 | ||||||||
| Alumni Association Home > Minnesota Magazine > Past Issues > 2005 > May-June 2005 | ||||||||
| ||||||||
| Growing Businesses in a Lab 5/5/2005
One day, the discoveries of ANDX, Inc., may save dairy farmers around the world hundreds of millions of dollars a year in lost milk production and give priceless peace of mind to cat owners. The startup, founded by two University of Minnesota professors, has developed diagnostic tests for a number of animal diseases, based on a meticulous parsing of the genetic code. One test detects Johne's disease, a global scourge that afflicts 40 percent of dairy herds in the United States; another identifies domestic cats that are likely to develop cancer after receiving routine vaccinations. More tests are in the pipeline for other animal diseases and microbes that taint human food. ANDX has kept a low profile during its three years of existence; its Web site is a blank slate, and it does its work in rented lab space tucked out of sight on the second floor of Snyder Hall on the University's St. Paul campus. But ANDX is poised to shed some of its anonymity; this summer the company plans to move into a $24 million bioscience incubator facility under construction near Highway 280, between the U's Minneapolis and St. Paul campuses. Inside the renovated shell of a former Target Corporation warehouse at 1000 Westgate Drive, the young company will have its own state-of-the-art wet lab, an office, access to conference rooms and other amenities, and designated parking for visitors. President Sagarika Kanjilal and her husband, Vivek Kapur, vice president of ANDX, are thrilled about the move. “The building will have tremendous facilities, and it's close to the intellectual community at the University,” Kanjilal says. That's the type of response that University Enterprise Laboratories (UEL), a nonprofit entity formed by the University in collaboration with the City of St. Paul and a group of Twin Cities-based corporations, was hoping for from prospective tenants when it conceived the notion of an incubator for bioscience companies. In the new facility, ANDX will join a community of biotechnology and other high-tech startups, many of them born at the University. Robert Elde (Ph.D. '74), dean of the College of Biological Sciences and board chair of UEL, views the facility as an entrepreneurial crucible-a means to transform “the technology that bubbles out of the U” into companies that over time will create hundreds of local jobs, generate technology licensing revenue for the University, and make Minnesota a player in the brave new world of biotechnology. As part of its renewed mission under University President Bob Bruininks to commercialize technology, the University has committed $2 million to help get UEL off the ground. “UEL is really emerging as the geographic center of the University's technology transfer efforts,” Elde says. And the incubator is central to the economic aspirations of the City of St. Paul and the state. Both St. Paul Mayor Randy Kelly and Governor Tim Pawlenty (B.A. '83, J.D. '86) want to create a homegrown bioscience cluster in the Twin Cities nurtured by University research. UEL could be the start of something big-for the University and the wider community it serves. JOSTLING FOR LAB SPACE Inventing the next big thing in bioscience is an expensive, potentially risky business. Outfitting a wet lab can cost hundreds of thousands of dollars. Pathogens, potent chemicals, and radioactive substances require special handling. “Legend has it that Medtronic was born in [company founder] Earl Bakken's garage,” Elde says. “Yes, it was. The problem is that you can't do molecular biology and nanotechnology in a garage.” A limited amount of lab space exists on campus, but companies spawned from University research that are ready to expand their operations and go to market must seek a home elsewhere. For cash-strapped startups, building their own lab facilities isn't an option; the UEL facility was created to satisfy that need-and provide a place where budding entrepreneurs could not only fine-tune their technologies but also hone their business skills. Led by Elde, the proponents of UEL spent four years planning the incubator, finding a good location, and raising funds. Early financial support came from the City of St. Paul, the University of Minnesota Foundation, and the Board of Regents, which agreed to dedicate $1 million in licensing revenue to UEL. The University invested another $1 million in the form of a 10-year lease for the Office of Business Development (OBD), created to nurture U startups (see article on page 32). Raising the $6.8 million in private donations needed to underwrite the cost of acquiring and renovating the Target building, located just off the bus transitway that runs between the campuses, was slow going. But Xcel Energy jumped in with $2 million and was followed by Medtronic, 3M, Boston Scientific, Guidant, Ecolab, Allina, Surmodics, and Dorsey & Whitney. A $13.8 million bond offering backed by Wells Fargo Bank and federal tax credits to investors will cover the balance of development costs. The transformation of a dowdy industrial building into an eye-catching structure with a skylit interior and 125,000 square feet of lab and office space began last fall. Minneapolis architect Tom DeAngelo (B.S. '78) has created a central “bioscience garden” that lets daylight into the labs and serves as a meeting place for tenants and visitors. Conference rooms, an auditorium, a coffee bar, and bamboo plantings ring the atrium. Out front, a big “UEL” emblazoned on a glass canopy greets visitors. The cool, sophisticated ambience in itself will be a draw for technology startups, says Chief Executive Officer Peter Bianco (B.A. '88): “Once the doors open, this will be the place to be.” In fact, startup companies began jostling for lab space even before Bianco, a