His account of what happened is unusually candid and gives a window into the risks involved in diagnostics development despite promising technology. Booth writes that "diagnostics aren't for the faint of heart," and that the sector is "a very tough business that faces many of the risks and costs of drug R&D but without the upside." And On-Q-ity, hit with unexpected problems, may have just been ahead of its time.
As Booth describes in his blog, On-Q-ity launched with some fanfare in 2009 through the merger of VC-backed diagnostics firms Cellective Dx and DNA Repair Inc., backed by a $26 million Series A led by Mohr Davidow Ventures and also including Bessemer, Physic and Atlas. On-Q-ity founder Mara Aspinall (now head of Roche's Ventana Medical Systems), brought with her a distinguished track record having run Genzyme for years. Other principals brought solid backgrounds from Myriad Genetics, Genomic Health, Dana Farber Cancer Institute and elsewhere, Booth recalled, based on notes he made in support of the company's 2009 Series A.
The technology itself also held promise, which was designed to allow clinicians to grab circulating tumor cells from a patient's blood and then count them and detail the type of cancer, enabling, in theory, personalized treatment. Separately, On-Q-ity also was developing DNA repair pathway tissue-based biomarkers to predict drug response for breast and lung cancer.
But, as Booth describes, the biomarker research ended up generating disappointing results in an early trial and two more larger tests, sucking up a lot of the Series A financing. A refocus on the circulating tumor cell (CTC) diagnostic program ran into unexpected development problems, leading to the severing of a LabCorp partnership. Then came massive management changes. Booth explains that the company's team made enormous R&D progress and raised a small Series B to help keep things going. But a search for a strategic partner/acquirer to continue work on the circulating tumor cell technology didn't succeed, and the principals decided to wind the company down.
So what went wrong? Booth argues in his blog that merging two promising but as yet "cash burning businesses" into a single company ended up being quite challenging, noting that "crashing two Fords together doesn't make a Porsche." He also said that investors should have tranched the funding into stages, to allow for the technology to be validated with smaller financing before rewarding it with more funds. Management instability didn't help, he said.
But ultimately, On-Q-ity may have simply been ahead of its time, particularly with CTC diagnostics, launching before outside investors or potential partners were willing to ride out its development. Cedars-Sinai Medical Center/UCLA are making progress with a NanoVelcro Chip that enables the use of CTCs for diagnostics. Epic Sciences also raised a $13 million Series B round last fall to advance its molecular diagnostic test that relies on circulating tumor cells, just to name two of many CTC diagnostic development efforts now gaining traction.
- read Booth's full blog entry