Author Institution: Edison BioTechnology Cente

Baunach, Dorothy C.

Furgalus, Margaret P.

Shesser, Lynn K.

The Ohio Journal of Science

KnowledgeBank at OSU

CRITICAL PERSPECTIVEBiotechnology: What's Ahead for Ohio?DOROTHY C. BAUNACH, MARGARET P. FURGALUS, AND LYNN K. SHESSER, Edison BioTechnology Center, 11000 Cedar Avenue,Cleveland, OH 44106-3052INTRODUCTIONSince its founding in 1987, the Edison BioTechnologyCenter has become the premier advocate for Ohio'sbiomed/biotech industiy. As part of the Ohio Departmentof Development's Thomas Edison Program, the Centerworks closely with the state's leading universities andmedical institutions, businesses, foundations, and civicand state organizations. Programs and services of EBTCfacilitate the growth of the industry, build a supportiveinfrastructure, and help to create a national identity forOhio. One of EBTC's key functions is to track the growthof Ohio's biomed/biotech industry. Presented here arefindings from EBTC's most recent state survey as well asdata from a number of national surveys. The challengesfacing Ohio as it takes its place as a key player in thisemerging industry are described.DISCUSSIONEBTC MissionEBTC has been monitoring, promoting, andcontributing to the growth of Ohio's biomedical andbiotechnology research and industry base for fiveyears. The center has not actively engaged inbiotechnology development involving agriculture, theenvironment, and animals (other than human) to date.Therefore, the comments offered in this paper are restrictedprimarily to EBTC's present constituency: theresearch and industry base in Ohio which focuses on theuse of biological processes to create products forhuman health care and for the more well-establishedbiomedical devices industry which is based on Ohio'sstrong manufacturing and materials base. EBTCdirects its programs to both the biomedical and thebiotechnology areas. It counts as members Ohio's majorresearch institutions (Case Western Reserve University,Children's Hospital Research Foundation-Cincinnati,The Cleveland Clinic Foundation, The Metro HealthSystem, The Ohio State University, Ohio University, theUniversity of Cincinnati, and University Hospitals ofCleveland) as well as corporate members from all areas ofthe state (Fig. 1).EBTC fills a unique niche between Ohio's academicand research institutions engaged in biomedical researchand a growing industry base; it supports this industrythrough five programs:1. Centers of Excellence—EBTC pursues multi-institutional, multi-disciplinary consortia whichcan assemble a critical mass of resources inspecific technology focus areas and increasethe probability of substantial technologicaladvances.FIGURE 1. EBTC membership (8 Institutions, 60 Companies).2. Technology Funding Programs—EBTC directs itsfunding to projects which have near-termcommercial potential and can attract follow-onfinancing for commercialization; its programsstrongly encourage alliances between Ohiocompanies and research institutions in technologydevelopment. Institutional research agenda arenot generally market-driven and may not alwaysmatch Ohio industry needs. The strategic plan ofEBTC defines a key role in assisting researchersand companies to cooperatively addressrecognized market needs.3. Business Assistance—EBTC focuses on providingservices to emerging biomedical andbiotechnology companies in 'ways which willnurture the growth of the industry base in Ohio.One-on-one counselling, focus groups and keyintroductions to clinical partners, potentialinvestors, etc., enable the entrepreneur to accessthe extensive network of resources which EBTChas assembled in five years of operation.4. Education and Outreach Programs, Publications—The programs provided by EBTC serve a varietyof education and networking objectives, andOHIO JOURNAL OF SCIENCE BAUNACH ET AL.draw more than 1,000 participants annually.Seminars feature topics of immediate interest andutility to emerging companies (e.g., FDA regulatoryissues, commercialization strategies, and so forth);topic selection is based on member surveys andinput from the industry. The Edison BioTechnologyCenter offers special programs to meet the needsof its institutional members. Currently indevelopment is a graduate-level training programdescribing the FDA approval process, scheduledto be offered at The Ohio State University later thisyear. The center is also involved in the creation ofa bioscience education program for high schoolbiology teachers which has drawn industrial, public,and foundation support. Publications provided byEBCT enhance the flow of information to itsgovernment, academic, corporate, and communityconstituencies.Industry Advocacy—A national identity for theOhio biomed/biotech industry is being built byEBTC. Special surveys, the annual Directory ofOhio Biomedical & Biotechnology Companies,and EBTC's participation in national studies,associations, etc., promote Ohio's expandingrole in