med-tech industry veteran who sits on the University's Business Commercialization Advisory Board, was hired to head UEL last September. Not just University-bred biotechnology firms came calling; although U-related startups get preference for lab space, and the incubator is billed as an ideal home for bioscience firms, any bona fide startup with a need for wet-lab space can apply for one of the 21 labs. GIVING STARTUPS A LEG UP UEL isn't the only game in town for high-tech fledglings looking for permanent roosts. Other Twin Cities tech incubators vying for tenants include Menlo Park on University Avenue in St. Paul and Elliot Park Life Sciences Institute near downtown Minneapolis. But these privately run facilities can't match UEL's unique combination of affordable, cutting-edge lab space; in-house business counsel; and links to the University and corporate world. At UEL, startups accustomed to knocking elbows with other researchers in University lab facilities get their own 850-square-foot lab modules, equipped with acid-resistant countertops and sinks, ventilation systems for siphoning off noxious gases, and refrigerated storage for cell cultures and specimens. Tenants will share a lab stocked with specialized equipment and supplies. The facility doesn't claim the lowest prices in the metro area-rates are “cost competitive,” Bianco says-but lease terms are flexible and UEL doesn't demand an equity stake in startups, as some for-profit incubators do. The incubator's location-it's a 10-minute bus ride from either campus-is a plus for entrepreneurs who also hold faculty positions at the University. And the facility sits in the St. Paul Bioscience Zone, one of three tax-free zones created by the state last year to stimulate economic development. Startups are eligible for state job creation and research tax credits, and their investors don't pay income or capital gains taxes. Scientists who found technology companies are notoriously clueless about business matters: raising money, devising sales and marketing strategies, negotiating with distributors. Through its resident service and support organizations, including OBD and Carlson Ventures Enterprise (a Carlson School of Management program that assigns students to evaluate and assist startups), UEL can help novice CEOs navigate foreign terrain. “For a first-time entrepreneur, there's so much to do just so they can sit down and start doing their work,” Bianco says. “Part of what we're going to do is ease that transition from the [research] bench to the entrepreneurial environment.” Ready access to business assistance was a draw for ANDX, which may occupy two adjacent lab modules. A student with Carlson Ventures helped Kapur and Kanjilal write their business plan, and they expect to tap into OBD's expertise as they develop new tests and expand their market reach. Currently the bulk of ANDX's revenue comes from testing blood and tissue samples sent in by veterinarians, amplifying minute snippets of nucleic acids to detect genetic markers for Johne's disease and a predisposition to feline sarcoma. However, that service model limits the number of tests that can be performed. In the future, the company may develop test kits for Johne's that could be used by agricultural labs around the world to diagnose the disease early-potentially saving dairy farmers more than $600 million annually in the U.S. alone. But Kapur, director of the University's Biomedical Genomics Center, and Kanjilal, an associate professor of medicine, are also looking forward to becoming part of what Bianco calls an entrepreneurial “ecosystem,” a place where ideas seem to float in the air and collaborations flower from chance encounters at the coffee bar. “To achieve critical mass we understand that we're going to have to be in an environment where we see and learn from other startups and become part of the startup community,” Kapur says. “That's why I think UEL is going to be good for us.” Another University startup slated to join the UEL community is StentTech, headed by Dr. Gladwin Das, director of the Cardiovascular Device Development Program at the University's Lillehei Heart Institute. Das founded StentTech to develop specially coated, biocompatible coronary stents for treating birth defects and heart disease. The company has shunned publicity; Das declined to be interviewed but did say via e-mail that UEL is a “natural choice” for him because of its top-notch facilities and the presence of OBD, which has helped the company forge links with the business world. Other UEL tenants not affiliated with the University include Gel Del Technologies, a developer of tissue-mimicking materials for use in drug delivery, cosmetic surgery, and blood vessel grafts; CIMA Nanotech, a firm that specializes in producing nanosized metal particles for conductive inks and coatings used in electronics manufacturing; and Prism Research, an inpatient research facility that conducts clinical trials of drugs and medical devices. The large, well-known life science companies that donated to UEL's cause won't have offices in the incubator, but tenants open to scientific and business partnerships will feel their presence nonetheless. Medtronic, for example, is interested in acquiring hot new biotech or medical-device technologies. And Allina Hospitals & Clinics sees UEL as a seedbed for therapies that may take root in the company's far-flung network of hospitals, clinics, and hospices. David Orbuch (J.D. '86), executive vice president of corporate responsibility and community relations for Allina, says he expects doctors to pay regular visits to the building to learn firsthand about new medical devices and treatments. SPREADING THEIR WINGS StentTech and ANDX are the first of more than a dozen University-related startups expected to take up residence at 1000 Westgate Drive this summer. Companies scouting for off-campus