Biotechnology is expected to be the knowledge-based industry of the 21st Century. With locations worldwide jumping on the bandwagon, few want to be left out of what they see as a boon for high-end economic development.

The US alone is home to more than 1450 biotechnology companies employing roughly 191,000 people, according to the Biotechnology Industry Organization (BIO). The biotechnology industry has mushroomed since 1992, with revenues increasing from $8bn in 1992 to $34.8bn in 2001, BIO reports. In 2002, however, venture capitalists slammed on the breaks as deals shrank to values in the $3bn range, according to estimates by PricewaterhouseCoopers. As a result, many feared that their biotech darlings would face an economic meltdown.

Biotechnology is not a get-rich-quick industry. It is one of the most research-intensive and costly industries in the world. In the US alone, about $15.7bn was spent in 2001 on research and development (R&D). Like all industry sectors, it has been affected by the worldwide recession (although economic indicators suggest this might be changing). Researchers can be involved in the most earth shattering R&D discoveries but, without the infusion of cash to deliver their findings intofull-fledged corporate entities, such research can wither on the vine.

Choice of location

In many cases, perseverance might be key as well as a cost-competitive location. In the early 1990s, when Dr Sudhir K Sinha, a Tulane University professor in New Orleans, wanted to carve out his niche to market his methods for analysing DNA for forensic police and civil law cases, he considered setting up his company in Gaithersburg in the US state of Maryland. “New Orleans did not cross my mind. There was no state support,” he says. “What the University of Maryland had that Louisiana did not were venture capitalists and an incubator programme. The area knew the business and had biotech investors who were willing to listen to my ideas.”

In 1985, the University of Maryland had already demonstrated its desire to be on the brink of new economic trends when it created the University of Maryland Biotechnology Institute (UMBI). UMBI united experts and integrated life science research, education and training to develop biotechnology as an industry sector for the state’s economic development. In nearby Rockville, the US Human Genome Project was already under way, a 13-year effort co-ordinated by the Department of Energy and the National Institutes of Health.

Cost considerations

But Dr Sinha soon found that, although venture capital was available in Maryland, most of the money would have to be spent paying for the high cost of living in the surrounding Washington DC metropolitan area. Consequently, he chose to take $10,000 offered by family and friends and open his company, ReliaGene Technologies, near New Orleans in Jefferson Parish, where the local economic development council was implementing its own, albeit small, incubator programme. “It was, by far, cheaper to get started here, despite the fact the state did not support this industry,” he says.

Fourteen years later, Dr Sinha finds that Louisiana still does not offer financial incentives for biotechnology, and venture capital is tough to find. “Investment groups here are focused on oil,” he says. But at $10 a square foot for laboratory space, and access to R&D and bright talent at Tulane University and Louisiana State University, Dr Sinha admits he cannot afford not to be located near New Orleans. “Do you think I could find that rent and these benefits somewhere else?” he asks.

Today, his company employs 56 people with gross revenues of about $7m a year.

Production outlet

Similarly Pamlab LLC, a pharmaceutical drug marketing company based in Covington, Louisiana, found the state’s cheap land and labour prime for its start-up. Recently, it decided to form a sister company, Red River Pharma, to manufacture its products. Like many such companies, Pamlab found that with every successful drug comes the headache of manufacturing it cheaply.

“We were spending $15m to develop and manufacture our products in Switzerland and Germany,” says Barry D LeBlanc, president and chief operations officer. Construction on Red River Pharma’s 20,000sqft facility is complete in Covington not far from Pamlab. Until the creation of Red River Pharma, Louisiana had only one drug manufacturer.

By locating Red River Pharma in its own back yard, Pamlab not only saves on manufacturing costs; “We are bringing development dollars into the state and our products home,” says Mr LeBlanc.

Still, Louisiana did not offer any funding other than a 10-year, 5% tax credit for job creation. “Clinical trials performed on the products are still done elsewhere in places like Silicon Valley, Research Triangle or San Diego,” says Mr LeBlanc. Yet ample discoveries are being made by researchers in the New Orleans medical community.

“There are more opportunities here than there are entrepreneurs with the capital to start up a company,” he says.

