E.B. Writers of Dallas

DFW Health Monthly, August 2002

By Esther M. Bauer

Texas cities with major research institutions stand to gain the most from commercial biotechnology ventures – that is if they can translate researchers’ findings into sound commercial ventures.
Currently, the startup ventures of the biotech industry are most likely to be located on the East and West coasts in cities like Boston, San Francisco and San Diego. Bunching entrepreneurial firms into such biotech centers creates synergy while making it easier for investors in multiple startups to attend individual monthly board meeting of their fledgling firms, experts say.
Even though Texas ranks third in the nation in terms of federally-funded life-science research within universities, biotechnology is in its infancy in Texas – making it difficult to attract top tier investor interest. Within the state, Dallas/​Fort Worth, Austin/​San Antonio, and Houston/​Galveston dominate the landscape of life-science research due to medical schools in those locales.
Those characteristics make the state’s emerging biotech industry an economic development generator, which means more jobs in the health sciences. In January, Gov. Rick Perry declared his intention to help the state’s publicly-funded research institutions channel more of their discoveries into commercial applications through startup businesses.
Legislation has become biotech-friendly, too. A line item in the last legislative session gives $9 million annually to The University of Texas Southwestern Medical Center in Dallas to foster biotech development. State-funded academic institutions also are now enabled to form for-profit subsidiaries or holding corporations for launching biotech startups.
Still, many problems remain, says, Dr. Dennis Stone, vice president for technology development at UT Southwestern in Dallas.
“As a tax-exempt institution, it is hard to form a for-profit corporation . . . to work exclusively with a group of venture capitalists when the next venture capitalist complains public resources are going to a particular individual. From a conflict of interest standpoint, public universities have a difficult time directly privatizing their research,” Dr. Stone says.
In comparison, Houston’s Baylor College of Medicine has spun off nearly 30 biotech companies in the past 20 years through its privatized technology development office. He says Baylor’s non-profit status allows it to proactively form companies.
UT Southwestern, however, typifies the indirect, slow path of most publicly funded state institutions.
The university engaged in a five-year incubation period and $10 million in research financing before it could attract enough seed money to spin off Eliance Biotechnology Inc. in February 2001. The vaccine discovery company pinpoints antigens to fight pathogens, such as bacteria. The focus is a hot biotech area due to the current bio-warfare threat and the need to create vaccines quickly. Eliance has since been acquired Rockville, Md.-based MacroGenics, www.macrogenics.com, raising $12.6 million in merger financing from top tier biotech firms on the West Coast. The operation is remaining in Dallas, but is doubling in size.
“The university has an equity stake, and I’m on the board of directors, but it is its own entity. It was an arduous process – a good example to us of what we are going to have to do to make it work in Dallas,” he says.
“Basically we have to develop the technology as far as we can, patenting it and advancing it at the bench. We have to find a group willing to provide seed financing. We have to find someone willing to be the CEO. We need to find a landlord willing to provide property. Then we get them together in a room and hope that something magical happens -- they form a company so we can transfer our technologies into it,” says Dr. Stone, who credits StarTech Early Ventures, www.startechev.com, with making it all happen.
The Richardson-based high-tech business accelerator is an indirect solution to getting past the privatization problem, he says. “They provided seed financing. I don’t think we would have a chance doing it without StarTech.”
The nationwide focus on commercializing biotech research promises to revolutionize the delivery of medical care – benefiting research entities, spin-off companies, investors, and patients using the end products.
Examples include the mapping the humane genome, which has created the emerging field of pharacogneomics. Drugs will be developed to interact with genes at a molecular level, resulting in different drugs tailored for patients with the same disease but different genetic profiles. Advances in microsurgery already means more precision and less invasive surgery. Telemedicine melds biotech and high tech, enabling electronic health care solutions in remote and rural areas. One application is an instrument physicians use to scan patients for diabetic retinopathy; they then send the data to a central processing site and analysis by a specialist.
Collaboration among universities and business incubators, such as Fort Worth’s MedTech Center, are all part of building an infrastructure to nurture the emerging biotech industry, says Thomas R. Kowalski, president of Texas Healthcare & Bioscience Institute, (www.thbi.com, Austin). The organization, which promotes medical research, development and manufacturing in Texas, was founded in 1996 as a statewide, non-profit public policy research and education organization.
“We been involved form economic development standpoint for over six years, but the competition is heating up in this country and globally. We are in eight- to 10-yearwindow of opportunity. The critical point is where will we be eight- to 10-years from now. We are laying the foundations today,” says Kowalski, who calls the transfer of technology from researcher to the marketplace the most challenging.
“When we look at the bench to the marketplace, what we are most interested is the commercialization piece and then early seed stage market piece. Our goal is to create an enabling environment to keep the technology here, to keep everything from going to both coasts,” he says.
Collaboration is key says Warren H. Webb, president of Fort Worth MedTech Center, (www.medtech.org), a non-profit business incubator established in 1998 and funded by such notables as Johnson & Johnson as well as the city of Fort Worth.
“We are a networking facilitating business incubator. We find individuals with cutting edge technology and assist entrepreneurs to meet guys with c-level management, private and venture capital investors . . . to develop strong business products and partnerships,” Webb says.
Of the 10 firms assisted, three have either been acquired by established companies or have moved to larger quarters. assisted 10 companies, 3 have already graduated, either acquired or outgrew their facility.
Graduates include Trincore Systems, Inc., and MyDoc online Inc. Trincore was a software development company in the health care industry whose technology was purchased in August 1999 by Data Critical Corporation of Bothell, Washington. MyDoc online, Inc., was a health care Internet company that developed an online suite of applications to support physician offices in scheduling appointments, managing patient questions, processing authorizations, and providing targeted health information. MyDoc was acquired in October 2000 by Aventis Pharmaceuticals of Parsippany, New Jersey.
The seven companies currently at MedTech, range from medical device firms to software and supply-chain management firms for the medical industry. One firm offers a medical device featuring infra-red technology to treat carpal tunnel syndrome.
“We assist originators of ideas to become better entrepreneurs. There are lots of individuals out there who invent the next software and medical device but when it comes to being an entrepreneur they trip and fall because they don’t understand the techniques to becoming a business person,” says Webb who also collaborates with the nearby University of North Texas Health Science Center in Fort Worth.