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Industry all grown up and has places to go; 30th anniversary of modern biotech sees firms ready to profit

By Jon Van, Tribune staff reporter
961 words
9 April 2006
Chicago Tribune
Chicagoland Final
4
English
Copyright 2006, Chicago Tribune. All Rights Reserved.

As the global biotechnology industry gathers at Chicago's McCormick Place on its 30th birthday Sunday, it celebrates passage from raucous adolescence to stable maturity.

Long plagued by boom and bust investment cycles and oceans of red ink, publicly held biotech companies have entered calmer times, an Ernst & Young analysis asserts.

Collective revenues of the world's biotech companies jumped 18 percent last year, reaching $63 billion. While they collectively still spend more than they take in, they are close to breaking even.

Modern biotech, which dates its birth to the founding of Genentech in April 1976, grew out of academic research and has mostly focused on devising new medical therapies and diagnostic tools, said Donn Szaro, lead author of the Ernst & Young study.

Health care is highly regulated, and it can take a decade or longer for a promising lab result to make its way to market, Szaro said. In the past 30 years biotech firms have launched so many ideas that they now have more product candidates in their pipelines than the traditional pharmaceutical industry, Szaro noted.

While companies based in California and on the East Coast have dominated biotech, other areas in North America and around the world are making their presence felt.

"There's a lot of biotech in Chicago and the Midwest," said Szaro, "and they'll be coming out of the woodwork onto the trade show floor [at McCormick Place]."

Landing BIO2006 in Chicago for its first Midwestern appearance is considered a coup. Politicians and business leaders tout biotech because of its economic attractiveness.

A Battelle study to be unveiled at BIO2006 notes that the average bioscience worker in the United States earned almost $66,000 in 2004, more than $26,000 greater than the average private-sector wage. The study also suggests that the nation's 1.2 million bioscience jobs generate an additional 5.8 million jobs.

Jim Greenwood, executive director of the Biotechnology Industry Organization, which is staging BIO2006, said that it's not unrealistic for regions around the country to aspire to become biotech hot spots.

"Unlike other industries, biotech isn't a zero-sum game," Greenwood said. "If one community lures a new automotive plant, that means another community loses it. But with biotech, you can grow your own ideas among academic researchers and invest in new companies to commercialize them. No one loses."

Simple to say but not easily executed. Because of their past successes, biotech clusters along the coasts have plenty of investors eager to back new companies, but that's not true in the Midwest.

"Geography does make a difference," said Joe Shaw, chief executive of OpGen, a firm based in Madison, Wis., that provides optical DNA identification as a service business. OpGen will be at BIO2006 to launch the next stage of its business which will provide equipment enabling hospital labs to optically scan DNA.

Using this technology, hospitals should be able to identify an infection source within hours rather than days, said Shaw. The company seeks $15 million to move to this new phase.

"There's a hesitancy of investors to look at opportunities outside their geographic area," Shaw said. "I've heard people in Boston and New York say they'd invest, but they won't because of where we're located."

A major investor in OpGen is the Milwaukee-based Mason Wells Biomedical fund, which raised $50 million from foundations, pension funds and investors. Daniel Broderick, the fund's managing director, said Mason Wells focuses on Midwestern firms.

"There's a lot more money now available in the Midwest than there was five years ago," he said. "I know of 10 to 15 venture capital funds that have raised money in that time."

Taken as a whole, the Midwest has as many biotech companies as the San Francisco region, said Robert "Al" Beardsley, chief executive of Kereos, a St. Louis-based biotech firm.

"There's a good amount of Midwest biotech, but you're drawing a circle almost 1,000 miles in diameter," Beardsley said. "In San Francisco, the circle is 50 miles. So there people keep seeing each other at meetings and seminars. Here, you're just not rubbing elbows as much."

Pat Morand, managing director of the Southwest Michigan Life Science Fund, which started last year and has raised $50 million, said there's no shortage of attractive biotech ideas in the Midwest. He's looked at 120 opportunities and is seriously considering putting money into four.

"Every day I come across new interesting companies," he said.

Many entrepreneurs view BIO2006 as a platform for launching new ventures. Dr. Eric Bremmer, a researcher at Children's Memorial Hospital in Chicago, timed a business launch to coincide with the trade show.

Bremmer and several colleagues have years of experience using automated DNA sequencing in their research. They will launch Precision Biomarker Resources, a company based in Evanston that will provide these services to other researchers.

Because the technology can be tricky to use, and interpreting the results is often difficult, many scientists should be pleased to pay someone else to do that work so they can concentrate on their core research, Bremmer said.

There are perhaps 10 companies already established to provide such services but none in the Midwest, he said.

"We'll sell to the national and international markets," he said. "But this is also a way to build up the biotech infrastructure in the Midwest. We'll put a lot of effort into serving the Midwest. It's a forgotten region, to an extent."