Life Science & Biotech and Sports Business

BioStorage gets set for major expansion: Three-year-old local firm eyeing West Coast, Europe

October 24, 2005

The 60 industrial-size freezers standing in formation like soldiers at attention look unassuming from the outside, but their contents are invaluable.

Stored at temperatures of minus-80 degrees Celsius, the millions of biological samples inside the far-west-side warehouse represent the future of disease research and drug development.

The repository is operated by BioStorage Technologies, a 3-year-old venture created by a pair of researchers who met at the local office of Princeton, N.J.-based Covance Inc., a drug-development services firm.

Oscar Moralez developed BioStorage's business plan and enlisted the aid of Dr. F. John Mills, who serves as CEO and chairman. After encountering skepticism from many venture capitalists, the two managed to raise $3 million, mostly from private investors. Now they have their sights set on snaring an additional $5 million to $10 million early next year to fund expansions to the West Coast and Europe.

The company's proximity to Indianapolis International Airport and the Federal Express hub makes shipping sensitive materials convenient. But many of its 20 clients are in the two regions targeted for expansion, Mills said, and would welcome closer storage facilities.

"Our customers are expecting us to do that," said the British-born Mills, who moved to the United States in 1997. "When you're in the bioscience business, you're talking temperature-sensitive, highly valuable materials."

A pharmaceutical company, for instance, might need quick access to a tissue sample from a patient involved in a clinical drug trial.

BioStorage Technologies transports, stores and manages biological samples and specimens, including clinical trial samples, active pharmaceutical ingredients, umbilical-cord blood, donor materials, plasma and serum.

Long-term medical storage is of critical importance to life sciences companies. For example, stored tissue from victims of the Spanish flu virus that killed millions of people in 1918 proved critical to scientists who recently reconstructed the virus, making it possible to develop vaccines to prevent a future pandemic.

Advances in medicine, such as the potential to cure certain diseases with stem cells derived from cord blood, are spurring the demand for storage banks. BioStorage Technologies, however, has developed a system its executives and investors hope will set it apart from the few competitors in the field.

The company late last month launched an Internet-based service that lets clients worldwide track and manage stored materials from their computers. The software application, known as Intelligent Specimen Inventory Storage System, or ISISS, provides such in-depth information as shipment schedules, complete listings of sorted samples, and audits that report on the activities and histories of every sample.

The service, which Mills compared to Amazon.com, provides added value for clients who annually ship thousands of samples to BioStorage Technologies, Mills said.

Mills declined to name BioStorage's clients because he does not have their permission to divulge the information, he said. He did reveal that the company's clientele includes some of the top biopharmaceutical and pharmaceutical companies in the world. They outsource storage duties, Mills said, because BioStorage Technologies can provide the services cheaper, and with better security, than the corporations themselves.

The amount they pay to store materials varies depending on volume and length of time. Standard fees include entrance and retrieval charges, and monthly storage costs. The company's revenue this year will top $1 million, and Mills expects the amount to triple next year.

Twilight Ventures LLC, the city's only venture capital firm to invest in the company, is encouraged about the positive outlook. BioStorage's unusual business model intrigued Twilight Ventures, said Ron Henriksen, the firm's chief investment officer.

"Once you understood the dynamics of the business ... then you knew it could bring a real package to companies," he said. "After you cover the fixed costs, it can be a very profitable business, so we're pleased."

Bruce Kidd, vice president of the Indiana Venture Center Inc., concurred.

"I've always thought of their business model as not that different from 'U-Store-It' facilities," Kidd said. "It's the same concept. They keep stuff that the big [pharmaceutical companies] of the world don't have the facilities to keep on their own. It's a classic case of outsourcing a pretty critical component."

Mills lamented that most venture capitalists had little interest in investing in BioStorage Technologies, although more are beginning to inquire as the company approaches another stage of fund-raising. Mills said central Indiana, through its BioCrossroads initiative, is making progress in the life sciences industry. But startups need better access to early funding, he said.

David Johnson, president and CEO of BioCrossroads, said competition for startup funds remains fierce. But, he said, there are more places for a company to go now than there were in the past.

"BioStorage is a good example of what a venture company can be," Johnson said. "We see that facility as proof positive that we're in the right game."

BioStorage Technologies has 15 fulltime employees and 20 part-time specialists who can assist when needed. The roughly 20,000-square-foot repository can house 450 freezers, nine times the number there now.

Besides the ISISS service, the company has diversified into offering entities susceptible to natural disasters a location to store materials. Companies in Florida, for instance, have transported samples to Indianapolis for fear of losing them in a hurricane. The scenario became reality at Tulane University, where 33 years' worth of blood samples from a heart disease research project were destroyed when generators failed during Hurricane Katrina.

Mills arrived in Indianapolis in 1997 to lead Covance's clinical trial packaging division and its central laboratory operations in the United States, Europe, Australia, Singapore and South Africa.

After opening a few freezers full of long, narrow boxes containing trays of catalogued test tubes, Mills opens another to expose bags of femur bones often used in bone grafts. Nearby is a large vat where umbilical-cord blood is stored in liquid nitrogen.

Said Mills: "It's a bit of science fiction that is becoming reality."
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