Eli Lilly spawns start-up: Maaguzi plans rapid growth selling software to manage clinical research trials

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Eli Lilly and Co. has sold clinical-research software it created to a veteran Indianapolis entrepreneur who plans to market it globally, potentially growing his startup company into one of the area’s largest technology firms.

Joe Huffine, best known as co-founder of the technology consultancy Onex Inc., said his new firm, Maaguzi LLC, should benefit as the market for research software grows explosively.

Maaguzi’s software allows researchers and patients to record data electronically instead of on paper. The software is geared toward studies done after a drug or medical device hits the market.

So far, Maaguzi only employs 10 people. But Huffine said space at the firm’s Intech Park headquarters is growing tight. He thinks Maaguzi’s employee count could top 100 within five years and eventually approach 200.

While other companies see similar potential and also are crowding into the field, Huffine said Maaguzi will have underperformed if it fails to reach $20 million in annual sales in four years.

Marty Morrow, Maaguzi’s director of sales and product development, added: “If we hit our marks, we’ll easily be one of the largest technology companies in the area within three to five years.”

Maaguzi will have an edge over many startups in that it already has a key customer, Eli Lilly. It also plans to market the software to other drugmakers, medical device companies, hospitals and managed-care firms.

Huffine, Maaguzi’s chairman and CEO, also runs The Zica Group LLC, an Indianapolis firm specializing in corporate spin-offs that bought the technology from Lilly.

Business leaders say Lilly’s move gives a boost to the city’s entrepreneurial community and to BioCrossroads, the economic-develop- ment initiative aimed at building on the state’s life sciences strengths. Part of its focus is on creating new fast-growing companies by spinning out research from universities and established businesses.

“This is the type of technology that has instant credibility [due to its Lilly connection],” said Marcus Chandler, cochairman of the business and technology practice group at Barnes & Thornburg. “Technology with credibility behind it attracts more capital. It spirals from that.

“This is just what we need.”

Boosting clinical research

About 80 percent of all clinical trial research is still done using paper forms-lots and lots of paper forms-to compile data.

“I mean there are, like, truckloads of paper,” said Mary Jo Lamberti, director of research for Boston-based Thomson CenterWatch, which monitors the clinical trial industry. “If you can cut down the amount of paper you use, you make your job much easier.”

That’s what Maaguzi-which means “medicine” in Swahili- aims to accomplish.

Its product allows researchers and patients to enter study data into a computer program via a secure Internet connection. Patients log in using a password and enter the necessary data using the program “just like they would use Amazon or Yahoo!,” Huffine said.

Besides saving trees, the software has other advantages, according to Morrow and Huffine. Data arrives faster and with a date and time stamp that allows researchers to know exactly when it was entered, a difficult task with faxed forms.

The software also can be tailored specifically to the study, which means the researcher doesn’t waste money on functions he or she never uses, Morrow noted.

Saving money comes in handy when it costs as much as $900 million to bring a new drug to market, Huffine said.

“This is one of the core technologies that can help reduce costs, speed up decisions on canceling drugs or speed up decisions on adding new studies,” he said.

Maaguzi will sell the application and a host of support services to help run it.

Huffine and Morrow declined to offer specifics on the cost of their software. They said the price varies widely, depending on a study’s size and complexity.

“We’ve implemented studies in five languages, but that costs money,” Morrow said.

In the beginning

The software is a creation of e.Lilly, a business-development division the Indianapolis company launched five years ago to look for ways to improve the pharmaceutical business.

e.Lilly began working on the clinicalresearch software several years ago and immediately saw its potential, said Bryan Dunnivant, the division’s operations manager.

“We just believed that there was a real opportunity there, an unmet need out in the marketplace,” he said.

Officials also concluded an independent start-up company was the best way to grow the business.

“It’s just not our core business, it’s just not what Lilly does,” Dunnivant said. “This is really a technology tool.”

Enter Huffine, who created Zica in 2003, two years after he sold Onex. Huffine declined to disclose the financial terms of the deal with Lilly, which closed last month. He said Maaguzi is the first company he’s created through a spin-off but hopes to launch others.

Meet the competition

Huffine believes electronic data collection of clinical testing is a $300-million annual market that could grow past $1 billion by 2010.

Researchers have shied away from using electronic data collection mostly because they’ve grown used to working with paper. However, both CenterWatch’s Lamberti and Huffine said that’s starting to change.

In fact, Huffine predicts 80 percent of the data collection will be done electronically by 2010.

Lamberti called that an “ideal” projection. “Ideal means it’s probably not achievable, but they’ll try,” she said.

Many companies are scrambling to have a role in the process.

Lamberti estimates more than 20 vendors produce electronic-data-collection software, and some drug-makers have their own in-house programs.

The list of competitors includes many small companies and some 800-pound gorillas, including Microsoft and Hewlett-Packard.

Morrow and Huffine like Maaguzi’s chances-for several reasons-in this scramble for new business.

How Maaguzi stands out

The electronic clinical trial market started developing about 10 or 15 years ago. Most of the software created for it focuses on early-stage research, or studies done to gain regulatory approval, Morrow said.

He said that software targets one objective, approval, and lacks the flexibility needed for Maaguzi’s specialty, research after a product already has reached the market.

On top of that, the U.S. Food and Drug Administration has started asking for more of these studies amid criticism that it doesn’t do enough to monitor drugs already in the marketplace.

“The market is shifting before our eyes,” Morrow said, adding that e.Lilly picked up on this trend early.

“They read the tea leaves and they read ’em right,” he said.

But the technology alone won’t make Maaguzi a success, company officials say. They say the firm will provide strong customer service and work closely with clients on how to use the software.

“You can’t just walk in and lay the CD down in their lap and say, ‘Here you go, have fun,'” he said. “If you don’t have a process, you’re bound for failure.”

Huffine and Morrow say they have no other clients lined up beyond Lilly, but are close on a number of agreements.

Aside from its Indianapolis headquarters, Maaguzi will start with offices in Boston and Philadelphia, hotbeds for medical research.

Eventually, the company plans to add locations on the West Coast and in the North Carolina Research Triangle, Huffine said. He said about 70 percent of its employees will be based in Indianapolis.

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