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NYBA Panelists: Recession May Spur Life-Science Spinouts from NYC Research Institutions

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This article was originally published on April 28.

The tanking economy may actually create an environment in the New York area that is conducive to spinning out life-science companies from area research institutions, various tech-transfer experts said at the New York Biotechnology Association's annual meeting, held last week in New York.

According to various panelists at the meeting, recent spates of layoffs in the banking and pharmaceutical sectors may contribute to the pool of available managers and scientists for life sciences startups; and the economic downturn may cause area investors to consider betting on early-stage technologies more frequently.

That, coupled with the anticipated opening of new, affordable life science incubator space such as Manhattan's forthcoming East River Science Park, to house nascent companies, had panelists and audience members buzzing over the possible creation of a university-fueled life sciences cluster akin to those in Boston and San Diego.

Representatives from the university tech-transfer, investment, and business-development communities pondered the role of New York's academic institutions in creating a life science cluster in the city during two tech-transfer-specific panel sessions on different days of the NYBA conference.

"I think the most exciting thing for biotechnology in the past five years has been the problems with Wall Street," Arikha Moses, chief scientific officer of New Jersey's TyRx Pharmaceuticals, said during a session entitled "Out of Academia and Into Industry: Commercializing Academic Research," held on day one of the meeting.

"There is a huge pool of financial talent" added Moses, who was a vice president at Athena Ventures prior to founding TyRx in 1998. "There are programs out there starting to pair Wall-Street types with entrepreneurs, and pair them with academics," she added, without elaborating.

Thomas Meyers, a partner in the New York office of law firm Cooley Godward Kronish, moderated the panel. He asked panelists whether there was merit in the idea that New York lacks the necessary entrepreneurial spirit – despite its strength in biomedical research – to create life science startups based on that research.

Panelist Abram Goldfinger, executive director of the Office of Industrial Liaison and Technology Transfer at New York University, said that he didn't think this was a fair assessment.

"Statistics show that New York universities have been quite active compared with other sectors in terms of starting up companies," Goldfinger said. "But they don't often end up as startups in the NYC area.

For example, Goldfinger said, NYU's entrepreneurial culture, particularly in the biosciences, is strong.

"We have many collaborations with pharmaceutical companies, but with newer technologies we've been more successful in creating startups or working with smaller startup companies," Goldfinger said, adding that NYU has created six startups in the last year, two of which have each received more than $30 million in financing.

"This creates excitement among the faculty – seeing their colleagues start up companies," he said. "Faculty members want to be part of that culture."

However, he also said that "most" of NYU's successful startups have moved to more fertile pastures for growth; i.e. Silicon Valley and the San Francisco Bay area.

"Beyond the academic sector, the hurdles in New York are cost-efficient facilities, seed-stage funds, and entrepreneurial talent," Goldfinger said. "There is more in the way of seed funding and angel networks recently, but there is still more to be done.

"A lot of talent is coming out of pharma now, which could help, and with the East River Science Park [opening], hopefully more companies will be local," he added.

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The East River Science Park, a project of Alexandria Real Estate Equities, is currently building the first of two towers in Manhattan. In February, BTW sister publication BioRegion News reported that Alexandria was in talks with a tenant prospect for 100,000 square feet of the East Tower, but that the economic downturn had caused the developer to delay plans to break ground this year on a second tower in the complex.

And the East River Science Park is not the only planned facility in New York that could provide affordable space to university life science spinouts. The State University of New York Downstate Medical Center in Brooklyn is currently in talks to expand its Advanced Biotechnology Incubator; and to convert another 525,000-square-foot former industrial building at the Brooklyn Army Terminal into a facility for companies that graduate from the incubator.

BioRegion News also reported last week that participants in a separate NYBA panel discussion were hopeful that the new spaces will help feed the development of a life science-based cluster in New York. Meantime, participants in the academic tech-transfer panels were equally enthused.

Panelist Katherine Breedis, an investor with Golden Seeds, an angel investment group with a specific focus on women entrepreneurs, said that she was "very bullish" on the new science park, and thought that it could be "a game changer."

