The MX Q&A: Brad Gray, NanoString Technologies

He was clearly not expecting to find dust bunnies under the desks. But Brad Gray humbly admits he thought he’d see a certain ramshackle aspect to operations at NanoString Technologies when he took over the top spot that had been vacant for more than a year at the Seattle-based life sciences firm.

What Gray did find after settling in confirmed even further that he had made the right decision to leave his VP post at a large and successful bioscience company, uproot his young and growing family, and move 3000 miles west.

“I have to say I was positively surprised. Maybe it was arrogance,” Gray says about his decision to join NanoString as president and CEO back in June 2010. “Coming from a large company to a smaller one, I just imagined that I would find people who were, you know, maybe less disciplined in terms of the way they make management decisions or where processes were a little bit loose. I was very impressed.”

What initially had impressed Gray was the company’s technology. As vice president of product and business development for Genzyme Genetics in Cambridge, MA, he first became aware of NanoString because its nCounter Analysis System could analyze hundreds of genes in small samples. Bill Young, hired as the company’s executive chairman in February 2010, had known of Gray’s Genzyme work when the former was running Monogram Biosciences. So when the start-up began looking for a CEO to fill the spot left open after the resignation of Perry Fell, Gray took the recruiter’s call.

Founded in 2004, NanoString has a strong base of research customers at academic institutions such as the University of Washington and Harvard who concentrate on validation of cancer biomarkers using the company’s nCounter platform. Launched in 2008, the system is based on technology licensed from the Institute for Systems Biology.

Gray was brought on board to embellish the company’s academic focus on molecular diagnostics and move it to the clinical realm. NanoString licensed the PAM50 gene signature for breast cancer from Bioclassifier last year and is developing its first assay. The nCounter platform received ISO 13485:2003 certification for the platform in 2010 with eventual FDA clearance expected, according to Gray.

The commercial push continues apace. Joining the executive ramp-up last year was Nalini Murdter, formerly a senior manager at Agilent Technologies, as chief business officer. In February 2011 J. Wayne Cowens, M.D., left Genomic Health to join NanoString as chief medical officer. Hired as well in February were Chris Grimley as vice president of marketing and Katherine Webster as vice president of worldwide sales. Both will report to Barney Saunders, who was recently appointed chief commercial officer.

Gray himself specialized in the pharmaceutical, VC, and diagnostics markets for six years at Genzyme, having worked four years before that as a healthcare management consultant at McKinsey & Company. He holds a BA in economics and management from Oxford University and an SB in chemical engineering from MIT.

In this MX interview, Gray discusses his expectations upon arriving at the start-up, the backlog of things to do, the company’s focus on “translational” medicine, NanoString’s unique market position, and his young family’s move to Seattle.

MX: The CEO position was vacant for more than a year when you joined NanoString Technologies. What’s it like coming in as head of a company, as promising as it is, that hasn’t had a permanent CEO for a while?

Brad Gray: First, when I arrived, there just was enormous unrealized potential. What I found were great people with a really powerful technology. What they were hungry for was strategic direction and leadership. That’s a pretty good set of ingredients to walk into. The fact that the employees here were hungry for change and direction that they’d been lacking without a CEO was a great opportunity for me. [It allowed me] to put my own strategy in place to repopulate the leadership team with folks who were the right caliber and had the right experiences to execute that strategy and to begin to shape the culture of the company in a way that supports our future. It’s not without its challenges, of course.

Such as?

I think in a situation where leadership has been absent for some period of time there’s an accumulated set of decisions that have been delayed until a new leader arrives. So there was a backlog of things to do and think about. But over all, it’s a great opportunity to come in and be able to set a new direction.

Building on that, you’re talking about a kind of to-do list of things to immediately address. What were one or two of the items at the top of that list?

There were several leadership positions that had been vacant that were, of course, direct-report [positions] to the chief executive officer…. In particular, the company had not had a chief commercial officer for some time. One of the first things I started doing was interviewing commercial leadership while simultaneously getting my own head around the kind of leader that we needed. It was an iterative exercise of my coming up to speed on the marketplace [and] the particular challenges of our business, while at the same time being able to test through an interview process some individuals who could fill that role.

I was really lucky that after only just a few months—I arrived in late June—by late September we had a new chief commercial officer on board, Barney Saunders. [He] had brought with him incredibly relevant experience from his time at Agilent, having competed in a very similar marketplace to what we’re currently addressing. That was one of the first things; we needed to refresh the commercial leadership of the company.

