Second Genome Pockets $5M to Uncover the Secrets of Bugs, Good and Bad, in Your Gut

8/9/11Follow @xconomy

There are trillions of bacteria living in everyone’s guts, and there’s an incredible diversity and delicate balance of species in there. What’s going on in the genetics of those bugs is mostly a mystery, but now a company, Second Genome, has come along to analyze the genomes of those microorganisms in a new angle on personalized medicine.

San Francisco-based Second Genome is announcing today it has raised $5 million in a Series A financing to support its work in analyzing bacterial genomes of the gut—which scientists call the microbiome. New investors Advanced Technology Ventures and Morgenthaler Ventures are leading the round, which also includes Seraph Capital, Wavepoint Ventures, and individuals who sunk $1.2 million in the company’s seed round a year ago.

The company, which I profiled here a year ago when it was called PhyloTech, was co-founded by a prominent crew, including biotech entrepreneur Corey Goodman (an Xconomist) and Gary Andersen, a scientist at Lawrence Berkeley National Lab. They originally wanted to use the tools of modern molecular biology—specialized gene chips and proprietary analytical software—to improve the world of environmental health, where scientists often struggle to answer what’s going wrong in contaminated soil or water.

But in the last year scientists have become increasingly intrigued by the Human Microbiome Project, and have begun referring to the microbiome as a “second genome” that may yield a treasure trove of insights into disease, like the Human Genome Project. So the company is now focusing much of its energy where biology’s interest is heading, says CEO Peter DiLaura. The company plans to use the new cash to see if it can identify hallmarks of microbiomes that are out of balance in individuals who suffer from chronic gastrointestinal diseases like inflammatory bowel disorder. If it can, the company should morph into a vital service provider for companies making various probiotic products, which seek to encourage the growth of so-called “good” bacteria in the gut. The global market for various probiotic ingredients and supplements is worth an estimated $21.6 billion, according to BCC Research.

“From the perspective of the scientific community, the role of the microbiome in human health has been accelerating rapidly,” DiLaura says. “It’s been implicated in a whole range gastrointestinal disorders, obesity, diabetes, and skin disorders. We believe there are important things to do in the environmental space, but the human health opportunity is really significant.”

Peter DiLaura

Second Genome isn’t cash-flow positive, but like a lot of startups born in the economic downturn, it runs a lean ship. The company has just seven employees, and has built up a roster of 40 academic customers who use its service, DiLaura says. He didn’t name the customers, although he says that much of the work Second Genome does today reflects the interest of scientists in the environmental health field.

This new batch of investment capital came to Second Genome for a few reasons, DiLaura says. The science of the field has been moving fast, and the company was especially intrigued when users at Baylor College of Medicine in Houston, TX, found what they thought were microbiome signatures in gut bacteria of children with inflammatory bowel syndrome. There are plenty of gastrointestinal disorders out there today that are poorly understood at the molecular level, and are plagued by therapies that don’t work well. And there’s interest, DiLaura says, among nutraceutical and probiotic companies in gathering scientific evidence to support claims that their products are healthy. Over time, DiLaura says, Second Genome can envision a day when clinicians will send in samples from a patient for analysis, and use the patient’s microbiome profile to prescribe specific pharmaceuticals or nutraceuticals, to address the problem.

Goodman, the company’s chairman, says the company has tightened its focus over the past year. The company has gone from “one with great technology but too many potential applications into the microbiome company focused on human health, and in particular, the gut. The opportunity for Second Genome is enormous.”

No other company has a technology platform quite like Second Genome’s for analyzing bacterial DNA, although it’s not the only diagnostic company scoping out this market. When Nestle acquired San Diego-based Prometheus Laboratories in May, it cited the smaller company’s gastrointestinal diagnostic capabilities as one of the reasons. And DiLaura notes that France-based Group Danone, the giant maker of yogurt and other foods, has said the role of intestinal microbiota is a key part of its strategy for growth.

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