Archive for September, 2005

Biotech is big here and growing bigger. There are 248 life- sciences companies in Wisconsin that employ 20,000 people and generate more than $6 billion in annual revenue, according to the Wisconsin Biotechnology and Medical Device Association.

And the fact that about one-third of these companies emerged in the last five years can be taken as a sign of healthy growth, especially considering the jittery economy.

It’s also evidence that Wisconsin biotech is getting closer to achieving the critical mass that industry analysts and venture capitalists speak of, where the industry has enough companies to spur activity and generate more start-ups and opportunities for employment and advancement.

“The atmosphere for biotech in Wisconsin is very accommodating,” says Thomas Primiano, president and CEO of Clonex Development Inc., a biotech firm that recently moved from Chicago to Madison.

“Wisconsin has a talented pool of scientists, entrepreneurs, and technical specialists who can really help start-up and early-stage companies grow rapidly. State government continues to foster the development of biotech through grants and loans. And University Research Park and the T.E.C. Center in Madison provide outstanding laboratory facilities that are relatively affordable.”

The hottest biotech trend in Wisconsin is, without question, embryonic stem-cell research.

“The energy coming from the stem cell center at UW-Madison, WiCell, and the Wisconsin Alumni Research Foundation provides a tremendous boost to stem-cell research in Madison,” says Primiano.

Dr. Robert Carlson, director of Marshfield Laboratories, is also excited about the rapid advances being made in molecular diagnostic techniques.

“These procedures will revolutionize our ability to combat infectious diseases,” says Carlson. “What used to take weeks to do with laboratory cultures can now be done in a matter of hours. This is especially valuable in fighting emerging infectious diseases like West Nile virus.”

Other groundbreaking research in Wisconsin is leading toward the production of clean and affordable alternative fuels, such as ethanol, through the application of unique biological catalysts.

Wisconsin has several biotech hotspots.

MADISON

Madison is by far the strongest biotech cluster in the state. More than 180 biotech companies are located in the area, drawn by the world-class research capabilities of UW-Madison and affordable high-tech incubators as mentioned earlier.

The Scientist magazine recently hailed Madison as a “low-key hotspot” for biotechnology, largely because of the city’s world- class research facilities, high quality of life, and affordable cost of living.

Although Madison’s biotech cluster is small by national standards, Madison companies are attracting national and international attention.

For example, Bayer HealthCare is teaming up with Madison’s EraGen Biosciences to manufacture and market EraGen’s test kit for cystic fibrosis. Bone Care International has been purchased by Cambridge, Mass.-based Genzyme Corp., and Lucigen Corp. is negotiating with Kikkoman Corp. of Japan, the world’s largest soy sauce producer, to use Lucigen enzymes for converting soybean waste into biofuel.

Finally, Mentor Corp., a Fortune 500 company based in California, recently set up a new manufacturing facility at University Research Park after acquiring the exclusive rights to a botulinum technology developed at UW-Madison.

According to The Scientist, UW-Madison ranked fifth in the country for earnings generated through its patented discoveries. That’s because the Wisconsin Alumni Research Foundation, which patents and licenses inventions made in UW-Madison labs and uses the proceeds to support more research, is one of the top organizations in the country when it comes to commercializing new technologies.

Biotech companies based on UW-Madison research patented by WARF include Cambria Bioscience, ConjuGon, eMetagen, Neoclone, Quintessence Biosciences, and Third Wave Technologies. WARF also has equity investments in these firms.

“WARF has added six new companies to its portfolio in the last 12 months,” says WARF spokesperson Andrew Cohn. “WARF presently has over 1,000 pending patent applications. Last year alone we took in 400 disclosures for new invention ideas from professors on campus.”

Madison has long been known for its highly educated workforce, including the hundreds of UW science and engineering graduates who enter the labor pool every year. Madison Area Technical College recently received a $450,000 grant from National Science Foundation to develop a new biotechnology certificate program. The purpose? To teach the advanced laboratory skills that are in demand by biotech companies to life-science graduates.

MILWAUKEE AREA

The Medical College of Wisconsin, a private academic institution, is emerging as a major biotech player in the state. Over the last 10 years, the federal funding it has attracted for research projects has grown from $53 million to $130 million. In 2004 the college ranked in the top third of the nation’s 125 medical schools for National Institutes of Health funding. Fifty-four invention disclosures were received during the 2003-2004 fiscal year.

Even though UW-Madison receives more federal funding than the Medical College of Wisconsin does, Milwaukee has a much larger employee base, which is a key site-location criterion for major biotech companies.

Milwaukee County Research Park is home to several biotech firms. The park is also the location for GE Healthcare’s new $90 million, 506,000-square-foot headquarters.

“It’s a great sign when the largest biomed company in Wisconsin decides to expand locally and not go somewhere else,” indicates Ron Kuehn, vice president of government relations for the Wisconsin Biotechnology and Medical Device Association.

UW-Milwaukee receives about $30 million every year for contract research, much of it going to biotech. Specialties include medical imaging, rehabilitative medicine, genomics, and medical informatics. Another key sector is chemical compounds.

“Right now we are in discussions with a major pharmaceutical company regarding licensing some of our chemical compounds for new medical applications, especially for the treatment of addictive behaviors,” says UW-Milwaukee chancellor Carlos Santiago.

The university has also launched the Biomedical Technology Alliance, a consortium led by UW-Milwaukee, the Medical College of Wisconsin, Marquette University, UW-Parkside, Milwaukee School of Engineering, and TechStar. With $1 million in seed money, the alliance has established a new research facility called the Wisconsin Institute for Biomedical and Health Technologies. An additional $15 million has already been leveraged from interested parties.