The city is not completely dry when drilling for investors, however. A group of five businessmen from New Orleans’ financial community have dug deep in their own pockets to form Autoimmune Technologies. Founded in 1995, the firm awaits US Food and Drug Administration (FDA) approval for its product: a kit developed to detect and help treat fibromyalgia syndrome.

“FDA approvals for diagnostic kits are much faster than those requiring clinical studies,” says Michael D Charbonnet, CEO at Autoimmune Technologies. He expects good news by mid-year for the kit, which he says is a major breakthrough for a chronic pain disorder that affects millions of women.

The kit is the result of research at Tulane University on women’s health. “Researchers at Tulane University discovered antibodies by accident that correlate with the symptoms of many fibromyalgia patients,” says Mr Charbonnet. “The discovery was earth shaking since the symptoms are frequently confused with other diseases.”

A Japanese firm has been selected to manufacture the kit. “It wants Asian rights to sell the product exclusively,” says Mr Charbonnet.

Fast track activity

With so many discoveries being made, biotechnology appears to be on a fast track despite its cash crunch. Proponents anxiously foster and grow research capabilities in an effort to position themselves for the next big biotech run. While ReliaGene may have passed up locating in the mid-Atlantic region of the US, Montgomery County in Maryland is becoming a hotbed for biotechnology in part due to the myriad spin-off companies coming out of the successful completion of the Human Genome Project.

In Rockville, Human Genome Sciences, for example, recently announced its licence agreement with Pfizer. Pfizer has acquired non-exclusive worldwide rights to research, develop and commercialise products based on gene sequences from staphylococcus aureus, for potential human and animal use.

Securing its advantage, in January the University of Maryland, Baltimore (UMB) broke ground on its new biotechnology project called UMB BioPark. UMB will incorporate a business incubator and a collaboration centre in the complex, which will include room for private life sciences and biopharmaceutical companies. When complete, the BioPark is expected to contain about 800,000sqft for research labs. The first building, slated for occupancy in December, will feature 120,000sqft of office and laboratory space.

“With more than 100 bioscience companies conducting $43m annually in research at UMB, this park will provide a dedicated facility for these companies and our faculty to collaborate in the commercialisation of bioscience innovations,” says UMB president David J Ramsay.

A huge advantage to the park are the 60-plus federal agencies and research laboratories within a 40-mile radius, including the National Institutes of Health, US Food and Drug Administration, Walter Reed Army Medical Center, The Johns Hopkins University and Medical System, the Institute for Human Virology, and the 11-campus University System of Maryland. The region boasts of 45,000 bioscience researchers and leading scientists, thereby making Maryland top of the ranks in the US for health sciencesprofessionals per capita.

University City Science Center in Philadelphia served as an inspiration for the project. Located in the heart of Philadelphia, the centre feeds off synergies created by the adjacent University of Pennsylvania and Drexel University. Covering more than 17 acres on prime downtown real estate, the centre’s University City Technology Park provides a collaborative environment for its 200-plus tenants, giving them access to the top brains at nearby academic institutions and capital from Delaware Valley businesses.

Chaperone Technologies, one tenant in the centre, develops an antimicrobial product, its first product, which is used in treating complicated drug resistant urinary tract infections.

California’s role

All eyes will fall on San Francisco this year when it hosts this year’s BIO conference. California already ranks high in the world of biotechnology thanks to the entrepreneurial spirit that also gave birth to Silicon Valley.

The University of California plays a big role in fostering R&D and then spawning start-ups. One key example is Genentech, which is regarded as the founder of the biotechnology industry. Genentech’s stock recently soared off the charts when the FDA announced in February approval of its new class of cancer drugs. Observers contend that its Avastin could be a multi-billion dollar drug, although not cheapto purchase.

Genentech demonstrates how medical and commercial rewards can be within reach. Getting to that level took years of research, huge sums of investment and a fight against a lawsuit that demonstrated the importance of intellectual property rights. Today the company has 13 protein-based products on the market for serious or life-threatening medical conditions and 20 projects in the pipeline.

Collaboration and technology transfer between universities and biotech firms is an economic growth motivator. The statistics speak highly of the University of California. A 2001 Ernst & Young survey found that one in four US biotech companies was located within 35 miles of a University of California campus. One in three California biotech companies was founded by University of California scientists.

