Live blogging the finals of Rice Business Plan Competition in HoustonApril 17, 2010: 1:42 PM ET
Final round of Rice Competition starting now. Six Teams have 15 minutes to present; 10 minutes for questions. Finalists include three medical companies, two from the microchip industries, and one with optical technology: BiologicsMD, Ambiq Micro, GlucaGo, Rebellion Photonics, Reveal Design Automation, OrthoIntrinsics
First up: BiologicsMD
Developing OsteoFlor, a new prescription medication for treatment for Osteoporosis.
"You're not looking at a hip fracture, you're looking at a death sentence." --Jerry Tenenbaum, MD Mount Sinai Hospital
Existing drugs: Antiresorptives (Boniva, Fosamax, Reclast; doesn't grow new bone), Anabolics (Forteo; grows new bone but requires shot every day, expensive)
In animal studies: OsteoFlor 13% increase in bone density vs. 5% for Forteo
3X efficacy, fewer side effects, less frequent dosing
Patent pending, 60 claims, three independent reviews (patentability, freedom to operate)
Annual prescription sales for osteoporosis: $2B in U.S.; $9B WW
Founders have already been awarded $18M in federal grant funding for other projects
Outsource: manufacturing, preclinical testing, clinical trials
In-house: assay development, regulatory
Total capital required: $5.3M
Exit strategy: Patent cliff+ Pipeline gap --> Demand for biotech --> Proven industry strategy
Angel Investors 4.5 years = 45X ROI
Now the questions:
Target group? Advanced users, history of fractures, low bone score, history of osteoporosis
How did you come up with your pricing? It's $4500 per shot/per year. Forteo currently costs $8500. This fits within industry expectations.
Possible application to chemo-induced alopecia.
Second team: Ambiq Micro
Future of computing: ubiquitous computing --> most energy efficient chip will win
Improve battery life, lower cost to user
World's most energy efficient microcontroller
4-10X less active energy than today's low power MCUs
25-130X less sleep energy than today's low power MCUs
Integrates into existing software
Competitive Analysis: Smart label application, 19X greater battery life
MCU market $13.2B, 5.5% CAGR/Low Power MCU $2.7B
Fabless: Chip design, sales in-house; fabrication, packaging, testing outsourced
Over $5M spent on research to date, 4 research prototypes 2005-2009
Goal: 40 customers, $12M net income on revenue of $41.2M by 2015
Seeking up to $10M: $1M seed round; $6M A round; Possible B round
Positioning for IPO!!! But could be acquisition target for silicon provider with gap in low power portfolio...
Doing customized MCUs is a pain. Uphill battle between Texas Instruments, MIT. How will you compete? Re: Texas Instruments, we are orders of magnitude lower power at same performance.
How much are you selling chips for and how does it compare? $1.87 per packaged microcontroller, parity with current market.
What about IP? Right now we have the exclusive licensing option; we will finalize agreement over next two months.
Who are your current investors? Letter of intent from entrepreneurs--no history in semi but successful exit experience.
It takes $50M to do anything in this field per KPCB's Bill Joy. Would you take more capital to move faster? Yes. We're testing waters to see what appetite is for semiconductor investing. Typical semi startup isn't as far along development line as we are.
You're two years away from selling a chip. Industry will change. What multiple over competitors do you need to be at to succeed? 10X. We have a lead but we must continue to innovate and come to market with a chip that's 10X better.
Third team: GlucaGo
"The Future of Drug Injection"
Device with two chambers: powder drug and liquid
No need for refrigeration, intuitive to use, engineered to fit existing drug filling processes
Developing drug is risky and expensive, so pharma adds unique delivery systems: syringes, pre-filled syringes, auto-injectors = all liquids
Fourth class: reconstitution devices = difficult and unsafe to use
Solid barrier between drug and liquid is what eliminates need for refrigeration
Cannot be refilled or reused, especially important to developing countries
Potential markets: emergency situations (aspirin, glucagon), vaccine delivery (requires refrigeration, trained health care provider), protein drugs (must be injected, complex molecules that degrade rapidly)
Hep C market: $2.7M WW, 20,000 new cases yearly U.S.
Partner with drugs due to come off-patent
Need $500K for regulatory approvals
Relevant parallel: Intelliject sublicense to Sanofi-Aventis: $25M up front; $205 in possible milestone payments
Need CEO to leverage contacts.
What about competition from other drug delivery i.e. internasal, subcutaneous/patches? Internasal degrades proteins. Subcutaneous: air bubble forms and hits side of impact area, no needle but still pain. More cost too. Patches prohibitive on molecular size going through the skin.
Doesn't drug in chamber need to be approved too? Mechanism of action needs to be validated, not drug in the chamber.
How did you land on your specific IP? We found holes is what had been done and identified that breaking the solid barrier had not been patented.
What about drug loss? Our device injects everything that's in the chamber.
Is there a good history of equity value in supplying the delivery system? We are selling licensing package rather than supplying drug makers directly. They have their own subcontractors they work with.
Are pharma companies willing to incur cost of approval for drug container? Yes, they have confirmed their willingness to do so.
Fourth team: Rebellion Photonics
The home team from Rice. Four women, one guy!
Product = camera that can "see" chemicals
Established technology, but now you can bring this outside the lab. Portable and instant.
