Startup gets $600,000 for drug testing device

By Megan Woolhouse, Staff Writer

An Atlanta startup has received more than $600,000 in venture capital to market a device that will cut down the amount of money pharmaceutical companies waste on impure drugs.

Atlanta-based Healthcare Capital Partners LLC and Boston-based New England Partners agreed on June 30 to fund the company, Stheno Corp., which is housed on the Georgia Tech campus.

Pronounced Stee-no, the company already has been working with a major pharmaceutical company to build prototypes of the device, CEO Bill Edens said.

“This is sort of our coming-out party,” he said. “This is the biggest amount of money we’ve raised.”

The device-about as big as a computer hard drive-uses a laser to spot irregularities in molecules.

When a sensor is installed in a pipeline full of liquid, it can detect molecular irregularities and alert production managers. Major pharmaceutical companies currently take samples off the production line to test purity levels in on-site labs. According to Food and Drug Administration estimates, about 10 percent of materials used to create drugs by pharmaceutical companies are scrapped.

Saving time and money

Thomas Brooks, principal of Healthcare Capital Partners, said he predicts the device could save the pharmaceutical industry hundreds of thousands of dollars a year in losses.

Currently, results can take hours or up to a day, Edens said. The new device would allow production managers to know instantaneously when a batch of drugs contains irregulars as well as too much or too little of an ingredient.

Getting to market just one day faster can have big financial implications. A drug like Albuterol, a popular asthma medication, brings in more than $3 million a day in sales, he said.

The technology stems out of research by a Georgia native, Phillip Gibbs, a former postdoctoral fellow at Georgia Tech who left to develop the company. Gibbs found a way to use a laser to spot irregular or impure molecules. The development process involved complicated science and experimentation involving light and sound beams and even a few stereo parts.

Introduced by a mutual friend, Gibbs, 36, and Edens, 34, met over lunch.

Edens had just graduated with an MBA from Georgia Tech and was looking for an idea. Both agreed that the technology could have a broad range of applications, and licensed the patented technology from the school to start the company.

The two men created a business plan and entered the Georgia Tech Business Competition in March 2003.

They lost.

But unlike other students’ imaginary proposals, their plan was real. The judges awarded them a new prize of “Most Likely to Form a Real Business,” which included $30,000 worth of legal, advertising and accounting services.

Their first investor was a judge from the competition, Georgia Tech alum Bill Oakes, who invested $200,000 in the project. They also raised another $100,000 of their own money and contributions from friends and family.

Nationally known partner

Edens said a nationally known pharmaceutical company took an interest in their technology and gave them $45,000 to develop a prototype. He said a contract arrangement prevents him from disclosing the company’s name.

Healthcare Capital Partners is a less than $50 million fund started in 2003 and financed solely by wealthy individuals from the Southeast.

“What excited me and the large pharmaceutical was…we can do it real time, which has never happened in the past,” Brooks said.

He said he learned about the company when it was part of Venture Lab, a Georgia Tech program matching promising research with early-stage capital investors. Brooks said he wanted to find a partner who had expertise in test equipment and had worked with investors at New England Partners.

Stheno also was admitted on June 30 to the Advanced Technology Development Center, a state-funded technology incubator program that helps early-stage companies get started.

Lee Herron, general manager of biosciences at the center, said Edens and Gibbs have been attuned to the market demand for their product, unlike some early stage companies that develop business plans based on “whiz-bang” technology alone.

“They’ve got some good intellectual property protection,…the technology is unique and it’s a startup with, in essence, guys who are young and in their first job out of school,” Herron said. “…They have a commitment and a passion for this.”

Reach Woolhouse at mwoolhouse@bizjournals.com