Disrupting a market, not creating one

Auckland biotech company Pictor has been radically reshaped to make a better return for investors under new management.

It’s a lesson for founders on innovation, how to go to market, and conserving your runway.

Pictor is an in-vitro diagnostics company that uses a novel ELISA platform to deliver accurate and efficient testing for complex and infectious diseases. (ELISA stands for enzyme-linked immunosorbent assay and is a commonly-used lab test to detect antibodies.)

The company was founded in 2006 by husband-and-wife scientific team Anand and Sarita Kumble (who remain shareholders) with the aim of making diagnostic testing for infectious diseases affordable in emerging countries. They developed the patented platform which is finally gaining commercial momentum following a turnaround under new investors and management.

Dr Jamie Platt, who has been a board member since late 2020, was appointed managing director in April last year and splits her time between the US and New Zealand. Steve Richardson, formerly an advisor to the leadership team and board, was appointed chief transformation officer in February 2023 and then chief operating officer in September. 

The reshaping under Platt has involved redefining the vision, taking a different view on how Pictor approaches its science, and boosting international board experience. It has come at a cost: staff numbers were halved to 15 last year following restructuring.

Unlike many of her publicity-shy kiwi counterparts, Platt is open about the challenges the startup has faced and what needed to change.

“We needed to reduce our burn rate and extend our runway and there was a lot of spend going on without much productivity,” she says.

It also changed out its science team from those focused on working at the cutting edge to those with more commercial and product development experience.

Platt and Richardson say there was previously a misunderstanding at the company about the nature of innovation.

“They thought cutting-edge science is innovation but unless you can turn it into a product that people want right now, it’s not worth anything,” says Richardson.

At board level, Laurie Heilmann and John Allen, who both have global market experience, lstepped in last year after the retirement of Danny Chan and Wanda Lee Mathias as directors.

The company is close to completing a seed round - having raised $9.3 million of a hoped-for $10 million - led by former Morrison & Co and Infratil CEO Marko Bogoievski and also supported by K1W1.  The pitch deck says the capital will help bridge it to achieving near-term commercial milestones and to become a cash positive business in November this year. The new shares were priced at $1 per share, on a pre-money valuation of the company at $34.6 million.

Bogoievski first invested in the company in early 2022 and is now the largest shareholder with a 21.5 percent stake. He says the company and its new science team are now more focused on the product development roadmap and near-term revenues, although the company still has capital table challenges.

“It’s low-cost, high-efficacy diagnostics. That in itself is not a new idea but if you can pull it off it is actually very valuable.”

‍

‍

What’s the market?

“We’re a platform company and what we’re doing now is developing products that demonstrate the value of our platform,” says Platt, “Coming from more of a global diagnostics background, I’m fairly aware of what is needed in healthcare in terms of diagnostics, not only in the US market but in the EU, APAC and other areas.” 

The number-one current healthcare problem in terms of expense and care is that most diagnoses aren’t done early enough because it is cost-prohibitive. 

“What we are pushing out to market are tests that are affordable, that a lab can run quickly. Our lab customers can make more money from these tests and these labs are not only the human health labs but also animal health labs,” she says.

The first thing the new management team did under its revised product strategy was look at the total addressable market (TAM) globally and set thresholds that products had to meet to stay in the development mix. 

“If it is not above this level and we don’t have multiple clients then even if it gives us money we may not develop a product because at the stage we are at, we need products that are going to sell,” says Richardson.

It’s shifted emphasis from cutting-edge science, where it can take years to develop a new diagnostic test, to producing ones already in market.

“If we did a HIV/Hepatitis test, it is not a test that doesn’t exist. We would have a more efficient, more cost-effective, more high-performance test that might save or catapult Pictor. But if we had gone to the board a few years ago and said ‘we want to do a HIV/Hep test’ they would have gone ‘what is the point in that? There are already hundreds of those,” says Richardson.

Platt says if you think about the problems fellow Kiwi biotech company Pacific Edge has run into in the US getting reimbursement for its novel bladder cancer tests, it had to create an avenue and a market where the government would pay for or reimburse the customer.

