Many of the leading biotech players are “doubling down” on their investments in hard times, betting that the growth industries of the future are poised to emerge from their laboratories.
In a time of severe budget cuts and painful belt-tightening throughout the country, a pattern is emerging: Most states are protecting their biotechnology initiatives from the fiscal ax.
There now is widespread recognition that the still-hot biotech sector is a crucial building block for future growth. Industries that will loom large in the 21st century—from cellulosic biofuels, to genetically tailored drugs that “deliver” themselves, to sophisticated defenses against bioterror—rapidly are moving from laboratories to the commercial sector.
It appears that everyone now understands that the seeds of economic growth can be found in molecules that are being rearranged and coaxed into amazingly productive configurations in laboratories across the land.
What also is becoming clear is that the locations which will reap the rewards of the ongoing biotech revolution not only refuse to pull back in hard times but, as a leading biotech exec in Kansas told us, “double down” on their investments and move full steam ahead.
Here’s a look at some of the biotech leaders who are bucking the economic tide and sailing without hesitation into the future.
Kansas: Emerging Biotech Powerhouse
Anyone listing the leading players in biotech usually focuses on the two coasts, particularly states like California and New Jersey, which have been established biotech hubs for decades. In 2009, attention must be paid to the middle of the country. Several states are putting down markers staking a claim to a leadership position in biotechnology across a number of key industries.
Nowhere is this more evident than in Kansas, which is building upon its existing strength in animal health, drug discovery and bioenergy research and quickly emerging as a new biotech powerhouse.
Kansas’ status as a biotech leader was cemented at the end of last year with the selection by the federal government of a site at Kansas State University for a $650-million biodefense lab. The National Bio- and Agro-Defense Facility (NBAF) will replace the 50-year-old Plum Island, NY, lab as the nation’s premier facility for the study of biological threats like anthrax and foot-and-mouth disease.
The lab is expected to generate 300 permanent jobs, with a payroll that could approach $30 million annually once the project is completed in 2015. Commercialization of products from NBAF will bolster the “Animal Health Corridor” in Kansas, already home to 34% of the $16.8-billion global animal health industry.
NBAF is the crown jewel in a glittering and lucrative array of biotech initiatives in the Sunflower State. Moving full steam ahead is the Kansas Bioscience Authority (KBA), a $581-million effort spawned by the Kansas Economic Growth Act of 2004. KBA specializes in connecting commercial start-ups with the state’s growing bioscience research clusters. The list of projects funded just in 2009 is impressive, including:
- The $4.1-million Kansas Bioenergy and Biorefining Center of Innovation, which will bring key industry players together with researchers from the University of Kansas and Kansas State University (KSU). The center will use biorefining to develop alternative fuels and chemicals, and it expects to commercialize efficient biomass resources for cost-effective, quality power and improved carbon capture.
- A $5-million award to the University of Kansas Medical Center to create the Kansas Bioscience Innovation Center in Drug Delivery, to be located in Kansas City, KS. This facility seeks to create a world-class drug delivery organization.
- The $26.4-million University of Kansas Cancer Center (Wahl/Hixon Research Complex), also in Kansas City, KS, which will conduct advanced National Cancer Institute-designated research.
- Colwich, KS-based ICM was awarded $1 million for a collaborative bioenergy research project to bring cellulosic ethanol solutions to the marketplace.
ICM was selected by the U.S. Department of Energy as one of four biorefinery companies to lead biomass-to-ethanol research efforts using innovative conversion techniques that will create biofuels from non-food sources such as switchgrass, corn fiber and sorghum.
This is just a partial list of the big-ticket biotech projects funded by KBA. Smaller initiatives include $400,000 to VasoGenix Pharmaceuticals for development of controlled-release drug treatments; $375,000 to Pinnacle Technology to commercialize a wireless neurochemical biosensor to advance pharmaceutical research; and $300,000 to Kansas State University to create a county-level inventory of biomass resources such as agricultural crop residues, grain and oilseed crops, and herbaceous energy crops.
According to Tom Thornton, KBA president and CEO, since the middle of last year the authority has committed more than $166 million to 22 bioscience projects. These investments bring total commitments to $215 million since KBA was created, funding that has helped companies create more than 1,100 biotech-related jobs.
