REPORT

The U.S. Midwest Biotechnology Industry

March 2003

JETRO

Economic Research and Analysis Dept.

Map : The Midwest Region of the United States

Table of Contents

Chapter 1 Biotech and the Midwest, an Overview ････････ 1

Chapter 2 Michigan ････････････････････････････････ 9

Chapter 3 Indiana ････････････････････････････････ 20

Chapter 4 Ohio ･･････････････････････････････････ 27

Chapter 5 Missouri ･･･････････････････････････････ 32

Chapter 6 Wisconsin ･･････････････････････････････ 36

Chapter 7 Illinois ･････････････････････････････････ 39

1

Chapter 1

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Biotech and the Midwest, an Overview

With the bursting of the dot com bubble and the decline in growth in the IT sector, much has been

made of the biotechnology industry and its opportunities for growth. The U.S. biotechnology industry

is growing, for sure, and many observers have noted that in this new phase of growth, the industry is

developing cores of activity outside of the traditional biotech “clusters” in California and the Northeast.

Many of these new clusters are located in the Midwest. Urban centers such as Chicago, St. Louis,

Cleveland, and Detroit, as well as university towns like Madison, WI and Columbus, OH, provide the

industrial and intellectual resources that led the number of biotechnology-specific companies in the

Midwest to climb to 63 in 2001, as compared to 56 in the Pacific Northwest and 51 in the

Pennsylvania/Delaware Valley, two well-recognized biotech clusters.

This industry already employ 88,990 people in the Midwestern states as medical scientists, laboratory

technicians, biological technicians, biological scientists, agricultural and food scientists, and other life

scientists.

The biotechnology clusters in the Midwest are diverse and growing, but there is room for significant

growth beyond this point, as all of the critical ingredients for the industry to flourish are present.

Building Blocks

Agriculture

The Midwest has long been the agricultural “heartland” of the United States. To this day, the

majority of grains produced in the U.S. is harvested within a 500 mile radius of St. Louis, one the major,

centrally located cities in the region. This fact has helped the Midwest, and St. Louis in particular, to

become one of the leading areas for plant science and the development of plant science technology.

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The Monsanto Corporation, located in St. Louis, is one the largest producers of agricultural products

in the world. Monsanto is the maker of the world’s best selling herbicide, Roundup, and many leading

seed brands.

The Donald Danforth Plant Science Center in St. Louis is another example of research excellence born

out of the Midwest’s agricultural heritage. Established by the Danforth Foundation and harnessing the

research power of several Midwestern research universities and corporations, the center is home to some

200 scientists conducting research in all areas of plant biology.

Washington University in St. Louis, Purdue University in Indiana, and the University of Illinois in

Urbana-Champagne are home to three of the oldest and most respected agricultural research programs in

the U.S. All three are also partners in the running of the Danforth Center.

Graph 1:

Biological Scientists in the Workforce, yr 2000

4570

7740

4220

134308990

10530

15620

899014800

Kansas Illinois IndianaIowa Michigan MissouriMinnesota Ohio Wisconsin

3

Medicine

The Midwest is home to many of the U.S.’s leading healthcare facilities and medical research centers,

including 1 of the top 5 medical schools and 2 of the top 5 hospitals.

The Washington University School of Medicine is ranked third in the country, and its affiliated

hospital, Barnes Jewish Hospital, is ranked ninth in the country, both according US News and World

Report. This highly respected institution received $289 million in research funding from the NIH

(National Institutes of Health) in 2001. Also notable at Washington University is its Genome

Sequencing Center, which is one of the five main centers across the world conducting the human

genome project.

Kansas City’s Stowers Institute for Medical Research focuses its $1.6 billion endowment on

researching the genes and proteins that govern early development in order to understand the diseases

caused by the malfunction of these genes and proteins later in life.

The University of Chicago has a life science research budget of over $250 million per year.

Important discoveries to come out of the University of Chicago include the first sustained nuclear

reaction, the isolation of erythropoietin and proinsulin, and the mathematical foundations of genetic

evolution.

Northwestern University’s research budget, at $210 million, rivals that of the University of Chicago,

and Northwestern has recently launched two new institutes focusing on bioengineering and nanoscience.

Northwestern’s Kellogg School of Management offers the only MBA focusing on biotechnology in the

U.S.

The University of Michigan is another top-ranking medical school in the region. Its Life Science

Initiative is focusing university wide efforts on making advancements in genomics, cognitive

neuroscience, bioinformatics, and biotechnology.

The Mayo Clinic in Minnesota, and the Cleveland Clinic Foundation in Ohio are the nation’s second

and third ranked hospitals, respectively. In addition to this the Cleveland Clinic Heart Center was

ranked number one in the country for the sixth straight year.

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Another notable Midwestern institution is the University of Wisconsin at Madison. A top-level

research university, UW Madison has been a U.S. pioneer in the area of technology transfer since 1925

with its Wisconsin Alumni Research Foundation (WARF). This group helps UW-affiliated

investigators turn the products of their research into widely applicable science.

These are just some of the outstanding examples of Midwest medical institutions that make up a web

of excellence that supports a vibrant biotechnology industry. Other notable educational institutions in

the region include Case Western Reserve University, the University of Indiana and the University of

Kansas.

Table 1:

University Life Sciences R&D Expenditures (in millions)

$140

$595

$234

$239

$535

$431

$231

$481

$348

$0 $100 $200 $300 $400 $500 $600 $700千

Stat

e

R& D Expenditure

Wisconsin

Ohio

Minnesota

Missouri

Michigan

Iowa

Indiana

Illinois

Kansas

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Table 2:

NIH Support to Institutions

$53,196

$473,149

$141,214$136,315

$389,888

$366,950

$281,517

$444,004

$253,205

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

States

Tota

l $

Kansas Illinois Indiana Iowa Michigan

Missouri Minnesota Ohio Wisconsin

6

Other Support

The pharmaceutical industry is well represented in the Midwest, with four of the largest companies in

the U.S. headquartered there. Baxter, Pharmacia, and Abbot in the Chicago area, along with Eli Lilly in

Indianapolis, are all involved in the commercialization of biotechnology innovation developed within the

region and around the world. Their research and commercialization capabilities have been an

indispensable asset to the development of the regional biotech sector.

