KALAMAZOO — Armune BioScience Inc.’s sale to a Wisconsin company provides another exit for investors that generates returns they can use in future deals for life sciences startups in Michigan.
Investors across West Michigan backed Armune, which developed a genetic diagnostic blood test for prostate cancer. The company was sold in mid-December to Madison, Wis.-based Exact Sciences Corp., a public company that developed and markets Cologuard, a test for colon cancer.
Stephen Haakenson, executive director of the Western Michigan University Biosciences Research & Commercialization Center, hopes investors’ successful exit from Armune provides encouragement for others to back startups in the state that are developing a new technology.
“If the money’s there to help move it along, I think there’s a lot more that can come out of the state of Michigan,” Haakenson said. “If the individuals are found to invest in some of this technology that is here in Michigan, it can get out there and do what we think it can do.”
The nonprofit BRCC, which started in 2004 and holds positions in 24 active portfolio companies, invested $750,000 in Armune over five capital rounds and was the company’s largest institutional investor, Haakenson said.
The Armune sale “was one of a few good exits” the BRCC recorded in the last several months, Haakenson said.
The BRCC invests in early-stage life science startups, putting up to $250,000 in each capital round. The return on the Armune investment will go into its fund for use in future investments. The BRCC, with a little more than $10 million in capital under management, last year completed eight deals, seven of which were follow-on investments, and Haakenson expects to make four to six new deals in 2018.
“This year, it’s going to pick up because of some of the returns,” he said. “We’re going to start doing a lot more new investments.”
Beyond the BRCC, investors in Armune included the Michigan Investment in New Technology Startups fund at the University of Michigan, Holland-based Grand Angels and Grand Angels Venture Fund II, and several individual angel investors across Southwest Michigan.
Grand Angels’ return on the exit will “allow us to keep investing in new companies and support growth for Michigan,” Managing Director Paul D’Amato wrote in an email to MiBiz.
While terms of the transaction remain undisclosed, the sale “was a really good, solid deal for the company” in what Armune CEO David Esposito calls a “tough market” for early-stage diagnostics firms pursuing a strategic partner.
Key to the deal was how well the technology behind Armune’s Apifiny test for prostate cancer complements Exact Sciences’ Cologuard diagnostic test, Esposito said. During 2017 as Armune worked with investment bank EMA Partners International to find a strategic buyer, “it was really about finding the right partner with the resources to be able to leverage this technology to make a difference in cancer,” he said.
“Given Exact’s resources and their scientific expertise, we couldn’t think of a better home for the technology,” Esposito said. “It’s a great fit for our technology, and we think it has a real strong chance at really impacting the early detection of cancer combined with them.”
Armune’s sale closed in mid-December but was not announced publicly until Exact Sciences mentioned it in January during a presentation at the JPMorgan Healthcare Conference in San Francisco.
Exact Sciences (Nasdaq: EXAS) expects to report 2017 sales of $265.5 million to $266.5 million when it releases annual results this month. At the JPMorgan Conference, CEO Kevin Conroy said the company processed some 571,000 Cologuard tests in 2017, a 134-percent increase from 2016.
In his presentation at the JPMorgan Healthcare Conference, Conroy said Exact Sciences has a goal of developing diagnostic tests for the top 10 cancers.
Formed in 2008 and based in Kalamazoo, Armune developed the Apifiny diagnostic test for patients suspected of having prostate cancer. Based on technology Armune licensed from the University of Michigan, the Apifiny blood test checks for biomarkers that indicate the presence of prostate cancer in a patient. The test works by detecting the antibodies produced when the body’s immune system recognizes a cancer antigen.
The sale to Exact Sciences included not just the technology behind the Apifiny diagnostic test but two new tests Armune was developing, one to differentiate between aggressive and non-aggressive prostate cancers and the other to monitor patients with non-aggressive cancer, plus tests for breast and lung cancer.
Armune, which has conducted about 15,000 Apifiny tests in two and a half years, is now in the process of closing the diagnostics lab in Ann Arbor, distributing proceeds to shareholders, and shutting down the business, Esposito said. Exact Sciences will continue to operate Armune’s R&D lab in Ann Arbor.