Video capable, battery powered, easy to use LCD screen.
Every material is made up of chemicals. All chemicals reflect light. Camera can read this reflection like a bar graph.
Competitor Ocean Optics can only capture a point in an image
Target customers: drug companies, food manufacturers, energy industry
Need to develop software for different customers to register presence of chemical and amount
Device does not rely on filters; more sensitive and adaptable
How we make $: hardware, service contracts, software updates --> recurring revenue
1st target market: security; secondary: pharma, energy industry
Already received $3M from NIH in 2007
Seeking $1.25M VC funds
Does technology work? Validation in 3 journals, 3 customers, 1st step of DOD intake
Difficult to make? One critical part. Easy for us to make; not for others. Rest off the shelf.
Initial sales? Market penetration can be slow because you have to educate customers. Since publishing in journals, customers have already started coming to us.
Gross profit margins of over 50%; 30X-45X ROI
Here we go with questions...
How does it work in layman's terms? Our big breakthrough is making it a full 16MP camera
Use diamond-turning machine to make critical part. Machine costs about $350,000.
Can you detect gases? Yes with active light system. So we would include a laser.
Is it plug-and-play or does it need to be integrated? Yes it is plug-and-play.
Software algorithms: one-off investment, once we create software algorithms we just need to get chemical libraries which are minimal cost because that's public information. They've optimized algorithms already since the technology has been around for processing graphics (like in video games).
Too many three-part questions for these folks! Someone needs to come up with a business to deal with these three-part questions...I can't keep track of them. Kudos for this team for doing so.
Differentiation: Patented ability to do 3D zoom. We have strong IP with the component that breaks apart the image.
Yes we can (!) ...do spectral unmixing.
Time's up! Next group: Reveal Design Automation
Leading chip design firms such as Intel and IBM are shifting to a new approach to finding bugs in their chips. But new approach isn't fast enough, can't be done until the end of the design process, only works on small designs.
"We solve that problem."
Past approach: Simulation approach requires annually defining specific test cases.
Chip complexity grows exponentially with each generation; too much effort for simulation to keep up.
The future: Formal verification, which uses a systematic proof-based approach.
We offer the best of both processes: complete coverage, short setup, continuous check, large designs.
Remove unnecessary information from the design.
Proven in academic and real world design and specifications; 6 years R&D.
Big four EDA tool vendors have integrated tool chains.
Some have standalone supplement and replacement tools.
Industry standard data formats, no technical barriers.
Acquisition of standalone tools into integrated tool chain.
$800M target market
Market price for formal verification software: $200K per chip design team.
Relationships: ARM -- prototyping Reveal and preparing to release tool; Intel -- negotiating a product trial phase for Reveal.
Exit via acquisition by big four EDA vendor by 2017.
Total ask through 2015: $15.5M
Questions--these should be toughies...
What happens to seed investors return if you exit prior to B round? We'll work with that seed investor to make sure they get a fair return for the risk.
Raise more money faster, exit sooner? Throwing more money at is not going to advance adoption cycle.
(Wouldn't it be cool if someone here just raised their hand and offered the money to one of these teams?)
"Maybe I'm slow, but does the product actually work today? If so, why aren't you going out and selling the product?" We're working on validating the prototype with ARM.
What about a strategic partner vs. a financial partner? Our customers don't deal with underlying technical challenges in formal verification space. They don't have intelligence in software development. On tool chain support side, their collaboration has simplified this.
Final group: OrthoIntrinsics
Another home team from Rice.
First measure of hand muscle weakness. Concentrating on muscles that let you tie your tie, use your chopsticks (laughs from the audience...).
Product: Peg Restrained Intrinsic Muscle Evaluator (PRIME)
Existing competition: manual muscle test, Rotterdam Device, hand-held dynamometers (not designed for hands).
Physicians can use for diagnosis; Surgeons for decision-making; intervention; therapists for rehabilitation.
"We do have adult supervision." Cue the advisors...
Class II non-significant risk device, approved along 510(k) pathway.
Watch out insurance companies: Can be used to justify health claims.
Price: $7,000 based on competitors and value; 200,000 addressable clinicians.
Recognized risks: slow adoption, slow sales growth, competitor entry.
This field has seen limited innovation in the last 30 years.
Initial ask: $500K
Canary in mineshaft for total neuromuscular function
FDA strategy: how long is it going to take? We don't attempt to diagnose, treat or mitigate disease. We can get initial filing fairly quickly. Documentation and testing ($7,000-8,000).
Convince me you are doing this full-time? I developed this technology while I was a Rice student. We're better suited for technical engineering side. Best for investors to select someone to fill sales, executive roles with more experience. We've divided labor so we can each add value in our own way.
Where are quotes from carpal tunnel doctors saying "This is the most awesome thing, I have to have it'? We have worked with clinicians, therapist developing our product. Therapists, after they see are demos, say, "I will purchase your device."
We want to be stethoscope for hand injury market.
What's the IP patent status? In negotiations with office of tech transfer. Hope to have an agreement with Rice within two months.
What about consumer market? It's outside our core competency but we've thought about it. We can command premium with clinicians now and don't want to dilute that.
Explain revenues beyond initial purchase of device? Sensitive instrumentation sensor. We'll be handling that service contract. Also collect and monetize patient data.
And that's it! Tune in later tonight for the results!