“We don’t have that. We have the labs we sell our tests to, there are existing codes that they will bill and they will make a bigger margin on. It’s a replacement and we are disrupting the market, not creating a market.” 

Platt, who was recently involved in two large M&As of US diagnostics companies, says in her experience startups lose sight of who their customers are.

“It’s important to keep focused, especially if you have something innovative. You can have a great idea but with innovation you have to be able to commercialise it and it has to go into a market that is ready for it.” 

The M. bovis woes

Pictor pitches itself as having one platform, many solutions. It now has three tests in the market and another four coming this year. 

It has changed the platform to increase the number of tests that can be done at once to 96 samples, providing more efficiency.

Richardson says the company previously also went down a rabbit hole developing an expensive reader to gauge the results of the tests that it didn’t own the IP for and would require too much capital to deploy with its platform globally.

It has instead developed a new, low-cost reader due out soon that will turn around tests for more than 90 patients within a minute.

Platt describes its SARS-CoV-2 antibody tests - one for saliva and one for blood - as “more of an opportunistic approach” that got complicated with regulatory issues with the US FDA. When the saliva test was finally launched in the US last year, a lot of funding for that type of SARS test had already dried up, she says.

However, one benefit of it being saliva-based is that US labs are using it in preference to having to deal with blood. “No-one has to get poked,” she says.

Pictor has also launched its new Mycoplasma bovis (M. bovis) test developed with Ministry for Primary Industries funding.

Richardson says its testing kit is less expensive and more accurate than the existing one in use and could allow for elimination of individual animals with the disease rather than whole herds.

The launch of the new test comes as new cases have been discovered in Canterbury, which shows New Zealand’s efforts to be the first in the world to eradicate it have not yet succeeded.

Pictor is still awaiting an MPI decision on whether to adopt the new test, and has now revised down its expected revenue for the year to around the $1 million mark due to the delay.

“This is a lesson learned for any small startup – don’t put all your eggs in one basket with a government agency because that procurement process that we hoped would be two to three months looks like it is going to be nine months and it has a massive impact on your cashflow,” says Richardson.

Platt’s already in the throes of planning a Series A capital raise for early next year but how much will depend on what happens with government funding for its M. bovis test. 

“For the next one [capital raise] we’re trying to look for strategic partners so we’re not necessarily going to make it public. We have a list but it’s actually quite a short list.”

‍

New tests

Platt is optimistic of a big upturn in revenue to $7 million or so in the 2025 financial year and then $20 million in the following year if it delivers four new tests a year as planned. 

The turnaround time for developing new products is much shorter now, partly because of strategic partnerships the company is developing with commercial entities, such as labs that are already doing the tests with competitors. 

“We’re trying to get into real commercial relationships with them so they will benefit; they might have some royalties or distribution arrangements on the tests. This is all kind of new for Pictor, so the cost of us developing those tests and time is dramatically reduced and you have locked in a customer,” says Platt.

New tests it is developing on the animal health side include one for Johne’s Disease and Bovine Viral Diarrhea (BVD). It wants to refine more products in the companion animal space, particularly for dogs, which is a fast-growing and insurance-funded market. 

On the human front it is looking at tests for ToRCH, which is used to help screen for infections that could harm unborn babies, Dengue-Zika, HIV/Hepatitis, and ENA (Extractable Nuclear Antigen) used to help diagnose autoimmune disease. 

Pictor’s new three-stage go-to-market strategy involves this year replacing existing singleplex ELISA tests with its multiplex tests. The following year it wants to move into taking a share of the existing multiplex immunodiagnostics market.

Then in year three Platt, who has a genomics background, hopes the timing will be right for a shift into proteomics (the large scale study of proteins). 

Platt sees huge market opportunity in the field, but it is still some way off from labs getting paid for that sort of testing.

“We don’t want to be a market creator, we want to be a market disruptor – let someone with deeper pockets and more ambition develop the market for us and then we will come in and take our share.”

‍