The park will allow researchers "to be very close to their companies and develop them here," she added. "Previously we didn't have space [in New York] and companies would often move to Boston."

Breedis also agreed that "the restructuring of pharma companies could cause an influx of talent" to manage or conduct research for said companies.

Don't Blame the Universities

In a second tech-transfer panel session entitled "How to do Business with the University," held on the second day of the conference, an audience member eventually steered the conversation toward the previous day's topic du jour by asking why New York has not become a biotech hub with its top-notch academic research capabilities.

Another audience member suggested that perhaps some of the blame could fall on university tech-transfer offices for not sufficiently nurturing startups based on research at their institutions.

But Kathleen Denis, associate vice president of technology transfer for New York's Rockefeller University, said that area universities are doing their part in terms of laying the foundation for successful startup companies. "You can try all you want to blame universities, but it's not going to happen," she said.

As an example, Denis pointed to the New York Academic Consortium, which comprises licensing and business-development offices of the seven largest biomedical institutions in New York City: Rockefeller University, Albert Einstein Medical College, Columbia University, Memorial Sloan-Kettering Cancer Center, Mount Sinai School of Medicine, New York University, and Weill Cornell Medical College.

In 2007, this consortium garnered some $1.9 billion in research funds; reported the disclosure of 643 new inventions from its faculty; executed 193 new licenses and options; and generated about $509 million in gross licensing revenue.

In addition, the NYAC members collectively were responsible for 20 new start-up companies, and have spawned 188 total startups to date. All of these statistics underscore the idea that judging purely by the numbers, New York is as rich a breeding ground for university-based bioscience startups as other more recognized areas of the country.

"Per dollar of research funding, New York creates as many startups as, for example, the Cambridge, Mass., area," Denis said. "They just don't stick here. It's a lack of good management and money."

Denis also agreed that a lack of affordable space has played a role in causing spinouts to relocate, and said that the East River Science Park "may change things."

Panelists also pointed out that there has in fact been precedent for the idea of university-based life science startups thriving in times of economic downturn due to an influx of skilled workers from area pharmaceutical and biotech companies.

For instance, Denis said that the current biocluster in North Carolina's Research Triangle Park area came about "when pharmas started laying people off" in the region.

Likewise, more biotech companies started popping up in the Albany, NY, area in the 1990s following significant layoffs from Albany Medical Center and General Electric, Eugene Schuler, chair of biotech-focused upstate economic development group BioConnex, said.

However, the idea that both tech-transfer offices and area investors could do more to create a university-based biotech cluster in New York may not be completely without merit, Alan Paau, executive director of Cornell University's Center for Technology, Enterprise, and Commercialization, said during the day-one panel session.

Paau, who previously served as assistant vice chancellor for technology transfer and intellectual property services at the University of California-San Diego, said that in his experience in both positions, "NY-area institutions work very hard to do tech transfer and to create startups," but many of these companies have moved from NY to San Diego or Northern California.

"Why? It's easy to blame things on cost, but I don't think it's that much cheaper to live in Palo Alto or around San Diego," Paau said. "I don't think the cost of facilities or living is the only reason."

Instead, he pointed to a phenomenon endemic to the New York area in which both investors and research institutions aim too often for "homerun" deals. "When I talk with entrepreneurs and investors, they have a lack of time, so they tend to go for the big deals," Paau said. "So if [a tech-transfer office] doesn't have a big deal to present, then they don't want to hear it. Perhaps this comes from the Wall Street mentality."

Paau added that this mentality extends to tech-transfer professionals in NY academic institutions. "They tend to be very deal-specific as well, and try to do the big deal. My California colleagues tended to be more portfolio-focused. A positive result of this approach is that you start to develop an ecosystem or culture."

Paau also said that having come from the San Diego area, he has not been disappointed in the quality of academic life science research in New York. He added, however, that there needs to be "a little bit of an attitude adjustment. Technologies coming from academic institutions are always going to be early-stage.