MARSHFIELD

Up north, another $24 million in R&D was spent last year by the Marshfield Clinic Research Foundation, the research division of the Marshfield Clinic. A portion of that money went to the rapidly evolving field of personalized medicine where researchers hope to find out why many new drugs only work in about 40-75% of the patients who use them. The right diagnostic tests could predict how patients will react to drugs based on their genetic profiles, allowing doctors to prescribe personalized medications with very low failure rates.

“Current Marshfield projects include identifying genes that increase the risk of Alzheimer’s disease, and how these genes interact with environmental factors,” says Cathy McCarty, interim director for the foundation’s Center of Human Genetics.

“Other studies are exploring genetic responses to medications such glaucoma drugs and the cholesterol drug Lipitor.”

Marshfield’s Lipitor research received over $1 million in funding from the National Institutes of Health. Other grants from the National Cancer Institute and Centers for Disease Control are financing research on screening cancers and assessing the effectiveness of flu vaccines.

ON THE LEGISLATIVE FRONT

Wisconsin means business when it comes to biotech – or does it?

Governor Jim Doyle has called for the funding of the $375- million Wisconsin Institute for Discovery on the UW-Madison campus, a $134-million interdisciplinary research complex near UW Hospital and Clinics, and a $132-million research facility at Medical College of Wisconsin and Children’s Hospital, plus $105 million to support public health, medical education and research at the UW Medical School and Medical College of Wisconsin. And Act 255, which was signed into law in the spring of 2004, provides tax credits to angel investors.

“The passage of Act 255 has definitely stimulated investment interest in Lucigen,” Burrell notes.

Yet the government still has Wisconsin Statute 180.0622(2)(b) on the books. Known as the “wage claim statute,” this law makes shareholders in a company personally liable for employee wages, up to the par value of their shares, should the company go bankrupt.

Top: University Research Park, MGE Innovation Center, Madison; Bottom: Milwaukee County Research Park

“This shareholder liability is a holdover from the nineteenth century,” says Peter Shively, an attorney with LaFollette Godfrey & Kahn SC in Madison.

“Wisconsin is now the only state that still has such a statute imposing liability on all shareholders for employee wage claims. The Wisconsin courts have further extended the reach of this anomalous law to corporations from other states that do business in Wisconsin, and in at le\ast one case the court expanded a shareholder’s liability beyond the limits set in the statute.”

Wisconsin’s wage claim statute clearly has a dampening effect on investment in Wisconsin corporations, including its biotechnology companies.

“Removing this statute would help reassure investors in Wisconsin’s biotechnology companies that they will not face personal liability for these claims, in addition to the potential loss of their investment,” adds Shively.

Then there’s the legislature’s position on restricting tax credits for stem-cell research, undoubtedly the state’s greatest biotech strength.

Bill AB206, which calls for more R&D tax credits, was recently amended on the floor of the Assembly to not allow credits to companies conducting stem-cell research.

“It’s ridiculous to create a tax credit for research, but then exclude the one thing that Wisconsin does extraordinary well and that gives us an international reputation – stem-cell research,” says Cohn.

Competition is heating up fast. California has pledged $3 billion over the next 10 years to embryonic stem-cell research. Connecticut has approved $1 billion for stem-cell research and Massachusetts has approved therapeutic embryo cloning.

“These states are trying to build their research infrastructure, but we’re already way ahead in Wisconsin, starting with the groundbreaking work of Dr. James Thomson at UW-[Madison],” Cohn adds. “This is something extraordinary to build on, not to take away.”

Cohn maintains that the legislature’s “anti-science” stance is scaring away venture capitalists, companies, and even scientists. “Governor Doyle has promised to veto the amended tax-credit bill if it passes, but even so, the bad message has already been sent.”

UW scientists, Cohn notes, are getting recruiting calls for California every day. “California has $3 billion to spend,” says Cohn. “They basically say, ‘What do you want?’ Just the other day someone offered to buy one of our scientists a house in California to go along with a big raise, which shows how fierce the competition is.”

THINKING REGIONAL

A recent study by the Milken Institute showed that the top biotech clusters are Boston, San Francisco, Philadelphia, New York, and Raleigh-Durham. Midwest clusters ranked eighth (Minneapolis) and ninth (Chicago).

Wisconsin’s biggest hurdle is its image of being remote. “We’re not a coastal state and that’s a challenge we have to overcome,” says Kuehn. “We have a certain ‘flyover problem.’ Even Chicago suffers from this perception.”

To fight this stereotype, the association markets Wisconsin as a “third coast” scientific community.

The majority of the big venture capitalists are on the East and West coasts, which are loaded with biotech investment opportunities.

“These biotech clusters are also more established and have track records,” says Harry Burrell, vice president of marketing and sales for Lucigen Corp. in Madison, whose core technology is genomics. “The Midwest biotech industry is much younger.”

Thus the Wisconsin biotech community is more dependent on angel investors, who typically invest from $250,000 to $1 million in biotech ventures.

Another drawback is that, so far, no big biotech anchor has ventured into the state.

“If a big pharma came to town, that would add huge credibility,” says Cohn. “Another advantage to having a major player would be the entrepreneurs that would eventually leave and start their own companies.”

Although the biotech field is very competitive, it’s still the most fertile when scientists are close to each other and communicate.

“We see a lot of this,” says Santiago. “The best part is that proximity leads to cross-discipline synergy. Physicists talk with doctors; biochemists talk with environmental scientists.

“Where disciplines touch is where progress happens – which means the future of biotech in Wisconsin is bright.”

“It’s a great sign when the largest biomed company in Wisconsin decides to expand locally.”

- Ron Kuehn, Wisconsin Biotechnology and Medical Device Association

Wisconsin’s biggest hurdle in attracting venture capital is its image of being remote.

Copyright Trails Media Group Sep 2005

Source: Corporate Report Wisconsin