Episode 16

It didn’t take long for the first wave of defeatism to hit the start-up community. On 1 April 2020, less than a month after Italy became the first country to impose a national lockdown to curb the spread of Covid-19, The New York Times started speculating about the end of the tech boom.

Not long after that first tremble, talk about a “great unwinding” made the circuit, with data specialist Startup Genomeconjecturing a mass extinction event for young, venture-backed businesses.

According to the World Economic Forum, by June more than 40 per cent of new ventures were in, or at risk of falling into, the financial red zone – equating to a runway of three months or less.

In Australia, treasurer Josh Frydenberg openly considered freeze-framing economic activity, advising small businesses to go into “cryogenic suspension” and let the storm pass.

Fast-forward to Q4’20 and the world economy has been thrown into a tailspin that has left many a start-up dangerously exposed. A mass extinction scenario, however, is yet to materialise.

Industry at a Crossroads

“The pandemic has had a meaningful impact on the life of start-ups – but not always in expected ways,” explains venture capitalist and Forbes columnist, Asheem Chandna.

“Some industries have thrived, even accelerated, while others now face secular declines, with structural transformations ahead. Overall, the net effect of Covid has been to accelerate the disruptive role of technology across industries.”

Nonetheless, a clear bifurcation has emerged. “At the top are businesses [that] have enjoyed growth and expansion during the Covid pandemic,” says Chandna. “At the bottom are those that have been disrupted and possibly permanently derailed.”

One industry that came out on top is health technology. According to Chandna, telehealth, for example, has seen a historic surge during the crisis and is likely to be more broadly embraced as part of a new normal.

The same is true for early disease detection. “If Covid-19 has taught us anything, it’s that early detection systems are crucial for the health of our community, as well as our economy,” says Dr Sebastian Bhakdi, Founder & CEO of X-ZELL – a Singapore-based start-up focusing on early cancer detection.

According to Bhakdi, X-ZELL’s focus is on cancer diagnostics – a disease even more destructive than Covid-19.

“Every day, more than 49,000 new cancer diagnoses are delivered worldwide, the vast majority of them too late to take meaningful action. At the same time, we lose almost 26,000 lives that may have been saved with an early diagnosis,” explains Bhakdi. “Cancer is not a temporary phenomenon, but a broad-based, systemic issue affecting generations across the planet.”

To turn the trend around, Bhakdi developed a revolutionary tool capable of detecting traces of clinically significant cancers in a small, 10mL blood sample when there is still time to take action.

Democratising Cancer Prevention

The key to X-ZELL’s new technology is the ability to identify and visualise tumour-associated Circulating Endothelial Cells (tCEC) in the host blood. Previously considered undetectable in clinical routine, these ultra-rare cells are shed directly from a tumour’s own blood vessels and serve as a powerful biomarker for the disease.

After years of research, Bhakdi has found a way to extract a single tCEC from five billion healthy blood cells and analyse it remotely using Artificial Intelligence (AI) – making for an affordable, non-invasive test that can slot into existing clinical infrastructure with minimal patient interaction.

“What’s exciting about tCEC testing is that it is supercharging traditional pathology instead of trying to replace it. That way you can build on an existing framework and make the technology accessible to more people, more quickly.”

The first application for the new technology is in prostate cancer screening – a space generating millions of false diagnoses every year due to a lack of reliable early detection systems. X-ZELL was able to develop a simple follow-up test for men with an inconclusive PSA reading that is able to more than 70 per cent of unnecessary interventions without missing any clinically significant cases.

Turning Crisis Into Opportunity

Since the Covid pandemic forced much of the world into lockdown, Bhakdi says X-ZELL has double-downed on strategy and tried to maintain the momentum generated during Q1’20.

“Coming off a very successful 2019 we had high expectations on 2020, and that has not changed,” he explains – adding the young company was on route to closing a $3 million seed funding round when the crisis evolved into a global phenomenon.

“With thousands of late-stage diagnoses every day and a solution right at our fingertips, we felt an obligation to keep going and help reduce the burden on our health systems.”

However, keeping up business momentum amid a global pandemic did require some “tough decisions”, according to the father-of-three. “In a move to limit our exposure to a full lockdown, we were forced to split up our leadership team and invest more aggressively in the expansion of X-ZELL’s international footprint.”

In late spring, Bhakdi and his family temporarily relocated to Thailand to work out of X-ZELL’s ISO-certified R&D Centre in Bangkok, which remained open for business for the duration of the crisis.

“While our clinical work in Singapore was put on hold due to a local lockdown, the decision allowed us to bring forward a whole range of research projects that are now ahead of schedule,” he explains the move. “Looking back, it’s been a blessing in disguise, as we made significant progress on applying our tCEC technology to new types of cancer, most notably leukaemia, lung and colon.”

