VCs Deliver Aid To Precision Therapeutics For Anti-Cancer Crusade

In an effort to take some of the guesswork out of determining which drugs are best suited to treat specific types of cancer in a particular patient, Precision Therapeutics Inc. has developed a patented technique for growing human tumor-derived cells in a culture and evaluating their response to anti-cancer drugs.

While Precision’s technology is relatively new, its methodology is derived from a practice that has been used for decades in determining which medications are most effective against infectious diseases.

“If you check into a hospital with an illness, a culture is done, and 24 hours later, you know what the germ is and a drug is prescribed that will hit the [disease] the best,” explained Gert Caspritz, a partner with Techno Venture Management (TVM), which recently co-led Pittsburgh-based Precision’s $17.5 million Series B round of financing with Birchmere Ventures.

“The same methodology applies here. We believe Precision has the know-how and trade secrets to be able to predict the outcome of a chemotherapy on a given cancer and a given patient,” he said.

The fundamental problem is, there are now about 400 or so anti-cancer drugs in the development pipeline, and not every one is designed to treat the disease on an individual basis. It didn’t used to be that way, however. In the early days, there were only a few anti-cancer drugs out there.

However, with so many drug regimens available now, treating cancer can sometimes be a hit-or-miss process during which physicians can lose valuable time in determining which drug is right for a given patient. In addition, that trial-and-error period can also mean a greatly reduced quality of life for the patient, as well as added costs associated with delayed treatments and hospital stays.

“With cancer, the approach to determining which chemo drugs to use on any one patient is not an individual process,” said Ken Wolfe, vice president of field operations with Precision. “Every application of chemo is essentially an experiment.”

To that end, Precision’s breakthrough product is certainly turning heads in the venture capital world. In addition to first-time backers TVM and Birchmere, other new Series B investors included investment bank Stephens Inc. and Draper Triangle Ventures, the Pittsburgh-based affiliate of start-up venture capital house Draper Fisher Jurvetson.

The transaction technically closed back in August, but Precision held off on making an official announcement until it had successfully recruited cancer diagnostics guru Stan Lapidus to its board of directors, Wolfe said.

Lapidus founded both Cytyc Corp. (NNM:CYTC) and Exact Sciences (NNM:EXAS) which provide state-of-the-art diagnostic screening tests for cervical cancer and colorectal cancer, respectively.

TVM’s Caspritz also received a seat on Precision’s board as a result of the financing, as did representatives from Birchmere and Stephens.

Precision plans to use the proceeds from its latest VC windfall to beef up its management team, finance continued research and clinical studies and put a national sales team in place.

Additionally, the company intends to relocate to a larger, 9,000-square-foot laboratory facility, also in Pittsburgh.

Liquidity Outlook

As far as an exit strategy goes, TVM’s Caspritz said he sees Precision as either an IPO or an M&A play.

“If the company can show revenue consistently over several quarters at a reasonable margin, I would say it has the potential to go public sometime in 2003 or 2004, depending on the speed of its progress,” he added. “Of course, in the business of diagnostics, there is always a certain amount of consolidation, so there might be a potential acquirer [down the road]. We would have to examine such an offer, but that’s also a possibility.”

Public market competitors have garnered mixed results with investors. As of market close last Thursday, Cytyc was trading at $24.49, down from an annual high of $30.22. Exact Sciences, which hosted an IPO on Jan. 30, 2001 at $14, closed at $7.44.

As Precision’s chosen space is not regulated by the Food & Drug Administration, its product is already on the market and is currently being used by more than 400 physicians.

Precision was founded in 1995.

Robyn Kurdek can be contacted at:Robyn.Kurdek@tfn.com