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Funding lets Nanostring pursue molecular "bar-code" reader

By Luke Timmerman
Seattle Times business reporter

MIKE SIEGEL / THE SEATTLE TIMES Inventor Krassen Dimitrov, left, Chief Executive Perry Fell and Operations Chief Amber Ratcliffe are among the team at Nanostring Technologies trying to develop a digital "bar-code" reader for single molecules.

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Now after months on the fund-raising trail, Nanostring has corralled the first $4.3 million it needs to develop a prototype instrument over the next year. If all goes according to plan, the machine will serve as a digital "bar-code" reader to identify single molecules in a mixture, similar to how a grocery store uses bar codes to identify a box of cereal on its shelves. The bar codes could be used a number of ways, such as spotting a single gene active inside a cancer cell.

OVP Venture Partners of Kirkland and Draper Fisher Jurvetson of Menlo Park, Calif., led the financing round.

The Seattle company did not snag the full $8 million it aimed for, but the investment puts several pieces in place. Perry Fell, 47, the former chief executive of Seattle Genetics, has officially joined Nanostring as chief executive. The company now can afford to rent its own space. It can hire a few more people with experience in scientific instruments. Most importantly, it is on track over the next 18 to 24 months to demonstrate how well its system works.

The company has pending patents and an exclusive technology license from the Institute for Systems Biology in Seattle, the nonprofit center led by Hood, a pioneer developer of high-speed gene sequencing machines. Nanostring's co-founders are in their 20s and 30s — inventor Krassen Dimitrov, operations chief Amber Ratcliffe, and scientist Dwayne Dunaway.

Fell, the leader, is talking big.

Nanostring Technologies Founded: 2003 Located: Seattle Employees: 6 CEO: Perry Fell, former CEO of Seattle Genetics Investors: OVP Venture Partners of Kirkland; Draper Fisher Jurvetson of Menlo Park, Calif. What it does: Developing an instrument that uses digital "bar codes" to precisely identify single molecules in a sample.

He said Nanostring's technology starts with taking a sample of cells to be studied. It uses probes made of strands of DNA that represent the entire genome, and each probe is attached to the equivalent of a unique bar code. The probes can then bind with a complementary strand in the sample. A scanner counts the number of bound bar codes, and the numbers are loaded into a spreadsheet.

Fell calls it a "revolutionary technological leap" that will drive genetic research tools from the analog world to digital.

So far, he said, the company has shown the individual parts of the system can work, but they haven't yet been pieced together. Nanostring needs to do that, and must find the right corporate partners to help, he said.

"If we can make this work, and we have a lot of work to do, this has tremendously broad-reaching applications," Fell said. "It's like an operating system for biological tests. It sounds like Microsoft."

Early-stage investor Carl Weissman, the president of Seattle-based Accelerator, likens the company's potential to Affymetrix or Applied Biosystems, now dominant players in genetic research instruments. He said he didn't invest because the amount needed was too big for his fund.

Weissman said there's risk the technology may not come together as hoped, or competitors could beat Nanostring to the market and corner it. But he said Nanostring could be first.

"It's potentially disruptive technology," Weissman said. "The market is clamoring for this kind of technology."

Nanostring's first goal is to develop its system as a research tool. It is aiming to replace standard gene chips, called microarrays, which tell scientists which genes are active, or turned on, in a sample of cells. That market is estimated to be worth $1 billion per year.

Eventually Nanostring sees itself moving on to bigger opportunities in medical diagnostics, agriculture, forensic evidence or environmental testing. Fell said someday Nanostring could make it possible to run hundreds of diagnostic tests simultaneously, helping doctors catch diseases much earlier.

Chad Waite, a partner with OVP Venture Partners, swore off biotech investing because he says it is too costly and time-consuming to develop a drug, but said he invested in Nanostring because it is making the "picks and shovels" of the biotech revolution.

Waite, an early investor in Seattle Genetics, also said he's comfortable with Fell because he brings experience and a methodical organizing style to a group of bright young people. Waite said it took several months longer than expected to attract another investor who understood the company and was ready to invest.

Hood said he's excited about Nanostring because it enables the "digitalization" of biology that's needed to carry out his vision for predictive, preventive, personalized genetic medicine.

The company's technology will be challenging, said Hood, because — as with the high-speed gene sequencers he's famous for — it requires creating a new instrument and developing more efficient chemistry methods for it.

Hood said Dimitrov, a former post-doctoral student in his lab, is "wonderfully creative" but needs to be surrounded by engineers, chemists and biologists to turn promise into reality.

If Nanostring successfully develops its instrument, it could detect tiny changes in samples that standard tools can't see, and do it faster and cheaper.

"I'd put pretty reasonable odds on this to succeed," Hood said. "They have an idea where proof of principle is clear, Perry [Fell] has a lot of experience and success, and Krassen [Dimitrov] has a chance to be a brilliant scientific leader."

Luke Timmerman: 206-515-5644 or ltimmerman@seattletimes.com

Copyright © 2004 The Seattle Times Company

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