Biotech start-up shows what it takes to survive in Missouri

Jacob2Every year, patients in the United States are prescribed billions of dollars worth of unneeded antibiotics.
Even worse, the misuse of these drugs is causing a rise in antibiotic-resistant infections, a serious health threat that leads to $20 billion in additional health care costs, according to the Centers for Disease Control and Prevention.

Dr. Tom Cohen has an idea to fix this problem, and he’s been working for the past three years to establish a start-up company in St. Louis to develop a potentially groundbreaking product—a 30-minute test that would determine whether a patient actually needs antibiotics.

2030 key driverHe’s already raised hundreds of thousands of dollars from competitions and investors in St. Louis and across the Midwest. However, he needs to raise millions more to bring his test to market. But Cohen is up to the challenge.

“This is something I’m very passionate about,” he says.

The idea came in 2011 when Cohen, then a laboratory researcher at Washington University, learned about a new technology that had been developed by Dr. Liqun Gu at the University of Missouri.

The technology—a nanopore sensor called The iNDxer—could quickly and inexpensively read DNA sequences. Cohen and his cofounder contacted MU about the technology and were granted a license to try to find a marketable use for it.

“We knew it was innovative,” Cohen says. “We just had to find the right use for it.”

Cohen immediately thought of antibiotic testing. A decade earlier, Cohen thought he had an ear infection, and his doctor prescribed him an antibiotic. Cohen, it turns out, did not have an ear infection. However, after taking the medication, he became very ill with a dangerous infection.

“Ever since then,” he says, “I’ve thought that we need a test that would have allowed the doctor to quickly say, ‘Hey, he doesn’t need antibiotics.'”

With his sights set on creating an antibiotic test, Cohen started researching and crafting an argument that the iNDxer was the right technology for the job and that it could be successful in the market.

Dr. Tom Cohen, founder and CEO of Nanopore Diagnostics, and Dr. Somes Das who leads research and development.

Dr. Tom Cohen, founder and CEO of Nanopore Diagnostics, and Dr. Somes Das who leads research and development.

Finding Funding

Next, his company, dubbed Nanopore Diagnostics, needed a peer reviewed article with an academic partner to prove his technology worked. That would require funding—and that’s where things stalled.

“We went at this for about a year and a half before we got any investment,” he says.

His first funding came through winning various local start-up competitions, which netted about $200,000.

With the wins helping to validate his idea, private investors started to get on board.

“I think part of the problem is we are a very early-stage, risky company,” Cohen says. “We’re trying to solve a gigantic problem, and we need a lot to get there. In the Midwest, there aren’t a lot of examples of people being successful at that.”

While it could have been easier to raise funds in a place where investors have more of an appetite for risk, Cohen says his struggles to find funding have helped refine his idea and have improved his skills as a business leader.

With his recent fundraising success, Nanopore Diagnostics is ready to move forward with developing its clinical test. Cohen also recently left his old job and began working for the company full time as its CEO.

Start-up Struggles

While there are still many hurdles ahead for Nanopore Diagnostics, Cohen’s story illustrates that Missouri’s climate for developing companies is improving. However, his struggles also show the need for more progress.

Ted Abernathy, a national economic consultant who helped lead the Missouri 2030 strategic planning process, says Missouri is currently a mid-range state when it comes to the factors needed to grow successful new companies.

“Young companies are a challenge, as everybody knows,” Abernathy says. “They need everything and want everything. Missouri’s entrepreneurial numbers are middle of the pack. Formation numbers are a little lower than the middle, ease of starting is slightly higher than the middle, but it’s not a competitive advantage against a lot of states.”

A 2014 Gallup survey commissioned by the Missouri Chamber further shows the challenges faced by nascent companies in Missouri. The survey of more than 1,000 business leaders illuminated a broad dissatisfaction with worker training in the state; this dissatisfaction was most pronounced among small and mid-sized businesses.

Small businesses were also especially vulnerable to health care costs, with 72 percent of small businesses reporting that those costs negatively impact their ability to grow, compared to 65 percent of large businesses that gave the same answer.

The survey also showed that Missouri’s tax environment was the state’s biggest obstacle to growth, with small businesses being the least satisfied with taxes.

“Across the board, Missouri’s small businesses seemed to be struggling more than large or medium-sized businesses,” says Courtney Behringer, with Gallup.

In the plus column for Missouri, the Gallup survey showed that businesses in general were satisfied with the availability of credit, affordability of land, access to customers, and business networking opportunities.

Even leaders at Missouri’s large, established businesses have stressed the importance of creating an environment where new companies can flourish.

“The development of new companies is just a sign of a healthy business environment,” says Thomas O’Grady, central division president of HNTB, a national engineering, architecture, and planning firm based in Kansas City. “The establishment of new companies creates a positive economic growth environment. You have new infrastructure being built, new buildings being built—commercial buildings, retail buildings, housing starts—all of that is being driven by the establishment of new businesses. Growth builds momentum as you have both new businesses starting and businesses relocating to a certain area.”

Eliminating Obstacles

Missouri 2030 is focused on encouraging future business growth by regularly reviewing the state’s tax policy to maximize the tax benefits for start-up and high-growth companies.

The plan will also work toward reducing regulations and encouraging the development of more venture capital, angel networks, and crowdfunding in Missouri.

Advocating for companies like Nanopore Diagnostics, the Missouri 2030 plan would also promote the commercialization of the research being done in Missouri’s higher education system.

From his perspective, Cohen suggested that Missouri must also work to create a more attractive living environment to attract highly skilled workers. He cited outsider perceptions of high crime and the recent unrest in Ferguson as major problems for attracting non-Missourians to the state’s start-up scene.
With Nanopore Diagnostics continuing to show promise, and with $11 million of investment still left to raise, Cohen is confident that a mix of local and outside investors will be there to help realize his vision.

He knows it won’t be easy—but, then again, it shouldn’t be.

“There are a lot of resources out there, but you have to work for it. That’s the way it should be because entrepreneurship is difficult,” he says. “It’s about being persistent, having small wins, and snowballing those into a bunch of momentum.”

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