U spin-off VitalMedix files for bankruptcy

VitalMedix is the only of 12 U spin-offs to file for bankruptcy.

Jessica Van Berkel

ItâÄôs back to the drawing board for the Office for Technology Commercialization as they try to license a drug that researchers say could save thousands of lives every year. The treatment for shock from blood loss, created by two University of Minnesota-Duluth professors, was the basis of VitalMedix Inc. until Feb. 22, when the company filed for Chapter 7 bankruptcy. VitalMedix was one of the first companies the University OTC spun off after reforming its commercialization process in 2007. Of the 12 companies the office has spun off, VitalMedix is the only one to fold so far. The University of Minnesota was a 20 percent shareholder in VitalMedix and never saw income from the company. The University did not lose any money when the company went under because it did not have to pay for the shares, said Doug Johnson, director of the Venture Center at the OTC. Johnson said the University is playing in a risky market because all the technology it licenses is in early stages and therefore more prone to fail. Early stage technology has not been tested in humans. The drug licensed to VitalMedix was originally tested on âÄúgolden gophers,âÄù or ground squirrels, and only progressed to testing on large animals like pigs, said Dr. Gregory Beilman, chief of surgical critical care at the University of Minnesota, who joined the study later. The company bought the technology in 2007, and during the past three years both VitalMedix and the University have been trying to develop the technology to make it suitable for human use. The UniversityâÄôs research is separate from VitalMedix, and it did not receive any funding from the company, Johnson said. After VitalMedix filed for bankruptcy, the technology became the sole property of the University, Johnson said. University researchers are trying to get federal funding to continue the research. VitalMedixâÄôs fall is disappointing but itâÄôs not the end of the technology, said creator Lester Drewes, head of the Department of Biochemistry and Molecular Biology at the University of Minnesota- Duluth. âÄúThis could save lives,âÄù Drewes said. âÄúWe know itâÄôs going to be successful.âÄù This time around, the OTC is attempting to license the drug to a big pharmaceutical company instead of a small startup, Johnson said. Only a well-established company would be able to take on the costs that go with getting the technology tested and FDA approved, he said. Johnson estimated the entire process of making a drug marketable costs between $50 million and $100 million. VitalMedix had raised $1.4 million in investments at the time it went under, said former CEO and President Bill Brown. The first $600,000 came from initial bridge loans from âÄúfriends of the University,âÄù Brown said. The company received another $800,000 after it moved to Hudson, Wis., to take advantage of the stateâÄôs âÄúangel investorsâÄù and tax credits for biotech startups. This money was only a small step down the long, costly road to commercialization. Brown estimated that the company needed about $15 million to survive. VitalMedix had about $51,025 in assets and $916,866 in liabilities when it filed for bankruptcy, according to the U.S. Bankruptcy Court. The tough economic time led to the close of the business, Brown said. âÄúItâÄôs what nobody wanted to have happen, but itâÄôs how business works … failures happen. In this case it was a business failure rather than a technology failure,âÄù Brown said.