Young Biotechs, Hungry and Anxious

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By Ellen McCarthy
Thursday, June 2, 2005

Ask folks along the Interstate 270 corridor if there's enough venture capital around to sustain a thriving biotechnology industry in the region, and you'll hear widely divergent responses.

Some say there's plenty of funding, but the quality of biotech start-ups needs to rise a few notches for venture capitalists to make large investments.

Others disagree. They say not enough money has been raised for biotech start-ups here. Investors are wary because it often requires a multimillion-dollar commitment to push a biotech product drug through the discovery, testing and commercialization process.

The debate was never too far from the surface Tuesday as executives of 15 young biotechnology companies from across the Mid-Atlantic -- including eight from Maryland's biotech corridor -- stood behind podiums and clicked through PowerPoint slides to make their case before rooms full of venture investors.

The session in Baltimore was an addendum to Capital Connection , an annual event where the best-of-the-best tech start-ups from the area are invited to give presentations to crowds of venture capitalists. For most of its 18-year history, Capital Connection, sponsored by the Mid-Atlantic Venture Association [MAVA], has been dominated by information technology and telecom companies.

"The life sciences sector is its own sector with its own investors and different business models. It's just a different animal," said Julia Spicer , MAVA's executive director. Biotech start-ups have traditionally been on the periphery of the information technology-focused venture scene in the Washington area, and haven't had much luck attracting their own coterie of investors.

There's no question that venture funding is crucial for young biotech firms. Almost by definition, they begin as small, entrepreneurial operations that need cash to buy expensive lab space and equipment.

But because it can take a decade or more to get a drug on the market, investors aren't going to see the quick returns they might expect with a software company.

Biotech companies have done better recently. Some 13 area biotech firms received $126.1 million in investments in the final quarter of last year, more than any other sector.

But that amount still paled compared to some of their counterparts in other regions, according to the MoneyTree Survey by PricewaterhouseCoopers , Thomson Venture Economics and the National Venture Capital Association . For the year, our region ranked seventh in biotech investments, behind places such as New England, Silicon Valley and the New York metro area.

Bruce D. Weintraub spent six years being rejected before finally raising $3.5 million to launch his Rockville start-up, Tropogen . "The problem is they weren't interested in early-stage biotech."

An Ernst and Young report saying Maryland dropped from third to fourth in the rankings of biotechnology clusters last year is prompting a bit of soul searching among the state's promoters. North Carolina, it seems, has outpaced Maryland in the growth of the industry.

At a forum on the future of the sector last week, Aris Melissaratos, Maryland's secretary of business and economic development, said there's lots of room for improvement, but to blame the lag on a lack of venture funding misses the point. For biotech firms the truth of the investing world is something of a Catch-22: Good businesses can attract funding, but you've got to have money in the bank to build a good business.

"We need to earn the right to get the money," Melissaratos said. "We have enough capital, bring better business plans."

Officials from Maryland, Virginia and the District gathered in Rockville yesterday to unveil a regional effort in nanotechnology. The Chesapeake Nanotech Initiative aims to foster collaboration among universities, firms and scientists working in the field.

Nanotechnology -- a science based on the manipulation of particles one-50,000th the width of a human hair -- is just beginning to emerge as a commercial sector, with products such as pants that don't stain and super-strength medical devices. But by 2015, the National Science Foundation predicts it will be a $1 trillion industry with 2 million workers, and local technology advocates are determined not to miss out on the potential windfall.

The Chesapeake Nanotech Initiative's first goal is to assess the region's existing strengths and figure out a plan to accelerate development of the industry.

"If you look at us as a region, we're probably stronger than any other state," Chris Foster , deputy secretary of the Maryland Department of Business & Economic Development, said of the area's nanotechnology capabilities.

By January officials intend to have a strategy to help companies and academics share resources and develop nanotech products more quickly.

"If we can foster greater collaboration, it means money can be spent on two different [scientific] instruments, rather than two of the same ones," said Peter Jobse , president of Virginia's Center for Innovative Technology .

Overheard:

"When Dr. Summers made those ill-fated comments about women in technology -- well, he clearly hasn't spent much time in Northern Virginia," ABC 7 anchor Maureen Bunyan said last month at the annual Women in Technology banquet in McLean. The ballroom filled with women erupted into applause at Bunyan's reference to Harvard President Lawrence H. Summers, who suggested that biological differences may contribute to the reasons fewer women than men occupy top jobs in science.

Ellen McCarthy writes about the local tech scene every Thursday. Her e-mail address ismccarthye@washpost.com.


© 2005 The Washington Post Company

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