Despite the economic downturn, the biotech juggernaut in Kansas shows no signs of slowing down.
“We are doubling down in tough times,” Thornton says. “We expect to award more than $120 million this year [to biotech projects].”
Maryland Keeps Biotech On The Front Burner
Every state is coping with a budget crunch this year due to the global recession. As each state grapples with the tough choices regarding how to allocate dwindling revenue streams, a pattern is emerging among those that have staked a claim to leadership in biotechnology—they are finding a way to preserve, and in some cases even enhance, their commitment to biotech.
A good example is Maryland, where state lawmakers have approved $56 million during the past three years in biotech grants to universities and private-sector researchers. In order to keep Maryland’s vibrant biotech sector competitive, Gov. Martin O’Malley has included an additional $18.4 million in biotech funding in his latest budget proposal, even as numerous other state programs were cut to close an estimated $2-billion deficit.
Maryland’s General Assembly also recently voted to continue to fully fund the state’s attractive Biotechnology Investment Tax Credit, which has been a magnet for entrepreneurs looking for seed money to invest in biotech start-ups.
The investment tax credit, which thus far has distributed more than $30 million in grants to 38 firms, has been so popular that investors have camped out in front of the state Department of Business and Economic Development (DBED) office each year to sign up for the credits.
The program encourages investment in Maryland biotech initiatives by letting investors receive a tax credit for 50% of the money they put into eligible companies. It has become a model for other states, including Virginia, providing $6 million per year in credits since 2006.
To be eligible for the credit, companies must be headquartered in Maryland, have fewer than 50 employees, and have been in business for less than 12 years. The credit cannot exceed $50,000 for individual investors and $250,000 for corporations and venture capital firms.
In the first round of budget considerations this year, Maryland legislators initially proposed cutting the tax credit allocation to $4 million. But when the budget was finalized, they restored the full allocation in recognition of the growth potential of Maryland’s biotech sector. Companies are accepted on a first-come, first-serve basis when the fiscal year begins on July 1. In 2006, it took about six months for companies to apply for all of the funds. Last year, the funds had been claimed in less than 12 hours. DBED reviews the applications and issues its initial credit certifications within 30 calendar days.
Two examples of biotech ventures that have benefited from the tax credit are Sequella, a Rockville, MD firm that develops drugs to treat infectious diseases, and 20/20 GeneSystems, also located in Rockville, which develops cancer diagnostic tools. Sequella raised approximately $2.5 million using the tax credits; 20/20 GeneSystems raised about half of its $4-million in investment through the program, and is planning to leverage the tax credits to raise another $1 million.
According to reports, Gov. O’Malley still intends to move forward with his Bio 2020 Initiative. Announced last year, this $1.1-billion program will quadruple funding for the Biotechnology Investment Tax Credit by 2013, leveraging an estimated $50 million annually to biotech start-ups in Maryland.
Biotech Sector Built On Academic Excellence
A strong state university program excelling in bioscience research is essential to the development of a biotech industry hub. This is the foundation upon which California, aptly known as the “birthplace of biotech,” has built a thriving sector that now is home to more than a third of the nation’s leading biotechnology firms, including top players like Genentech and Amgen.
The University of California has established a system-wide biotech research and education program that is closely tied to partnerships with industry. UC Discovery Grants, awarded by an industry/university cooperative and matched by state funding, are fueling growth in a wide spectrum of biotech initiatives, including agriculture, biomaterials, medicine, engineering, genomics, veterinary science, and environmental and marine sciences. More than 300 companies participate in the Discovery program. With genomics-based discoveries accelerating at an exponential pace, the Riverside Institute for Integrative Genome Biology at UC Riverside is bringing a multidisciplinary approach to generate innovations geared to improving quality of life, from expanded agricultural productivity to environmental benefits. The institute supports advanced studies in genomics, gene expression, proteomics, microscopy and bioinformatics, and also includes the Center for Plant Cell Biology and the Center for Disease Vector Research.
The institute has more than 100 participating faculty from approximately 20 academic departments. Applying an interdisciplinary, systems-based approach and state-of-the-art technology, the institute supports collaborations among researchers on campus and in the scientific community, develops novel approaches and technologies to solve complex biological problems, and explores the translational development of potentially commercial technologies and projects.
