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At Incubation Assoc. Conference, Officials Tout Successes, Define Challenges, Pitfalls

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SAN ANTONIO — The National Business Incubation Association held its 22nd International Conference on Business Incubation here May 5-7. Below is a roundup of select events.
                       
Virginia Biosciences Development Center Eyes Part of Philip Morris Vivarium
 
The Virginia Biosciences Development Center is in talks to make available to tenant businesses part of a vivarium at the 450,000-square-foot Center for Research and Technology that Philip Morris USA opened late last year in the  Virginia BioTechnology Research Park in Richmond.
 
David Lohr, the VBDC’s executive director, said tenant startup businesses within the center have a need for vivarium space that the Philip Morris center can satisfy because the facility, which cost $350 million, is larger than the tobacco giant needs.
 
“They built substantial vivarium capacity, more than they now have concluded is needed. So we are actually negotiating with the contract company that runs that vivarium,” Lohr said during a panel discussion entitled ‘Building Successful Bioscience Programs and Companies.’ “And very likely, in the course of the balance of this year, we will also be able to offer that as an alternative to the university. Right now, that’s still to be finalized.”
 
Lohr said many tenants now use the vivarium within the Medical College of Virginia or MCV Campus of Virginia Commonwealth University, some two blocks from the VBDC. “They have a world-class animal facility, so most of our tenants would go there.”
 
The VBDC is a 27,000-square-foot incubator within Virginia BioTechnology Research Park, a nine-building, 1.1-million-square-foot life sciences campus.
 

 
Alexandria CEO Trumpets Seattle Accelerator’s Early Success With Startups
 
Joel Marcus, the chairman and CEO of Alexandria Real Estate Equities, told conference attendees that the Seattle post-incubator facility his company launched five years ago for early-stage companies has fulfilled its initial promise of jump-starting life-science business activity in that city.
 
Marcus said the facility, which bears the simple name Accelerator, has created 10 companies that have either spun out or are planning to do so later this year. Three of those companies have grown to employ a combined 150 people and raise a total $140 million in capital, with more set to join them. “There are a number of companies in the pipeline,” he said.
 
Marcus spoke during a discussion entitled ‘Technology Clusters: Accelerating Science-Driven Startups and Convergence Innovation. Alexandria is a publicly traded real estate investment trust headquartered in Pasadena, Calif.
 
A single management team has worked with the spinout companies, compared with the multiple management teams that typically work with tenants at traditional incubators. Marcus said that difference is a key factor in Accelerator’s success, as are its access to investors, and the science expertise of the facility’s anchor tenant, the Institute for Systems Biology.
 
Marcus added that the accelerator now accounts for 70 percent of the venture capital awarded to Seattle life sciences companies.
 
“This was never the intent,” he said. “The intent was to always to make a lot of money for the investors, and create big-idea great companies. [Accelerator] is probably, to my way of thinking, one of the most powerful new-age structures for creating science-driven companies.”
 

 
Biotech Growth Reshapes Company Mix at Atlanta Technology Incubator
 
One reflection of the life science industry’s growth in Georgia is the growing number of such companies based at the state-funded Advanced Technology Development Center, an executive told BRN.
 
Biotech, pharmaceutical, and medical-device companies now account for “at least 15 to 20” percent, or seven shops, of the roughly 40 tenant “member” companies at ATDC, headquartered in Atlanta within the Technology Square campus of the Georgia Institute of Technology.
 
That’s up from a single business three years ago, said Cindy Cheatham, director of business development at ATDC, discussing the progress and challenges facing the incubator.
 
Speaking during a session entitled ‘Helping Your Clients Prepare for Successful Financing,’ Cheatham said “there are a couple of things going on: There’s a biotech focused professional [Lee Herron] who is incredible. Also, there is money from a seed fund that is helping seed new companies.”
 
She referred to the State of Georgia Seed Capital Fund, which invests up to $1 million in Georgia-based startups specializing in bioscience, broadband communications, semiconductor technology, and content processing. The state amended its constitution to create the fund, which made its first investment in 2000 and has racked up 21 investments to date. Average funds awarded have been $165,000 in initial deals and $450,000 overall.
 
“There’s a great program at Georgia Tech called the Wallace H. Coulter Department of Biomedical Engineering. There’s a partnership between Emory [University] and Georgia Tech in bioengineering. There’s the [Centers for Disease Control and Prevention] in Atlanta. There’s knowledge and there is talent from Emory, the Medical [College of Georgia] and the University of Georgia. We also have a wet-lab space; that helps,” Cheatham said.
 
