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Feature Articles : Jul 1, 2009 (Vol. 29, No. 13)

Building a Successful Biotech Incubator

Proximity to Academic Hubs and Capital Remains a Crucial Factor in Hatching a Thriving Cluster
  • Gail Dutton

Regions are looking to biotech to make the difference between boom and bust for their economies, but it takes more than tax incentives, buildings, and land to construct a winning biotech incubator. Unfortunately, the regions doing the planning often ignore that basic fact and proceed blithely onward despite a scarcity of the type of human capital and infrastructure that makes the difference between success and failure.
“A lot of things have to happen in order to have a successful biotech initiative, and the state can only do so much to build a better environment,” stresses Maik Klasen, senior healthcare consulting director at Frost & Sullivan.

Without the key ingredients, “it’s difficult to understand why regions think they can compete with established clusters,” muses Joe Panetta, CEO of BIOCOM, San Diego’s biotech association. Success, he says, “comes down to the ability to do the most innovative research.” Intellectual property must be on the cutting edge.

“Go to any established cluster,” Panetta says, “and there are strong universities.” San Diego’s companies can collaborate with researchers at the University of California at San Diego, The Scripps Institute, the Salk Institute, and other nearby stellar resources.

San Francisco companies have the University of California at San Francisco, Stanford University, UC-Berkeley and, to some extent, Cal Tech. Boston has Harvard University and MIT. Seattle has the University of Washington. Research Triangle Park is relatively near Duke and the University of North Carolina. Buffalo, NY, cites the Hauptman-Woodward Medical Research Institute, as well as the University of New York at Buffalo with its strong departments of chemistry, engineering, and bioinformatics.

Having worldclass researchers nearby fosters an intellectual climate in which ideas are exchanged easily and partnerships are developed. Consequently, both business and academia are strengthened. “The combination of abilities to do innovative work is a powerful stimulus,” Panetta says.

MaRS is another good example. Located in the heart of downtown Toronto, the MaRS facility is less than a mile from five major teaching hospitals, the Ontario legislature, and the University of Toronto. More than two dozen research institutes and Toronto’s financial district are also nearby.

“Collaboration is the essence of the new economy,” insists Ross Wallace, director of strategic partnerships at MaRS. “There’s a new focus on the power of institutions to generate intellectual property and ideas, and then build around them.”

Consequently, MaRS is a vertical incubator, with a wide variety of companies and stages of development. That mix helps companies better understand the conditions that foster growth. MaRS is home to more than 65 organizations, including The Hospital for Sick Children, the Ontario Institute for Cancer Research, Merck Frosst Canada, the McEwen Centre for Regenerative Medicine, Celtic House Venture Partners, AIM Therapeutics, and AstraZeneca Canada.

Talent Depth

“It’s all about collisions and density of collisions,” Wallace says, referring to the serendipitous results of bumping into brilliance again and again in the work environment and in social settings. That’s why clusters flourish.

“Incubators need close proximity to academic hubs and to key hubs for the city,”Anthony Johnson, CEO of Empire Genomics and partner at Buffalo Biosciences, says. A study of successful incubators, made while Buffalo Biosciences was in the planning stages, indicated a need to be within five miles of one of those hubs, he adds. In contrast, incubators that are physically isolated find development more difficult.

The nature of biomedical research today increasingly requires multidisciplinary teams that include genetics, bioinformatics, biochemical, and chemical expertise. Therefore, when institutes build new lab spaces, they are constructed in a way that causes researchers from multiple disciplines to interact. The University of Michigan did this in its 230,000-sq-ft Life Sciences Institute.

North Carolina, in a different approach, established a program that brings leading academic scientists into a company for one or two years, Johnson says. The scientists learn to work on commercial products, and the corporation gets the benefit of fresh insights.

Many of the regions hoping to build a biotech cluster, however, lack universities with strong programs that relate to biotech. “You have some level of innovation at each university,” Klasen admits, but “the highly ranked schools have more entrepreneurs, which increases the likelihood of spin-offs.”

So although a researcher may generate the ideas for the next blockbuster, to bring them to fruition there must be a pool of people with the skills not only to start a company but to help it grow. That means more than just the senior executives and scientists, but also the chemists, biologists, research scientists, and marketing and communications experts, cautions Steven Hochhauser, senior healthcare consultant for Frost & Sullivan.

Private Incubators

Private incubators are a relatively new addition. They can be a boon of innovation for pharmaceutical firms and help ensure early sales for young companies. The catch is that the sponsoring company has the right of first refusal regarding the output from companies in the incubators. The question then is whether the young company can become viable.

