Caltech + Stanford Startup Raises $75M in IPO

Fluidigm is a microfluidics company based upon technology licensed from Stanford University and Caltech.  Luke Timmerman from Xconomy does a great job of tracking the history of Fluidigm and the company’s long road to IPO.

The Invention

Fluidigm co-founder Stephen Quake invented a microscopic valve while he was teaching at Caltech in 1998. Much the way a transistor controls the flow of electrons in a computer chip, Fluidigm’s microfluidic valve performs the same function for the life sciences industry in a microfluidic chip made of rubber. Quake and Gajus Worthington founded Fluidigm in 1999. Worthington is the company’s president and chief executive officer, while Quake is head of Fluidigm’s Scientific Advisory Board, co-chair of the bioengineering department at Stanford University, and an investigator of the Howard Hughes Medical Institute.

In the late 1990s, most microfluidic experts came from the semiconductor industry and preferred substrates like silicon, glass or plastic, but not Fluidigm. Quake’s invention created the chip out of fusing multiple layers of rubber. That substrate is unique within the bio-chip industry and is illustrative of how Fluidigm has pioneered its path to creating a variety of PCR-based solutions.

A Decade of Successive Inventions

Today, Fluidigm’s technology enables the rapid, efficient, highly parallel, and reproducible analysis of tens-to-hundreds of genetic markers, across hundreds-or-thousands of DNA samples, in hours instead of days or weeks.  Fluidigm’s technology supports genomics-based applications such as single-cell gene expression, high sample throughput SNP genotyping and ground-breaking capabilities such as digital PCR and automated target enrichment for next-generation sequencing.

Xconomy - Feb 11, 2011

“You know what they say about how if you don’t at first succeed, try, try again.

South San Francisco-based Fluidigm said today it has completed its initial public offering, which comes more than two years after it had the misfortune to attempt an IPO at the height of the worst financial crisissince the Great Depression. This time, Fluidigm pulled in about $75 million, by selling about 5.6 million shares to investors at $13.50 a share. The price was on the low end of its forecasted range of $13.50 to $15.50 a share. The company is now ready to start trading on the Nasdaq exchange under the ticker symbol FLDM.

Fluidigm has traveled a long and risky road to its IPO day. Founded in 1999, it has piled up a deficit of more than $196 million since it was started by Stanford University biologist Steve Quake and CEO Gajus Worthington to create a high-powered, microfluidic instrument for researchers. It has sold about 200 of its machines, which sell for $200,000 each. As I wrote in a story in December, the Fluidigm machines can be used to do things like detect rare cancer stem cells that are hard to find, and which are thought to enable cancer to rebound following chemotherapy. Stem cell researchers use the Fluidigm machines to identify signatures of induced pluripotent stem cells—ordinary adult cells that scientists reprogram into a stem-cell like state.

Fluidigm hasn’t turned profitable yet, although its revenues have been climbing enough that it expects to start running in the black by mid-2011, Worthington has said.

Deutsche Bank Securities and Piper Jaffray led the offering, which was co-managed by Cowen and Co. and Leerink Swann.

Lab on a Chip > Circulating Tumor Cells

There is no doubt that lab on a chip technologies are hot right now in the venture capital community and I would like to highlight one application that has caught my attention. The identification and isolation of rare cell populations from whole blood samples has been a persistent challenge for researchers and clinicians.  Lab on a chip technologies offer a solution to this challenge because of their miniaturization and incredible sensitivity.

Tumor cells circulate in human blood at incredibly low frequencies (1-10 CTC per ml of whole blood) relative to other cell populations, making it quite challenging for researchers to sift out a few CTCs from a heterogeneous pool of other cells.   To put this in context, only 10-20 cc (=10-20 ml) of blood is drawn during a normal physical.  Therefore, in any given blood sample there is likely to be no more than 10-200 CTCs amongst 50 million plus white blood cells and several billion red blood cells. 

In the past, quantification of CTCs was almost impossible.  Previous technologies focused on isolating and amplifying CTCs so that lab tests could be run.  Amplification of primary cancer cells through passaging could result in additional mutations, making the older CTC isolation technologies rather ineffective.  The ideal technology would be one that was so sensitive that CTC binding events could be quantified without the need for cell amplification.  But with so few cells available, isolation becomes a daunting task.  Add in a high risk for false negatives, and CTC isolation becomes all the more challenging.      

