What began as a research endeavor of New Mexico State University that was struggling to sustain itself financially has become a multi-million dollar trio of companies that were recently purchased by a national investment firm – bringing funds back to the inventors and into Arrowhead Center’s ongoing efforts to commercialize innovation.
BelHealth investment partners, a New York-based health care private equity firm, has agreed to purchase the Genetic Testing Laboratories and its sister companies, the Forensic Testing Laboratories and the Clinical Testing Laboratories, all housed at NMSU’s Arrowhead Technology Incubator in the Genesis Center, for a combined $5.3 million.
BelHealth Managing Director David Sturek told DowJones.com that his firm has been exploring opportunities in genetic testing over the past year, believing it is the “fastest growing segment of the laboratory testing space.” “It has the best prospect from an investment standpoint,” he said.
The Genetic Testing Lab began in 2001 as a partnership between NMSU’s Physical Science Laboratory and the molecular biology graduate program. The inventors of the technology and innovators for the enterprise that became Genetic Testing Laboratory and associated companies were Peter Lammers, a biochemistry professor at NMSU, and John Spalding and Stefan Long of the Physical Science Laboratory.
After several years of development with assistance from Arrowhead Center’s incubation efforts, the GTL spun off as a private company in 2005, with a majority of equity held by Jack Ellis and Bill White of El Paso. The new company, still located on the NMSU campus, developed several affordable commercial applications for the DNA technology, including an Ancestral Origins DNA kit and a home paternity testing system.
Later, the company expanded to include the sophisticated and state-certified Forensic Testing Lab, which handles forensic DNA analysis for law enforcement entities across New Mexico and beyond. Most notably, the lab was instrumental in helping to solve the grisly 2003 murder of former NMSU student Katie Sepich, for whom a law expanding the evidentiary collection of DNA is named.
Founded in 2009, the Clinical Testing Lab uses genetic analyses to help identify predispositions for diseases and receptiveness to certain medical treatment options.
NMSU and Arrowhead Center Inc. held a 35 percent stake in the GTL and a 17.5 percent stake in the FTL, and their sale resulted in nearly $1 million in net proceeds for the university. Of that, roughly $400,000 – half the net proceeds of the GTL sale – will be split among the investors, and the remaining net of $583,000 will go to Arrowhead Center Inc. for further distribution in accordance with the university’s policies.
NMSU Interim Vice President for Economic Development Kevin Boberg, who was for years Arrowhead Center’s director and CEO, said the sale is a success for the university in many ways – not only because of the funds coming directly from the sale, but because the buyers have indicated that they won’t be taking the company – or the dozens of jobs it created – away from the campus.
“I met the CEO of BelHealth, and he expressed that his desire is to grow the company and expand the relationship with the university,” Boberg said. “And it’s more than just staying on campus – it’s reaching back into the university for research and development to continue to expand. Toward that end, they are already exploring ways to fund graduate assistantships for students working with the lab.”
Boberg said the impact of this sale for Arrowhead Center goes way beyond the money involved. It’s been inspiring to watch the company grow from a three-man operation to one that employs about 40 people on campus. “The financial part of the return on investment isn’t trivial – it isn’t trivial to the university, and it isn’t trivial to the inventors – but it’s only part of what we get out of it. We want to encourage faculty and students to be entrepreneurial,” he said. “It’s a significant return on investment on university aspirations – on the story and success of the research enterprise at NMSU.”
With other ideas and technologies in every stage of conceptualization and development in Arrowhead Center’s student, faculty and entrepreneurial incubators, a success story like this one can help inspire, help support requests for funding and investment, and help attract and retain top thinkers to the university, Boberg said.
NMSU President Garrey Carruthers said this sale is an excellent example of how intellectual property at the university has been transformed into a private company. “When we first started this enterprise, this company was losing money,” Carruthers said. “We spun it out into a joint public-private partnership, and now, as a result of their success on our campus, we have sold it to another laboratory for a considerable sum of money. We’d like to do this frequently.”
