out of equation early on,” he says. Companies with established technologies and customers “are not easy to find. They’re certainly rare.”

And then fortune struck.

Charles River Laboratories, which had acquired Molecular Imaging Research (MIR) in Ann Arbor, MI in 2008, was looking to pull out of the region. Sensing an opportunity, BVP and Arcus Ventures last month acquired the MIR assets and raised $7 million to restart the company.

“A lot of risk factors associated with a startup in California just went away with this opportunity in Ann Arbor,” says new MIR CEO Tom Ludlam.

MIR’s prized asset? A 20,000 square foot facility near the University of Michigan that houses lab space, a 8,000 square foot virarium, imaging suites, and tissue culture space. Since 2003, the company has performed over 250 imaging studies. Over the past 12 months, MIR provided imaging services to 23 pharmaceutical and biotechnology companies, including eight top 20 companies.

The first step, Ludlam says, is to reboot the operation. The company plans to reestablish contacts with customers and strengthen its sales and marketing teams.

“We need to get back to full strength,” Ludlam says. The company has “been in a bit of a hiatus. One of the things that MIR has suffered from is a lack of broad exposure to the brand. A little bit of investment in sales and marketing is going to pay big dividends for the company.”

BVP and Arcus also want to invest heavily on internal R&D, Ludlam says.

MIR was an attractive asset because of the broad range of cutting-edge imaging technologies it offered, he says, including fluorescence, bioluminescence, and advanced MRI and PET scans. The company will explore expanding into different technologies, applications, and disease targets. For example, MIR wants to look more at topography and metastatic cancers that spread rapidly to other parts of the body.

Jim Adox, managing partner of Venture Investors’ office in Ann Arbor, welcomes MIR. Having worked with a couple of drug startups, Adox says the number of players in small animal imaging is very small. Plus they don’t offer the breadth of imaging technologies found in MIR’s arsenal, he says. Drug firms prefer a range of such technologies because they want to see how their therapies impact animals from multiple vantage points, Adox says.

Adox also says MIR could anchor Michigan’s drug community in much the same way Detroit’s auto supply network anchors the state’s car industry.

MIR executives say they are entering the market at the right time. The company’s imaging technologies will help drug firms use fewer animals and produce superior results, says MIR chairman Stephen Sullivan. He is a former CEO of Harlan Laboratories, one of the country’s largest contract research organizations (CRO) for drug makers and a top competitor to Charles River Laboratories.

Normally, drug firms test their therapies at six, 12 and 18 month intervals, using a different set of animals as the baseline for each period, Sullivan says.

With advanced imaging, a company can test a drug on a group of animals, examine the data after six months, and then resume the same therapy on the same animals for another 12 months, he says. That means a company could ultimately use a third less animals than it does today.

“One of the real benefits for imaging is that you can use far less animals for research and get far better data,” Sullivan says. “You get data on the same group of animals for the whole life of the study. Every company in the pharma world is committed to using as few animals as possible.”

“You may be wondering ‘Gee, this is so obvious, why doesn’t everyone do this?’” he continued. “Most of the drugs in development today are being compared to existing drugs, which were developed with these prior methods. [Drug companies] can be very slow and conservative [with animal testing] because you can be comparing apples with oranges.”

Ludlam says MIR enjoys the advantage of working in a space where pharma companies don’t yet feel the pressure of regulators and investors.

“One of the things that we are counting on here is that we are operating in the early stage clinical environment,” he says. “This is really science for informational purposes.”

Added Sullivan: “One of the advantages for being a first mover is that you can define the space.”

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