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Jun 15, 2014 (Vol. 34, No. 12)

Incubators Blossom along with Their Startups

From our June 15 issue.

  • Click Image To Enlarge +
    Biotechnology incubator facilities are on the rise not only in the U.S. but in Europe and Asia as well. [luchschen shutter/Fotolia]

    Garages may have worked in nurturing Apple and Microsoft, but a biopharma startup needs its own kind of space for lab equipment, from water baths to next-gen sequencers.

    Next year marks the 20th anniversary of the startup venue ranked by UBI last year as “World’s Best University Biotech Incubator” among 150 incubators in 22 countries. The University of Florida (UF)’s Sid Martin Biotechnology Incubator in Alachua, FL, can count among its graduates four publicly traded companies. The newest is AGTC, a developer of drugs for rare lung and eye diseases that went public March 27. Companies launched at the incubator have attracted $1 billion in capital since its 1995 opening.

    Incubator director Patti Breedlove said Sid Martin’s success reflects UF’s $650 million in annual research, mostly in life sciences; its commercialization process; and its skill at creating startups. Sid Martin operates on an approximately $600,000 annual budget. About two-thirds come from client space fees; the remaining third, from UF.

    “The incubator’s policies and processes are adapted to this sector,” Breedlove told GEN. “These include selectivity in admissions, a review committee dominated by investors, an emphasis on recruiting experienced CEOs, annual reviews as a condition of continuance in the program, flexibility in length of stay around long development cycles of this sector, a large network of investors and service providers, attention to customer service with positive, transparent corporate culture and extensive networking, and a leadership role in cluster development.”

    In Iowa, biotech startups are among Iowa State University Research Park’s more than 50 companies. They include cancer immunotherapeutics developer NewLink Genetics, and Boehringer Ingelheim Vetmedica, the German pharma’s U.S. animal health division launched as NOBL Labs. A startup at the University of Iowa’s BioVentures Center, Emmyon, is a university spinout developing natural and pharma products for muscle disorders.

    Ontario, Canada, incubators include the MaRS Discovery District in Toronto, where startups in biopharma and other technologies have created more than 4,000 jobs and, in the last three years, raised over $750 million in capital; and The Stiller Centre for Technology Commercialization in London, ON, where Sernova in April showed promising Phase I/II results for its Cell Pouch™ implant with insulin-producing islets in type 1 diabetes patients.

    In Poland, the Lódz Technology Incubator within Technopark Lódz opened in 2007 for 18 companies. It added space for 50 more in 2012, expanding into the building that houses BioNano Park and its two labs for startups, the Industrial Biotechnology Laboratories and the Molecular and Nanostructural Biophysics Laboratories. The Jagiellonian Center of Innovation in Krakow provides up to €200,000 (about $273,000) in seed funding in exchange for minority stakes in startups, and amenities that include a kindergarten, a wellness and fitness center, and central laundry. Startup Hub Poland in Warsaw offers a startup acceleration program with a PLN 50,000 (about $16,000) grant, six months’ free stay and visa, plus services such as legal and patent documentation, visa facilitation, and a path to global expansion.

    “It’s all about how you are helping entrepreneurs getting quality business planning, keeping them focused on milestones and what it takes to build a quality company, introducing them to sources of capital, and networking them to the entrepreneurial community. Anything short of that is not in my mind an incubator,” Mitch Horowitz, vp and managing director, Battelle Technology Partnership Practice, told GEN.

  • Attracting Biopharmas

    The California Institute for Quantitative Biosciences (QB3)—a joint venture formed in 2000 by University of California’s San Francisco, Berkeley, and Santa Cruz campuses—has filled its newest incubator, the 23,700-square-foot QB3@953, which turned a profit in less than a year, Kaspar Mossman, Ph.D., QB3 communications director, told GEN.

    QB3@953 is one of five incubators in QB3’s incubator network serving 105 startups in biopharma and other technologies. QB3 also offers a seed-stage venture fund, Mission Bay Capital; “Bridging the Gap,” a program awarding up to $250,000 over two years to bridge NIH research funds and startup commercial funding; and “QB3 Startup in a Box,” which as of last year helped 201 startups incorporate and pursue federal Small Business Innovation Research (SBIR) grants.