The Midwest is also home to a variety of technology incubators that facilitate the formation of start-up

companies. An example of these is the Nidus Center for Scientific Enterprise on the Monsanto

Corporate Campus in Missouri. The Nidus Center offers successful applicants wet lab and office space,

as well as business development services to help them grow. Incubators like this are springing up all

across the region, located mainly around major research universities.

Government Initiatives

Local governments around the world are recognizing the potential for growth and development in

biotechnology, and are courting the industry aggressively. The Midwest is leading the pack in this area

in many ways, with several states and municipalities in the region in advanced stages of ambitious

biotech promotion programs.

The state of Michigan is a national standout with its commitment to developing its biotechnology

industry through its impressive “life science corridor” program that seeks to create a chain of biotech

development from the urban center of Detroit in the east to the university town of Grand Rapids in the

west. Michigan has used its portion of the tobacco company legal settlements to create a plan that

commits to the appropriation of $50 million annually for 20 years to the development of the biotech

industry. With a commitment totaling $1 billion, this is the largest such state-sponsored program in the

U.S.

The state of Missouri has designated itself as the “BioBelt,” and has created programs to support the

biotech industry. Likewise, Ohio has committed to nurturing its central region as a biotech cluster to

complement its medical research centers in Cleveland. The state of Wisconsin has earmarked $65

million of its public pension funds for investment in biotech start-up companies. The determination of

several governments in the Midwest to create biotech clusters offers members of the life science

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community every advantage in building out their industry.

Why the Midwest?

Ripe for Commercialization

In the past, venture capitalists have tended to view the Midwest as “flyover country,” focusing their

investment efforts on better-known biotech clusters such as California, New Jersey, and Massachusetts.

That is all changing, however, as increasing competition and expense in the coastal clusters have led

investors to look inland in search of technology for co-licensing, co-marketing, and proof-of-concept

investment.

“We didn’t like the atmosphere there [the West Coast],” said Mr. A of Fujisawa Pharmaceuticals, the

Kansai company that has set up the F.I.T.E. venture fund in Chicago and is already funneling money into

one Madison, WI company.

This kind of enthusiasm is mirrored by U.S. venture capitalists as well. A Vice President of the

Battelle Memorial Institute, interviewed by the New York Times at last year’s Biotechnology Industry

Organization annual meeting in Toronto, said “This used to be a bicoastal phenomenon…but clearly

you’re seeing bioscience as a much bigger focus across places people wouldn’t think about.”

A report published in 2002 by the Brookings Institution provided a detailed survey of the 51 most

populous cities in the U.S. and analyzed each for the current development and potential for growth in the

life science industry. It determined that nine metropolitan areas were fully functioning and fulfilling

their potential as biotechnology clusters. It then labeled four other metropolitan areas as “research

centers” where research activity far outpaced the national average. These four cities, according to the

report, had all the makings of major life science centers, but have not yet reached their full potential

because commercialization activity has not caught up to research. Three of these four cities, Chicago,

Detroit, and St. Louis, help make up the core of the Midwest biotechnology community.

This fact is telling and highlights well the reason behind all of the excitement currently surrounding

biotech in the Midwest. On the East and West coasts, the research is there, but so are all of the

well-established investment firms, creating a competitive environment difficult to break into for those

new to the U.S. market. In the Midwest, the research and technology are there, the top scientists and

institutions are there, the support industries and institutions, such as agriculture and start-up incubators,

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are there, and the willingness and financial support of the local governments are there. All of these

factors, coupled with the less competitive commercialization market, make the current moment one of

unparalleled opportunity for those wishing to enter the biotechnology industry in the Midwest.

Subsequent chapters of this report detail, state by state, the participating companies and institutions of

the Midwest biotechnology industry, as well as analysis of their specialties and relative strengths across

the region.

9

Chapter 2

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Michigan

Traditionally known for its automotive industry, in recent years Michigan has come to focus on

joining the prestigious ranks of such biotech industry leaders as California and Massachusetts.

Strengths Michigan has 15 public universities, 51 private universities and colleges, as well as 29 community

colleges, all of which contribute to over $400 million in life science research and development

expenditures. The private sector boasts over 300 established biotech firms, such as Pfizer and

Pharmacia, as well as a total of 750 biotech-associated companies. These firms spend over $1.2 billion

on research and development each year. In fact, Michigan is second only to California in R&D

expenditures. Ranked fifth in the nation for medical research technology patents and licenses,

Michigan is well established in the biotech field.

Michigan’s government is committed to seeing the area’s biotech industry grow and has started a

number of initiatives to further that goal. The state has a high quality of life, with affordable housing,

four seasons, and stable power and water sources, compared to coastal competitors.

There are over 20,000 life science workers and, among that number, 13,430 biological scientists in

Michigan. The workforce will continue to grow, as there were 2,377 biotech degrees granted in 2001 and

79% of Michigan’s high-tech college graduates stay in Michigan for their first job. The state is home

to at least 300 established biotech firms and over 750 biotech-associated firms.

Weaknesses As noted above, Michigan is mainly thought of as a manufacturing state and has much to overcome in

its industry image to attract new biotech firms and personnel. Furthermore, the state lacks a strong

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entrepreneurial spirit in its biotechnology sector, and networking within the state’s research institutions

is not strong historically. Appropriate lab space and incubator support have also been hard to come by

in the past.

In 1999, Michigan was ranked 9th in the United States for University Life Sciences R&D expenses,

and that fact, coupled with the above problems, led the Michigan Economic Development Corporation

(MEDC) to make a strong push for funding and support of the biotech industry by the state government.

Luckily, their timing was right and the face of the Michigan life science sector began to transform.

Michigan Life Sciences Corridor In November 1998, the tobacco industry settled with the State of Michigan in the amount of $310

million immediately, with another $8.3 billion to follow, as compensation for medical aid provided by

the state to ailing smokers. The only stipulation of the funds was that it must be used for health-related

purposes and the biotech market was a natural choice. The state awarded $1 billion of the funds to the

Michigan Life Sciences Corridor, a twenty-year initiative designed to “develop Michigan as one of the

world’s premiere life sciences research and commercial centers.” The Corridor is administered by the

MEDC and overseen by a governor-appointed Steering Committee. Of the annual $50 million, 40

percent will be allotted for basic research, 50 percent will be used to fund collaborative university and

industry research and 10 percent will be used for commercialization and product marketing activities.

As budget becomes more of a problem in Michigan, the original $50 million a year has already been cut

to $45 million under Governor Jennifer Granholm’s administration, but the difference will be made up

later.

