Expert: Sale of Assurex Health makes believers out of startup investors

Is Cincy's startup scene now officially legit?
Posted at 10:10 AM, Aug 04, 2016
and last updated 2016-08-04 14:43:36-04

CINCINNATI - The $225 million sale of Mason-based Assurex Health is likely to bring more capital and credibility to Cincinnati’s startup scene because the deal delivered a healthy return for early investors in the biotech firm built from research at Cincinnati Children’s Hospital Medical Center.

“Selling companies recycles money back into the ecosystem,” said Mike Venerable, seed stage venture investor for CincyTech. “It makes more believers out of more investors.”

Myriad Genetics Inc. CEO Mark Capone told investors in a conference call Wednesday that Assurex Health will be “a significant contributor to overall growth” for the Salt Lake City, Utah-based company that generated $723 million in revenue last year from a dozen different diagnostic tests. Assurex Health generates annual revenue of $60 million, Capone said.

Assurex Health developed a genetic test called GeneSight, which helps doctors find the right medications and dosage level for patients with mental illness.

“Assurex Health completes our commercial infrastructure and provides a significant channel targeting the neuroscience space,” Capone said. “Assurex has 160 direct sales reps calling on psychiatrists in clinical practice in the United States today. We will use this channel to sell not only GeneSight but our myPath Bipolar test if it is successful in clinical studies. Our goal in all of our sales channels is to have multiple products that can leverage our substantial infrastructure investments and benefit from cross-selling opportunities.”

That approach made Myriad Genetics an ideal buyer for Assurex Health, CEO Gina Drosos told WCPO.

“They have a primary care sales team that can allow us to access new clinicians,” she said. “They have some new technologies that we believe can be very complimentary to GeneSight. They have international operations that we believe we can leverage to expand our footprint faster.”

Assurex Health considered other sale options, including offers from private-equity firms and an initial public offering. But Myriad made the most sense because it enables future growth for the company, which will remain in Mason as a wholly-owned subsidiary of the Utah firm. Drosos sees the sale as a big win for the Cincinnati startup community.

 “I think it shows that Cincinnati is a leader in creating successful, entrepreneurial companies that can go on to find great exits,” she said.

At $225 million, the deal is the largest ever secured by a Cincinnati startup. And the price could reach $410 million if performance milestones are met. Those are numbers that make venture capital investors more willing to place bets on Cincinnati companies, Venerable said.

“It shows we have a great pipeline of opportunities, great companies being built here,” said the CincyTech veteran.

CincyTech invested about $1 million in Assurex Health. Venerable declined to comment on its investment return.

“It’s a good outcome,” he said. “Good for investors, good for us, good for the community, the people that work there, good for Children’s.”

Venerable sees the deal as a big win for Ohio’s Third Frontier Program, a $2.1 billion initiative that was launched in 2002 to stimulate a high-tech economy in Ohio.

“This company does not exist without the Third Frontier,” he said. “That’s where our money came from. That’s where Children’s Tomorrow Fund came from … That catalytic state program was huge. Now, we’re starting to see it pay off big.”

Assurex Health helped Mason establish a biotech corridor that spawned other high-tech companies and is credited with attracting more than 2,400 new jobs to the city. Beyond those results, Venerable sees an intangible benefit to the sale of Assurex Health.

“We’re really making a generational change here,” he said. “Everyone involved in these businesses now has experienced scale, mass growth, what it’s like to drive an innovative company. Those people become the human capital seed for the companies we fund going forward.”