    Bayer, Novartis, Pfizer, and Roche have joined QB3 and Mission Bay Capital to find and invest in promising startups. A fifth pharma, Johnson & Johnson, oversees Janssen Labs, which operates an incubator within an incubator in part of QB3@953—one of three sites where Janssen assists startups across all J&J sectors, including therapeutics and diagnostics.

    “We are interested in companies that can either be involved in areas of strategic interest to Johnson & Johnson, specifically within oncology, immunology, neuroscience, cardiovascular or metabolic disorders and infectious diseases, as well as platform technologies or advancing revolutionary science targeting an important unmet medical need,” Melinda Richter, head of Janssen Labs, told GEN.

    Janssen Labs sites in San Francisco, Cambridge, MA, and San Diego host 53 life sciences companies. They have access to core research labs, office and lab space, an operations team for day-to-day activities, a business services team to accelerate development, a commercialization curriculum, and introductions to funding partners.

    In the Bay Area, Janssen is building a 30,000-square-foot South San Francisco site set to open at year’s end.

  • Building a Community

    LabCentral formally opened in April, five months after welcoming its first tenants. Co-founders Johannes Fruehauf, M.D., Ph.D., and Peter Parker joined Cambridge Innovation Center (CIC) founder and CEO Tim Rowe to create the incubator, using a $5 million capital grant from the quasi-public Massachusetts Life Sciences Center (MLSC).

    Dr. Fruehauf, LabCentral’s president and executive director, told GEN the incubator generates revenue from startups, which pay rent starting at $4,000 a month for a bench, as well as $15 million from industry partners that include J&J, Novartis, and Pfizer, for access to incubator members.

    LabCentral selects startups deemed to have the highest potential for success, starting with an online application. Startups that look promising are invited to visit or speak by phone. The final step is a formal presentation before a selection committee that includes Dr. Fruehauf, Parker, and Robert Urban, head of the J&J Innovation Center based at the incubator. Of over 100 applicants, about 25 have been approved.

    “We select our companies based on their willingness to be part of a community, not just hunker down and do their own science, but also to communicate, to share, to embrace our idea of transparency, to help out other people next to them. That’s what’s going to make a difference for them in the end, if they communicate and interact with other scientists, then they’re more likely to come up with good new ideas,” Dr. Fruehauf said.

    About two-thirds of LabCentral’s startups are drug developers; the rest develop research tools or medical devices. About half are spun out of or affiliated with nearby MIT, from which the incubator rents its space. The region’s other research institutes and universities, including Harvard and Tufts, also generate startups.

    LabCentral expects to fill its entire 28,000 square feet this summer, then double its space in an adjacent building under construction—a buildout for which MLSC has awarded a second $5 million grant.

    Bayer HealthCare houses startups at “CoLaborator™” sites in Berlin and San Francisco’s Mission Bay. Merck & Co. contributed $90 million toward the California Institute for Biomedical Research (Calibr), a not-for-profit formed to accelerate translation of basic research into new treatments. Illumina is creating an accelerator program for startups developing next-generation sequencing applications; the application deadline was extended to July 30. In November, Celgene plans to start housing in its San Francisco space startups funded by Versant Ventures under a collaboration with Versant-backed incubator Blueline Bioscience in Toronto.

    Versant is among venture capital firms doubling as incubators. Last year, Avalon Ventures and GlaxoSmithKline (GSK) launched a $495 million collaboration to form and fund up to 10 early-stage life science businesses in San Diego, each with $10 million in Series A financing and R&D support from the VC firm and pharma giant.

    Avalon and GSK jointly approve the new companies, one of which has been created. The partners will use San Diego incubator space to house the startups, whose staffs will actually work for an entity named CoI, short for “community of innovation,” moving among the startups.

    “It’s more capital efficient,” Jay Lichter, Ph.D., managing partner with Avalon Ventures, told GEN. “You can get senior people who are somewhat expensive to work on an early-stage company, but only spend maybe 10 or 20% of their time on it.”

    A postdoc or senior researcher from the founder’s lab is brought in to drive science, under Avalon supervision “to make sure they’re doing product development as opposed to just research,” Dr. Lichter said.

    This story has been corrected from an earlier version, which mistakenly said Avalon and GSK created five new companies, not one. GEN regrets the error. 


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