Study groups

Study groups

New incubators provide place for young firms to grow

by Andrew Tellijohn   Dr. Charles Halstenson has been doing bioscience clinical research for two decades. He’s always wanted to run his own test facility.

Now he has his chance.

At the end of January, Prism Research Inc. became the latest and largest of a dozen start-up companies, consulting firms and trade organizations to sign leases with University Enterprise Laboratories Inc. (UEL), the new, non-profit bioscience incubator, located in St. Paul between the University of Minnesota’s Twin Cities campuses.

Halstenson, CEO of Prism, signed a 10-year lease to occupy 15,000 square feet on the main level of the building.

Prism will use the space for its 52-bed, semi-private inpatient facility where volunteers will help the company conduct Phase I and II clinical trials on treatments for diseases such as diabetes, HIV and hypertension.

The company could have started and operated from a traditional space. But Halstenson says he was attracted to the lab by the reduced costs from shared expenses covered by UEL and the building’s proximity to the university, which will provide access to several different kinds of resources, from school honchos to students.

“Being part of the university gives us access to potential study volunteers as well as a central location,” he says. “We also want to have students from the university to come to our site for research experience.”

Prism Research will make itself available to do clinical tests on research conducted by other UEL-based companies as well as its own projects, once it gets up and running, Halstenson says. The company expected to move in by March.

Incubators around town
UEL is one of three bioscience incubators starting up in the Twin Cities right now. They include:

• Menlo Park, a 78,000-square-foot building on University Avenue in St. Paul, was the first to open.

• The private, for-profit Elliot Park Life Sciences Institute (EPLI), located at Hennepin County Medical Center (HCMC) in downtown Minneapolis, will focus on orthopedic and trauma research, says Harlan Jacobs, president and founder of Genesis Business Centers Ltd.

Jacobs, through Columbia Heights-based Genesis, has helped found three other business incubators. He is working with several private funders to establish the Elliot Park lab, which will house about 10 companies in the 8,000 to 10,000 square feet available.

Elliot Park will have a full biomechanics lab on premises and a satellite downlink conference center, amongst its selling points, Jacobs says.

Plus, in the heart of downtown, doctors won’t even have to go outside to get from their medical research facilities to the Minneapolis Life Science Capital Fund, which will have space.

Once it exists, those tenants “will be eligible to step in and apply for some equity capital,” Jacobs says.

Dr. Frank Burton, an assistant professor of pharmacology at the University of Minnesota, has gone part-time to spin off an orphan drug and diagnostic software company, Psyncretis Inc., at the EPLI incubator.

Among his list of 10 advantages EPLI had over UEL are its proximity to HCMC, its available space for medical as well as academic labs, and its willingness to consider housing companies the UEL lab might reject. “Private incubators have an advantage there,” Burton says.

The roots of incubator projects date back to the late 1950s in New York. Under the leadership of Control Data Corp. founder William Norris, who in the late 1970s established a division of the company aimed at developing incubators around the United States, they began appearing in the Twin Cities.

When Norris left Control Data, however, the concept lost favor. Several incubators still exist around town, but none with the vigor of those Norris founded.

“At one point in time, Minnesota was a leader in the whole area of business incubation,” says Candace Campbell, principal with Minneapolis-based CDC-Associates Inc., and one-time member of the National Business Incubation Association board of directors. “Now we’re not.”

Campbell, while not directly involved with any of these new start-ups, has high hopes for their success. With the high cost and the research needs of science start-ups, it is critical that they are “linked to the best and the brightest and the latest and greatest in science,” she says. “It’s important for the business community, it’s important for the university, it is important for the future of our state.”

‘Something happening’
The Prism lease was a coup, says Peter Bianco, CEO of UEL. It put the bio-technology incubator envisioned by (among others) St. Paul Mayor Randy Kelly and Robert Elde, dean of the university’s College of Biological Sciences, a year ahead of its projected leasing space. It was no coincidence that soon after announcing Prism’s lease, UEL scored $24 million in funding from investors.

“With $24 million in the bank, UEL has gone from being a concept to a reality,” says Bianco, whose father was an orthopedic surgeon at the Mayo Clinic in Rochester. He himself spent time with such companies as Johnson & Johnson and Sofamor-Danek, a division of Medtronic Inc. “This is one of the more interesting projects I’ve ever been involved with. There’s just something happening — you don’t question it. You just do it.”

Other tenants agree, though it didn’t take signing a lease for some of them to be on board.

“I’m a huge supporter of the project even if we weren’t living here,” says Jon Brodd, CEO of Cima Nanotech Inc., another of the early lessees at the UEL building. “To have not only a support network, but something that is set up for and understands the needs of start-up technology companies is a great thing to have.”

Cima Nanotech, a seven-year-old company, formed when St. Paul-based 3M spin-off Aveka Inc. merged with NanoPowders Industries of Caesarea, Israel.

The company manufactures nanoscale metal particles that are used in electronics and other products. Cima probably would have opened a St. Paul office anyway, but was intrigued by the opportunity to share space with other intelligent scientists so they could collaborate on problems.

