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Divyen Patel: No Bootstrapping Blues for Memphis Microarrays
FEBRUARY 2003

At A Glance:
CEO/Founder, Genome Explorations, Memphis, Tenn. 1986 - BSc, applied biochemistry, Liverpool Polytechnic, UK. 1992 - PhD, biochemistry, University of Leeds, UK. Thesis: "Characterization of Non-Specific Esterase Isoenzyme Forms in Normal and Leukemic Myeloid Cells." Postdoc - University of Tennessee, Investigation of mechanisms involved in signal transduction resulting from the activation of ANF-C and TGF-beta1 receptors in human and rat models. 1994-2001 - Section leader, St. Jude Children's Research Hospital, Memphis, Tenn.

If there is a Horatio Alger story in microarrays - other than that of Steve Fodor, the founder of Affymetrix - it could possibly be brewing in Memphis, Tenn., where startup Genome Explorations is four years ahead of its business plan, and co-founder Divyen Patel happily functions on four hours of sleep a night.

Patel created the Affymetrix core lab at St. Jude Children's Hospital three years ago and then thought that the kind of research that microarrays empower could extend past the narrow focus of diseases studied at St. Jude's.

After finding a partner in former naval aviator Arno Justman, he got a GeneChip brand system, some lab space, and transformed from a research scientist into a bootstrapping, gene-chip packing research services entrepreneur.

A year later, Patel and his team of three have mostly paid off the equipment, brought in $1 million in revenues, and have assembled a list of global clients for microarray analysis. Now, they are preparing to create an umbrella holding company to manage the initial firm and at least one spinoff, while looking to create similar labs overseas.

BioArray News recently spoke by phone with Patel from his Memphis office, which is five blocks from blues music mecca Beale Street, but perhaps more importantly, just three blocks from one of his first customers, the University of Tennessee hospital.

Why Memphis?
I did my training at St. Jude's Research Hospital, so I was already here. And, the other thing that has been very helpful is that FedEx has its headquarters here. So, samples from Singapore can be here the next morning. It's fortuitous. And, the cost of living is extremely good in Memphis. Talent can be a little difficult to get, but we are blessed with having St. Jude here as well as the University of Tennessee Medical Center. We have university clients on both the East Coast and the West Coast, just about everywhere. What you have done, establishing a commercial entity, seems like a great idea.

What was the eureka moment?
The motivation was based around the data that we generated while I was at St. Jude. We were looking at leukemic samples at that time and the data was so fascinating that I felt this would be very useful for other disease states as well. As a pediatric oncology hospital, St. Jude was really only interested in looking at children's diseases. The data was compelling enough for me to try and branch out to apply the technology to other diseases, especially adult tumors.

So, how did you get it going?
My partner, Arno Justman, and I financed it out of pocket. In setting up the lab, we asked most of the vendors for 90-day terms for repayment. Affymetrix was fantastic. They gave us very favorable terms and gave me the go-ahead to set up the service provider thing. I think we were the first to get a contract from Affymetrix to do this. We were profitable in our first quarter of operation. At the end of the first fiscal year of operations, we had revenues in excess of $1 million.

We have 62 different universities, representing probably in excess of maybe 200 investigators [as customers]. We first acquired databases of scientists, and then marketed to them with our own fliers. Since then it has been word of mouth. People talk about our services at various conferences; and our data has been amongst the best that the Affymetrix platform will allow.

We are at year four of our business plan: We anticipated we would provide services for maybe the University of Tennessee for the first year, then go into the North America market slowly in the second year, Europe in the third year, and Asia in the fourth. We did all that in the first four months.

That speaks to your business acumen, or the state of the market for this type of analysis.

Certainly, it's a little bit of both. If the data coming out of the lab had not been of any value, we wouldn't get the word of mouth.

What do you think has made this possible?
We are touching people that don't have access to this technology, and would desperately like to have access. Secondly, a lot of people get baffled with the data that comes out. With our complete service, we tend to do a lot of handholding with clients so they don't feel like they have been thrown into the deep end. At the front end, we help them design experiments so they get the best quality data. At the back end, we will help them analyze and plan additional studies if they are interested. I can't overemphasize this: I never came out here to make a million dollars. This wasn't meant to be a money making thing. I saw the power of the technology. At the time I set up the core facility at St. Jude, there was only one system in Tennessee and only 100 globally. I think everyone should have access to it.

I first heard about microarrays when I went to AACR in San Diego, where Affymetrix basically launched their product, back in 1995 or 1996. I've always been interested in looking at differential gene expression but the technology we had at that time was so archaic and irreproducible. At that time, I was doing differential display, using sequencing gels. When they came out and said here is a chip with 2,000 genes on it, we were amazed. It was cost prohibitive at that time, but later on it became more affordable.

Why did you decide on Affymetrix technology, and how do you handle data?
We have looked at the other platforms, and I had done so when we were at St. Jude. We got funding at St. Jude to bring in the system, starting the core there in 1998. Affymetrix was chosen because of the huge lead that they have in the numbers of sequences that go on their array. We rely on the Affymetrix MAS 5.0 software, and have an agreement with a company in Belgium, Applied Maths, to do most of our clustering. We also have an alliance with Data Description for their product Datadesk. We usestandard Affymetrix reagents but have modified the protocol somewhat to get more reproducible data. For normalization, we use a global scaling methodology.

You are going to spin out new business lines. Where did that idea come from?
Diagnostics is the place we want to head first. The spinouts are based around the pilot studies we have conducted as a service provider. Through pilot studies, we have been able to identify several different diseases that lend themselves quite well to generating gene expression signatures. When we generate these profiles, the intent is to get to the stage where we have signatures for specific diseases that would ultimately serve as diagnostic chips. That's where the spinoff companies are. Genome Exploration is for services, and the spin-offs are R&D arms that we will generate and fund for each disease we follow. The diagnostic chips that come out of that will be the revenue generators for those companies.

This will be funded partly through Gene Explorations, and private investors - angels and the medical community in the Memphis area. We are trying to raise $400,000, which is enough to pay for the samples. Our staff will process the chips at cost. The money will go towards buying chips, and also, lawyers' fees. There're always lawyers.

What are the diseases you have studied?
We started off with brain tumors and we are also interested in sepsis, Alzheimer's, and diabetes.

What has been the biggest cost your first year?
It's been the equipment, maybe there is $20,000 left to pay and the whole lab is paid off. We don't have any other debt. It's actually fun. You think about a scientist coming out of the field, I have 16 years in research, and doing something like this, it's been exciting. I'm still in the lab. I do everything: I answer the phone; I run the samples when needed; and go to the international meetings when needed. I sleep four hours or less.

What's in the future for you?
We are going to try to get the second part of the company going, providing validation for investigators, using real-time PCR. We want to take NA from clients and give them data back that they can go directly to publishers with. I'm going to Dublin soon, to look at potential sites to see if we can branch out there. We have looked at Wales and London. In Dublin, there are tax incentives and a science community - lower Ireland has five universities - and we would instantly have access to those people.

It has been a fun ride so far and I don't see it slowing down any time in the future. We will start off with just one disease - I think we are focusing on brain tumors - and based on how that does, the revenues fund the next disease, so we never, at any stage, need substantial dilutions. The main reason is that once you bring the VC people in, the buck becomes more important. Bootstrap is the method for us.



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