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North Carolina Alliance Hatches 3-Year Plan To Make State Leader in Medical Technologies

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The North Carolina Biotechnology Center, eager for the state to acquire the same national leadership reputation for medical device and software businesses as it has with biotechnology, has partnered with a statewide industry group to push the state for greater support of companies specializing in medical technologies.
 
The Center and the North Carolina Biosciences Organization — the state’s chapter of the Biotechnology Industry Organization — last week released a 20-page report outlining the challenges and strengths of the medical technology industries found in the Old North State.
 
The report, North Carolina’s Strategic Plan for Advanced Medical Technologies, describes a three-year strategy that begins with launching a North Carolina Center for Advanced Medical Technologies, complete with business plan and list of funding sources.
 
The new center would use the public-private biotech center model, a private, government-subsidized nonprofit entity created in the state in 1984 and credited with catapulting North Carolina to leadership in attracting biotech and pharmaceutical businesses and nurturing startups, especially in and around Research Triangle Park.
 
“Because of its strong base in biotechnology, North Carolina has a major opportunity to be a world leader in this new, exciting era of advanced medical technologies,” the plan declared.
 
The plan also envisions a role for the existing North Carolina Biotechnology Center: Expand its Center of Innovation program by developing networks of entrepreneurs, researchers, funding sources, and facilities intended to boost medical technologies businesses.
 
The plan includes a variety of specialties, from medical diagnostics and surgical devices to nanosensors, wireless monitoring devices, informatics and other communications software, and specialized materials and coatings. Some of these technologies are labeled “convergent” because they are based on two or more tech platforms.
 
Growth in some of these types of companies has been growing. For instance, the number of medical device companies based in North Carolina last year increased by 28 percent to 142 from 111 in 2001. Collectively, these companies employed 7,222 people and together produced 781 FDA-approved devices.
 
By comparison, the number of these companies increased by 22 percent between 1990 and 1996 and by just 5.7 percent between 1996 and 2001.
 
“There is clearly a burgeoning advanced medical technologies industry including medical devices, but [it includes] other kinds of convergent technologies that might be taking place between biotech, IT, nanotech, and other areas,” Ken Tindall, senior vice president of science and business development at the biotech center, told BioRegion News last week.
 
“It has special needs, and this report indicates that, one, there is an industry here in North Carolina — we are by no means a leader in this industry — but that there’s opportunity for North Carolina to increase the industry and grow companies here in North Carolina and provide a support base in order to help those companies grow.”
 


“We don’t have, in North Carolina, what you would call an anchor tenant. But we’re hoping to build a few of those.”

Cutting Red Tape, Seeking Funds

 
According to Tindall, the stiffest challenges include the need to develop coordination among industry, government, and academia. “There needs to be an organization or an entity or a person who can champion this industry, who can identify the needs out there, who can make the linkages between this business and that researcher, or identify the policy issues that need to be addressed legislatively,” he said.
 
Policy issues to be addressed, he said, include cutting red tape and copying the biotech industry’s success at tapping government funds. The report does not detail how much funding the advanced medical technologies companies would pursue, or how much they would lean on the state to come up with the money, and Tindall would not discuss how much the industry wants and from where. “That analysis has not really been done,” he said.
 
“Funding is an important piece of it, especially for the early-stage companies,” he added. “That’s true everywhere in the world. At the biotechnology center, which serves biotech industry startups very well, we’re not in a position where we’re able to put money into that new software program that does something that’s important to healthcare.”
 
Short-term, however, Tindall said the biotech center can help by offering initial funding for the new med-tech effort — $2.6 million over five years to be exact — by developing “centers of excellence” for the med-tech industry, namely virtual networks to link professionals and resources.
 
“It’s a way of providing them a runway to bring in partners, to identify opportunities, to gather the kind of collaborations that need to take place in order to grow this industry in a coordinated way,” Tindall said.
 
If this past summer is any indication, the industry should find some friends in Raleigh. The state’s current $20.7 billion budget, adapted in July, gave the biotech center a 30-percent funding increase, to $15.6 million from $12 million.
 
The state also set aside $100 million for life sciences research programs and facilities statewide, led by $25 million to create a statewide cancer-assessment and -prevention program at University of North Carolina at Chapel Hill’s School of Medicine.
 
State officials committed another $50 million for the cancer research in 2008-09 and every fiscal year thereafter [BioRegion News, Aug. 6].
 
They have much to be hopeful about. In 2006, North Carolina was the nation’s third-largest biotech cluster, according to an Ernst & Young report that measured the number of biotechs state-by-state. More recently, second-quarter venture capital figures compiled by E&Y showed that two North Carolina biotech sub-regions — “Research Triangle” and “North Carolina/South Carolina” — recorded eight venture capital deals totaling $83.1 million among biotech and pharmaceutical companies.
 
Research Triangle, with $67.3 million in seven deals, placed sixth-highest in biotech VC spending among the 29 sub-regions tracked by E&Y. Most of those sub-regions saw almost as much investment in medical devices as in biopharma companies as investors gravitated to faster returns, smaller losses, and brighter prospects of profitability compared with early-stage biotechs and pharma companies. [BioRegion News, July 30]
 