Riverside also is developing a technology transfer center/incubator to spur the development of bioscience initiatives. The Riverside Innovation Center (RIC) will serve as an innovation hub and launch pad for emerging life science and software companies. By attracting entrepreneurs developing life science and software solutions and providing them with wet-lab space, business mentoring, domain expertise, a network of contacts, and business assistance programs, the RIC will become a center for innovation and will help foster the growth of the biotechnology and software sectors in the region. Riverside County, CA is home to leading companies in the manufacturing of coronary and endovascular products, mechanical ventilators, respiratory care products, imaging, and diagnostic products. Biotech players include Alliance Environmental; Opto 22; Chemicon, International; Boston Scientific; Rama Corp.; Viasys Healthcare, Inc.; Biotron Diagnostic, Inc.; Luxfer; Tellus Medical Products, Inc.; PCI; Ziehm Imaging; FFF Enterprises; Steris Isomedix Services; Medical Extrusion Technologies, Inc.; Nutrilite; and Winslowe Environmental, Inc.
Genome research centers also have been established at UC Merced, UC Berkeley, and UC Irvine, among other locations. The Joint Genomics Institute is a U.S. Department of Energy-funded collaboration between Berkeley, Livermore and Los Alamos. Taking this research a step further is the San Diego Biomedical Genomics Microarray Facility, which applies microarray technology to the science of genome sequencing.
In New Jersey, long a leader in pharmaceuticals and healthcare-related technologies, four universities—Rutgers, New Jersey Institute of Technology, Princeton and the University of Medicine and Dentistry of New Jersey—and the New Jersey Biotechnology Life Sciences Coalition are partnering with a large heathcare research and business consortium from England in an initiative called the White Rose Health Innovation Partnership (HIP). The White Rose partnership is geared to accelerate the translation of promising healthcare technologies toward clinical application.
New Jersey also provides a good example of the growth potential of a mature biotech sector. According to an industry survey conducted by BioNJ, revenue generated by New Jersey’s public biotech companies increased by 113% between 2005 and 2007, to $3.2 billion, and when private concerns are included the revenue total topped $5 billion. The aggregate market cap for the state’s publicly held biotech companies was nearly $30 billion, up from about $17 billion in 2005.
A Regional Approach to Biotech in Pennsylvania
Pennsylvania, which emerged last year as the top-ranked state in biotechnology strength in Business Facilities‘ 2008 state rankings report, is taking a regional approach to biotech that is spreading the fruits of this growth sector throughout the state.
A good example is the Pennsylvania Biotechnology Center of Bucks County, a joint creation of the Hepatitis B Foundation and Delaware Valley College. Funded in part by a grant from the Commonwealth of Pennsylvania, the $12-million center is a 62,000-square-foot facility that opened in August 2006 and seeks to maximize synergies between nonprofit scientists and their commercial colleagues.
Among the companies participating at the center are Biosante Pharmaceuticals, specializing in hormone therapy products and drug-delivery systems; Buckingham Life Sciences, a maker of biomarkers and diagnostics; Calisto Pharmaceuticals, which is exploring small-molecule therapy for cancer; and Green Oil Co., engaged in the research, development and production of green energy products based on canola.
The Institute for Hepatitis and Virus Research (IHVR) sponsors the Regional Biotechnology Council of Central Bucks, which is spearheading development in the biotech community. The Council hosts seminars on topics important to start-up companies and provides valuable networking opportunities through regular meetings and an annual biotech conference. As a designated Ben Franklin Innovations Center, the IHVR biotechnology programs are partially funded by a grant from Ben Franklin Technology Partners of Southeastern Pennsylvania (BFTP/SEP).
The IHVR, also known as the Pennsylvania Commonwealth Institute, is an independent, nonprofit research institute in Doylestown, PA, that was established in 2003 by the Hepatitis B Foundation to conduct discovery research and nurture translational biotechnology. The IHVR brings scientists together from commercial, academic and other nonprofit institutions to pursue common research themes in an environment conducive to interaction, collaboration and focus.