an industry which is becoming increasinglyimportant to the national economy. The center isin a unique position from which to observe theindustry and assess Ohio's participation. Tomonitor industry development, EBTC draws uponnational surveys as well as its own studies.National Level OutlookThe accounting firm of Ernst & Young annually studiesthe national biotechnology industry, surveying companiesthat use biological processes to develop products forhuman health, animal health, agricultural productivity,food safety and nutrition, energy enhancement, andenvironmental conservation. The firm has just released its1993 report (Burrill and Lee 1993), and key observationsindicate that the biotech industry is maturing and movingtowards the wide-spread launch of products that havebeen in development for several years.• Total revenues ($8.1 billion) are up 28% from thelast reporting period.• Of survey respondents, 89% expect to launchtheir first product by 1996.• Ernst & Young predicts industry-wide profitabilityby the mid-1990s, as a number of products clearthe FDA.• Ohio now ranks 12th in the nation in numberof biotech companies, a 20% increase from1991 (Fig. 2).The next ten years are projected to be growth years forthe biomed/biotech industries. Investment in researchand development for human health care is increasing and,FIGURE 2. Location of biotech companies in the United States as reported by Ernst & Young (1993).BIOTECHNOLOGY IN OHIO VOL. 93as more products obtain FDA approval and reach themarketplace, industry-wide profitability is anticipated.This optimistic outlook points to a promising future forOhio as it takes its place in the industry.Outlook for Ohio's IndustryCompetition among states for a key position in thebiomed/biotech industry is intensifying. Many states,notably California, North Carolina, Maryland, New York,Massachusetts, and Pennsylvania, have achieved nationalprominence with well-established programs to supportthe industry. In 1992, more than 80 biotechnology centerswere located across the United States, each with variousresearch, technology development, education, and businesssupport programs. Most are affiliated with major academicresearch institutions and many are part of larger researchpark and business incubation programs. All receive statesupport through universities or regional developmentprograms. Advantages for Ohio in this competition aresignificant and, if further developed, can make the state amajor player.The biomed/biotech research and industry base inOhio is notable and should be a continued source ofeconomic growth for the state. Human health care willremain a primary focus of investment for research anddevelopment. A direct relationship between the level ofresearch funding provided by the National Institutes ofHealth (NIH) and the number of biomed/biotech start-upshas been demonstrated by EBTC. In 1990, Ohio rankedtenth in the receipt of research dollars from NIH (Fig. 3);continued NIH funding at present or greater levels shouldhave a positive effect on industry in the state.This optimistic outlook is confirmed by EBTC's ownsurvey (Edison BioTechnology Center 1992) of thebiomed/biotech industry in Ohio, released in July 1992.A key finding is that small to medium size companies(annual sales less that $200 million) have experiencedsignificant growth over the last five years, with averageannual increases of 14.2% in employees and 17.8% insales (Fig. 4).Furthermore, the rate of new company formation,historically five starts per year, has been accelerating since1985. Based on survey findings, EBTC predicts the formationof at least 14 new companies by 1994; Ohio's small tomedium size biomed/biotech companies (in actual numberof companies, the largest segment of the industry) couldhave aggregate sales as high as $650 million and anemployment level as high as 7,000 by that time.Challenges to Ohio's IndustryOhio faces several challenges in developing its biomed/biotech industry.1. Retaining the Benefits of New Technologies inOhio—In developing Ohio's technology base, itis important to allow for alternative com-Number of CompaniesFIGURE 3. Company formation and NIH dollars.NIH $'s (millions)OHIO JOURNAL OF SCIENCE BAUNACI1 ET AL.mercialization strategies. Wherever appropriate,the teehnology itself should remain within thestate, either by transferring it to an Ohio companyor by forming a new Ohio-based company todevelop and market it. However, it must berecognized that biotechnology is developed withinthe context of a global market and depends to alarge extent on strategic alliances which canunderwrite the large research and developmentefforts typical of many biotech products. In somecases, it is more advantageous to the state torecognize a particular technology as a product,and market it to maximize the revenue return tothe state. Exploiting the full potential oftechnological strength in Ohio thus challengesthe traditional cultures