One ATDC company, CardioMEMS, is a Georgia Tech spinout that has raised more than $60 million for its work developing medical devices that use microelectromechanical systems, or MEMS, to diagnose and treat cardiovascular and other diseases. The shop closed a $33 million series E financing round last December.
 
Another ATDC company, Biofisica, a CibaVision spinout, is one of 10 bioscience seed-capital recipients. The company is focused on developing wound-care devices that combine biological processes with electrical stimulation. Biofisica’s POSiFECT Bio-Electric Stimulation Therapy or BEST, and POSiFECT RD wound-care dressing are available only in the UK and Europe.
 
“We’re starting to get our second generation of entrepreneurs coming out of the medical schools, coming out of some of the existing technology companies,” Cheatham said.
 
During the session, Charles Ross, ATDC’s acting general manager, said that the number of ATDC’s life-science companies will likely grow as many of them are expected to obtain financing through the $40 million Venture Capital Fund announced earlier this year [BRN, Jan. 28] by the public-private Georgia Research Alliance.
 
The alliance, a coalition of businesses, universities and state government, has been approved for $7.5 million in state funding toward launching the venture fund, while private investors would raise the remaining $32.5 million. The fund is intended to finance university spinout with an emphasis on vaccine developers and other life-science specialties.
 
“Many of these companies, we expect, will ultimately be a part of our incubator,” Ross said.
 

 
Texas Emerging Tech Fund Chairman Decries ‘Me-Too’ Life-Science Efforts
 
David Spencer, chairman of the Texas Emerging Technology Fund Advisory Committee, cautioned attendees seeking a direction for their incubators to think twice before jumping on the life-science bandwagon.
 
“It really concerns me when everyone sits down and says, ‘We’re going to be a biotech center.’ Wait. Why?” he asked rhetorically during a keynote address he delivered at the conference. “‘That’s really what everybody is going into, [and] we need to get in on it.’ Good luck,” said Spencer. “Everybody else is getting in on it, too.”
 
“What is going to provide differentiation? What is going to make us different? And why would we dump all this public money, all this time, into being a me-too player?” Spencer added.
 
By comparison, Spencer said effective incubators were those best able to deliver on four ‘Ps’ — “proclivity,” or a specialty it can provide better than others; “proximity” to the market sector it wishes to serve; “potential” for attracting tenant businesses and funding; and “passion,” which he defined as creating “a place with energy [and] interesting people that add value.”
 
Spencer heads a 17-member panel of high-tech leaders, entrepreneurs, and research experts that reviews potential projects and recommends how TETF funds should be allocated. The fund, part of a push by Texas Gov. Rick Perry to ramp up state tech-commercialization efforts, has to date invested $110 million in 61 completed deals and has a pipeline of another $17 million in 22 pending deals with undisclosed companies.
 
While life sciences account for 48 percent of TETF’s deals, the state does not spell out any tech specialties for funding, TETF Director Mark Ellison told BioRegion News earlier this year [BRN, March 17].
 

 
Israel’s Life-Science Industry Has Grown Since Incubator Privatization, Officials Say
 
Israel’s life-sciences industry has benefited in the six years since the government began privatizing most of the country’s incubators, two officials said at a discussion session.
 
The number of life science companies has mushroomed to 1,340 in 2008 from 25 a decade earlier. While that number rose to 150 in 2000, Israel sought much larger growth in that industry and other high-tech specialties.
 
In 2002, the nation began switching control of its incubators to private investors. Also that year, Israel chose a venture fund headed by Yehuda Zisapel, president of Rad Data Communications Group, in a competition to run a new life-science incubator. Partners in that venture include German drug giant Merck KgaA.
 
Total funding for those life sciences companies has more than doubled over the past 8 years to $350 million in 2007 from $135 million in 1999.
 
Idan Tamil, managing director and president of the Rad BioMed Incubator in Tel Aviv, said his facility has nurtured eight companies, with four others still small enough to remain at the facility. Half the companies assisted by Rad BioMed originated as university tech-transfer projects while the remainder originated as entrepreneurial startups.
 
Tamil said the incubator expects to do more business in coming years because around 100 new biomedical companies get formed in Israel each year. The number has been as high as 144 in 2004, but has plateaued more recently to 87 new companies in 2006 and 88 last year.
 
He said Israel encourages life-science startups by allowing them to receive government support for three years rather than the customary two, and by awarding larger subsidies intended to account for the longer timeframes for developing new treatments and technologies.
 
