Biotechs Consider Sites Outside the Industry Hubs

Jul 10, 2009

These are dismal times for anyone wishing to start a biotech company. The US economy and stock market are in the tank, and venture capital is tight. At least 100 of the publicly traded biotechs this year will fail or be taken over. So why would a entrepreneur want to further disadvantage himself by locating his company miles away from traditional biotech hubs like San Diego, Boston, and Rockville?

There are a number of good reasons why a nascent biotech company might make what appears to be a counter-intuitive decision regarding location. First, almost every state and many regional political entities have biotechnology development initiatives that provide generous startup funds. In many instances, the competition for funds will not be nearly as tough as that seen in regions where established companies vie for limited resources. For example, in 2007, San Diego-based Amylin Pharmaceuticals moved its manufacturing hub to Ohio after that state offered an eight-year, 75% tax break and provided $3.5 million in job creation incentives.1 Since then, California’s economic ills have made it virtually impossible to offer attractive incentives to startups or established biotechnology firms.

In addition, several states outside the main biotech power centers provide matches for proposals funded through the federal small business innovative research (SBIR) program. For example, Kentucky has recently matched SBIR proposals up to $100,000 and provided startup grants of $30,000 and loans up to $500,000. Today, Louisiana is an example of a region that finds itself in a favorable position to invest in biotechnology, after the destruction from Hurricane Katrina brought a massive influx of federal funds. Baton Rouge, home to the capitol, Louisiana State University, and the Pennington Biomedical Research Center is a natural choice for development of a biotechnology industry.

Esperance Pharmaceuticals Inc ( is one of the recent additions to the Baton Rouge biotechnology scene. The company is developing a new class of targeted anticancer drugs that bind to specific receptors on the cell’s surface. The technology is based on membrane disrupting peptides (MDPs) that selectively kill cancer cells without harming normal cells. In preclinical animal models of a range of human cancers, MDPs destroyed primary tumors and eliminated metastatic cancer cells. Moreover, they appear to be active against cancers resistant to traditional chemotherapeutic drugs.

Other biotech and high-tech companies in the Baton Rouge metropolitan area include NuPotential, Inc. (adult stem cell technology); TransGenRx, Inc. (transgenic expression of proteins in chicken eggs); MaxiFlex LLC (fiber optic devices for urological surgery); and Albermarle Corporation (chemical producer developing green technologies). The Pennington Biomedical Research Center is an internationally known center for the study of nutrition. It has in place collaborative agreements with a number of companies throughout the United States and Europe.

The biotechnology industry will never replace the millions of jobs being lost in the manufacturing sector, but the quality of the jobs and what these companies add to the community are powerful incentives for state and regional governments to offer lucrative startup packages. It may not happen overnight, but there may be a day when the middle of the United States represents more to biotech executives than an obstacle to be surmounted when flying from coast to coast.

1. Somers T. Thinly spread funds make training hard. San Diego Union Tribune. 2007 Nov. 7.

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