Generally speaking, are there any challenges coming from a larger, publicly traded company to a smaller, private company? What expectations did you face?

I think the change from being in a large company to a smaller one is much smaller than the change of going from a role of not being a chief executive to being a chief executive. It so happens that Genzyme was—it no longer is—[made up of] relatively independent business units. It felt smaller than it was, and I had a staff of about 40 people working for me. It wasn’t that different from the number of employees that we had when I arrived at NanoString. [Genzyme] didn’t feel vastly different in scale, but the key difference, of course, is going from being in a traditional company’s organizational structure. Even if you’re at the top or among the leadership team, you’re still reporting up to a corporate leadership structure. It’s very different than reporting to a board of directors and having the buck stop on your desk for every decision from “what color is the brochure” to “how are we going to raise capital?” That role change I think is substantially more than the cultural change [of moving] from a large company to a small company.

How involved, then, do you like to be—or have to be—in hiring decisions and at what level?

It’s important to me to be involved in hiring decisions throughout the executive ranks. We’re not that big a company, so all C-level positions clearly report to me, and I spend a tremendous amount of time making those hiring decisions. And [some] even the direct-reports beneath them…are vice presidents at NanoString, I spend multiple hours with candidates before I feel that the company is ready to make a decision. Especially early in my tenure—and we’ve done a lot of hiring relatively early in my tenure—it’s very important to me to make sure that we have a very strong cultural fit as well as the traditional kind of skill fit and experience fit that you would look for. So I’ll always spend a lot of time on hiring, but I spent a disproportionate amount of care in this first nine months.

Do you delegate the initial contact with candidates, who are then vetted and passed on up to you for consideration?

A lot of the hiring I’ve done has been for people who report directly to me. There’s really no one to delegate that to. In fact, I’m the first interview and the last. To the extent that [when] there’s another hiring manager such as when Barney Saunders, the chief commercial officer, was building his team and hiring new VPs of sales and marketing, he, of course, screened initial slates of candidates…that he felt had the potential to be the right fit. Then we used a panel approach of peers to that individual—peers to Barney and sometimes to me—to make our final selection.

Now that we’re on that topic, how would you describe the capabilities of the C-level candidates you’re seeing?

First of all, there are a lot of great people that I’ve had the opportunity to meet through this process. Some of them were very strong fits and ended up here, but many of them were great executives who just weren’t quite the right profile for us. … [We have] a very particular set of niches, though, and I think for the [skills] that we’re looking for, there are really small [talent] pools.

For instance, one of the important hires I’ve done is our chief medical officer. We’re developing products in a category that did not exist before 2004. The number of individuals who have actually developed products that are on the market today in that category—which is multiplexed gene expression–based diagnostics—I think you could count on one hand. If that’s an experience set you’re looking for, there’s a very small universe of people who bring that, so you either have to be comfortable with “repurposing” someone from a different industry into that role, or you have to get really fortunate and attract one of the very small handful of people [with that experience] to come. And we were extremely fortunate to be able to hire probably the individual who has more development experience than just about anybody in the world in this area; or he’s one of the top three. He was Dr. Wayne Cowens from Genomic Health, who basically built Genomic Health’s pipeline of multiplexed, gene expression–based tests.

So, has your tenure so far met your expectations? Has anything surprised you in either a good or a bad way?

I have to say I was positively surprised. Maybe it was arrogance. Coming from a large company to a smaller one, I just imagined that I would find people who were, you know, maybe less disciplined in terms of the way they make management decisions or where processes were a little bit loose. I was very impressed. In my first or second week at NanoString I sat in a steering committee that we use here to make product-development decisions, and I was very impressed by the design control process that was being followed, the discipline and commitment to time lines, the fearless decision-making based on fact and not delaying decisions or being wishy-washy. It was as good as and sometimes better than what I had experienced at Genzyme. And that surprised me. I was perhaps arrogantly thinking that only large companies would have processes like those.

You’ve said you want NanoString to be a company that helps researchers make important biomedical discoveries and helps physicians to translate them. What’s your plan to accomplish that?