quarters in March included Acera Biosciences, which focuses on creating synthetic versions of therapeutic compounds found in nature; Nanocopeia, a 3-year-old company that is working on nanosized, fast-acting drugs; and Heart Failure Technologies, another firm founded by Das. UEL officials don't anticipate lab space going begging in coming years. The University has identified more than 60 technologies-the fruit of more than $500 million in sponsored research awarded annually to the U-that could be licensed to local startups in coming years. Many of those companies will seek wet-lab space near the University and move into the incubator when space opens up. “We have strong technology that's available now, and we're working internally to be sure that we keep the pipeline flowing,” says R. Timothy Mulcahy, the University's new vice president for research. If these firms thrive, the University, the Twin Cities, and the state will share in their success. In the short term, the University stands to gain from the opportunities UEL gives faculty to launch their own companies and collaborate with researchers in private industry. In the past, biological sciences professors bent on commercializing their discoveries have threatened to leave the University because of a dearth of incubator facilities. Now the 40 new faculty members whom the University has hired in the past three years as part of the University's Initiative in Molecular and Cellular Biology have good reason to stay. UEL also offers students the opportunity to gain hands-on experience as interns and part-time employees of tenants. In the long term-over the next 10 to 15 years-the U and the state stand to gain much more if a research park grows up around the incubator. Collaborating with city officials and high-tech trade groups to develop such a park is a high priority for Mulcahy's office. As UEL-raised startups spread their wings and settle into permanent space in the research park, they're likely to be joined by other technology companies that want to be close to the facility and University researchers. That kind of organic clustering-similar to the process that gave rise to research parks near the University of Wisconsin-Madison and Iowa State University-promises a bonanza of licensing fees for the University, hundreds of well-paying jobs for U graduates and Twin Cities residents, and robust economic growth. In the University of Wisconsin-Madison's research park, 107 technology and ancillary companies employ more than 4,000 people. “This is something that's going to benefit the entire region,” says Mulcahy, a former vice chancellor for research at Wisconsin. A University of Minnesota research park anchored by UEL dovetails neatly with the bioscience visions of the City of St. Paul and the Pawlenty administration. Mayor Kelly's office is promoting the idea of a University Avenue “bioscience corridor” bustling with startups and established life sciences firms. “Bioscience is a growing sector worldwide, and we want to be a part of it,” says Tom Triplett, senior policy adviser to the mayor. City officials have identified potential building sites along the University transitway and have asked the Minnesota Legislature for $20 million for infrastructure improvements near UEL, including links to proposed light rail and commuter rail lines, new roads, upgraded sidewalks and lighting, and affordable housing. The state views UEL and a future University research park as part and parcel of a broad initiative to make Minnesota a national leader in biotechnology, a $39 billion industry in 2003. Besides supporting the creation of bioscience tax-free zones, Pawlenty was instrumental in launching a joint University-Mayo Clinic biotech research program, and in the last legislative session he sought $20 million to build a biotechnology and genomic research center in Rochester. INVESTMENT AND INSPIRATION If these ambitious plans bear fruit, future chroniclers of Minnesota's biotech industry will point to UEL as the proverbial garage, the place where it all began. But the facility's success and a return on the University's $2 million investment are by no means assured. The biggest challenge facing UEL and its boosters is helping startups secure financing when they're ready to leave the nest. Young companies crave cash-upwards of $10 million to develop a product and bring it to market-even more than tax breaks or conveniently located lab space. Unfortunately, local venture firms tend to invest in the medical device sector rather than in biotech, and Minnesota is terra incognita to venture funds based on the coasts. More than 40 others states, among them Wisconsin, Missouri, Iowa, Illinois, and Michigan, are wooing private investment for their own bioscience initiatives. “We have to talk seriously about what happens when a company is ready to graduate from this building,” Bianco says. “Unless there's investment capital specific to biotechnology for them, they're going to go to San Francisco or Boston. If we become a farm team for San Francisco or Boston, this will have been a colossal failure.” Bianco believes that state government should create a fund to invest in early-stage bioscience companies, like those already established in Wisconsin, Michigan, and Pennsylvania. Developing reliable funding so that UEL graduates can prosper in Minnesota-instead of relocating to established biotechnology centers elsewhere-will take years of sustained effort by the University, the business community, and local and state government. For now, as construction crews put the finishing touches on the incubator, companies like ANDX and StentTech have more immediate concerns, like packing up their equipment and finding out where the vending machines will be located. In a bioscience incubator, inspiration can strike at any time of the day or night. Phil Davies is a St. Paul-based technology writer. |
|
