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Friday, March 09, 2012

Ohio Taxpayers Fail To See Rosy Return On $900,000 State Loan for Cincy Biotech Startup: Fire Sale Auction Tied To Incentive Package Flop

Ohio Biomedical Loan Didn't Work Out   
By James McNair
Daily Bellwether contributor
CINCINNATI (TDB) -- Five years ago, an Ohio startup company called SpineMatrix hailed its breakthrough technology in diagnosing lower back pain. Venture investors hopped on board with $17.5 million in seed capital. The Ohio Department of Development loaned $900,000 from its Innovation Ohio Loan Fund. In return, SpineMatrix pledged to build a factory and, within three years, create 76 jobs.  Backed with public money, the biomedical project was supposed to deliver a payoff for the state's economy.  The press releases sounded optimistic.

Along the way,  SpineMatrix moved from Akron to Blue Ash and changed its name to Verium Diagnostics in May 2011. But the wait for the company to deliver was all for naught, and the state’s roll-of-the-dice on a promising yet embryonic venture demonstrates the pitfalls of sinking taxpayer money in the private sector. Last month, an agent for ODOD announced a foreclosure auction of Verium’s assets. No estimate of their worth was provided in the public notice, but the assets included equipment, fixtures, inventory, personal property, accounts and other debts, none of which was described in any detail. The deadline to bid was Friday.

Ohio officials apparently have anticipated the company’s demise for some time. In a December report to the Ohio General Assembly, state Attorney General Mike DeWine included Verium on a list euphemistically calling deadbeat borrowers “non-compliant loan award recipients.” The outcome for Verium was the fire sale that was supposed to end Friday in a downtown Cincinnati law office.  Verium’s website, www.veriumdiagnostics.com, says nothing about the company or its fate. A phone call to CEO William Christy was not answered. Verium appears to have simply packed it in, as there is no bankruptcy filing under its current or former name.

Alas, an unfortunate end to a little green shoot. Verium owned a patented, FDA-approved device that non-invasively scanned a patient’s neuromuscular system for underlying problems. The machines would be leased to spine centers. Former CEO Ben Shappley told an Ohio Venture Assocation gathering in 2008 that the company was in an “enviable” market position. “Right now,” he said, “there’s no competition for determining the physiology of low back pain.”



  



 

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