Lab on a chip startups are attempting to leverage the sensitivity and specificity of microfluidic chips to address the CTC identification challenge.  Below is a list of some university startups that have novel lab on a chip technologies to identify CTCs: 

• Biocept was spunout of Peter Kuhn’s lab at The Scripps and is commercializing the CEE™ Cell Enrichment and Extraction platform.  The CEE technology is a microfluidic device that uses a chip coated with upright polymer fibers that are of different heights and widths.  Blood travels at variable speeds – slow closer to posts and faster away from posts – which enhances the probability of a CTC binding to an antibody attached to the post. 
• On-Q-Ity was spunout of Mehmet Toner’s lab at Mass General / Harvard and is commercializing a microfluidic based technology that is similar to the Biocept technology.  On-Q-Ity uses a process similar to Biocept’s to isolate CTCs, and then uses a second proprietary process to separate CTCs from other bound cells through cell size exclusion (CTCs are typically larger than leukocytes).
• Vitatex was spunout of the State University of New York at Stony Brook. The Vitatex technology uses a substrate coated with cell adhesion matrix (CAM, a porous layer of extracellular matrix polymer coated with blood-borne adhesion molecules) that mimics the interstitial microenvironment, in which tumor cells invade.  CTCs naturally adhere to CAM allowing for their isolation and enrichment from whole blood samples.

I am still undecided if I believe CTC isolation technologies will actually work on a commercial scale.  Application-wise, the low hanging fruit is to go after solid tumors that are hard to biopsy (lung, pancreas, etc.) and therefore could benefit from a “liquid biopsy” via CTC isolation.  After the low hanging fruit is picked, I am not sure what role lab on the chip tests will play in a clinician’s arsenal. 

My guess is that clinical validation studies through retrospective analysis will look quite convincing, but most technologies won’t hold up in prospective trials.  CTCs are so rare that there is a very high probability of false negatives, which could be rather disastrous for patients that actually do have cancer.  Clinicians will most likely want to see lots of data, requiring expensive trials, before they start using lab on a chip technologies to indentify malignancies.  I look forward to tracking the progress of Biocept, On-Q-Ity, and Vitatex, with the hope that my pessimism will be converted to optimism.

Update on January 5, 2011 by Martin Lehr

Even if a diagnostic is capable of identifying CTCs, what does that really mean to the patient?  To be honest, I am not entirely sure.  Some thoughts:

• There is a strong chance that any two people with the same number of CTCs and similar cancer subtypes could have wildly different clinical outcomes (one patient gets cancer while the other does not).
• Just because CTCs are there does not mean a person will get cancer.  A strong immune systems most likely renders most of the CTCs.
• A floating CTC could end up anywhere.  
• Are these CTCs progenitors or fully determined cancer cells?  Does that matter if they are floating around?

Microfluidics > University Startups

I have reviewed several interesting microfluidic opportunities from our University Partners over the past few months and I thought it might be an appropriate time to share some knowledge I have gained from speaking with microfluidic companies and thought leaders. 

The concept of microfluidics is fairly straightforward – to take old, larger fluid handling devices and miniaturize them.  Decreasing the size of the device decreases the use of expensive liquid reagents and wasting of valuable sample material, allows for greater functional flexibility (compacting 3 different functions requiring 3 separate machines into one new device), and enables greater portability. 

The rate of innovation in microfluidics right now is astonishing.  Valve density (the gold standard for microfluidic progress) is doubling every four months, shattering Moore’s Law.   Universities are at the vanguard of microfluidic innovation and have spunout numerous companies that are poised to become future market leaders.

• Accuri Cytometers (University of Michigan)
• Advanced Liquid Logic (Duke University)
• Caliper (UPenn)
• HandyLab (University of Michigan)
• Helixis (Caltech)
• Euveda Biosciences (Johns Hopkins)
• Fluidigm (Caltech)
• Nanogen (UCSD)
• On-Q-ity (Mass General)
• Seventh Sense Biosciences (University of Michigan)

A common challenge for microfluidic companies is to find the best commercial application for their unique microfluidic technology.  Applications can be broken down into roughly four segments: academic research tools; pharma drug discovery; personalized medicine; and defense / public safety.  Personalized medicine represents the largest market opportunity, but also has the most significant regulatory, execution, and capital requirement hurdles.

In looking at microfluidic opportunities, I focus my attention on two things.  First, I want to see the presence of a strong CEO or Executive Chairman.  The microfluidic/IVD market is very competitive and I want to invest in someone who knows how to navigate the waters.  Second, I want to see a clear path for achieving commercial traction.  Selling into pharma or large medical networks is much harder than in the past and those sales are typically lumpy and unpredictable.  An alternative – and what I keep an eye for – is a plan to sign a distribution agreement with a strong partner (Fisher, Invitrogen, Millipore, Roche, etc.) who knows how to sell into the desired target market. 

The microfluidic segment of the in vitro diagnostics (IVD) market is poised for significant growth over the next five years and this is attracting the attention from large acquisitive corporations such as Abbott and even non-traditional life science companies like IBM.  Several University Partner companies have been acquired (Handy Labs, Helixis) recently and we expect the pace of microfluidic acquisitions to accelerate over the next few years as life science and tech corporations look to diversify their revenue streams.