of both institutionaltechnology transfer offices, which have a biastowards out-licensing, and state fundingdepartments, which define successful technologytransfer in terms of job creation or retention.2. Ensuring Adequate Financing Mechanisms—Research can be funded in the early stagesthrough a combination of foundation grants andfederal and state programs, but the entrepreneurfaces a funding gap when forming his/hercompany to commercialize a product. He/shemay no longer qualify for continued supportfrom these early stage sources, most of whichdirect funds through institutions rather than intobusinesses, and the product is not yet sufficientlydeveloped to attract venture capital or bankinvestment. In many cases, at this stage, theentrepreneur must devote time and energy toseeking private investors, at great cost to themanagement of the business. The cost to theeconomy is high when these growth-orientedbusinesses fail. Projects with good commercialpotential may die before they can attract traditionalinvestment funds. At the very least, thecommercialization process will be slowed andproduct introduction delayed.Absence of seed funding is not the only financialchallenge. EBTC's survey found that over thepast five years, Ohio biomed/biotech companiesattracted only 10% of the venture capitalinvestments made in Ohio and accounted foronly 1% of all venture capital invested in biomed/biotech ventures in the U.SGrowth in the biomed/biotech industry in generalwill be tempered by the U.S. health care policydecisions and FDA and other regulatory postures,but the availability of capital, both seed fundingand venture capital investment, will be critical to1801987 1988 1989 1990 1991Employees -+• SalesFIGURE 4. Employee and sales growth in small to medium Ohio biotech companies, n = 61 of 111.(Millions)BIOTECHNOLOGY IN OHIO VOL. 93the future of Ohio's industry.3. Ensuring a Pool of Technically-trained Labor—Ascientifically literate pool of employees isimportant for expansion or retention of emergingbiomed/biotech businesses in Ohio. The lifesciences have seen an explosion of knowledgeand the translation of that new knowledge intotechnology in the past two decades. Unfortunately,many primary and secondary school teachershave not had the opportunity to become familiarwith advances in the life sciences and areunprepared to incorporate this new and excitingknowledge into the curriculum. Studies haveshown that students make career choices as earlyas the seventh grade; it is imperative that effortsbe directed toward both teachers and students toenhance the effectiveness of science educationand to encourage students in the pursuit ofcareers in the life sciences.Entrepreneurial IssuesIn its national survey (Burrill and Lee 1992), Ernst &Young identified four key factors in developing thebiotechnology industry:1. Proximity to world-class research institutions.2. Access to venture capital and other forms offinancing.3. A climate which supports and nurtures theentrepreneurial culture.4. High quality of life/low cost of living factors.Ohio has the basis for providing all four of theseelements, but further development is needed in each area.Institutional researchers must be encouraged to see thecommercial potential of their work and to explorethat potential; institutional barriers which discourageresearchers from commercializing their work must beeliminated.Ohio is home to several large venture capital groups;these firms must be encouraged to invest in Ohio-basedventures and to assist in bringing venture capital to bearfrom other regions of the country. In addition, innovativeways of providing seed capital funding to assist early-stagecompanies must be explored.Ohio's incubator program provides a nurturingenvironment for emerging businesses but on a small scale.Supporting the entrepreneur/promoter who can envisionthe commercial possibilities of an idea and, moreimportantly, provide the push to translate that idea into amarketable product, is a vital part of business development.Finding new ways of providing that support will be criticalto the future of Ohio's industry.Finally, quality of life factors can be related to the needto develop locally, and to attract and retain the talentedlabor pool which will be needed as the Ohio's biomed/biotech industry matures.LITERATURE CITEDBurrill, G. S. and K. B. Lee, Jr. 1992 Biotech '92: Promise to reality, anindustiy annual report. Ernst & Young, San Francisco, CA.and K. B. Lee, Jr. 1993 Biotech '93: Accelerating commercialization.Ernst & Young, San Francisco, CA.Edison BioTechnology Center 1992 Ohio's biomedical and biotechnologyindustry: An analysis of the state's activities and progress. EBTC,Cleveland, OH.

Critical Perspective: Biotechnology: What's Ahead for Ohio?

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Critical Perspective: Biotechnology: What's Ahead for Ohio?

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