Core Technology Alliance

One of the most important underlying objectives of the Michigan Life Sciences Corridor program is to

foster partnerships between the State's life science companies and its leading research institutions. To

this end, 40 percent of the funds will be used to fund a network of five labs at universities and research

facilities across the state: the Van Andel Research Institute in Grand Rapids, Michigan State University

in East Lansing, the University of Michigan in Ann Arbor (2), and Wayne State University in Detroit.

These laboratories form the Core Technology Alliance and provide research and services to Michigan

researchers affiliated with universities, private research institutes, and biotechnology or pharmaceutical

firms for a minimal fee. The labs, which were initially funded through a grant worth $39 million, are still

in their early stages and waiting for more equipment to be set up.

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SmartZones

In April 2001, to supplement the Michigan Life Sciences Corridor’s success, Governor John Engler

enabled the MEDC to establish 11 clusters called “SmartZones” around the state. These “Zones” were

created to further stimulate the growth of technology-based businesses and jobs by aiding in the creation

of recognized clusters of new and emerging businesses, those primarily focused on commercializing

ideas, patents, and other opportunities surrounding university or private research institute R&D efforts.

At least five of the SmartZones have a specific emphasis on nurturing biotechnology and life sciences:

Woodward Technology Corridor SmartZone (Wayne County)

Lansing Regional SmartZone (Ingham County)

Kalamazoo SmartZone (Kalamazoo County)

Grand Rapids SmartZone (Kent County)

Ann Arbor/Ypsilanti SmartZone (Washtenaw County)

Most of the above SmartZones are located adjacent to the universities or research institutions in the

Core Alliance. Thus far, the SmartZone clusters have been extremely successful in establishing

Michigan’s life science industry, with six incubators and over 19 companies having relocated to the

SmartZones since 2001.

Michigan Venture Capital Firms

Life science companies account for the majority of major investments in Michigan, with information

technology a close second. Below is a list of a few major venture capital firms in the state:

Arbor Partners, LLC (Ann Arbor)

Arboretum Ventures (Ann Arbor)

Arch Development Partners, LLC (Based in Chicago, focuses on Michigan firms)

Avalon Investments

EDF Ventures (Ann Arbor)

Essex Worldwide

North Coast Ventures

Questor Partners

Seaflower Associates

Sloan Ventures (Birmingham, MI)

White Pines Ventures, LLC (Ann Arbor)

Wind Point Partners

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Clusters

Ann Arbor Cluster

The University of Michigan

For the last eight years, The University of Michigan has been the #1 public university in the nation for

research, spending over $591 million in 2001. The amount of research done in Ann Arbor annually is

what has sparked the largest of all the Michigan biotech clusters—with 437 biotech-associated firms

within 50 miles of the city.

Core Technology Alliance

The only cluster to host two laboratories in the Core Technology Alliance, Ann Arbor’s labs provide

two very distinct services to small firms that cannot afford the research on their own. The first lab is

Michigan Center for Biological Information (University of Michigan), which provides computer analysis

of biological data for fledgling firms. The second, Michigan Proteome Consortium (University of

Michigan) specializes in identifying and separating proteins.

Life Science Initiative

Launched in 1999, the University of Michigan’s Life Science Initiative is one of its most progressive

programs, with $700 million committed to furthering the study and expansion of life sciences to date.

The areas of most concentrated research in the Initiative are:

Cellular signaling

Genomics and complex genetics

Chemical and structural biology

Neuroscience

The Initiative has three main parts: research, values and education. The “research” aspect of the

initiative focuses on providing facilities across U of M’s campus including a $100 million laboratory

facility, to serve as a hub for cross-disciplinary research and teaching in the life sciences. The institute’s

faculty will be 20 to 30 world-class researchers from a variety of disciplines who are new to Michigan.

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The Medical School is also augmenting its research facilities with a 470,000 square foot building that

will be complete in 2005. The “values” section of the initiative centers on the Values and Society

program, in which the University feels it is essential to constantly examine the implications that

profound life sciences insights will have on human society and the biosphere. This unique program asks

difficult questions about the advancing science and enables informed public discourse. Finally, the

“education” portion of the initiative hinges on the creation of new undergraduate and interdisciplinary

graduate degrees in the life sciences.

University of Michigan Tech Transfer

In addition to the Life Sciences Initiative, the University hosts an Office of Technology Transfer

(OTT) that provides a resource for transferring University technologies to investors in the market. The

main services of the office include:

Disclosure facilitation

Patenting and other protection

Start-up assistance

Licensing

Legal Support

Decision Support

Over the last five years OTT has facilitated 914 disclosures, 267 license agreements, 590 patent

applications, 34 start-up companies, and $19.9 million in licensing revenue.

The Office of Technology Transfer and Corporate Research (OTTR-Medical) is the area of the office

that deals specifically with biotech and pharmaceutical transfers.

Ann Arbor Biotechnology Business Incubator

One of the aforementioned incubators (that were created as a result of the SmartZone program) is the

Ann Arbor Biotechnology Business Incubator (Aabbi). This multi-occupant incubator will provide

space for biotech start-up firms. An established biotech firm will anchor the facility and inhabit 2/3 of

the space. The first 25,000 square foot phase of the Aabbi will be available in the spring of 2003. A

second 25,000 square foot pod, connected to the initial facility by glass walkway, is planned to be ready

for occupancy near the end of 2003.

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Living in Ann Arbor

The cost of living in Ann Arbor is higher than that of the other clusters, with the median sales price

for existing homes in 2001 at $187,000. However, Ann Arbor is consistently ranked as one of the 20

best places to live and work in the US (US Employment Review Magazine), one of the best places to

raise children in the US, and one of the safest places in the US.

Lansing Cluster

Michigan State University

MSU spends more than $100 million annually on life science research and often generates more

patents that Massachusetts Institute of Technology, Stanford or Harvard, including over 77 in the last

three years. The Lansing area boasts 70 biotech firms, with the majority centered around MSU and

East Lansing.

Core Technology Alliance

Michigan State’s contribution to surrounding biotech firms is its Michigan Center for Structural

Biology (Michigan State University, East Lansing). The laboratory develops instruments to examine

the molecular structure and function of proteins.