Grant incentives

To encourage early stage biotech projects, the University of California offers discovery grants. The grants leverage funds from the university and the state of California with those of private industry to conduct basic research. The university contributes $3m to the

programme and, in recent years, the state has contributed $1.7m annually (although its budgetary crisis is quickly diminishing its commitment). Industry provides the balance of the funding. The programme is unique in that it ties university researchers directly to industry. Since 1996, the grants programme has funded more than 1000 collaborative research projects totalling $225m.

In one example, Celera Diagnostics, a joint venture between the Applied Biosystems Group and Celera Genomics Group of Applera Corporation, worked with University of California, San Francisco (UCSF) researchers to discover several novel genetic markers associated with an increased risk for heart attack. The UCSF research activities for this study were funded in part by Celera Diagnostics and in part by a university discovery grant.

“This study, and others that are under way at Celera Diagnostics, can provide valuable insights into genetic contributions to coronary heart disease,” says John Kane, professor of medicine and biochemistry, and associate director of the Cardiovascular Research Institute (CVRI) at UCSF.

The work of the Translational Genomics Research Institute (TGen) in Phoenix, Arizona, which is a non-profit biomedical research institute, is to make and translate genomic discoveries into advances in human health. “Our belief is that we will be able to take the wealth of new data emerging from the human genome project and translate it into direct benefits for patients,” says chief operations officer Richard Love. “We are doing this by accelerating research and discoveries into the practice of medicine by providing the vehicle to bring together academia, government agencies, and clinical and corporate entities into productive partnerships. There is a big need for transactional drug development and doing it well.”

TGen sets out to give companies the ability to speed through the clinical trial process so they can know whether or not it is going to be worthwhile investing great time and money on the development of certain drugs. Until TGen was set up, there was no common platform for sharing or obtaining genomic information.

“Progress in genomics will come incrementally, but the potential for accelerated success is much higher at TGen as we build one of the strongest translational development teams in the world,” says Mr Love.

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Biotech locations in Europe
Country - No of companies
Germany - 360
Great Britain - 331
France - 239
Sweden - 179
Switzerland - 129
Netherlands - 85
Finland - 76
Denmark - 75
Belgium - 69
Italy - 51
Ireland - 35

Source: Ernst & Young, Endurance – The European Biotechnology Report 2003, June 2003

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European lures

Ernst & Young, in its 2003 European Biotechnology Report, counts 1629 companies in Europe’s top 11 biotech locations (see table). Changes in laws, patent protections and support for R&D has promoted Europe as a leading centre for biotechnology. The Berlin-Brandenburg region of Germany has witnessed phenomenal biotech investment thanks to venture capital, government financing and low-interest loans. Research at Charite University Medical Centre and Potsdam University has spawned biotech innovations.

In France, California-headquartered Allergan is reaping benefits from its fairly new European R&D Centre at Sophia Antipolis on the Mediterranean coast. The centre’s 120 researchers are embarking on clinical research, pharmaceutical development and pilot production, among other things.

Idenix Pharmaceuticals, based in the US city of Cambridge, Massachusetts, has drug discovery operations in Montpellier, France and Cagliari, Italy. It has been working in collaboration with the University of Montpellier and the National Centre for Scientific Research in France on the discovery, development and commercialisation of new therapeutics to treat life-threatening diseases.

Swiss expansion

Switzerland’s well-established and renowned life sciences companies, combined with the strength of its universities and technical institutes, are building an innovative and dynamic biotechnology industry. Since 1996, the number of Swiss biotech firms have grown by 30%, thanks largely to various government programmes that seeded the industry until 2003. Today, Switzerland has the fifth largest biotech market in Europe. Companies range from leading multinationals to innovative university start-ups.

In Sweden, Torben Jorgensen, CEO of Stockholm-based Affibody, reveals that his firm performs its own R&D and works closely with the Royal Institute of Technology and Karolinska Institute, two highly regarded research institutions. Karolinska Institute alone consists of 32 departments and 13 research centres and is the source of 40% of all medical research at universities throughout Sweden.

Mr Jorgensen says that a huge plus for biotechnology in Sweden is that professors in Sweden retain patents on their research and have the right to commercialise their discoveries. “This gives companies like ours good access to R&D,” says Mr Jorgensen. “It also creates a good environment for entrepreneurs.”

