Genetics startup Counsyl raises $28 mln from Goldman Sachs, Rosemont

by Reuters
Thursday, 8 May 2014 13:00 GMT

By Christina Farr

SAN FRANCISCO, May 8 (Reuters) - A Silicon Valley startup that screens parents-to-be for rare genetic diseases has raised $28 million from Goldman Sachs and Rosemont Seneca Technology Partners.

That brings total financing for the Bay area startup, Counsyl, to $93 million. Chief Executive Ramji Srinivasan said he will use the new money to develop products, and market tests for consumers and physicians across the United States.

Counsyl, which claims it can detect more than 100 rare inherited diseases such as cystic fibrosis and spinal muscular atrophy, said 250,000 people have opted for its genetic screening test in the past five years.

Prospective parents who discover they are at risk of passing on a disease to their children can choose to take preventative measures, such as in-vitro fertilization with genetic testing of the embryos.

Srinivasan said the company initially focused on a diagnostic test for more complex genetic diseases such as Alzheimer's but "couldn't find enough signal."

Counsyl shifted to testing prospective parents for a range of inherited diseases, once it realized that few of them had a clear idea of their family history.

"We've been surprised to learn that one in two people is a carrier for something," said Eric Evans, Counsyl's chief science officer.

The company expects to reach a broader market with a new set of tests. Counsyl now offers a BRCA 1 and BRCA 2 screening, which can indicate a high risk of pancreatic, prostate, breast and ovarian cancers. Demand for that test has skyrocketed since actress Angelina Jolie revealed that she had elected to undergo a preventative double mastectomy.

Like its fellow genetics-testing startups, Counsyl may have to grapple with legal and regulatory issues down the road. Last year, 23andme agreed to stop selling its $99 DNA test in the United States until it obtained marketing authorization from the FDA.

In a public warning letter, the FDA said it feared false positive or false negative results from the genetic test could prompt patients to take "morbidity inducing" actions, such as unnecessary surgery.

Counsyl said customers have the option to connect with a genetic counselor to discuss their results in more detail.

A recent U.S. Supreme Court ruling ended diagnostic firm Myriad Genetics' BRCA testing monopoly, which it had held since the 1980s. In the months after that ruling, a number of companies - Counsyl included - began offering cheaper BRCA tests.

In October, Counsyl took preemptive action by filing suit against Myriad. That case is pending, but Counsyl spokeswoman Julie Supan said the company is confident it will not infringe "valid claims of Myriad's patents."

Counsyl, which owns and operates its own laboratory, faces stiff competition from Quest Diagnostics and LabCorp, which also offer a range of genetic tests. But Srinivasan said Counsyl is differentiated from its rivals due to its focus on easy-to-use software and consumer experience.

Its screenings are covered by more than 100 insurers and the average out of pocket fee is $150 to $350, the company said. (Reporting By Christina Farr; editing by Steve Orlofsky)

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