Technology Transfer

The Michigan State Office of Intellectual Property (OIP) facilitates the commercial development and

public use of technology developed by MSU researchers. The office obtains patents and licenses them to

private industry in return for royalties, which are shared with inventors and their academic units under

University policy. OIP’s technology transfer program, as measured by royalty income, is eleventh in the

country, with royalties of more than $30 million per year. MSU licensees include large and small

companies worldwide, and a growing number of entrepreneurial ventures in Michigan and elsewhere.

Incubators

Started to exclusively meet the needs of biotech start-ups, MBI International is adjacent to the campus

of MSU. MBI has over 10,000 square feet of incubator space with tenant space ranging from 300 to

1050 square feet. In addition to providing space, MBI offers technical, business and administrative

support to their tenants. MBI's emphasis is on near-term opportunities, those that can move through

15

technology and business development in five years or less. As part of the Lansing Regional SmartZone,

MBI is given special attention by the MEDC.

MSU Biotechnology

MSU is one of the top agriculture schools in the nation, and its biotechnology department reflects this.

MSU’s biotechnology department includes researchers from a number of departments including:

Chemical, Agricultural, Civil and Environmental, and Mechanical Engineering, Food Science and

Human Nutrition, Horticulture, Crop and Soil Sciences, Chemistry, Biochemistry, and Microbiology.

Using a combination of these resources MSU’s biotech study focuses on (among others):

Food Engineering

Protein Structure

Drug Design

Metabolic Engineering

Biorheology (Flow behavior of biological materials)

Laser Spectroscopy (raman, infrared, uv-visible and fluorescence)

Wayne State Cluster

Wayne State University

Wayne State University in Detroit houses the nation’s 4th largest medical school, attracts more than

$80 million annually in research funding, and is responsible for the drugs t-PA, a clot-buster, as well as

AZT and dCyd for the treatment of AIDS.

Core Technology Alliance

The Michigan Center for Genomic Technologies (Wayne State University) provides area life scientists

with state-of-the-art DNA sequencing, high-volume DNA genotyping information, and provides an

outlet for the Michigan Microarray Network. The network works to create an infrastructure that will

nurture the development of translational genomics. Funding for this center was awarded by the MEDC

at $6 million, and will be led by Wayne State researcher Dr. Mark Hughes.

Research

In addition to the work done at the Michigan Center for Genomic Techonologies, Wayne State has

received funding for 5 other university projects by the Michigan Life Sciences Corridor for a total of

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$4.8 million. The research centers around DNA and cancer research for the most part, because of the

strength of Wayne State’s Barbara Ann Karmanos Cancer Institute. Researchers include: Hiranmoy

Bhattacharjee, Peng George Wang, John Santa Lucia, June Kan-Mitchell, Roy Baynes, and Fred

Reinhart.

Tech Transfer

Wayne State University’s Technology Transfer Office (TTO) is responsible for the identification,

protection, marketing and licensing of intellectual property (e.g., patents, unique biological or other

materials, and copyrights) developed by WSU faculty. In addition, TTO reviews and negotiates material

transfer, non-disclosure and sponsored research agreements when they relate directly to WSU inventions.

The office also has staff dedicated to the transfer of bioengineering information.

Incubator

Wayne State’s Research and Technology Park was designed to help facilitate technological interaction

between industry, government, and academe, while assisting in the growth of high-tech business

ventures. As part of the Woodward Technology Corridor SmartZone, the main focuses of the park are life

sciences, advanced manufacturing/engineering, and information technology. Phase I, a 40,000 square

foot facility, is slated for occupancy in early 2003.

Grand Rapids Cluster

Rich with research facilities, the Grand Rapids area boats over 115 biotech-associated firms and is

continuing to grow rapidly as a result of its connection with the Michigan Life Sciences Corridor.

The Van Andel Research Institute (VARI)

The Van Andel Research Institute (VARI) is an independent research organization focused on

molecular cancer research. Since VARI's opening in May 2000, more than 70 scientists have been

recruited from top universities and research institutions worldwide, with the eventual goal being to house

more than 200 scientific and administrative staff.

Biotech research at VARI centers around seven state-of-the-art laboratories specializing in:

Cytogenetics & Genotyping

Monoclonal Antibody

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Microarray Technology

Imaging & Microscopy

Germline Modification

Mass Spectrometry and Proteomics

Bioinformatics

Leading the research is VARI Director George Vander Woude, PhD. Arthur Alberts, PhD, Brian Cao,

MD and others contribute to research as well.

Core Technology Alliance

The western arm of the Core Technology Alliance, the Michigan Animal Models Consortium (Van

Andel Research Institute, Grand Rapids) analyzes and develops transgenic mice. The mice are used to

determine the actions of particular genes, to create models for the study of human diseases and for other

studies. Animal pathology, cytogenetics, cryopreservation and animal repositories are also components

of this effort led by the Van Andel Research Institute.

Other Grand Rapids Institutions:

Grand Valley State University's $60 million Center for Health Professions, which will include

30,000 square feet of wet lab and incubator space for emerging life sciences firms (under

construction)

Grand Rapids Community College's $30 million Calkins Science Center

Calvin College life sciences building: a research center involved in research on the effects of

nutrition and certain drugs on fracture healing, as well as the possible development of artificial

tear solutions.

The Grand Rapids Medical Education & Research Center: medical training, continuing

education, and acts as a clearinghouse for local clinical trials, including trials in neuroscience,

trauma and critical care, infectious and digestive diseases, and cardiovascular studies.

The Wege Institute for Mind, Body & Spirit: holistic health care combined with traditional

medicine

Incubator

The Grand Rapids SmartZone Incubator is a joint initiative between the City of Grand Rapids, VARI,

The Right Place Program, Grand Rapids Community College and Grand Valley State University. The

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incubator will be housed in Grand Valley’s new Center for Health Professions and will be approximately

10,000 square feet. The objective of the incubator is to foster start-up and developing technology-based

businesses.

Kalamazoo Cluster

Centered around Western Michigan University, the southwestern cluster has grown significantly

thanks to the Michigan Life Sciences Corridor and local economic initiatives.

Western Michigan University

WMU was the first university in the nation to approve a Master of Science degree in molecular

biotechnology in 2001. The degree combines the disciplines of chemistry, biological sciences and

statistics to train students in high throughput screening techniques. The head of the degree and all

biological research is Dr. Brian C. Tripp.

