Claremont Creek Ventures’ portfolio company Gene Security Network in race for prenatal test

September 9, 2011  source: originally published in the San Francisco Business Times

Photo: Spencer Brown The winner “is the company that’s going to help families,” says GSN CEO Rabinowitz.

Gene Security Network’s race to develop safer, more accurate prenatal test is all business for Matt Rabinowitz — and it’s personal.

A relative of Rabinowitz, Gene Security Network’s CEO, took a blood test for the likelihood of Down’s syndrome in her unborn baby and was deemed low risk, but she gave birth to a child with the disease. The child died six days later.

The probability of such inaccurate results could shrink if Gene Security Network and a handful of other prenatal diagnostics developers continue their pace toward new tests. But GSN, like San Carlos-based Verinata Health and well-known Sequenom Inc. , face an uncertain future of regulation that could restrain investors.

Gene Security NetworkEqually so, critics of these prenatal tests say doctors and patients aren’t well educated about what the growing number of unregulated tests can do and which ones are legitimate.

Still, GSN is having a coming out party of sorts. Last month, it commercially launched its first noninvasive prenatal test to determine paternity. It is the first salvo, Rabinowitz said, in GSN’s battle targeting San Diego-based Sequenom and surging Verinata. Tests designed to diagnose Down’s syndrome or other fetal aneuploidies, where there is an extra or missing chromosome, could hit the market next year.

Redwood City-based GSN has focused its algorithms for a couple of years on more than 100 in vitro fertilization clinics, but personal episodes like those with his relative convinced Rabinowitz to turn GSN’s efforts toward disease-specific prenatal testing as well. Its technology can make the diagnostic call based on minute amounts of free-floating fetal DNA found in a mother’s bloodstream.

By using a simple blood test and a stronger statistical algorithm, Rabinowitz said, the test would replace invasive amniocentesis or CVS tests that raise the risk of miscarriage or deformities.

“The company that’s going to win this game in the long term is the company that’s going to help families have healthy kids,” Rabinowitz said.

The selling points of GSN’s tests are their timeliness — allowing parents more time to decide whether to abort the pregnancy — reliability and complete results, Rabinowitz said.

To prove it, GSN is in the middle of two large clinical trials that will gather more data and could help the company make a more convincing pitch to doctors and parents. One of the tests focuses on the in vitro fertilization market; the other is funded by the National Institutes of Health and is looking at the prenatal market.

With data from that NIH-funded study in hand, GSN expects to launch the prenatal test next year.

“We’re the only company with a real test on the market and a diagnostic in a trial funded by the NIH,” Rabinowitz said.

The winner also will need a lot of money. GSN closed a $12 million Series C round, led by Sequoia Capital and including Claremont Creek Ventures, Founders Fund and Lightspeed Venture Partners , in November 2010. Verinata, which has not launched a product commercially, last month closed a $48.5 million Series C round that included existing investors Mohr Davidow Ventures , Sutter Hill Ventures and Alloy Ventures .

Privately held GSN would not disclose sales figures or how much cash it has on hand.

The wild card in the race, though, is the Food and Drug Administration, which has been promising guidelines on laboratory-developed, or “home brew,” tests. The question then is one of enforcement of those rules, said Ken Powell, president of Genesis Business Development LLC and a former director of business development for medical device, equipment and diagnostic developer Becton, Dickinson and Co.

“It is exactly the wild, wild West. The FDA is clueless,” Powell said. “There’s no enforcement personnel, so how can you regulate when you can’t enforce?”

 See related story GSN Races to Improve Prenatal Tests for Genetic Conditions at Bloomberg News.