“Pfizer has an incubator here in San Diego,” Panetta says. Likewise, according to Johnson, “Biogen Idec is establishing an incubator in New York.” With an anchor tenant and emerging companies, the initiative helps Biogen Idec develop projects at lower costs and with less risk, integrate promising projects into its pipeline, and benefit from the cross-fertilization of ideas.

Capital

Very good companies can acquire capital regardless of where they are located. That said, it’s easier when the company is near the money because venture capital companies tend to concentrate on the dominant industries. Firms in biotech hubs like Cambridge, San Diego, or San Francisco can access local venture funds. Biotech companies starting in less biotech-intensive locations such as Oregon and Oklahoma will find that local firms are focused on other industries, so venture capital will be harder to attract.

Colorado is succeeding in this endeavor. Since committing the state to bioscience in 2003, bioscience investments through 2008 totaled $1.3 billion, ranking Colorado number 11 in the U.S. for bioscience venture capital investments, according to the just-released Colorado BioScience Association study. This was accomplished through state funding for proof-of-concept activities and through proceedings to strengthen bioscience infrastructure with increased university competency and business networks.

Training

Entrepreneurial support and training are vital to biotech start-ups. Brilliant scientific founders aren’t necessarily brilliant in business, and even experienced executives can be stymied by the regulatory considerations associated with bringing a drug to market. To fill in some of the gaps, the savviest business accelerators hold regular get-togethers and seminars.

For example, BIOCOM’s monthly meetings typically attract more than 200 people. It hosts more than 100 networking opportunities each year. Some of the topics have included financing trends, transitioning from the lab to leadership, a briefing on the key concepts of modern biology, and strategies to inspire innovation.

MaRS has a virtual education program dubbed “Entrepreneurship 101.” One February class features budgeting, another agrifood innovation. The classes are available at no cost, and anyone can register. The program also includes blogs and discussion groups such as the drug development and cancer targets groups. So far, MaRS has relied on viral marketing to get the word out.

Buffalo Biosciences has a seminar series that takes entrepreneurs through the entire process, including raising capital, grant writing, licensing, and working with universities for partnerships and tech transfer. “You have to take resident knowledge and transfer it to a body of knowledge people can use,” Johnson says. “Different technologies and ideas drive business.”

Support Services

“An incubator needs not just a group of accountants, but a group of experts with hands-on experience in taking a product from idea to market,” Johnson says. “This is totally different from the academic world.”

To provide that expertise, MaRS developed the MaRS Venture Group. This team of experienced investors, entrepreneurs, technology experts, and advisors works with companies to help them bridge the gap between entrepreneurial start-up and experienced growth company. The Venture Group provides market intelligence as well  as advisory services such as strategic planning, partnership and alliance building, intellectual property management, marketing and communications, sales strategy, channel development, financing, and human resource development. It works with groups outside the MaRS orbit, too.

Government Involvement

“The state or county can only provide infrastructure, land, tax breaks on capital equipment, etc.,” Klasen says. “For example, Abbott received a $10 million tax break when it located a new manufacturing plant near Chicago,” Hochhauser adds. That region’s goal is to develop a new biotech cluster.

Williamson County, Tennessee, is another example. With Nashville as its hub, the county decided to build a healthcare cluster that included biotech. Building on existing industry, the county developed the Cool Springs Life Sciences Center to house biotech and bioscience firms. BioMimetic Therapeutics is the anchor tenant.

In 2003, Colorado decided to make the biosciences a key driver of the state’s future economy. Since then, its universities have increased bioscience research capabilities and added classes to support biosciences. Colorado is capitalizing on its strengths in medical devices by expanding the biotechnology sales and use tax credit to medical-device companies, maintaining a dedicated bioscience staff for the Governor’s Office of Economic Development and International Trade, and making a long-term commitment by funding ongoing development projects, including medical campuses, technology parks, and superclusters. A Biosciences Executive Corps also has been created to mentor start-up companies, along with entrepreneurial support networks.

Quality of Life

Quality of life is a final concern in locating a biotech incubator. People expect—and require—a certain level of cultural entertainment. Singapore, for example, boasts symphony and theater, but found it needed something extra to attract the top- echelon executives and scientists it wanted for the Biopolis project several years ago. Therefore, it persuaded The Las Vegas Sands Corp. to open a Las Vegas-style casino in Singapore; the Marina Bay Sands is expected to open within a year.

What It Takes to Succeed

  • Access to capital
  • Innovation
  • A critical mass of expertise
  • Leaders experienced in all stages of development
  • A diverse service provider community
  • Experienced workforce