Mergers and acquisitions of life science companies that find their way into this space normally involve some combination of famous executives, billions of dollars, or the commercial fate of a medical miracle.
This one is different. Chances are you’ve never heard of Semprus Biosciences of Cambridge or the bigger company that bought it Monday for relatively modest money. The medical technology, though important, is no miracle. The main reason Semprus chief executive David Lucchino’s name may ring a bell is that he happens to be the nephew of Boston Red Sox president Larry Lucchino.
But the Semprus story caught my attention because it illustrates so many of the challenges of building a life science company from scratch. Those involve solving technical problems, creating visibility for a business idea, and making hard decisions about money. For every famous Cambridge biotech company in the news, there are dozens of smaller Massachusetts ventures like Semprus trying to maneuver through the same business obstacle course in relative obscurity.
Semprus had a few advantages right out of the gate in 2005. Lucchino and cofounder Chris Loose were both students on the start-up friendly campus of MIT. They were both known to Robert Langer, the influential MIT professor who suggested Lucchino and Loose might be able to help each other.
Loose, an engineer in Langer’s lab, was working on technology to apply a chemical coat on implanted medical hardware that could limit common complications like infection and blood clots. He sent Lucchino, a business student at MIT, an e-mail out of the blue. Was Lucchino interested in exploring the opportunity just weeks before the deadline for a business plan competition at MIT? Of course he was.
They entered the MIT $1k competition, a kind of elevator-pitch preliminary contest before the bigger event known today as the MIT $100k Entrepreneurship Challenge. Loose and Lucchino won both MIT contests. In fact, their new company soon embraced business-plan competitions as a strategy to raise visibility and a little cash.
They won contests at Harvard, Oxford University, and Rice University. The prizes became bootstrap money to keep the business going until a round of funding from angel investors raised $1 million.
Of course, Semprus would need a lot more money. And it managed to raise another $1.5 million in 2007, then $8 million more from venture capitalists the next year, and $18 million in a final venture round in 2010.
Raising the $8 million in 2008, at the height of the financial crisis, turned out to be the toughest test. “There were many pitches,” Lucchino recalled. “That was not an easy task.”
The founders were able to attract all their venture money because they made steady progress on engineering and business issues.
One challenge: proving the science behind the thin polymer coating really worked — that it would stick to a variety of surfaces, stay there, and do the job better than existing alternatives. That meant promoting peer-reviewed research, so Semprus began presenting at a dozen or more technical conferences annually.
Another challenge: finding a medical product to improve. Semprus focused on a company already making a government-approved catheter and convinced the manufacturer, Health Line International Corp., to help it engineer an improved, coated version. That agreement helped Semprus submit its first product for approval to the Food and Drug administration, an application now pending.
As Semprus advanced, another company approached Lucchino and Loose with a takeover offer. Teleflex Inc., a Pennsylvania company that makes implanted devices, eventually offered $30 million up front and as much as $50 million more in performance payments over several years.
Semprus investors had put about $29 million in the company, so the Teleflex bid essentially offered the return of their capital and potential profit in the future. That’s pretty good, but not a home run return for a high-risk investment in a seven-year-old company.
The alternative? Semprus could pass, but it only had one product awaiting approval. It would take millions more and additional time to develop a second coated device.
“It was an easy decision at the end of the day,” says Lucchino. Semprus took the Teleflex offer because investors got cash in hand — no small detail — and a good chance to profit. The technology itself would move forward faster than Semprus could manage on its own.
Every small life science company like Semprus faces an uphill battle to develop technology and make money. The conclusion of this story — with new products that can help people and satisfied investors — is a happy ending.