X Factor: NextGxDx eyes fresh capital raise, dismisses exit notion
Milt Capps Updated 8 March 2018
Update: 8 Feb 2018 - Concert Genetics expands insurance workflow, clinician guidance etc via platform, release here. 1 March 2017 - The company changed its name to Concert Genetics. 8 July 2016 - Rob Metcalf, former Digital Reasoning president, was today named CEO, with Mark Harris moving to Chief Innovation Officer. The company has raised more than $8MM capital to date. 5 Oct. 2015 - NextGxDX filed report 2 Oct. on $1.5MM capraise. Our March 11, 2015 story follows.-Ed.
NEXTGXDX, the HealthIT company based in Franklin, is likely to pursue additional debt or equity capital in 2H 2015, said Founder and CEO Mark Harris, Ph.D.
Hospitals pay to license the NextGxDx platform to manage their genetic test-ordering workflow, while partnering laboratories pay when the NextGxDx platform is used to order one of the labs' genetic tests.
The four-year-old company is not contemplating an exit "anytime soon," said Harris, citing strong early results from introducing its GeneConnect suite, which is for use by hospitals in managing workflow associated with genetic-test ordering.
Harris said he has "no crystal ball," but acknowledged that an eventual strategic exit remains the likely outcome. He stressed that strong sales traction has reinforced its organic-growth emphasis; and, the company has numerous opportunities to create additional valued-added products, perhaps including business-intelligence offerings driven by its analytics. Harris said he has no interest in an IPO.
A successful exit by NextGxDx or any of a number of other ripening local healthIT startups would extend a winning streak, which has thus far included Healthcare Productivity Automation's exit two years after formation To Trizetto (now part of Cognizant); and, Change Healthcare's more recent sale to Emdeon, after more than seven years in business.
Asked about X-factors in the company's business environment, Harris acknowledged potential unknowns associated with the rapid evolution of Genetics; medical-practice trends; the expanding market; adoption patterns; consumer behavior; and, regulatory changes that could, over time, affect the business environments of laboratory, hospital and clinic customers.
Harris nonetheless expressed confidence in NextGxDx growth projections that support the idea of a capital raise for growth, which could take the form of a Series C.
NextGxDx now has approximately 50 shareholders, including Jim Kever of Voyent, who is chairman of the NextGxDx board of directors, and has prior experience with both Emdeon and WebMD (and Envoy) businesses.
The board also includes George Lazenby, former Emdeon CEO; Walter Loewenbaum, chairman of bioassays technology provider Luminex (Austin) and a former Envoy chairman; and, Jim Lackey, CEO of revenue-cycle startup Complete Holdings and the former chairman and CEO of Passport Health Communications (sold in 2013 to Experian).
Investors also include Abstraction Ventures (New Orleans), Nashville Capital Network and Jumpstart Foundry (wherein Harris' NextGxDx business idea was vetted in 2010-11).
As previously reported, since its inception just over four years ago the group has raised "more than $5MM" through its Seed and Series A and B rounds. NextGxDx has 16 employees and could reach "at least" 24 by year's-end, with most hires likely to be in sales and marketing, bioinformatics and operations.
NextGxDx now has about 35,000 genetic tests in its database, after adding at least 10,000 tests in the past six months, Harris said today. Laboratories that are already in its database are generating about 50 new tests per week, and the universe of test-producing labs is expanding, said Harris.
Early in 2013, while its platform's beta test was still underway and its revenue runrate was still less than $1MM, Harris told this reporter the company might sell to a strategic bidder as early as 1H 2015. At that time, the company was marketing mainly to clinical professionals, to gain early adoption and build brand-awareness.
In 2H 2014, the company stepped-up marketing GeneConnect to individual hospitals and healthcare systems, and now has a "double-digit" number of them aboard. On average, it's now adding one hospital or system, per month, said Harris.
Consequently, its priority marketing targets are now individual hospitals and hospital systems, with emphasis on academic research centers and children's hospitals, which are heavy users of genetic testing, said Harris.
Insisting that the company has no direct platform competitors, Harris asserted that NextGxDx is the "only group with the scalable technology infrastructure" to support the sharply rising U.S. volume in genetic-tests ordering. Moreover, he said, the company believes it has a "very long list" of additional product and service opportunities, depending on "how the market plays out."
Asked at several junctures about competing brands in or near NextGxDx's space -- including McKesson and Athenahealth (Athena is a NextGxDx customer) -- Harris in each case cited platform or marketing differences that he believes leave his startup company with plenty of maneuvering room. NextGxDx CFO Trey Noel spent nine years in senior finance and management roles with McKesson, prior to joining NextGxDx.
When interviewed in 2013, Harris had at least two other companies on his radar: At that time, Bio-Reference Laboratories (NASDAQ:BRLI), the New Jersey-based diagnostic-laboratories group, was licensing and converting to a business unit the GeneTests.org platform created at the University of Washington. Also at that time, the Genetic Testing Registry popped onto the scene, having been created by the National Institutes of Health. Today, neither of them is impeding NextGxDx's progress, according to Harris.
NextGxDx's advisors include attorneys with Bass Berry & Sims and its auditors are Frazier & Deeter. Other advisors include Carr Riggs & Ingram (valuations) and Puryear Hamilton Hausman & Woods (tax). WSquared handles financial payroll and related tasks. It banks with Pinnacle Financial Partners and Lovell Communications handles PR, said Harris.
Asked whether NextGxDx's strategy or projections have been affected by the recent FDA ruling clearing the way for direct-to-consumer genetic-test sales by 23andMe -- which is backed by Google Ventures and is partnered with Genentech -- Harris said there is no direct impact, given that his company deals only with tests that must be ordered via a clinical professional. (Subsequently, on March 12 Forbes reported 23andMe is taking-on the Pharma drug-development role.)
Earlier this month, NextGxDx became a member of the Washington, D.C.-based Personalized Medicine Coalition. And, in December, Harris became of member of the 2015 Nashville Health Care Fellows, a group that is led by former U.S. Sen. Majority Leader Bill Frist, M.D., and is affiliated with Nashville Health Care Council.
Harris holds a doctorate in Cancer biology from Vanderbilt University School of Medicine; an MBA from the Owen Graduate School of Management at Vanderbilt; and, a VU bachelor's in molecular and cell biology, according to his LinkedIn profile.
For a 2012 Battelle report on Genetics and Genomic clinlab testing's economic impacts, please click here.
Harris, his wife and their two children reside in Williamson County. VNC