Frustration the trigger for success at iGene
By Karamjit Singh January 31, 2013
- Taps power of own software to create a service for clients
- RM28mil invested in R&D over the past 8yrs, partly with govt support
WHAT would most entrepreneurs do if it bothered them that the great software they built was not being utilized to its maximum potential by clients?
Most would shrug, sigh but pocket the revenue. Not Matt Chandran (pic), who was doing well providing consultancy and selling a bioinformatics software solution to clients when it hit him that clients “did not have the will to tap the power of our software to its maximum potential.”
This frustrated him and he figured that he might as well tap the power of his own software to build products.
He likens it to selling software to clients that helps them build a car, except that clients were not using it to do that. This gave birth in 2005 to InfoValley Life Sciences, a biotech group that uses the power of bioinformatics to build its own software.
“We became a car manufacturer,” says Chandran.
But why be bothered about whether clients were fully using his software or not? “We had built a baby with tremendous power but whose potential was not being realized because of the limitations of its user,” he says.
Today, InfoValley Life Sciences has its own deoxyribonucleic acid (that other DNA) cancer kit. But rather than sell the kit to hospitals, InfoValley Life Sciences started offering molecular cancer screening services to hospitals.
Through its own central molecular lab in Kuala Lumpur (KL), hospitals from the Pantai Group, KPJ Group, all tertiary public hospitals in Malaysia, as well as hospitals in Indonesia, Thailand, the United Kingdom, United Arab Emirates and Saudi Arabia were sending their DNA samples to the lab in KL.
It still is in very small numbers, Chandran admits, “but it is creeping into their system.”
The results are analyzed and mapped to clinical data sent by the hospitals and a digital report, the Clinico Molecular Report, is sent back to clients.
Here, Chandran takes a step back. “If you see what we are doing here, we are not selling technology, nor are we selling a product. We are offering a service to clients which is fully managed within a software system with all the workflow, administration and adoption done for them.”
He calls this their strategy for doing business. The change in business model happened in 2005 but the first kit was only released in 2008 with the cancer kit introduced in 2009.
A critical factor in the success of the model was the RM5.42-million (US$1.76-million) grant Chandran received from the Ministry of Science, Technology and Innovation in 2005 that funded a lot of the research and development (R&D).
Profits from his other services were also ploughed back into this. The 2007 investment by Malaysia Venture Capital Management Bhd (Mavcap), the Malaysian Government’s venture capital arm, was yet another key milestone for Chandran with its RM7-million (US$2.27-million) injection.
However, this money was injected into InfoValley subsidiary iGene Sdn Bhd, an advanced medical informatics company which was set up in late 2004 and was pushing its Digital Autopsy System.
The thinking behind the Digital Autopsy System started in 2003 with the product introduced in early 2004. It then attracted the interest of a Singaporean company, Genetec, under the Economic Development Board banner which wanted to invest in the system.
iGene was incorporated in late 2004 for this reason but the deal fell through because of misaligned interests. “We wanted to take this global and had our long-term roadmap for this from the start,” says Chandran, who credits his global thinking to his experience prior to setting up InfoValley in 2000.
“I had worked in three multinationals before and there you learn to think global. My last position was with Peregrine Capital, a Hong Kong-based healthcare venture capital firm and I had a portfolio that ran into the hundreds of millions of dollars.
“I did not make investment decisions but once those decisions were made, I was part of the execution team on the ground,” he says.
Undeterred by the breakdown in the deal and with a biotech boom around him that helped InfoValley generate a lot of revenue, he pushed ahead with iGene on his own, until Mavcap invested in 2007.
He points out that Mavcap’s RM7 million -- for a 12% stake -- was just part of the RM28 million (US$9.1 million) that has been invested over the past eight years into R&D for the Digital Autopsy System. It is an incredible amount to be invested in by a small company but Chandran shrugs it off.
“If you are an entrepreneur and you believe in something, you will do anything you can to try and make that happen, and I just ploughed most of the profits from my other businesses back into this,” he says.
The recent announcement of an RM70-million (US$22.7-million) investment by Agensi Inovasi Malaysia (AIM) at a discounted valuation of RM200 million (US$64.98 million) certainly justifies the risk Chandran and Mavcap have taken.
Mavcap chief executive officer Jamaludin Bujang (pic) is elated with AIM’s investment, telling Digital News Asia that, “as a Series A investor, we are delighted to learn that there are other Malaysian investors willing to participate in the company's follow-on funding.
“This is rare in Malaysia and we really hope that there will be more investors like AIM in the future. They provide funding continuity and could lessen the burden faced by Mavcap in funding its portfolio companies.”
What is even sweeter about AIM’s investment is the RM200 million valuation. “For Mavcap, it's even more meaningful as AIM is entering at a higher valuation, thus validating the company's future growth potential,” Jamaludin adds.
That potential now rests on how well Chandran executes on the Digital Autopsy network he is building across the United Kingdom. As we reported on Jan 29, iGene is currently building a Digital Autopsy System there, consisting of four full scale Digital Autopsy facilities and 14 Digital Autopsy scanning centers with all the information feeding into one data center – all based on the Build-Own-Operate model.
Chandran says iGene will charge ₤500 per case with the digital autopsy coming with a radiologist reading which will be sent back to the respective hospital coroners. As with the DNA Cancer kit, Chandran is rolling out a service, not selling a technology or a product.
Both Chandran and Jamaludin are excited about the possibilities of adopting the same model globally. While AIM's entry into iGene will help Chandran roll out his service in what Jamaludin describes as “the highly-lucrative, UK market,” both are hoping iGene can use the AIM investment as a springboard to enter the much-larger, European market later.
Jamaludin seems particularly excited. “We think iGene can go very far as we think the market is wide open with only a handful of players at the moment. It's a disruptive technology with wide application across the market and the service can be priced competitively against the current technology.
“We have every reason to believe that iGene will be successful in the future,” he adds.
There is a lot riding on Chandran being able to pull this off in the United Kingdom. If he does, the RM500 million valuation he says iGene has been potentially valued at may just come through.
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