Funding the Search for DNA
When Foley Hoag began working with Gene-IT, Inc., www.gene-it.com, the Westborough, MA company was the U.S. subsidiary of a French-owned technology company that facilitates rapid world-wide searches for genetic sequencing data essential to the work of lawyers and scientists. This information, relating to the chemical blueprints of specific genes, is fundamental to biotech patents, pharmaceutical developments and research regarding genetic defects. Gene-IT's search engine, GenomeQuest, rapidly aggregates and reveals genetic information currently dispersed in patent offices, commercial repositories and public databases. But in order to grow, Gene-IT needed substantial funds for marketing and product refinement.
Parties Oceans Apart
New York was identified as the money center most likely to fill the these critical capital needs, but investors there were reluctant to invest in an American company owned by a French entity. Furthermore, any restructuring associated with United States investment presented tax, equity compensation and employment issues arising from the differing laws and customs of France and the U.S. To further complicate matters, a disgruntled former employee with substantial shares also resisted any change in ownership. Gene-IT turned to the Venture Capital and Emerging Technologies Group at Foley Hoag for a solution.
Bridging The Troubled Waters
Working with Foley Hoag, the Gene-IT group was restructured by a corporate inversion transaction, making Gene-IT, Inc. the owner of the French company. Securities held in the French company were exchanged for securities in the domestic company after the lawyers developed incentives that were acceptable to both foreign and domestic investors. Foley Hoag attorneys also worked with counsel for French and New York investors to close the deal, while mitigating the concerns of the disgruntled shareholder. The deal was also structured to avoid negative tax consequences, the New York investors were persuaded that equity compensation incentives expected by French employees were appropriately conferred, and the institutional French investor accepted representations and warranties in creatively atypical forms to facilitate closing.
As a result, Gene-IT obtained $4.1 million in funding from two New York venture capital funds. After further marketing and product enhancement, the core product is now used by leading biotech, pharmaceutical, and plant genomics companies around the world including Roche Diagnostics, Novartis, Biogen, Amgen, Procter & Gamble - as well as patent offices and biotech-focused law firms including Foley Hoag.