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Ariz. Institute’s ‘Virtual Incubator’ Aims To Nurture Biotech Alliances, Start-Ups

Arizona non-profit ThirdBiotech Research Group last week launched a drug-discovery research institute and “virtual incubator” to encourage academia and industry to collaborate, and to help create new biotechnology companies in the state.
The group, which was incorporated last year, is attempting to bring together Arizona-based research institutes, universities, and companies to provide wet lab space, business services and mentoring, and technology-commercialization assistance to life sciences entrepreneurs and fledgling companies, with the goal of benefiting the greater biosciences economy in Arizona, ThirdBiotech’s founder said this week.
“I founded ThirdBiotech on the idea that bringing together the life sciences community is going to be beneficial for a lot of reasons — sort of a ‘high tide raises all boats’ philosophy,” founder Jeff Morhet told BTW. “It helps to foster and grow new jobs. If you really wanted to build an economy, you’ve got to do it based on new companies.”
ThirdBiotech has been flying under the radar for the past year or so but decided to publicize its efforts last week, Morhet said. To this point the organization has mostly hosted meetings to encourage discussion and networking among the Arizona biosciences community, but in recent weeks it has stepped up its efforts to foster the development of new biotech companies based primarily on research conducted at Arizona’s universities and non-profit research institutes.
The group will primarily focus on nurturing technologies and companies in the areas of proteins and antibody engineering, since most of the group involved with the research institute has experience in that particular area, according to Morhet, although he declined to name other founding or board members. Other potential areas include medical devices, industrial and environmental biotech, bioinformatics, and forest, agricultural, and marine biotechnology.
ThirdBiotech said that its overarching goal is to “identify and assist three formal projects per year;” to “facilitate the creation of one biotechnology firm per year;” and to “have a greater than fifty percent survival rate at the third year mark for companies it has created.”
So far, the group has not taken on a formal project, but Morhet said that there are a “few in the queue,” and that further announcements will likely be made this year.
A key aspect of ThirdBiotech’s effort, Morhet said, is a “virtual incubator” that will attempt to find lab space for entrepreneurial researchers or nascent biotechs at companies and institutions around the state on an as-needed basis.
This approach differs from traditional incubator models, which Morhet claims have generally been a failure in Arizona, and in the US in general.
“It’s virtual from the standpoint that we haven’t dedicated specific resources or brought up a structure, because almost every other incubator we’ve known has failed because they often spend their money on the incubator first,” Morhet said. “An incubator is a tough nut to get through because you have to have a business plan to support it; otherwise it’s going to fail.”
To that end, ThirdBiotech is working with regional companies, universities, and research institutes to seek out lab space on a case-by-case basis for researchers with promising biotechnologies that are ready to have a company built around them.

“An incubator is a tough nut to get through, because you have to have a business plan to support it; otherwise it’s going to fail.”

Mohret’s own company, Canadian biotech InNexus, of which he is chairman and CEO, maintains laboratory operations on the Mayo Clinic’s campus in Scottsdale, Ariz., and will allow local bio-entrepreneurs to use between 250 and 400 square feet of wet-lab space until they can break out on their own. He declined to identify other entities that might donate lab space.
“Actually mapping a business plan to a hard facility is too difficult, and there have been too many mistakes with this,” Morhet said. “You might get the financing to contribute to building [an incubator], but the ongoing pressure of trying to match a business plan up with an incubator has actually shown to fail on a pretty regular basis.
“And if you think about it from the incubator’s standpoint, [the question becomes] who are their customers?” Morhet added. “They’re early-stage researchers who have little money and certainly less structure.”
To help nascent companies establish themselves while in the donated lab space, the ThirdBiotech research institute plans to offer assorted business services and research resources, which could include business consulting, mentoring, partnering, scientific advising, and use of scientific equipment.
Another facet of this is working with university tech-transfer offices to help university spinouts develop foundational intellectual property portfolios.
“We have a diagram that we walk people through: Here’s your idea here, and here’s where you want to be,” Morhet said. “What does it mean to build foundational IP? What does it mean to do initial IP filings? What is IP?”
Even though many university tech-transfer offices have traditionally taken on similar responsibilities, Morhet said that not all of them have the resources or expertise to do it well.
“There is only so far that a university can go,” he said. “We’ve built this institute as a non-profit. It does not take or own any IP; it’s there to help facilitate. It really picks up and works with the tech-transfer offices for the researchers.”
Nina Ossanna, director of business development for the University of Arizona’s BIO5 Institute, told BTW that many of the services that Morhet’s organization will strive to provide are beyond the purview of most tech-transfer offices.
“Tech-transfer offices do not serve an incubator role,” said Ossanna, who has been one of Morhet’s early collaborators for organizing networking events. “We don’t find managers for companies, we don’t fund companies. People don’t understand the amount of activity that is needed to get a company started.”
ThirdBiotech also seems to share some goals with state or regional bioscience organizations, such as the Arizona BioIndustry Association, which in March restructured its operations by integrating with the Bioindustry Organization of Southern Arizona to “better support the growth and success of its member companies and to unify, empower, and advance the bioscience industry” throughout the state.
The difference between ThirdBiotech and state or regional bioscience organizations is that ThirdBiotech is “putting real boots on the street to be able to execute on both the science and the business,” Morhet said.
“Originally we started to lay down the foundation for what would be referred to as a life-sciences association or organization, much like AZBio’s mission,” he added. “Do we do that? Yes. Is it a life sciences organization? Yes. Does it do what AZBio was somewhat programmed to do? I think so. But we’re also adding to this a lot of structure that an association like that wouldn’t have.”
Ossanna, who is also on the AZBio board of directors, said that it is more of an industry organization that typically represents companies that have been established for a longer period of time.
“Really what we’re seeing in Arizona is that there is so much activity building in the biotech area that this is definitely more of a need” for the kind of services that ThirdBiotech is offering, Ossanna said. “AZBio thinks this is great and supports Jeff; and as part of BIO5 I can say that I support Jeff, as well.”
In terms of funding for potential startups, ThirdBiotech will not be providing direct funding, although it will attempt to match candidates with state life science-funding opportunities, angel investors, and venture capitalists.
As far as supporting its own operations, ThirdBiotech will rely solely on contributions and sponsorships. So far, in addition to InNexus, the group has secured undisclosed sponsorships from GE Healthcare, the Greater Phoenix Economic Council, the Canada-Arizona Business Council; BIO5 Institute; and ArizonaCure. Phoenix-based law firm Osborne Maledon is also listed as a sponsor of recent networking events on the ThirdBiotech website.
Morhet said the pitch to potential supporters and contributors of lab space and services is that they will be in the know when it comes to promising early-stage biotechnology development, and they will be contributing to the greater good of the life sciences community at large.
“As the chairman and CEO of InNexus, I will tell you that having more biotechs and available resources in our proximity greatly benefits me,” Morhet said. “If I have places where I can farm and pick and steal employees from, I want it.”

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