The Interview: Matthew Walls, CEO of Epistem

WHEN Manchester’s civic leaders went out to sell the city to the world at the annual MIPIM property conference in Cannes earlier this month, they  made great play of the city’s scientific credentials.

The city’s “creative director” Peter Saville, said that the city’s strength would be based on the same foundation as it was in the 19th Century – innovation.

He pointed out that 300 new significant discoveries came out of university research last year, while Bruntwood CEO Chris Oglesby reeled off the long list of scientific breakthroughs that have been made in the city from people like John Dalton, Ernest Rutherford and Alan Turing.
 
If Genedrive fulfils potential which Epistem’s chief executive officer Matthew Walls believes it has, the firm’s co-founders Chris Potten and Catherine Booth could be hailed as the latest pioneers to emerge from the city.

Epistem was originally part of the Paterson Institute for Cancer Research, but was spun-out in 2000 in a bid to commercialise the expertise developed in examining epitheleal stem cell tissues for the discovery of cancers and gastrointestinal diseases.

It raised £8m from a flotation on the Alternative Investment Market in 2007, when its revenues were just £900,000. Last year, the company turned over £5.6m and declared a pre-tax profit of £300,000 – its second full year of profitability. It is also debt-free, and its market cap currently stands at around £30m.

Walls said that the company’s success on the Alternative Investment Market – an environment where so many other smaller biomed stocks have floundered – has been due to its “portfolio” approach.

There are three main strands to the business – contract research, novel therapies and biomarkers, or personalised medicine.

Contract research was the first revenue-generating division and is still responsible for around half of the company’s total sales, which analysts at Epistem’s in-house broker Peel Hunt is predicting will reach £6.5m this year. Its interim results are due to be unveiled on March 29.

“What I’ve sought to do over the years is try to make sure we’re on the right side of City and market expectations,” said Walls.

The division carries out research on behalf of many of the top ten pharmaceutical giants including AstraZeneca, Pfizer and others – to see how effective drugs in development are in treating particular diseases.

Its Novel Therapies division, meanwhile, partners with the same pharmaceutical companies on new regenerative medicines, and has a long-term deal in place with Novartis. It is funding research being undertaken by Epistem that could eventually lead to major milestone payments of up to $45m if new products successfully emerge from the partnership.

However, it is in the personalised medicine division that Walls is now predicting the greatest growth – largely due to its new Genedrive, which is set to launch within the next few months.

Genedrive is a molecular diagnostics machine which will allow GPs, surgeons or other healthcare consultants to run diagnostic tests for cancers, bacterial infections and other conditions that will produce results within 20 minutes.

This could even allow it to be used in operations such as mastectomies, where lymph nodes removed during surgery are tested for cancerous cells.

Alongside its medical uses (see news), Walls said that Genedrive is cost-effective enough for use by vets, by food technologists to check for pathogens or by environmental regulators or other firms which need to test the purity of water supply.

“It could provide a broad spectrum of assays,” he said. “There’s no-one in the market who has been able to do this.”

He also added that he could foresee a day where the technology eventually becomes cheap enough for people to use at home – completing self-diagnoses which “would tell you how well or ill you are” before you decide to book an appointment with a doctor.

He expects it to be “a few months” before the firm announces the first major order that is likely to spark Genedrive’s formal launch, but he is confident of its success.

“It’s taken us five years, but we feel comfortable that we’ve developed something that’s small, friendly and easy-to-use,” he said.