Entries in Semiconductors (4)

Thursday
Dec092010

MC10 Featured in MIT Technology Review

In the current Tech Review issue (Link), there is a nice piece by Katherine Bourzac on our portfolio company, MC10. MC10 is an advanced materials company commercializing conformal, high performance CMOS (complementary metal–oxide–semiconductor) electronics. The company’s competitive advantage stems from its ability to transform rigid, planar electronics into new types of systems that can bend, stretch and wrap into novel form factors. MC10 uses the existing semiconductor industry infrastructure to make these systems, thereby leveraging proven performance and cost competitive economics. The comapny works with partners in a joint development model to prototype and manufacture novel applications for consumer, military, medical and industrial applications.

Wednesday
Dec082010

Insider Trading + Expert Witnesses

Over the last month there has been a rash of insider trading news involving the use of expert witnesses by hedge and mutual fund managers to gain insider knowledge about publicly traded tech and life science companies.  The SEC has issued a series of subpoenas to top tier investors, including SAC Capital, Citadel, Janus, and Wellington, to learn more about their use of expert witnesses.

To gain insight into highly technical companies such as tech and life science companies, institutional investors use expert witnesses, typically supplied by specialist firms such as Gerson Lehman Group and Primary Global Research, to support their own diligence work.  In theory, the guidance that an expert witnesses provides should be limited to publicly available information; however, recent reports by the Wall Street Journal suggest that many expert witnesses have been leaking sensitive information to investors who then used the information to jump ahead of the stock market.  The most egregious accusation was uncovered by the WSJ that the scientific advisory board of a biotech company divulged results from a key clinical trial to an investor before publicly presenting the data. 

While insider trading amongst high-flying hedge and mutual funds doesn’t directly affect the university startup ecosystem, it does have repercussions.  

Tech and life science companies are incredibly capital intensive.  The public equity markets provide an exit opportunity for VCs as well as capital to support the long-term growth of venture-backed companies.  The economic downturn effectively shutdown capital markets for venture-backed companies from 2008 to early 2010.  This put incredible stress on VC funds, which were forced to bridge many of their investments to exits for 2-3 years longer than anticipated.  Many funds are now running low on capital and do not have enough exits in current funds to justify raising new funds. 

The health of the venture ecosystem relies on having a well functioning capital markets system - without it, VCs become overly reliant on M&A and are open to price pressure from acquirers.  Only recently have the capital markets begun to thaw.  The news of insider trading amongst leading tech and life science companies, including Advanced Micro Devices, Human Genome Sciences, MedImmune, and Merck, will undoubtedly once again shut down capital markets, leaving VCs in the lurch.

Let’s hope that the SEC’s expert witness inquiry gets quickly sorted out and IPOs once again start flowing for venture-backed companies.  If not, VCs will continue to be capital constrained and there will be little money flowing into university startups.

Tuesday
Nov232010

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.

Thursday
Nov042010

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.