VitalMedix Filing Chapter 7 After Jumping from Minnesota to Wisconsin

Wisconsin Governor Jim Doyle hailed the arrival of VitalMedix as a prime example of the state’s ability to attract top businesses with tax credits. But the shine has quickly worn off a business that was once a feather in the state’s cap.

VitalMedix, a biotech company founded by college professors in Minnesota, is now filing chapter 7 bankruptcy, only months after arriving in their new home, reports the Minnnesota Daily.

Founded by two professors from the University of Minnesota-Duluth, VitalMedix was built around a new treatment they developed for the shock to the body that occurs as a result of blood loss.

The company was the product of a program at the University of Minnesota that spins off commercial businesses. Reformed in 2007, the program—called the Office for Technology Commercialization—has launched 12 companies. VitalMedix is the only one of these companies so far to file for bankruptcy.

As a part of the arrangement, the University of Minnesota received 20 percent of the shares of the company. The school never realized any income from VitalMedix, but according to the director of the Venture Center at the OTC, Doug Johnson, the school did not lose any money because they received the shares at no cost.

The OTC was hoping to license the drugs that VitalMedix produced, drugs which investors hoped would save lives and create a prosperous business. This was not the case.

The OTC is willing to invest in companies that are in the very early stages, with technologies that are far from a sure thing. These technologies often have not been tested on humans, and they are more prone to fail than companies with more established technologies.

The drug that was licensed to VitalMedix was tested on ground squirrels—called “golden gophers”—and advanced to testing on pigs, but got no further along in the process. VitalMedix bought the technology from the university in 2007, and since that time there had been cooperation between the company and the University to bring the process to the point where the drug could be tested on humans.

When with the Chapter 7 filing, the technology upon which VitalMedix was based was returned to the university. Researchers at the school are currently attempting to get federal funding that would allow them to continue the research undertaken by VitalMedix.

Lester Drewes, the head of the Department of Biochemistry and Molecular Biology at the University of Minnesota-Duluth, told the Minnesota Daily that the life of the technology will continue despite the Chapter 7 bankruptcy filing.

“This could save lives,” he said. “We know it’s going to be successful.”

The OTC will attempt to market the technology to larger pharmaceutical companies, rather than smaller entities like the one that filed for bankruptcy.

Officials from the OTC estimated that the process of bringing a drug to the marketplace could cost anywhere from $50 to $100 million. At the time that it filed for bankruptcy, VitalMedix had raised just $1.4 million in investments.

Former CEO and President of VitalMedix Bill Brown said of the company’s failure, “In this case it was a business failure rather than a technology failure.”