According to Bhakdi, X-ZELL also set up a dedicated AI division at the company’s Bangkok site that is led by the company’s London-based Head of Software Development & IT, John Lea. In collaboration with specialists from around the globe, it is developing an algorithm capable of analysing a digitised blood sample live on screen.

“At the start of the crisis, I would not have dared to imagine how much progress we would be able to make in such a short time. Our goal was to go develop a deep convolutional neural network around our technology that is able to pre-analyse a digital sample and point out areas of interest to a pathologist.

“The crisis allowed us to spend more time and resources on the project than we anticipated, so now we are very optimistic that the system could be up and running in a clinical context as early as 2021.”

Focus on Execution

Bart Van der Voort, X-ZELL’s Head of Medical Device Development, has seen a similar surge in productivity during lockdown. Under his guidance, X-ZELL’s engineering team used Singapore’s Circuit Breaker initiative to bring the company’s hMX™ cell separation system from prototype stage to serial production. 

One of three technology modules that enable the extraction of tCEC from a small blood sample, it will be available as a standalone product from November 2020, allowing researchers to efficiently strip a blood sample of all healthy cells without risk of losing any – atypical – target cells.

Protected by a global patent, the hMX™ system is the second commercial product spun off from the company’s rare cell detection platform after 2019’s Cryoimmunostaining™ Suite, which recently received a facelift.

“When we went public with the ability to identify cells in human blood that were previously considered undetectable, it didn’t take long for the phone to start ringing,” Van der Voort recalls. “People wanted to explore what else we were capable of, so we decided to gradually spin off some of the core modules and make them available for research use.”

Covid-19, he adds, inspired the team to fast track the lengthy productisation processes in a move to “democratize” cytology diagnostics, a field long overdue for innovation.

“The crisis made us witness just how much pressure our health systems have to endure,” says Van der Voort. “If there’s a way to be part of the solution – for example by freeing up valuable flow cytometry time in pathology labs around the world – we are willing to put in the work.”

The final piece of hardware to make the leap from prototype to production line will be a cell scanning system feeding directly into X-ZELL’s AI algorithm. It too could benefit from the crisis, with Van der Voort expecting the first delivery – to X-ZELL’s own R&D Centre – by the end of 2020.

Commitment to Singapore

With so much progress on the R&D front, X-ZELL’s operational team has been busy setting up collaborations with key opinion leaders across the world to put the new technology to the test.

At the same time, deliveries of the second generation Cryoimmunostaining™ Suite continue in both Asia and Europe, where COO Johannes Hille has taken on the job of setting up X-ZELL’s fourth overseas office next to the US and Thailand.

“Europe – specifically Germany – has been a strategic target market for us long before the crisis began,” Bhakdi says. “It’s because of Johannes and his team that we are still on track with our planned expansion and will soon be able to announce some high-profile collaborations – both in Europe and back home in Singapore.”

In fact, Bhakdi says Singapore is still top of mind for X-ZELL, with a high-profile tCEC study up and running again and more “exciting news” to follow. “Despite the short-term measures taken to navigate the crisis, we pride ourselves on being a Singaporean company,” he says.

“Just as much as we remain true to our strategic plan for 2020 – regardless of the tactical changes we ‘ve had to make along the way– we stay deeply committed to our adopted home and can’t wait to be reunited with our local team.”

Room for Innovation

Despite X-ZELL’s ability to turn crisis into opportunity, Bhakdi is quick to acknowledge that virus-induced crises continue to pose a significant threat to venture-backed start-ups – even those in digital health.

“It’s fair to say that Covid-19 – irrespective of the devastating impact it had on all of us – has become an enabler for some industries, especially health technology. Maybe that’s something the doomsayers didn’t expect back in March and April,” he muses.

“But we still need to keep our guard up, especially because there is no digital health without lab work and patient-facing research. What analysts often overlook when they proclaim the winners and losers of the crisis is that there is no data analysis without data generation. At X-ZELL, we have been able to evade these kind of issues because we cover the entire cell detection workflow from end to end, but others won’t be so lucky.”

What’s more, Bhakdi says digital health was just as crowded as “hyped up” industries like collaboration software – meaning competition is high and future consolidation likely. “There is tremendous room for innovation and advancement, but you need to keep innovating, you need the funding, and you need the right talent. Just because you are in a growth industry doesn’t make you an automatic success.” 

According to venture capitalist Asheem Chandna, for every success story in booming segments such as health technology and collaboration software, there are numerous examples of businesses that will have to make tough choices to survive.

Like X-ZELL though, they have a chance of benefitting from the crisis if they find ways to keep executing amid the new normal. “The shock of a global pandemic has left us with an inescapable conclusion about the future of tech start-ups,” says Chandna.

“Hunkering down and hoping the future will look like the past is not a viable strategy. Existing start-ups need to evolve towards post-Covid futures where technology innovation and digital experiences will be even more instrumental to business success.”