University Research Park, the technology campus developed for the University of Wisconsin-Madison, this spring will begin constructing an accelerator building intended to retain startups that have outgrown its incubators — especially the state’s relatively young cluster of life-science companies.
URP Director Mark Bugher said the 65,000-square-foot building, which will cost $7 million, is currently in the design phase, and that his group is “hoping” to break ground “in the next couple of months.”
Bugher said it will take about nine months to construct and should be completed early next year. The facility will rise on land south of the MGE Innovation Center, a 113,000-square-foot, 85-suite incubator on Research Park Boulevard that leases space to 40 startups and has nurtured more than 70 companies since it opened in 1989.
MGE is expected to graduate life-science companies into the accelerator, which will feature an as-yet-undetermined number of suites of up to 5,000 square feet. Tenants could split their suites into two 2,500-square-foot spaces.
URP expects to determine the number of suites it will make available after it signs an anchor tenant for a significant portion of space, Bugher said, adding that the group has entered into lease talks with one undisclosed prospective tenant.
Bugher said the tech park decided to build the accelerator because the MGE Innovation Center has maxed out its space for companies advancing beyond incubator stages but that are not yet ready to occupy their own space. Most of those post-incubator companies, he said, were spinouts of UW-Madison.
“Our sense is that this will continue to grow rather aggressively,” Bugher told BioRegion News earlier this month. “We work very closely with our patenting and licensing office here at UW-Madison, and they’re enjoying pretty significant increases in academic interest in patenting technologies,” primarily life science technologies. “That’s usually a good sign,” he said.
Indeed, the Wisconsin Alumni Research Foundation, which supports scientific research at UW-Madison, obtained 115 US patents based on technologies developed at the school during the year ended June 30, 2007, according to figures released last July by WARF. That’s a 67-percent increase from 69 in 2005-2006, though only 29 percent higher than the 89 recorded in 2004-2005, according to figures reported to the Association of University Technology Managers, which tracks university-based tech commercialization activity.
WARF said its number of patent applications filed rose to 300 in FY 2007 from 203 in both FY 2006 and FY 2005, according to the AUTM data. In addition, spending by WARF on UW-Madison research rose to $850 million in 2006-07 from $831.9 million in FY 2006 and $798.9 million in FY 2005.
“It’s all across the gene-therapy, drug-discovery [disciplines]; that whole area of life sciences by and large. And much of it [was] stimulated by pretty significant federal spending in research on this campus,” Bugher said.
Alternative Revenue Source
One likely reason URP wants to retain startups can be traced to declining federal grants. Though UW-Madison ranked first in 2007 among individual public university campuses receiving federal research funding, its take from the National Institutes of Health, a key cash contributor, has plateaued in recent years, according to data available on NIH’s web site.
For the federal fiscal year ending 2007, NIH spending across all research disciplines on campus dipped 0.7 percent to $241 million from $242.7 million in FY 2006. That decline followed a 5.6-percent drop from $257.1 million in FY 2005.
Two other trends could offer additional reasons. First, the school reported a nearly 12-percent decline in invention disclosures during FY 2007, which fell to 410 from 464 recorded in fiscal 2006, according to AUTM. AUTM did not record a figure for FY 2005.
“We’d prefer to keep people rotating out of the incubator as they get to the point where they’re ready to expand and grow their companies.”
Second, the number of new license and option agreements signed in 2006-07 fell to 60 from 159 in FY 2006 — a 62-percent decline — after sliding 26 percent from FY 2005, which generated 216 agreements, according to AUTM. WARF spokeswoman Janet Kelly could not explain the decline; another foundation executive who could have provided details was unavailable for comment at deadline.
Bugher said the new accelerator, which would be paid for through undisclosed private funding, would be better able to serve accelerator-stage companies because it could offer them longer lease terms than the one-year leases available at the incubator.
“We’d prefer to keep people rotating out of the incubator as they get to the point where they’re ready to expand and grow their companies,” he said.
At URP, private equity has been filling the void left by diminishing NIH funds. James Leonhart, executive director of the Wisconsin Biotechnology and Medical Device Association, whose group is headquartered at URP, told BioRegion News last week that the accelerator is especially welcome by his organization because “at least a third” of the state’s companies are at various pre-Series A venture-capital stages and can benefit from the new facility.
Leonhart said URP accounts for about one-third of the state’s 350 biotech companies. Those companies employ around 30,000 people and generated $8 billion in combined revenues last year.
“I think it makes a strong exclamation to what’s happening with this industry in this state, from discovery and licensing, to incubator facilities, and now an accelerator facility,” Leonhart said. “All those things point to the strong growth that we’ve experienced in the last number of years, in terms of growing critical mass for the biotechnology industry in this state.
“There’s excitement about what can happen in the life sciences industry,” he added.
One possible reason: The selection of Madison for this year’s World Stem Cell Summit, which is expected to draw around 1,000 attendees to Wisconsin’s state capital. The meeting, to be held Sept. 22-23, is co-hosted by WARF’s WiCell Research Institute subsidiary, the Genetics Policy Institute, and the University of Wisconsin Stem Cell and Regenerative Medicine Center. Madison is home to five stem-cell research companies, a number Leonhart said is expected to grow in the near future.
Despite the nod from the World Stem Cell Summit, Wisconsin still lags other states in stem-cell research spending. For instance, it would have to spend $50 million more each year in order to catch up to California, the nation’s top stem-cell spender with $3 billion approved over 10 years, James Thomson, the UW-Madison researcher who first isolated human embryonic stem cells, told the Madison chapter of the Wisconsin Innovation Network last month, according to local press reports.
Leonhart also cited recent tech-commercialization activity at two other academic institutions: the private Medical College of Wisconsin and UW-Milwaukee. Between those schools and UW-Madison, Leonhart said, increased startup activity has led to an uptick in life-science investment in Wisconsin: Following a $30 million, 10-year package of tax credits for angel investors enacted in 2004 and which fully took effect the following year, the number of angel capital networks has risen from a handful then to about 20 today.
According to Dow Jones VentureSource, the number of VC deals in Madison metro area biotech, pharmaceutical, and medical device companies increased last year to three from one in 2006. In addition, venture capitalists invested $50.1 million in these companies during all of 2007, almost double the $29.6 million raised during the previous year.
In addition, Madison’s VC take last year accounted for 60 percent of the $83.5 million for all VC funding across Wisconsin during all four quarters of 2007, according to VentureOne.
Established in 1984, URP is a private, nonprofit tech park that houses 115 companies in the life-science and other tech specialties and employs more than 4,000 people. It comprises 34 buildings that contain about 1.6 million square feet of office and laboratory space.
Earlier this year, the park completed its newest space, a 50,000-square-foot addition to the Third Wave Molecular Diagnostics building, which houses Roche Applied Science. Also completed earlier this year was a $12 million renovation of 20,000 square feet of space at UW-Madison’s Institute for Influenza Viral Research.
URP would add to its existing space if it succeeds in what Bugher called “very active discussions” now in progress with the Credit Union National Association, or CUNA Mutual Group, to acquire a 20-acre parcel that includes its offices.
URP plans to subdivide that property, included on its map, available here, along with its existing buildings and the accelerator site, into five lots, each lot having the development potential for 65,000 square feet of new space in buildings three to five stories tall.
“We expect that to hopefully come together pretty soon, hopefully within the next 30 to 60 days,” Bugher said.
Other than the CUNA space, URP can develop a four-acre lot at the campus’ northeast corner. Bugher estimated URP could develop there “40,000 to 60,000 square feet,” depending how much area is subtracted by city officials due to the presence of slopes on the property.