“Networking has just an incalculable value for early stage start-up companies,” Brodd says. “The only thing, and this is a double-edged sword, of getting a lot of really bright scientists together — is getting distracted.”

Construction has begun on the incubator building. The upper level will primarily house office space. On the main level, through a maze of hallways, exist more offices and then the highlight — a conglomeration of space being renovated into research rooms, including 22 “wet labs” paid for by Maplewood-based 3M Co. and available for hands-on research.

University officials, the city of St. Paul, large corporate investors and business leaders are gambling that every aspect of the biotech industry from trade groups to start-up companies to eventually venture capitalists themselves will  inhabit the building, which was formerly occupied by TargetDirect, the e-commerce arm of Minneapolis-based Target Corp.

Bianco declined to discuss the financial details of leases to UEL tenants. But he says they signed good deals, not only because they are financially beneficial, but because they provide for resources, such as the wet labs and other technologies, that generally make starting bio-tech firms cost-prohibitive.

So who else is on board so far?

The Prism deal leaves UEL’s 103,000 square feet of space about 40 percent spoken for. Its 11 tenants appear pumped at the progress.

“This is a great opportunity to have everything they need at their fingertips to maximize their opportunities for success,” says Ray Frost, CEO of MNBIO, a trade association dedicated to growing life sciences in Minnesota. “Right now we are off to a very successful start.”

MNBIO is managed by Ewald Consulting. Both firms have space in the building. Frost says MNBIO will act as another resource for biotech firms that locate in the building. Among those are:

• Gel-Del Technologies, which produces purified proteins that can be molded into almost any form and then engineered to mimic the body’s own tissue.

• Stent Tech, which develops biocompatible stent technologies used to treat birth defects and cardiovascular disease.

• University of Minnesota Office of Business Development, which nurtures business opportunities based on University research.

• Carlson Ventures Enterprise, a program developed inside the Carlson School of Management that teaches MBA students the due diligence process for venture capital, investment banking and other new venture opportunities.

• Minnesota Research Fund, which funds development and commercialization of technology from Minnesota educational institutions.

• ANDX, which uses genomic information to develop diagnostic tests for the pet and agricultural animal sectors.

• M.D. Biosciences, a globally active company researching biotech needs for individual clients.

Long-term plan
While Bianco and others are excited by the progress, they warn that the incubator is in its infancy. For a look at how officials view its potential, however, look no further than a few hours to the east.

Bianco regularly convenes with Mark Bugher, director, and Greg Hyer, associate director, of the University Research Park at the University of Wisconsin-Madison.

The two-decade-old research park boasts many success stories, and offers a glimpse of what Bianco says needs to be the next step. The Madison-based University Research Park opened 20 years ago, five years ahead of its first incubator building for start-up companies. The incubator now occupies 50,000 square feet spread out over three buildings. That space is likely to double in the coming years, says Greg Hyer, associate director of the program.

Hyer cites several examples of companies that started off in incubator space that have later moved to buildings in the research park or grown and been acquired.

One, Tetrionics, was founded in 1989 to supply the pharmaceutical market with high-purity vitamin D analogues. The $1.3-billion chemical product company Sigma-Aldrich Corp., St. Louis, Missouri, acquired Tetrionics in June 2004.

Another, EMD Biosciences, is now the research group of the Life Science Products division of Merck KGaA, the German pharmaceutical giant.

“We don’t really see any end to the opportunities for creating those startup companies,” he says. “It’s clear there is demand here.”

Bianco believes a few years down the line, the UEL Laboratory at the University of Minnesota will be discussing similar success stories — if it capitalizes on its existing momentum and builds a similar park where companies that outgrow the incubator can move into office space of their own nearby.

“UEL in and of itself will not succeed without a place for people to go,” he says. “Otherwise we’re going to be a farm team for Boston or San Francisco.”

Nearly every state in the country is building or wants to build such an incubator, he says. They result in more companies and great, technology-based jobs.

“These aren’t retail jobs,” he says. “These are high-skilled, high-paying jobs. Everybody sees these as the jobs they want to attract.”

[contact] Peter Bianco, University Enterprise Laboratories Inc.: 651.209.4889; pt******@***mn.org; www.uelmn.org. Jon Brodd, Cima Nanotech: 651.646.6266, www.cimananotech.com. Dr. Frank Burton, Psyncretis Inc.: 612.347.4841, bu****@********is.com, www.psyncretis.com. Candace Campbell, CDC Associates: 612.827.7988; cc*******@************es.com; www.cdc-associates.com. Ray Frost, MNBIO: 651.265.7840, ra**@***ld.com; www.mnbio.org, www.ewald.com. Charles Halstenson, Prism Research Inc.: 651.636.2001; in**@**************nc.com; www.prismresearchinc.com. Greg Hyer, University Research Park (University of Wisconsin, Madison): 608.441.8000, www.universityresearchpark.org. Harlan Jacobs, Genesis Business Centers Ltd.: 763.782.8576; ha**********@************rs.com; www.genesiscenters.com.