Stockholm is a hotbed for academic research and a centre for intellectual property, which makes Swedish biotech companies such as Affibody attractive for research collaboration. Today, Affibody is working in alliance with Amersham Biosciences of Piscataway, in the US state of New Jersey, on the development of robust affinity proteins for industrial and large-scale separation protein purification. Under the agreement, the two companies will work to develop affinity-based products for use in the production processes for protein-based pharmaceuticals. For Amersham Biosciences, the collaboration entails an expansion of its research portfolio regarding products for purification, that is, affinity chromatography.

“By working together, we hope to get more international exposure,” says Jorgensen. Business at Affibody has already expanded. During the past two years, the firm, which uses innovative protein-engineering technologies for the development of products in the core business areas of biotherapeutics, proteomics and separomics, grew from 15 employees to 65.

Strong UK centres

The UK remains on the shortlist for biotech advancement. When executives at UK-based Avecia Biotechnology decided it was time to invest in a new advanced centre for biologics manufacturing, the likely choices were to expand existing operations at one of its plants in Canada, Switzerland or Billingham, in England’s Teeside region. “We also considered Singapore,” says Stephen Taylor, general manager of Avecia.

The firm chose Billingham for its Ł70m investment and production got under way last September. Plans call for the plant to have the capability ofproducing 40,000 litres of protein biologics from microbial cell lines. The fully operational facility will be capable of running four large scale manufacturing campaigns at the same time.

Oxford, Cambridge, London and Scotland remain strong centres for biotech companies operating in the UK. The Thames Valley, in particular, has given birth to a major European cluster with Celltech being a leader. Recently, this fully integrated, R&D intensive global biotechnology concern ceased in-house target discovery activities and is now focusing on licensing products from academia and other companies. The company acquired six novel oncology targets following its acquisition of Oxford GlycoSciences during 2003. Support for the Amgen osteoporosis collaboration and ongoing validation of novel targets discovered at Celltech’s operation in the US city of Seattle (which has since closed) are being transferred to its research center in Slough, UK. Bioinformatics activities that were based in Seattle are being moved to Celltech’s Slough and Rochester facilities.

“While the quality of scientific research at the Seattle site has been exceptional, it has proven challenging to generate a sustained flow of novel targets from a relatively small group,” Dr Goran Ando, CEO of Celltech, says regarding the consolidation. “In light of this, Celltech has concluded it is a more efficient use of its resources to pursue external collaborations to access new targets. This will enable us to maximise the impact of our R&D budget by redeploying financial resources to accelerate development of our promising early stage pipeline.”

Belgium has achieved international status thanks to research in gene sequencing and plant transformation technology. Companies such as Innogenetics and the Johnson & Johnson company Tibotec-Virco work in the therapeutics categories of HIV and Aids, infectious diseases and oncology.

“We have a long lasting history in Belgium as a research organisation,” says Gustaaf Van Reet, vice-president at Johnson & Johnson Development Corporation in Beerse. “This stems from our pharmaceutical research on drug discoveries that has shifted toward biotechnology and the use of molecular science.”

In Flanders, the Interuniversity Institute of Biotechnology works in conjunction with biotech firms by gathering together nine leading university research groups to aid in the transformation of scientific knowledge into commercial applications.

Hotspots in Asia

Asia is also developing into a hotspot for biotech R&D. In Singapore, national science and technology plans and policies have been formulated to promote R&D in biotechnology and to make the environment conducive for private sector investment in R&D. Institutes and centres of excellence include Ngee Ann Polytechnic and the Johns Hopkins Medicine Division of Biomedical Science in Singapore.

“During the past five years, we have conducted research programmes in Singapore,” says Edward Miller, dean and CEO of Johns Hopkins Medicine. “Now we want to expand our commitment to Singapore’s biomedical science industry by expanding the academic programmes that would allow current and future research to bear fruit.”

Johns Hopkins Medicine in the US city of Baltimore, Maryland, is the largest recipient of biomedical research grants from the US National Institutes of Health. The new academic division will begin its operations this year in Biopolis, the epicentre of biomedical research in Singapore.

Johns Hopkins, and so many other firms, demonstrate how biotech R&D knows no boundaries.