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MUSC, SCRA Betting Charleston Incubator Can Keep University Biotech Startups Local

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A biotechnology incubator planned for downtown Charleston, SC, will provide much-needed space for a “full pipeline” of startup companies emanating from research laboratories, hospitals, and partners of the Medical University of South Carolina, officials involved with the project said this week.
 
With the goal of developing the state’s “knowledge economy,” the Charleston Innovation Center is one of a trio of incubators and research centers being developed near South Carolina research universities by the South Carolina Research Authority, a state-founded non-profit applied research and commercialization services company, officials said.
 
The other two research incubators – one at Clemson University focusing on advanced materials and one at the University of South Carolina focusing on alternative energy and nanotechnology – are also in the works, with the Clemson incubator farthest along.
 
SCRA is obligated to fund construction of the three centers – it will pump some $5 million into the Charleston incubator – under a South Carolina law called the Innovation Centers Act passed in 2005.
 
That legislation also created a program called SC Launch, a joint venture of SCRA research foundations of Clemson, MUSC, and USC that supplies entrepreneurs, researchers, and early-stage companies with resources such as upfront counseling, facilities, seed funding, and mentoring.
 
Bill Mahoney, CEO of SCRA, told BTW this week that the agency has assisted nearly 100 companies since April 2006; about 40 of which have licensed IP from the partner universities. The remaining companies were created “either by larger companies, or independent entrepreneurs,” Mahoney said. “So the primary thrust is to support the research focus areas of the universities, but we will have other folks. We do VC-style due diligence on these guys before we enroll them in the program.”
 
Although the incubators at Clemson and USC are expected to contain some life-sciences overlap, the Charleston facility is intended to be pure-play biomedical to take advantage of a recent spike in research and commercialization activities at the nearby MUSC, and may be the final piece needed to create a sustainable biotech-based economy in the region, William Hood, executive director of the MUSC Technology Transfer Office, told BTW this week.
 
“There are a lot of state initiatives now to provide seed and venture money to the startups,” Hood said. “Coupled with that, [MUSC] has made a pretty significant commitment to tech transfer in the last several years.”
 
Hood said research awards have grown significantly from “$40 million or $50 million in research awards” 10 years ago to a record-high of $193 million in FY 2007, and are likely to top out around $200 million in FY 2008, which ended June 30. “And they’re all in the life-sciences space,” Hood said. “So the last piece was: ‘Where do we house these startups?’”
 
MUSC is “fairly new to the tech-transfer game,” Hood said. According to the Association of University Technology Managers’ most recent licensing activity survey, the school spun out three companies in 2006, executed 10 licensing or option agreements, and received about $600,000 in licensing revenue. In 2005, the school reported no startups, five licenses or options, and about the same tech-transfer revenues as in 2006.
 

“This project is going to fill a real need, and I’m pretty comfortable that as soon as it is ready to be occupied, we’ll be able to fill it with local companies – primarily university spinoff companies.”

The school, which started its tech-transfer program in 1994, did see some early success, Hood said, in the form of 1996 medical device spinout Micrus Endovascular, which went public in 2005.
 
“The interesting thing is that one of the very first startups from MUSC ended up going public,” Hood said. But Micrus ended up setting up shop in San Jose, Calif. “There just wasn’t an infrastructure in Charleston available to them across the board, whether it was money, physical space, management, the whole ball of wax.”
 
Even current nascent MUSC-generated companies have been struggling for an area foothold: tissue-engineering firm First String Research, while maintaining a presence in Charleston, was forced to seek out additional lab space in Research Triangle Park, NC; meantime, drug developer Argolyn Biosciences, which last month closed a $15.8 million financing round, found some space in Charleston, “but it was a significant issue for them,” Hood said.
 
“We have tried to pigeonhole these companies into extra lab space at the university; there are a few areas around with some lab space,” Hood added. “This project is going to fill a real need, and I’m pretty comfortable that as soon as it is ready to be occupied, we’ll be able to fill it with local companies – primarily university spinoff companies.”
 
SCRA’s Mahoney said that the new innovation center will be a “win for [MUSC] because their licensing efforts will have a vessel into which these companies can go. We will provide both the space and the equipment that is required.”
 
In exchange, SCRA will typically take an investment position in the companies it houses, as well as charge rent for the space. As a non-profit agency formed by the state, SCRA “feeds itself” by competing for applied research and commercialization services contracts, primarily for the federal government and large corporations, Mahoney said.
 
“But we also have the mission of helping knowledge economy companies in the state stand up,” Mahoney added. “Now that we have a pipeline of these companies, and good mechanisms in place to bring together these public and private partnerships, we’ve got a tremendous opportunity. Now it is time to put the physical infrastructure in place to support these guys. And hopefully we’ll see job creation and higher per-capita wages.”
 
It is unclear exactly when the incubator will open, but SCRA officials said that the organization is eyeing the fall of 2009. According to SCRA, the Charleston city council has given initial approval for the incubator to be built in a 28,000-square-foot former mattress factory two miles from the MUSC campus, but will review the proposal once more before a final approval.
 
MUSC also hopes the innovation pipeline will remain full for several years, as the Charleston Innovation Center is “Phase I” of a larger plan to open a drug-discovery center and bioengineering building on campus, and an entire research park adjacent to the campus.
 
“The next part of the picture is that we’ve got 44 acres right next to campus that will be an urban mixed-use research park, with industry buildings and more incubator space – very high-density – as well as residential condos,” Hood said. “All of that is with that commitment of trying to engage industry into the academic setting – both established companies, and providing this climate for these startups to flourish.”
 
The school just broke ground on the drug-discovery center earlier this year, and hopes to begin construction on the bioengineering center, which will be in collaboration with Clemson University, in 2009. The expanded research park is in the “earliest planning stages,” Hall said.

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