Biotech Firms Sought

Most major U.S. biotechnology and biomedical firms are on either the East Coast or West Coast, clustered near the academic institutions that spawned them. The enormous expanse of country in between--that's fly-over country.

Many state and local governments are making efforts to encourage bioscience activities in their communities for the high-paying jobs and the taxes they can generate.

According to a report that the Battelle Technology Partnership Practice and the State Science & Technology Institute prepared last year for the Biotechnology Industry Organization, only 14 states identified the biosciences as an economic development opportunity in 2001. But the study, called "State Bioscience Initiatives," points out that "today, 40 states are targeting the biosciences for development, and all 50 states have technology-based economic development initiatives that are available to bioscience companies."

Many of these government initiatives are beginning to succeed. According to location consultant John Boyd Jr., pharmaceutical and biotech firms are closely scrutinizing midwestern locations to save money. The agglomeration of biotech companies in coastal areas can make them less competitive. "Our California clients tell us that it is difficult for them to recruit and retain researchers in San Francisco and San Diego because of the high cost of living," Boyd says.

However, in a just-completed study that analyzes operating costs for biotech companies across the country, Boyd Co. does not even rank Cincinnati. Boyd says his BizCosts survey ranks the top 60 U.S. and Canadian biotech locations and that it would have taken a survey of the top 70 for Cincinnati to show up. The life sciences are just not a significant element of the Cincinnati area's economic profile, Boyd contends.

But he says Cincinnati could be a good location for pharmaceutical and biotech facilities. A lot of old, unused manufacturing space is available in the area for conversion to life sciences manufacturing. Boyd's report shows that the annual operating costs for a leased 100,000-sq-ft biotech facility employing 200 workers would be $15.8 million in metropolitan Cincinnati. That is significantly better than the highest cost location, San Francisco, where operating costs are about $19.4 million. The lowest cost place to do business is Montreal, where costs are $14.2 million.

Cincinnati USA Regional Chamber officials claim they've got more going for them than Boyd acknowledges. But they know they've got to do more than just offer attractive rents and access to reasonably priced housing. They understand that an infrastructure that supports the biosciences is key to the growth of the industry, and they are committed to creating such an infrastructure.

WHAT THE Cincinnati metropolitan region does have is a major medical center at the University of Cincinnati (UC) that includes Cincinnati Children's Hospital. In 2001, UC took over 350,000 sq ft of research space donated by Aventis and created the Genome Research Institute (GRI). The site employs 350 scientists who focus on the mechanisms of disease at the genetic, molecular, and cellular levels. Bio/Start, a nine-year-old incubator on the edge of the UC College of Medicine campus, has 18 wet labs and four dry labs in 33,000 sq ft of space to rent to start-up biomedical businesses.

The area also has a significant number of degreed scientists. Cincinnati economic development officials say the area has more than 105,000 people employed as physicians, engineers, biomedical and environmental scientists and technicians, agricultural and food scientists, and microbiologists.

Training the next generation of bioscience workers, UC, Miami University, Wright State, and the University of Dayton all offer undergraduate and graduate biomedical degrees. Cincinnati State has a two-year co-op biomedical program to train technicians.

And the area also has its bioscience business stars, including Procter & Gamble Pharmaceuticals and Girindus. P&GP, with about $2 billion in annual sales, concentrates on cardiovascular, musculoskeletal, and metabolic disease. German pharmaceutical ingredient manufacturer Girindus employs 50 people, including 35 chemists, in an oligonucleotide facility it built in 2002 near GRI.

Dorothy H. Air, associate senior vice president at UC, heads up the Office of Entrepreneurial Affairs, created four years ago. She says her job "is to develop networks and resources to commercialize research coming out of the university."

The university already has an active licensing program, Air says. In both 2003 and 2004, the U.S. Patent & Trademark Office issued nine patents to UC, six of which were bioscience related. Through the end of July, UC has garnered five new patents, with four about to be issued. Dan O'Neill, associate director of UC's Intellectual Property Office, says patent activity is up and that the university expects to file 50 patent applications in 2005, 65% of which will be bioscience related.

Air says she helps faculty write grant requests for money from the Third Frontier Project, a 10-year, $1.1 billion state-funded effort launched in 2003 to support high-technology research with job-creating potential. "I help develop an entrepreneurial approach at UC," she says.

UC has had some successes spinning off companies. They include Cutanogen, a company that develops tissue-engineered skin substitutes; Phase 2 Discovery, set up to develop drugs that treat psychiatric and neurological disorders; and Protein Express/PX Pharmaceuticals, a specialist in recombinant protein technology.

A realist, Air admits that Cincinnati and other communities in Ohio and along the Ohio River can't effectively promote the area to bioscience companies without a regional effort. UC, along with institutions such as Wright State, the University of Kentucky, Ohio State University, and the Air Force Research Laboratory's Human Effectiveness Directorate, have banded together to stimulate economic development of life sciences in the region as members of the Ohio Valley Affiliates for Life Sciences.

Formed in 2002, the group spends more than $2 billion annually on life sciences research. "Individually, we can't compete against the East and West Coasts," Air says. But as part of a larger region, Cincinnati hopes to be a contender.

"We recognize we have a niche role in biotechnology," says Carol J. Frankenstein, president of Bio/Start, the business incubator near the UC medical complex. Since Bio/Start got under way in 1996, 35 companies have used the incubator, where they benefit from below-market rents. Six have failed. One successful Bio/Start graduate, Inotek Pharmaceuticals, moved to Beverly, Mass. Inotek currently has more than 100 employees and last year raised $20 million in private equity.

"We have to be realistic," Frankenstein says. "Our first choice is to keep the companies that graduate in the area." She ticks off some of the Cincinnati area's benefits: access to a large number of medical and technical people, competitive commercial rents, reasonable living costs, a good train and road transport network, excellent airport links to major U.S. and world cities, a growing venture-capital presence, and growing biomedical institutions.

Rather than just thinking of Cincinnati as "fly-over country," Frankenstein hopes biotech firms will take advantage of all the region has to offer. "We are trying to move Cincinnati into the second tier," she says.