Economic Development

Southwest Michigan First, the chief economic development agency in Kalamazoo County, began its

quest in 2001 to attract biotech companies and venture capitalists to the region. Because of Southwest

Michigan First’s urging, Arch Partners LLC, a venture capital firm based in Chicago, now invests solely

in Western Michigan biotech firms. Along with funds from the Kalamazoo SmartZone initiative,

Southwest Michigan First funded the first biotech incubator in the Southwest Michigan region.

Incubator

Started by Southwest Michigan First and the MEDC, the $12 million Southwest Michigan Innovations

Center biotech incubator at Western Michigan University’s Business, Technology and Research Park has

already made Kalamazoo an attractive draw for early-stage companies. At 58,000 feet, the incubator is

ideal for companies in the areas of biomedical, pharmaceutical, medical device, bioinformatics, and

toxicology. Already occupied by 5 companies, the Innovations Center looks forward to continued growth

in years to come.

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Conclusions

Investment

Michigan is already seeing a large growth in their investments, in 1999 alone saw a 50% increase in

the number of investment deals from the previous year. Venture capital under management nears the $2

billion mark in Michigan, and the SmartZones alone have captured over $80 million in company

investment. Michigan is the #1 state in industrial research and development intensity (National Science

Foundation) so investment should continue to increase.

Growth

In 2001, at least 22 new life science companies were formed in Michigan. The Life Sciences

Corridor is increasing lab space, financial support structures, and networking opportunities for scientists

in an effort to continue their success. While Michigan has a lot to overcome, both in image and

capability, the state is making great strides in the right direction.

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Chapter 3

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Indiana

The health and life sciences industry in Indiana, consisting of the biotech, pharmaceutical, medical

device, and health information technology fields, is one characterized by growth and constant

development in recent years. New partnerships between universities, the government and successful

pharmaceutical giants in the private sector are truly advancing the state’s life science industry. In

addition, small start-ups, often run by former employees of established life science corporations, have

the potential to develop into innovative firms.

Strengths According to the Indiana Health Industry Forum, the state’s more than 82,000 life science employees

create over $13.6 billion in economic output each year. The most concentrated area of life science

activity is centered in Indianapolis, mainly because it plays host to Eli Lilly’s world headquarters.

Bloomington and West Lafayette, homes of Indiana University and Purdue University respectively, are

also research and development hotbeds, though there are smaller pockets of life science activity in all

areas of the state.

While Indiana’s universities, large pharmaceutical corporations, and the partnerships that have arisen

between them are indeed its largest strengths, there are a number of other reasons companies choose

Indiana for their home. In recent years, the state has begun to see a large increase in the number of

venture funds, state funds and initiatives specifically targeting the health and life science industries.

Central Indiana has large concentrations of key life sciences workers (i.e. Chemical Technicians, 78%

greater than the national average) and the universities produce large numbers of life science graduates

each year—11,000 in 2000 alone. A number of technology transfers have also been established to

facilitate collaboration and innovation at the state’s major universities. Also crucial to the growth of the

industry in the state, the forming of informal social networks, such as the Indiana Health Industry Forum,

has enhanced the cohesive atmosphere between the state’s life science intellectuals. Indiana has a high

21

quality of life and as a whole the state’s management is well respected and often sought after.

Weaknesses While Indiana is seeing a large increase in all of the above-mentioned areas, the state still lags behind

much of the country in its rate of economic growth and expansion. Unlike the surrounding states of

Michigan, Illinois and Ohio, Indiana has failed to remain in the top 20 of per capita income in the last

few decades. Indiana firms often have trouble attracting and retaining labor, with technical and skilled

employees as the most difficult to find. Despite recent increases, according to studies done in 2000,

insufficient funds, undeveloped networks and inadequate publicity remain a problem for many life

science firms.

The main weakness within the state appears to be the relative youth of the industry and, as with most

Midwestern states, an image problem with those unfamiliar with the potential of the state’s resources.

Central Indiana brings up the average numbers of the state, but all problems are intensified outside the

Indianapolis corridor (from Bloomington to West Lafayette). While it is assuredly on the right path,

Indiana will need time to develop a stronger network of dedicated and interested persons, firms and

funds.

Statewide Initiatives/Partnerships

Local and life science industry giants such as Lilly, its affiliated service companies, and major state

universities formed the Indiana Health Industry Forum (IHIF) in 1994 as an advocate organization for

the health industry. The forming of the IHIF was Indiana’s first step in strengthening its life science

industry.

As the hub of life science activity in the state, the Central Indiana region was a natural choice for a

statewide non-profit initiative. Formed on February 13, 2002 by Indiana University, the City of

Indianapolis, the Central Indiana Corporate Partnership (CICP), Purdue University and the IFIH, the

Central Indiana Life Sciences Initiative hopes to attract further investments and federal dollars to the

corridor stretching from Bloomington to Indianapolis to West Lafayette. Nearly $1.5 billion has already

been invested and committed to projects through 2005.

Announced in 2002, the Indiana Proteomics Consortium was established to create a mechanism for

scientists from Eli Lilly, Indiana University and Purdue University to work together on projects that

22

leveraged the Universities' expertise in analytical chemistry and instrumentation with Lilly's long history

of experience with protein therapeutics and protein drug targets.

Other pertinent organizations and initiatives include:

Access to Technology Across Indiana (ATTAIN)

Advanced Research and Technology Institute (ARTI)

Indiana Business Modernization and Technology Corporation

Medical Device Manufacturers Council

Venture Funds

Though not one of Indiana’s greatest strengths, venture capital firms are beginning to take interest in

the life sciences. Here are the most influential in Indiana:

Central Indiana Life Sciences Initiative Capital Formation Committee

The Venture Club of Indiana

e.Lilly

Lilly BioVentures

Indiana 21st Century Research and Technology Fund

Central Indiana Corridor Cluster

Indianapolis

Unlike most strong life science areas, Indianapolis does not have a university that is historically strong

in biotech and the life sciences. Instead, two Fortune 500 companies in the life science field,

pharmaceutical giant Eli Lilly and Company and its medical division spin-off Guidant Corporation,

along with four other firms in the area employ well over 15,000 people in Central Indiana. The four

other large firms in the area are:

Elanco Animal Health

Roche Diagnostics

Cook Group

Dow AgroSciences

In addition to the work done by these firms, Indiana University, Purdue University Indianapolis

(IUPUI) and its associated Medical Schools supply a number of research, labor, development facilities

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and receive grants supporting the life science complex.

