Sontra Survives And Looks For Fresh Start
Franklin biotech is back from the brink of extinction, with a new name
Diabetes is a manageable disease, but it's certainly not a pleasant one, especially when it requires daily needle pricks to measure blood sugar levels.
So a method of checking blood sugar without the needles would certainly be a godsend for the 20.8 million Americans with the disorder. And such a method would no doubt be a money-maker for the firm with such a technology, right?
Well, maybe.
Franklin-based Sontra Medical Devices did have such a technology - an electronic gizmo that could measure blood sugar levels through the skin and transmit the results to a monitoring device. It even had FDA approval.
Only trouble is, the company nearly folded less than a year ago.
Keep Hope Alive
But the man who helped keep the company on life support by finding a quick infusion of capital earlier this year is now hopeful that a merger and a new name will do wonders.
Sontra's fresh start comes in the form of a fortuitous merger with Pennsylvania-based Echo Therapeutics. Under terms of the deal, announced in late September, Sontra, a publicly held company, merged into the privately-held Echo Therapeutics in a stock-for-stock deal. The name Sontra no longer exists, although Mitchell will stay on as chief operating officer and chief financial officer of the merged company, which is now known by the Echo Therapeutics name.
The Sontra saga came to a head at the end of 2006 with an announcement from the board of directors that the company would "cease operations." The news came after the company reported $4.2 million loss for the first nine months of the year and received notification from Nasdaq that it was in danger of being delisted.
Sontra's first Hail Mary play came when Mitchell, who had been with the company since June 2006 as CFO, brought in investors - Sherbrooke Partners LLC of New York - to provide a $600,000 infusion of cash in exchange for company stock. That money allowed the company to avoid extinction. At the same time, it was announced that Sontra's then acting CEO Thomas W. Davison would resign, and Mitchell would take over at the helm.
While Mitchell managed to keep Sontra alive, he knew that the Sherbrooke deal was not a long-term solution.
"I didn't want to have to take in another $600,000 to buy another three months," he said. And that's why the Echo Therapeutics deal came just in time.
Mitchell will continue to drive the transdermal glucose monitoring side of the merged company's business. The Franklin office currently has about 20 people working on research and development for the company - some are on staff, most are consultants. But the numbers are growing. Soon after the deal was announced, Mitchell added three new employees.
While Mitchell says a move is possible, he said research and development operations will remain in the region.
Echo Therapeutics' claim to fame is a "drug enhancer" technology that allows certain drugs to be transmitted through the skin. It's the "transdermal" approach that the two firms have in common, according to Mitchell, and one that makes future collaborations possible.
But it's not just Sontra that is benefiting from the deal. Echo Therapeutics, which was previously part of the clinical research organization Cato Bioventures out of North Carolina, gets the benefit of the public markets thanks to the merger, according to Patrick Mooney, who now steps in as Mitchell's boss as part of the two companies coming together. Also in the executive lineup up under the new structure is Shawn Singh, who will serve as interim president.
Beyond The Drama
Sontra's troubled past doesn't phase Singh or Mooney.
"You've got to look beyond that stuff," Mooney said. "That's where you find the value in the market."
Sontra's struggles, according to Mooney, were due in large part to the previous management.
"They didn't do a fabulous job of telling their story," he said.
Outside of working for diabetics, Mitchell said the blood glucose monitoring patch also has application within the critical care ICU. Mitchell explained that when a person goes into trauma, his or her glucose levels jump all over the place, and must be monitored closely. Currently, hospitals must draw blood and send those samples off to a lab to check on glucose levels. With Sontra's technology, blood glucose levels can be monitored constantly.
"It's pretty easy to put the two companies together," Mitchell said. "Now we just have to execute."
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