The Research Triangle Park region of North Carolina is on the short list of possible relocation sites for an Australian ultrasound technology company looking for a foothold in pharmaceutical manufacturing.
The technology of North Sydney-based Cavitus is currently used in the food and beverage industries. But Chief Technology Officer Darren Bates said the startup is looking to broaden its platform to encompass chemicals and pharmaceuticals. A move to the Triangle would put Cavitus in close proximity to a number of pharmaceutical manufacturing plants including facilities run by GlaxoSmithKline (NYSE:GSK), Biogen Idec (NASDAQ:BIIB) and Eisai Pharmaceuticals.
Boston, a technology and pharma center in its own right, and Chicago are also on Cavitus’ list of potential sites. Bates said Chicago’s advantage is its central location. But he said a North Carolina location would put the company closer to its European customers. Cavitus plans to complete the move to the United States within the next 18 months.
“We’re looking at North America as our main market area,” Bates said.
In the meantime, Cavitus is looking for expansion capital. The 3-year old company raised $7 million in a Series A round from investors in the United States and Australia. Bates isn’t saying how much the company needs for another round but he does say the company brings in about $2 million in annual revenue.
Cavitus’ technology uses high frequency sound to cause dissolved gas bubbles in liquids to expand and contract thousands of times per second. The agitation can be used in a variety of ways, from cleaning tanks to reducing the viscosity of a liquid to make a process more efficient. Bates said the technology doesn’t replace any existing components in a company’s processes. Instead, the technology is a “bolt on” component that is added to existing processes. One beverage company, for example, added the technology to its production line to reduce foam, which had been wasted product.
Nondisclosure agreements prevent Cavitus from discussing many of the company’s customers. But Bates said that one of the company’s largest clients is Minneapolis-based agribusiness giant Cargill. Bates says Cavitus has had an easier time getting the attention of medium-sized companies because the bigger food and beverage giants are harder to crack.
It’s not going to get any easier targeting the pharmaceutical industry, said Mike Wokasch, a former pharmaceutical industry executive who now runs his own consultancy based in Madison, Wisconsin. Wokasch says pharma companies are always looking for ways to make their processes more time and cost efficient. But regulations can make it hard to make those changes.
Minor changes can be made with some adjustments to a company’s records, Wokasch said. But any major changes will require the go ahead of the U.S. Food and Drug Administration. If a manufacturing change is significant enough, the FDA will require that a company prove that the product manufactured under the new process is exactly the same as the product produced from the old process. That can require the company go through the time and expense of setting up and running a parallel system.
“It’s more of a hassle than most operations are willing to go through,” he says.
But Wokasch said that the fact that the technology has already been implemented by some companies in the food and beverage industries could help make the case to the FDA for Cavitus’ technology.
Carver Weaver, director of business retention for the Durham Chamber of Commerce, said that while the chamber hopes Cavitus chooses Durham for its U.S. location, incentives to attract the company are not on the table at this time. Any incentives would be based on the company’s capital investment and job creation benchmarks.
“It’s a little too early in the due diligence process for Cavitus to answer those questions,” Weaver said.
Cavitus is small, currently employing 15. But Cavitus will be hiring, Bates said. In particular, the company is looking for engineers. Right now Cavitus’ only Tar Heel tie is Joel Muse, a retired Goodyear (NYSE:GT) chemist who returned to his native North Carolina late last year to become a business development representative for Cavitus.
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