Indiana University

Housing the second largest medical school in the United States, Indiana University is the hub of

medical research in Central Indiana. The School of Chemistry is ranked third in the country in analytical

chemistry, a crucial focus in genomics and proteomics, and IU is strong in both areas.

Indiana Genomics Initiative

Thanks to a Lilly Endowment grant of $105 million, the School of Medicine is leading the way in

genomics research through its leadership of the Indiana Genomics Initiative (INGEN). There are six

components to INGEN:

Bioethics

Bioinformation

Education

Genomics

Medical Informatics

Training

The research focuses on animal research, cell and protein expression, genotyping and gene expression,

human expression, microscopy, in viro imaging, proteomics, and technology transfer.

Technology Transfer

IU’s answer to the tech transfer problem faced by many university researchers is the previously

mentioned Advanced Research and Technology Institute (ARTI), with offices in Bloomington and

Indianapolis. ARTI is a not-for-profit agency that facilitates industry-Indiana University research and

technology collaborations. As a technology transfer center, ARTI works to help businesses develop and

commercialize new technologies. In addition, a strategic focus for ARTI is to create new companies and

provide support services for those companies. ARTI has helped form five new companies from

university research and offers more than 100 technologies for licensing, benefiting from groundbreaking

work by the Indiana Genomics Initiative and the Indiana Proteomics Consortium.

Incubator

A life sciences and technology business incubator managed by IU's Advanced Research and

Technology Institute, Indiana University's Emerging Technologies Center houses both the IHIF and the

24

Indiana Proteomics Consortium. Only open since late 2002, the incubator has much room to grow in

its current location in downtown Indianapolis.

Purdue University In 2001 alone, 109 patents were filed and ten new companies formed based on Purdue University

research. More than 15% of the university’s funding comes from industry sources putting it in the top 10

in the nation in that category.

Research

Building on its core strengths of agriculture, engineering and the sciences, areas of Purdue’s research

strengths useful for a life science cluster include:

Analytical chemistry (ranked first in the country)

Genomics

Biomedical Engineering (the fastest growing engineering program at PU)

Pharmacy

Veterinary medicine

Molecular structural biology

Food science

Purdue also boats one of only two nationally designated Cancer Centers not associated with an

academic medical center.

Agricultural Genomics Initiative

In December 1998, Purdue established an Agricultural Genomics Initiative in order to become more

competitive while contending for new funds for agricultural genomics research. The Initiative has

already raised funds for The Agricultural Genomics Core Facility. This facility is housed in 1,500 sq. ft.

of laboratory space, which presently includes two DNA sequencing machines capable of sequencing

over 200,000 samples per year, automated plasmid DNA preparation equipment to streamline daily

operations, and has the capacity to construct and read microarrays for gene expression profiling studies.

Discovery Park

With help of a $26 million grant from Lilly, in 2001 Purdue announced it would build a $100 million

Discovery Park. Purdue will leverage the grant and state funding with existing university funds, private

donations and federal research support to create the $100 million park. Initial plans for the 40-acre site

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on the west edge of campus call for centers to house research in nanotechnology, bioscience/engineering

and e-enterprises. The park also will include an entrepreneurship center to help transfer research findings

into products and services.

The first building being built for the park is the Birck Nanotechnology Center. This $56 million

facility is among the first in the nation designed specifically for nanotechnology research rather than

conventional semiconductor processing.

Technology Transfer/Incubators

Purdue has a number of different venues for licensing and supporting the technology produced by its

research facilities.

Purdue Research Park

Purdue Gateways Program

Purdue Office of Technology Commercialization

Smaller Clusters

Warsaw

A Northern Indiana town of only 12,000, Warsaw has made quite a name for itself in the medical

device field. Medical orthopedic device companies like Biomet Inc., DePuy Inc. and Zimmer Inc.

control over 30% of the global market in orthopedic joint replacement.

South Bend

In 2001, Notre Dame University’s sponsored research amounted $34.1 million, and included study in

orthopedic implant materials and the development of a micro fluids-based blood monitoring system.

The university also collaborates with companies like Bayer and Zimmer on implants, adhesives and

blood diagnostics.

Southern Indiana

The southern third of Indiana is also home to a number of large life science firms. GFI Research, a

division of West Pharmaceutical Services, is located in Evansville. The world’s leading manufacturer of

patient care systems and leading provider of specialized rental therapy products, Hill-Rom is based in

Batesville. In Columbus, Blairex produces over-the-counter drugs.

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Conclusions

It is evident from this glimpse at the Indiana biotech network that the industry is heavily reliant on

funds from large, established firms like Eli Lilly and Company. Other venture funds are starting to

arise, but outside of the state of Indiana very few are taking notice of the progress being made within the

state lines. Indiana has much to overcome, but image and networking with those outside the state look

to be the most important to continue the pattern of growth.

In addition to capital issues, Indiana must consider providing more research facilities and incubators

for small start-ups. These facilities now exist primarily at the universities.

Because of the presence of Indiana and Purdue Universities, Indiana’s workforce is beginning to

become a more highly skilled labor base, and this too will help progress life science firms and increase

the likelihood of retaining graduates.

Indiana is on the way to being competitive with the coasts in terms of its life science potential, but it

will require strategic planning and growth in order for others to know about its promising future.

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Chapter 4

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Ohio

According to Omeris, Ohio’s state-funded and BIO-affiliated life science organization, the over 1,000

bioscience-affiliated firms in the State of Ohio employ over 31,000 people. Of these almost 50% are

biological scientists. These numbers exceed national averages and the state government has committed

significant funding, including, as in Michigan, part of the funding it received in the Tobacco Master

Settlement Agreement, to the enhancement of the life science industry.

Strengths First among Ohio’s strengths are its broad-based, advanced research institutions. The Cleveland

Clinic, Case Western Reserve University, The Ohio State University, the University of Cincinnati, and

Children’s Hospital in Cincinnati are nationally prominent institutions involved in biotechnology

research, and they are complemented by institutions such as Wright State University in Dayton and the

Ohio University in Athens.

There are also a multitude of prominent life science corporations involved in the development and

funding of biotechnology research, such as Procter and Gamble pharmaceuticals, the Battelle Memorial

Institute, Cardinal Health and Abbott Labs.

Statewide initiatives, such as the “3rd Frontier” program instituted by Governor Taft, and local

leadership undertakings, such as the Columbus Technology Leadership Council, are focusing their

efforts on high technology industry organization, including the life sciences.