Rina Pridor, program director of the Israeli Technological Incubator Authority, said medical device companies account for 39 percent of startups and biomedical companies represent 19 percent. More than half of Israel’s biomedical companies, 52 percent, specialize in medicine, while another 20 percent are developers of new therapies.
 
Diagnostics companies account for 10 percent, followed by developers of biologicals and healthcare information technology (both at 5 percent) and agricultural biotech (3 percent).
 

 
PharmOptima, Akron Global Business Accelerator Win Incubation Awards
 
A contract research organization that graduated last year from a Michigan incubator, and an Ohio incubator that serves biomedical and other tech tenants were life-science winners of NBIA Incubation Awards, according to a luncheon presentation.
PharmOptima, which specializes in pre-human testing phases of clinical trials, won the association’s Outstanding Incubator Graduate Award in the technology category. Last year PharmOptima, which employs 37 people and has annual revenues of $3.5 million, graduated from the Southwest Michigan Innovation Center in Kalamazoo, relocating to nearby Portage.
 
The Akron Global Business Accelerator captured the Incubator Innovation Award for its Ohio Global Technology Commercialization Initiative. Launched in 2006, the initiative is designed to help domestic startups and attract to the US international companies specializing in biomedicine and advanced materials, advanced energy, information technology, instrumentation, controls, and other electronics.
 
During its first year, the tech-commercialization initiative formed a biomedical small-business cluster, stepped up outreach efforts, collaborated with international affiliates, and joined the Northeast Ohio Consortium for Wound Healing and Research. The accelerator credits those efforts with helping it attract 12 new companies.
 
Accelerator CEO Michael LeHere told the audience the initiative reflects state support for nurturing startups, including an Ohio Department of Development program that established 10 technology incubators statewide.
 
Other winners included: Millennial Media, a wireless advertising company based at Baltimore’s Emerging Technology Center (Outstanding incubator client, technology category); One-Stop Cellular, a chain of wireless communication stores based at the Dan River Business Development Center in Danville, Va. (Outstanding incubator client, non-technology category); Smith Research, an engineering and architectural firm that graduated from the Louisiana Business and Technology Center in Baton Rouge (Outstanding Incubator Graduate, non-technology category); the Environmental Business Cluster in San Jose, Calif. (Incubator of the year, technology category); and Australia’s Darebin Enterprise Center (Incubator of the year, non-technology category).
 

 
Cisneros Highights Four Future Challenges for US Incubators
 
The chairman of a group that promotes life-science activity in San Antonio used his luncheon keynote address to highlight what he called the challenges US incubators are most likely to face over the next several years.
                       
Henry Cisneros, chairman of BioMed SA and San Antonio mayor during the 1980s, said US incubators will need to develop more links to overseas resources; align themselves closer with regional economic strengths; help fulfill the nation’s need to nurture more innovative startups; and secure more global funding sources for resident companies.
 
Cisneros, who is also the executive chairman of CityView, which develops and finances urban residential real-estate projects, said incubators that master these challenges can strengthen their communities’ economies much as San Antonio benefited from the startups nurtured by an incubator created by Control Data Corp, the pioneer computer mainframe company.
 
Since then, Cisneros noted, San Antonio has sought to build a life-science industry focused on medical education, clinical trial capability, spinout company generation, and military medical research. The region is home to five US bases.
 
That last focus, he said, would be strengthened if the US Department of Homeland Security chooses a 100-acre portion of Texas Research Park — a 1,236-acre San Antonio site owned by the nonprofit Texas Research and Technology Foundation — as the home for a planned $500 million National Bio and Agro-Defense Facility.
 
Four other states — Georgia, Kansas, Mississippi, and North Carolina — are also competing for the project. A decision is set to be announced in October. The facility would start construction in 2010 and begin operations by early 2014.
 
BioMedSA, which completed its second full year of operation last year, promotes development of the life sciences and healthcare industries by positioning them as a single economic sector that is San Antonio’s largest. In a 2006 report by the Greater San Antonio Chamber of Commerce, available here, the combined sector accounted for 112,762 jobs and some $15.3 billion in economic activity.
 
“It is possible, it is truly possible, for a city, a metropolitan area, a region, to become masters of their own destiny,” Cisneros said.
 
Cisneros served as San Antonio’s mayor from 1981 to 1989, and later served as secretary of Housing and Urban Development under President Bill Clinton from 1993 to 1997.
 
Clinton pardoned Cisneros in January 2001, two years after he agreed to plead guilty to making a false statement to the FBI and pay a $10,000 fine. The plea deal capped a special counsel investigation touched off by statements about payments to a former mistress, made after his appointment to HUD’s top post, from which he resigned in 1997.

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