If you look at startup exits, you don’t usually see biotechnology startups represented since they typically generate their biggest profits long after an IPO or acquisition. One San Antonio biotech acquisition has broken that mold, with an amount that netted its limited partners an exceptional return, even by angel investing standards.
Intrinsic Imaging, a biotech startup that provides imaging support mainly to clinical trial vendors, has been acquired by WCG Clinical, Inc. for $80 million. According to the S-1 form filed with the SEC on July 1, WCG Clinical purchased Intrinsic Imaging’s artificial intelligence (AI) radiology imaging support services to add the innovative capability to their “proprietary suite of technology-enabled solutions.”
WCG Clinical is a clinical research trial services company that works with biomedical entrepreneurs to develop new treatments and therapies for patients. Since launching in 2012. With a 2020 revenue of over $460 million, WCG Clinical has raised large amounts of growth capital in private equity funding, acquiring companies over the last three years to add needed services to its offerings.
MRI machines, CT scanners, and x-rays produce images that allow clinicians to look for signs of disease or injury in a patient, providing invaluable data for clinical trials that support drug and device development. That makes spotting the images that require immediate attention from the more routine “normal” scans challenging for the radiologist with an ever-growing workload.
Lance Reinsmith, M.D., a radiologist with the South Texas Radiology Group, came up with the idea to leverage AI to sort and flag the ones needing the immediate attention of the radiologist. Reinsmith recognized how routine functions in radiology — like measuring changes in the size of lesions — could be automated with the help of AI.
A practicing radiologist for over nine years, Reinsmith started working on big data analytics in 2014. By 2018, he had written an AI algorithm using convolutional neural networks or CNNs, a type of deep neural network most commonly applied to analyzing visual imagery. Deep neural networks are computer algorithms used in machine learning inspired by the biological neural networks typically found in animal brains.
“So much of our jobs taken up with mundane tasks. AI can free us up to focus more time on patient care,” Reinsmith told Startups San Antonio in 2019. “AI can make us better at what we do — research, diagnosis, and better use our time.”
By 2018, Intrinsic Imaging was launched and rapidly became a global leader in developing these tools for physicians across multiple therapeutic areas. One of our San Antonio startups to watch in 2019, the company has performed clinical trials for large sponsors who have brought multiple products to market.
“Most of us are operating at or near full capacity, and several projections show that our workload will continue to rise in the future,” Reinsmith said. “Many industries have seen a surge in automation, and medicine is no exception.”
Intrinsic Imaging chief medical officer Amit Mehta, M.D., is a San Antonio radiologist and Alamo Angels founder and investor who sees AI evolving as it learns more from working with better, more diverse data sets.
Radiologists in the South Texas Radiology group operated the new company as a lean startup, Mehta said. He said the radiologists and other angel investors had funded Intrinsic Imaging for an undisclosed “typical seed funding” amount. Possessing the specialized expertise for the industry sector that Intrinsic Imaging supported, these angels helped the company with funding and industry knowledge.
Most seed funding rounds for early-stage startups run from $25,000 to $500,000 and up to $1 million. The average annual rate of return for angel investing is about 27%.
The sale of Intrinsic Imaging likely represents the “largest biotech services exit in the history of our city,” Mehta emphasized. “From an angel investment perspective, this success story demonstrates how angel investing is alive in San Antonio, given the significant oversized returns on the amount invested.”
Mehta pointed out how the exit for Intrinsic Imaging is good news for a city often overlooked when it comes to angel investing opportunities.
“Biotech is alive and well in San Antonio, and the myriad opportunities for capital placement into device and drug development here is world-class. Investors from all over the country should take note of the work being done here in San Antonio,” Mehta said. “We have the potential for Silicon Valley-type of returns, given our high quality of innovation, support, and talent.”
The featured image is of Dr. Lance Reinsmith of Intrinsic Imaging. Photo credit: dlmoorephotography for Startups San Antonio.