There is a strong entrepreneurial culture in the state, although this culture has not traditionally been

focused on the life sciences. Ohio also boasts a surplus of workers with technical degrees—a study by

Battelle showed that while Ohio universities graduated 4,177 engineers and 3478 scientists in 2000,

there were only 1,800 and 540 jobs in those areas, respectively. So, in terms of local talent to staff the

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increasing number of start-up companies, Ohio has plenty of room to grow.

Weaknesses Like in many Midwestern states, the main barrier to fulfillment of the potential for growth in Ohio’s

biotechnology sector is a lack of venture capital and angel investors.

Clusters

Cincinnati

Cincinnati has a small but growing biotechnology cluster that has been able to make strides in the

development and commercialization of technology through partnerships involving strong academic,

medical and private sector institutions. Local leadership is also seeking to break through barriers by

letting the cluster develop across state lines to take advantage of the research strength of the University

of Kentucky in Lexington and the University of Louisville and Jewish Hospital in Louisville .

University of Cincinnati

As the largest single employer in the city of Cincinnati, the impact of UC on the local economy and on

the local research community can not be overestimated. Along with the Children’s Hospital Research

Foundation, UC received over $150 million dollars in research funding in 2002. Within the university

lie the Genomics Research Institute, a major collaborator in the Human Genome Project, the

Cardiovascular Research Building and the Vontz Center of Molecular Research. According to Bio/Start,

the regional biotech business incubator, areas of particular research strength at UC are cardiovascular,

cancer, neuroscience, and environmental health research, and the university accounts for $4 billion

annually in biomedical technology licensing revenues.

Procter and Gamble

A global marketer of over 250 consumer brands to over 140 countries, P&G is headquartered in

Cincinnati and is an area leader in pharmaceutical and bioscience research and licensing. P&G

currently has an annual R&D budget of over $2 billion, and along with fellow pillar organization,

Ethicon Endo-Surgery, forms the backbone of the corporate side of Cincinnati’s life science cluster.

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Cleveland

With The Cleveland Clinic at its core, the Cleveland cluster boasts world-class hospitals, research

institutions, and incubators, and counts as its primary strength biomedical research and technology.

The Cleveland Clinic Foundation

The Cleveland Clinic was ranked as the number one cardiovascular hospital in the U.S., and the number

three hospital overall, according to U.S. News and World Report. The Clinic’s Urological Institute and

Digestive Disease Center are counted among the best in the nation, and it ranks in the top ten in nine other

medical specialties. The Clinic is home to the Lerner Research Institute (LRI), which receives over $150

million in funding annually, and is the third largest research institute in the U.S.

Case Western Reserve University

CWRU, along with the Cleveland Clinic, is a core institution in this region’s life science sector, and

partners with the Clinic in a variety of ventures. But CWRU has a significant impact on the region in

its own right. For example, in 2001 the CWRU School of Medicine ranked 15th in the country with

$179.3 million in National Institutes of Health (NIH) funding, the so-called “gold standard” in

evaluating funding clout. This number represented a 9.5% increase from 2000.

BioEnterprise

BioEnterprise is a business formation, incubation and “acceleration” company formed by equal

co-partners, The Cleveland Clinic, CWRU, and University Hospitals Health System. A

well-established Cleveland-based institution, BioEnterprise provides biotechnology start-up companies

with access to venture capital and other sources of funding, access to materials and lab space, as well as

instruction in obtaining top managers with experience in the field. BioEnterprise clients include

companies such as Athersys, Inc. and NextMED Systems.

Columbus

As the home to Ohio’s largest university, it’s state-sponsored bioscience “accelerator” in Omeris, and

the world’s largest contract research organization in Battelle, Columbus has a growing biotech sector

with huge potential for further growth.

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The Ohio State University

There is extraordinary breadth to the research strengths at OSU, and the Columbus cluster is trying to

take advantage of this multi-faceted university which stands in contrast to a cluster like Cleveland,

which is focused so heavily on the biomedical field. According to U.S. News and World Report,

OSU’s Medical School, Pharmacy School, Department of Veterinary Medicine, Chemistry Department,

and Agricultural research areas ranked 40th, 7th, 6th, 20th, and 14th in the country, respectively. OSU is

also outpacing peer institutions in terms of growth with research expenditures increasing from $125

million to $146 million from 1995 to 1998, which, at a rate of 23%, was almost double the national

average (Battelle, 2001). Affiliated with OSU is the Science and Technology Campus Corporation,

which provides lab space and facilitates technology transfer for OSU spin-off companies.

The Children’s Research Institute

CRI is a Columbus area children’s hospital research center which ranks among the top ten in the U.S.

of such institutions. Among CRI’s specialties are molecular oncology, infant pulmonary mechanics,

pediatric injury prevention, gene therapy, and vaccine development.

Battelle

The Battelle Corporation is a major pillar institution in Central Ohio and the Midwest. It develops

technology and commercializes products in a variety of industries, including pharmaceuticals,

agro-chemicals, health care, environmental technology, and national security. It has designated

biotechnology as one of its core areas for future development, and has placed an emphasis on technology

commercialization. Examples of the establishment of Battelle Pulmonary Therapeutics and Battelle’s

relationship with iMEDD, an OSU spinoff company.

Cardinal Health

A producer of pharmaceutical and other healthcare products, this Dublin, OH pillar company posted

2002 sales in excess of $44 billion. Cardinal manufactures and distributes patient care, surgical, and

drug delivery products and employs more than 49,000 people worldwide.

Conclusions

With their diversity of research, corporate and medical assets, Ohio’s three primary biotechnology

sector’s have all the ingredients for continuing growth and expansion in the life sciences. The progress

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of state-wide and local industry development projects, still young when compared to other states in the

region, will be a determining factor in the success that Ohio has in fulfilling its biotech potential. Of

course, another factor in this will be the state’s ability to increase the national profile of its life science

clusters in order to attract still-lacking investment capital.

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Chapter 5

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Missouri

The state of Missouri has drawn on one of its traditional strong points—agriculture—to place itself as

one of the national leaders in plant and agricultural sciences as it makes its way into the 21st century.

The state’s place in the world of agriculture is well established: 15% of Missourians still work in

agriculture-related industries, the state ranks in the top 10 nationally in the production of hay, grain, rice,

soybeans, corn, cotton and watermelons, and it is in the 10 ten in production in almost all livestock areas.