The market we serve today is really translational medicine. Researchers use our technology to try to determine generally how a genomic aberration of some sort correlates with important clinical outcomes, whether it be disease versus non-disease or good-prognosis versus bad-prognosis or drug-responder versus non-responder. The reason they use our technology is because it’s incredibly simple, precise, and robust. Those same attributes of our technology are the attributes you would want in a clinical platform—simple enough for a medical technologist to use but powerful enough for a translational researcher to use. We’re very fortunate to have a technology that can bridge that gap very naturally. The way we’re delivering on this aspiration is, first, to help our current customers, who are translational researchers, succeed by giving them the tools they need, and then growing as a company along with them as their discoveries are reduced to practice and converted into diagnostic content. Then [we have to deliver] a platform that can be used in the clinic that takes advantage of all the same product attributes.

How important is throughput to all of this, in that setting?

It depends tremendously on the context. Most of our research customers today are doing studies on the order of hundreds of samples. In that case throughput is not incredibly important because throughput of the system under a certain configuration can be up to 72 samples a day. So in any given study it’s just a few days of work. In some studies, though, that people are beginning to bring us, [like] genome wide-association studies, [they] can be 6000 samples. Obviously, that’s a very different throughput demand. But generally today the throughput of our system is more than adequate for our researchers’ needs.

In the clinic I would say the product category that we’re developing in diagnostics…are these predictive and prognostic gene signatures for cancer; that’s the product category that we’re initially addressing with a diagnostic version of the nCounter system. In any given institution thankfully there are not that many cancer patients that are seen every week [with] a particular cancer. Again, the throughput of tens of samples a day for the distributed vision that we’re looking for is thought to be more than adequate. In other words, if we were going after very routine testing where every patient coming into the hospital were to be tested for cholesterol or blood counts, [throughput would be a different matter.] We’re going after very esoteric testing. The throughput demand is much different.

You’ve enumerated three goals for NanoString—build sales of the nCounter system for academic use, sharpen your market focus, and recruit senior management for a push into clinical diagnostics. It seems to me that you’re doing well on the third one. In your estimation how is the company doing so far in reaching those goals?

On the first one, addressing the life science researcher, it’s been tremendous. In the fourth quarter alone we saw a 20% increase in our installed base. There’s tremendous momentum and interest in the nCounter platform today, both in the academic community and frankly in pharma companies. So we’re growing very rapidly on that side of our business. I’m very pleased with how we’re performing against that first objective.

On the second objective of sharpening our focus I think we’ve made a real commitment on the clinical side of our business to cancer with the selection of our first product. And as it turns out, about 60% of the use of our technology in research is also in cancer. So over the last months translational research in general and cancer specifically have emerged as a very important focus from a market perspective as we think about new product offerings on our system, both in research and in the clinic. I think cancer is an emerging theme, more so than the day I arrived. And then, yes, as you pointed out the addition of Dr. Cowens in particular and Bernie Saunders in particular have been tremendous additions to the leadership team in the last months. We have an almost complete team today.

It sounds as though everything is where you want it to be technologically. What has to happen both technologically and financially for NanoString to accomplish the goals you’ve set out?

Technologically, not much actually. The fundamentals of our platform are such that we don’t need to make any significant changes to our technology to have a clinical format and a clinical version of the instrument chemistry. The more important challenge between where we are today in the clinic is clinical validation of the diagnostic content. We secured access to the breast cancer– intrinsic subtyping intellectual property in 2010, and we have been working to develop a diagnostic assay based on that. But what lies ahead are the challenging and expensive portions of that product development effort, which are, in particular, clinical valuation studies. We are intending to develop a product that will be approved by FDA in the U.S. and other regulatory authorities outside the U.S. So we have to develop the product clinically to a very high standard.

That’s the main challenge that lies ahead; it’s really clinical rather than technical. And it takes money, and the company will need to secure additional financing to fuel the development effort of those diagnostic products. That’ll be a priority for us in the future.

What’s your time line?

I’d rather not get into specific financing time lines and plans, but the momentum of the business has been sufficiently positive that I have a high degree of confidence around our ability to secure capital that we need to continue to fuel the growth of our life sciences tools business and to bring the diagnostic product to market. NanoString received $30 million from Clarus in 2009. That was the [most recent] series investment.

Can you speak in general about the response of the VC community?

Yeah, it’s been very positive. A lot of people had a chance to look at NanoString at the time of the Series C financing, and when I come across those who did and I give them an update on the company they are universally impressed with the progress we’ve made. At the time of the Series C financing the nCounter platform had just been commercialized, and the number of placements we had was quite small and people were really using it for the first time. Today, we have a significant installed base and a large number of customers who rave about their experience on the platform. Venture capitalists listen very carefully to the voice of the customer as they’re evaluating a technology that’s been commercialized. They hear great things universally, so it’s been a very positive reception when we talk to the VCs.