Ernst & Young/Dow Jones VentureOne
Sub-Regional List of Venture Capital Awards,
Medical Devices/Equipment and Medical Software/Information Systems
Second Quarter 2007
Region Investment
amount ($M)
# of deals
Bay Area
266.89
16
Minnesota
125.80
7
South Bay
100.98
5
Peninsula
98.91
6
Los Angeles
91.30
2
Connecticut
87.31
4
Orange County
72.00
4
Greater Seattle
60.15
3
San Diego
58.90
5
New Jersey
36.10
3
East Bay
36.00
3
Boston
34.69
4
Austin
32.00
1
Georgia
28.90
2
Maryland
25.30
2
Potomac
25.30
2
Colorado
23.50
4
San Francisco
21.00
1
Oklahoma
15.00
1
Pennsylvania
10.50
3
North Texas
10.40
1
Salt Lake City/Provo
8.53
1
Pittsburgh
8.50
1
Research Triangle
7.00
1
Philadelphia
5.00
3
New York City
2.10
2
Illinois
2.00
1
N. Carolina/
S. Carolina
0.50
1
TOTAL
1,049.56
89
SOURCE: Ernst & Young and Dow Jones VentureOne, Quarterly Venture Capital Report,
second quarter 2007

E&Y’s second-quarter figures tell a different story for North Carolina when it comes to investment in both medical device and medical software companies. The two regions comprising North Carolina racked up just two deals totaling $7.5 million, skewed by the single $7 million, first-round financing deal closed by MiCell Technologies of Raleigh, a developer of polymer-drug combination coatings for use in stents and other medical devices. During the second quarter of 2006, North Carolina’s two regions saw two deals totaling $16 million, almost a quarter of the total $66.2 million in nine medical technology deals recorded for all of 2006. One sign of hope: During the first half of 2007, a total $59.5 million in four med-tech deals took place.

 
But that $7.5 million investment isn’t enough to budge the state from its 24th-place Ernst & Young perch of sub-regional venture capital awards in medical devices, equipment, and software/information systems (See chart). The North/South Carolina sub-region, typically dominated by North Carolina companies based outside of RTP, placed dead last at 28th place.
 
Four of the top five sub-markets for medical device and medical software investment are in California. Taken together, the Bay Area, South Bay, Peninsula, and Los Angeles sub-regions account for $558.08 million, or just over half of the $1.05 billion in investment recorded in 89 deals in the second quarter of 2007.
 
The E&Y figures showed that several states without large biotech clusters still ranked high in medical device/software investment. Minnesota, home to the Mayo Clinic, Medtronic, and St. Jude Medical, recorded the second-largest amount of second-quarter venture capital with $125.8 million during the second quarter.
 
Ranking sixth was Connecticut, where four companies generated a total $87.31 million in VC deals in the second quarter. The state’s strengths include talent from Yale University and the biomedical engineering program at the University of Connecticut, as well as lower taxes than neighboring — and competing — Massachusetts. Austin, Texas, and the entire state of Georgia also placed in the top 15.
 
“We don’t have, in North Carolina, what you would call an anchor tenant,” Tindall said. “But we’re hoping to build a few of those.”
 
Most of those tenants, he acknowledged, will likely develop long-term within the state rather than be attracted from elsewhere. “It’s wonderful to recruit companies. … That’s a wonderful opportunity for the state in terms of jobs and revenue,” he said. “But the ability to be able to make an industry successful really does come from being able to grow your own. That’s been our experience with the biotechnology industry here.”
 
Home-grown talents can help enable this. North Carolina “has some strong teaching institutions and academic centers,” including Duke University and UNC, said Mark Leahey, executive director of the Medical Device Manufacturers Association, a national trade association based in Washington, DC. “It has the physicians who are on the cutting edge that are needed to bring these technologies to the market through the R&D process.
 
To commercialize a new device, you really need an experienced tactician to utilize that device,” he said. “Obviously that’s something North Carolina has. And they seem to have support from government as well, which is helpful.”
 
According to Leahey, there are “a couple of factors that are key to a geographic area having success” in developing a cluster of medical technology businesses. “First is venture capital,” he said. “The VCs want to have more interaction with their companies and the executive team,” Leahey said. “Second is the proximity to prominent teaching institutions with a proven track record of developing innovative technologies that can be transferred to commercial entities to commercialize products.
 
“The third component is the historical knowledge of executive and CEOs who go off with engineers to start off their own companies,” he added.
 
Cash Kow-Towing
 
The strategic plan developed by the biotech center and NCBIO envisions the new advanced medical technologies center hiring at least three professionals in its first year — an executive director, webmaster/researcher, and administrative assistant/education coordinator — as well as naming an advisory board of “key leaders and visionaries who can help guide and support the strategies, tactics and priorities of the center.”
 
Also in its first year, the new center would create a database of companies and vendors, an online job board, a brochure about the medical technology industries, and methods for tracking the needs of companies and the center’s performance in meeting them. The medical tech center would also study successful organizations in other states, including San Diego’s BIOCOM, Minneapolis’ Medical LifeScience, and the Massachusetts Medical Device Industry Council, and promote successful medical technology companies throughout North Carolina to economic development groups, the public, and the media.
 
During the second year, the new center would begin publishing an annual report reviewing the industry and a periodic newsletter, as well as launch an on-demand Internet channel to replay panel discussions.
 
The center would also plan and launch an annual North Carolina Advanced Medical Technologies Conference showcasing companies and linking entrepreneurs with investors. The conference would be one of several envisioned in the state, since the new center would also “recruit existing medical technology conferences to locations in North Carolina,” as well as “begin planning for a national medical technologies conference to be held in North Carolina,” according to the strategic plan.
 
That national conference would take place during the third year: “The goals of this effort should be to position North Carolina as a state leading the way in emerging technologies for medical advancement, and to attract large medical company executives, investors, and medical technology executives to North Carolina,” the strategic plan recommended.
 

Also during the third year, the new center would participate in conferences outside North Carolina, and join with medical tech and broader healthcare groups throughout the Southeast in promoting the region, especially to larger businesses. The center would also build relationships with similar groups internationally, and launch a state-supported “seed fund” toward research and commercialization of medical technologies, along the lines of the $20 million BioAdvance fund created by Pennsylvania for life science investment

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