Companies developing diagnostics (MDx) and “omics” technologies (e.g., genomics, epigenomics, proteomics, metabolomics), used as predictors of clinical outcomes, are reportedly continuing to face obstacles attracting venture capital (VC) and private funding. According to a VC company spokesperson, “Until we see exits that are substantially larger than what we’ve been seeing, the value of the exit does not justify a huge amount of investment.” Epic Sciences President and CEO David Nelson echoed those comments, noting “The returns or the market sizes that have been achieved with traditional diagnostic companies are not the same as the therapeutic companies. There are very few billion dollar-type product opportunities in diagnostics. And that’s certainly one thing that venture capitalists look at, that sort of home run.”
Just one omics/MDx company reportedly went public in 2012; several others have withdrawn their IPOs, let their IPOs lapse or delayed launch. Despite the interest in new omics technology, investors have learned that getting a company to the commercial stage can be costly. Another VC insider said, “It gets good press,” but two omics/MDx companies that went public in 2010 reportedly spent more than $100 million to get to market and they are “still not profitable.” Macroeconomic factors affecting the industry include the 2008 economic downturn, ongoing budget battles and sequestration in Washington, D.C., as well as a purported unpredictable reimbursement environment under health-care reforms. The mergers and acquisitions pipeline has also apparently been depressed. See GenomeWeb, April 1, 2013.