Recently celebrating its 25th anniversary, BFTP/SEP invests in innovative enterprises and creates commercialization pathways that generate wealth through science and technology. Part of a statewide network in Pennsylvania, BFTP/SEP has provided more than $130 million to grow more than 1,600 regional enterprises. BFTP/SEP is a founding partner of The Nanotechnology Institute, Mid-Atlantic Nanotechnology, the Emerald Stage2 Venture Fund and the Minority Angel Investor Network.
Among the BFTP-funded success stories is BioNanomatrix, which has pioneered technology enabling nanoscale investigation and analysis of genomic DNA. The Philadelphia-based company develops analytic and imaging platforms designed to dramatically reduce the time and cost needed to analyze DNA and other components of the genome. BioNanomatrix recently won the 2009 Frost & Sullivan Technology Innovation of the Year Award. The Frost & Sullivan Best Practices Awards identify companies, products, processes and executives that have achieved world-class performances.
BFTP invested $250,000 in BioNanomatrix in 2006, and in 2008 honored the company at the 14th Annual Ben Franklin Emerging Business Awards, known as the “Bennies,” in which the company won the Best Management Team category.
BioNanomatrix’s unique nanochannel array technology enables rapid and cost-effective analysis of the entire human genome, delivering single-molecule sensitivity in a massively parallel format for genetic diagnostics, personalized medicine and biomedical research applications.
BioNanomatrix recently received a Phase II grant from the National Human Genome Research Institute (NHGRI) of the U.S. National Institutes of Health (NIH) to support further commercial development of the company’s nanoscale whole genome imaging and analysis platform.
The 30-month, $2.08-million Small Business Investment Research (SBIR) award was made under the BioEngineering Nanotechnology Initiative, an interdisciplinary, multi-institute consortium with the stated goal of supporting the development of nanotechnologies critical for enabling essential breakthroughs that may have tremendous potential for affecting biomedicine.
“We are pleased that the NIH has again recognized the potential of our unique approach by awarding us this Phase II grant for the commercial development of our integrated nanoscale whole genome imaging and analysis platform,” Dr. Michael Boyce-Jacino, president and CEO of BioNanomatrix, said.
“BioNanomatrix’s nanoscale technology is intended to allow researchers to directly image and analyze very long, individual intact strands of DNA at the single-molecule level with very high resolution. [This yields] a great deal of genomic information that is not currently accessible…for a wide range of research and diagnostic applications,” he added.
“Pharma Days” Bring Firms Together in Massachusetts
While many states are reaffirming their commitment to biotechnology growth, the sector has not been immune to the credit crunch. According to industry analysts, numerous small- to midsize startups have found themselves cut off from capital, with limited cash and an insufficient amount of financial resources in their pipelines—and drug-development programs that could take more than a decade to come to fruition.
Therefore, some analysts are predicting significant closures and consolidation if the downturn continues through the end of this year. According to the Massachusetts Biotechnology Council, in Cambridge, MA, in January nearly half of the 83 public Massachusetts biotechnology companies had less than a year of cash on hand. Mass Bio has responded to the financial crisis by retooling its investor forums to help smaller firms hunt down capital.
Instead of having only traditional financing players in attendance to partner with about 400 biopharma companies in Massachusetts, Mass Bio also brought 15 disease foundations to its forums. From the public sector, Mass Bio invited the National Cancer Institute, the federal Small Business Innovation Research and Small Business Technology Transfer programs, and the Massachusetts Life Sciences Center.
Mass Bio also has organized “pharma days,” bringing in business units from the big pharma companies to meet with executives from about 150 companies.
North Carolina, which is home to more than 450 bioscience companies employing an estimated 55,000 people, has issued a blueprint for transitioning the state’s traditional manufacturing base to a biotechnology driven economy. Called “New Jobs Across North Carolina,” the plan calls for biotech-related employment in the state to be doubled during the next 12 years, with an emphasis on biomanufacturing initiatives that will be spread throughout the state, building upon the successful hubs that already have been established in the Tarheel State’s famed Research Triangle and Triad regions.
According to the North Carolina Biotechnology Center, the state already has a $3-billion share of biotech’s estimated $40 billion global market. The center believes biotech’s future growth will be exponential: it is predicting that the global market for bioscience-related industries will grow threefold in the coming decade, exceeding $120 billion annually within the next 10 years.