The customers are not listed on the Web site. Are they all university-based?

They’re not [listed]. We don’t publicize who are customers are in general. There’s a large number of very high-profile academic research universities, NCI cancer centers, and pharma companies that are doing a substantial amount of research using our system today.

In the U.S.? Overseas? Both?

Most of our installed base is in the U.S., but we’re beginning to accelerate our growth outside the U.S. tremendously. About 25% of our new system placements in the first quarter were overseas.

For what you’re aiming at in the clinical diagnostics space is there a great deal of competition?

In general clinical diagnostics and molecular diagnostics is a competitive market. We are going after a particular niche that I think our technology is uniquely positioned to address. This particular product category of cancer diagnostics is based on multiplexed gene expression, looking at multiple gene signatures at once. Today it’s really only addressed by clinical labs that are using service-based business models based on PCR-based technologies. There are not that many ways to take those gene signatures, put them in a device, and take them to FDA and then sell them on a distributed basis. I think our technology is uniquely suited for that, given its robustness, its reproducibility, and its compatibility with formal and fixed paraffin-bedded tissue that is used for dealing with tumor biopsies.

There’s a certain ruggedness you’d need for that, right?

There is. I think that means we’re going after a niche that’s in a sense white space. There aren’t that many technologies that can address that the way we can, and so I feel very good about our positioning within our chosen product category.

And that description would appeal to the investment community, I would think.

I think so. You know, we have a situation where the CLIA lab has emerged within the U.S. as a viable business model for providing these kinds of services. But there are a few negative consequences of that model. One has been that the pathology community in the U.S. has been in a sense left out of this revolution, with tissue being shipped to one central location and pathologists not playing their traditional role of providing testing and providing information back to the oncologist in their local community or catchment area. The second negative consequence is that if you’re a patient or physician outside the U.S., it’s very challenging to get access to the kinds of services that are being offered out of CLIA labs in the U.S. So, you know, there’s a real hunger “exU.S.” for access to these new technologies. I think we’re uniquely suited to address the needs of pathologists inside the U.S. and physicians and patients outside the U.S. in a way that CLIA labs just can’t.

The company’s Web site seems pretty well put together and easy to navigate. From a chief executive’s point of view how important are a good Web site and good Web site design—and social media for that matter—to a company’s growth?

I think the Web site is the first impression that a lot of potential customers get about a company and technology today. If they’re at a conference and they hear about NanoString or nCounter or somebody mentions it in a talk, the first thing they do is go back, go to Google, and type it in. I think it’s very important for making a first impression, and probably, I suspect, in aggregate more fundamental education about our technology is done via the Web site than is done via the direct sales force. I suspect.

I’m less clear and confident on the role that social media play in our particular technology. Our instrumentation is a high-end piece of…research equipment; I’m not convinced that people make those kinds of purchase decisions based on Facebook. But I don’t know. It remains to be seen the role that social media play in our business. That’s very rapidly evolving.
On a personal note, one of the biggest decisions you had to make was whether you wanted to move from the Northeast to the Pacific Northwest with your family.  Is it difficult to make that kind of decision, even it means heading up a company as promising as NanoString, because you’re talking about moving your whole family to the other side of the country?
I should tell you the story. You’d be even more impressed.

Obviously, it wasn’t a case of “honey, we’re going to move to Seattle.”

I came out here to interview around the end of March last year. And my wife at the time was 7½ months pregnant with our second child, and neither of us had ever visited Seattle. I said to the company—Bill Young and others: “Listen. If we’re going to be serious about this, you’ve got to fly my wife and me out soon, because the doctors aren’t even going to let her travel any more in a couple of weeks. And we can’t possibly move to a place she hasn’t ever visited.”

We came out and we toured Seattle and were charmed. She went home on Sunday, and I spent Monday with the company and I was very excited and impressed. And I ended up accepting the job the day before my daughter was born. And then moving about six weeks later. Myself. Leaving my poor wife—a saint—to pack up our house, to sell it, and then to move out basically a month later, over the summer.

So, we worked through a lot of challenges to come out here and be in Seattle and be part of NanoString. That was not a hard decision to make. Seattle is a wonderful place to raise a family. Seattle has a vibrant technology community and a small but vibrant life sciences community. And we had always had a sense of adventure about wanting to live somewhere else. Having never visited Seattle, I would have never guessed that Seattle would be where that adventure took us, but it was an easy decision.