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NanoString Grabs $20M From GE, Former Genzyme CEO to Pursue Molecular Diagnostics

Xconomy Seattle — 

NanoString Technologies has pulled in another $20 million to capitalize on its genetic analysis instrument for researchers, and to pursue the lofty goal of creating a workhorse diagnostic tool that enables more personalized medicines.

The Seattle-based company is announcing today it has raised $20 million in its Series D venture financing, which includes new investors GE Healthcare, BioMed Ventures, and Henri Termeer, the former CEO of Cambridge, MA-based Genzyme. NanoString’s existing investors, Clarus Ventures, Draper Fisher Jurvetson, and OVP Venture Partners, also participated. Founded in 2003 with a technology license from the Institute for Systems Biology in Seattle, NanoString has now raised a total of $67 million in its history.

The investment from GE is the industrial heavyweight’s first as part of a new five-year, $1 billion R&D initiative to beef up its cancer diagnostic and molecular imaging capabilities. The technology it’s betting on provides scientists with a digital readout on the extent to which genes are dialed on or off in a sample-what’s known as gene expression analysis. The tool has gained popularity the past couple years with academic customers, especially those at The Broad Institute of MIT and Harvard, because of its ability to help spot patterns in complex diseases like cancer where 50 or 100 genes might be perturbed instead of just one.

Once researchers identify more of these complex signatures, and learn what they mean to various types of cancer, NanoString says its machine could help physicians craft individualized strategies about what types of drugs to use, and how aggressive to be, with individual patients.

“I think we could end up being as big a molecular diagnostic company as there is, and will be,” says CEO Brad Gray. “Our technology is perfectly tuned to where medicine, in particular, cancer, is going.”

NanoString CEO Brad Gray

The investment by Termeer is the second big check he has written in the past couple months to support R&D in personalized cancer medicine, after he and his wife Belinda donated $10 million to start a new program at Massachusetts General Hospital. Gray, a former vice president of Genzyme Genetics, says he re-connected with his former boss over the summer to tell him about the potential applications of NanoString’s tool for personalized medicine.

“Henri is incredibly passionate about personalized medicine. He was a leader in genetic medicine, before it was in fashion,” Gray says. From a business standpoint, Gray says Termeer was drawn to the idea of NanoString selling its machine around the world as a diagnostic tool used by physicians and technicians in clinical settings, instead of the traditional model in which diagnostic firms set up centralized labs and have physicians ship in their samples.

“Henri immediately became intrigued with the potential of nCounter to enable a distributed version of personalized medicine,” Gray says. “We’re talking about taking very high complexity molecular diagnostics out of the central lab, and into a globally scalable business, where these tests can be run in any lab in the world.”

NanoString introduced the first commercial version of this tool, called nCounter, in the summer of 2008, for research purposes only. Last month it rolled out a second-generation product that’s supposed to have 50 percent higher bandwidth (known as throughput in the genetics business); more flexible software for analyzing the data from the instrument; and hardware that can be used by basic researchers, but that is manufactured in sync with more rigorous, consistent diagnostic industry standards.

Major life science tool companies like San Diego-based Illumina (NASDAQ: ILMN) and Carlsbad, CA-based Life Technologies (NASDAQ: LIFE) and others have struggled this year amid uncertainty about cuts to federal research budgets that are the lifeblood of their customer base. NanoString is privately held and doesn’t disclose its financials, but Gray did say the company has forced its way through the headwinds and is “100 percent in line” with its revenue plan for 2011 through the first three quarters of the year. The company’s instrument debuted in with a price tag of $235,000, and NanoString has chosen to boost the machine’s capability while holding the line on price, Gray has said.

The company plans to use the new investment capital to expand its sales force, and continue to gain market share in the academic and industrial customer segments, Gray says. NanoString has about 90 employees now, and plans to grow its headcount “judiciously,” Gray says. The company will also invest some of the cash in clinical studies to develop its instrument for diagnostic purposes, including research designed to show the value of the PAM50 signature, which looks at 50 genes that are thought to provide useful information for doctors treating breast cancer. Once the PAM50 test is established, the NanoString tool should be useful for many other different kinds of gene signatures for different cancers, Gray says.

“Our customers continue to bring us information from their discoveries of new biomarkers, and ask us how we can work together to develop new diagnostics,” Gray says.

Pharmaceutical companies tend to be slow adopters of new technologies like this compared with academic labs, but NanoString has doubled its base of industry customers in the past year, Gray says.

Like anything else in biology, it will take a long time, study by study, to prove whether these gene signatures are providing the valuable information researchers expect. And the FDA will have to scrutinize the data, test by test, and say whether it’s good enough for physicians to rely on for diagnostic purposes. The first diagnostic filing in particular will be the most extensive, because the agency will need to get familiar with the hardware, as well as the gene signature.

None of that seems to deter Gray. “The only limit to how quickly we can grow and how big we can be is the speed at which we can—in a quality way—identify gene signatures of clinical utility and get them properly validated as diagnostic products. The only limit I see on the life sciences tools side is the number of people with ambition and resources to pursue science with nCounter.”

“I think we are skating to where the puck is going. I’m very optimistic.”

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