Building on this traditional strength, state leaders in government, academia, industry, and foundations

have committed to the expansion of the life science sector in Missouri through programs such as the

BioBelt, which envisions a multi-state swath with St. Louis at its center, devoted to the promotion of the

plant and life sciences.

Strengths With it’s agricultural history and commitment to the plant sciences, Missouri has made a very focused

effort to position itself as a leader in a specific life science area, using most of its resources to this end.

Corporate and private foundation funding is present, and the state government is committed to the life

sciences. As recently as May of 2003, the State Legislature passed a bill allocating $700 million from

the state’s tobacco settlement to the development of the life science over the period from 2007 to 2025.

The state is home to major research such as Washington University and the University of Missouri,

which are coordinating on the project of developing the plant and life sciences.

Weaknesses

Missouri has already made considerable headway in establishing as an effective life science cluster.

In the areas of further developing an entrepreneurial culture and expanding the cluster further outside of

its focus in St. Louis, however, there is room for improvement.

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Clusters

St. Louis

St. Louis represents Missouri’s primary life science cluster. According to the Battelle Institute, 290

regional life science-affiliated firms employ 22,000 people and have an annual economic impact of

$10.5 billion. The four major universities in St. Louis spent $377 million on R&D in the year 2000,

and they graduate approximately 2,800 life science degree-holders annually. These impressive

statistics and the integration with which industry, researchers, and government act in fostering economic

growth in the life sciences have made the area a benchmark example in studies examining U.S. regional

industry development.

Monsanto

Monsanto is a the world leader in the development, production and marketing of crop protection

technologies, and its St. Louis research facility employs 960 plant scientists. The company

manufactures Roundup, the top-selling herbicide in the world, as well as the seed products DEKALB®

and Asgrow, and posted 2002 sales totaling $4.6 billion.

The Donald Danforth Plant Science Center

This center is a $75-million, 170,000-square-foot research center founded by the Danforth Foundation,

a major St. Louis area philanthropic organization, and operated with the support of the State of Missouri

and in partnership with the Missouri Botanical Garden, Monsanto Company, Purdue University, the

University of Illinois at Urbana-Champaign, the University of Missouri-Columbia, and Washington

University in St. Louis. The Danforth Center’s 15 laboratory suites and 14 greenhouse host teams of

scientists from all over the world conducting basic and applied research in the plant and agricultural

sciences.

Washington University in St. Louis

Washington Universities is one of the U.S.’s premier research institutions and is involved in a variety

of research endeavors. In addition to conducting much of the region’s plant science research, the

university’s School of Medicine is among the top ten in the U.S. annually, has been host to 17 Nobel

Laureates, and conducts groundbreaking biomedical research in conjunction with top-ranked regional

34

hospitals, such as Barnes Jewish Hospital. Washington University’s Human Genome Sequencing

Center is one of three major U.S. centers participating in the Human Genome Project. The university

boasted $303 million dollars in NIH funding in 2001, which was 5th among U.S. universities.

Nidus Center for Scientific Enterprise

The Nidus Center is a life science incubator located on Monsanto’s corporate campus. After passing

through a rigorous selection process, nascent biotechnology companies can take up residence at the

center and are granted access to state of the art wet and dry lab facilities, management consulting, and

networking opportunities.

Center for Emerging Technologies

The CET is another area incubator that provides start-up companies with laboratory space, business

management assistance, and help in securing investment capital. A not-for-profit, public-private

partnership, it is sponsored by the State of Missouri, St. Louis University, Washington University, and

the University of Missouri, St. Louis.

University of Missouri

The University of Missouri, Columbia is located in the center of the state and is the main campus for

the University of Missouri system. Its Health Sciences Center conducts medical and clinical research.

The university is also the state’s participant, along with the University of Illinois, Urbana-Champagne, in

the Illinois-Missouri Alliance for Biotechnology, a cooperative program that has attracted U.S. Federal

funding to Missouri’s life science industry.

Kansas City The Kansas City area is another small but growing life science cluster in the state of Missouri.

Straddling the two states of Missouri and Kansas, the cluster is home to two major universities and

research institutes.

Kansas City Life Science Foundation

The KCLSF and its member organizations are trying to foster cross-state collaboration in the areas of

aging and related diseases, neuro-degenerative and cardiovascular diseases, cancer and infectious

diseases, and in the process increase the region’s ability to attract funding.

35

Stowers Institute for Medical Research

Founded in 1994, the Stowers Institute is dedicated to research in disease prevention, which it

conducts at its $300 million, 600,000 square-foot facility in Kansas City. The Institute plans to

eventually house 45 independent teams of 10-12 scientists each, and by 2002 it had already attracted 12

such teams.

Higuchi Biosciences Center

Just across the state line at the University of Kansas, the Higuchi Biosciences Center (named after

Takeru Higuchi, the former chair of the Department of Pharmaceutical Chemistry) is the major

pharmaceutical research facility in the Kansas City area. There are three semi-autonomous research

centers within the HBC: the Center for Bioanalytical Research, the Center for Drug Delivery Research

and the Center for Neurobiology and Immunology Research. The Kansas Innovation Corporation

(KIC) handles the HBC’s technology transfer and licensing functions.

Conclusions

By building on its strengths, maintaining focus in industrial development, and integrating

public-private cooperative efforts, even across state lines, Missouri has been able to achieve what many

sub-regions in the Midwest are trying to do—create a viable, job-producing biotechnology cluster. The

presence of Washington University has also allowed the state, already strong in plant science, to

diversify its presence in the life science world, adding to its stature and recognition, which in turn has

made it easier to bring outside investment capital into the state.

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Chapter 6

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Wisconsin

Biotechnology activity in the state of Wisconsin is focused around its primary cluster in Madison.

The University of Wisconsin’s main campus is located in Madison, and the University’s research

activities are the engine that drives Madison’s budding biotech cluster. Research strengths are

complemented by support institutions and have led the Madison cluster to make strides in gaining

national prominence, and many see it as lying on the cusp of becoming a large cluster on par with those

on the East and West Coasts if it builds out a few key aspects necessary for growth.

Strengths

Wisconsin’s primary biotech strength is the world class research done at its universities and research

institutes. The state also has experienced and long-standing technology transfer organizations that

license its technology to companies in Wisconsin and around the world. As Wisconsin has been able to

take advantage of its research innovations through technology licensing, the state has become home to

growing number of spin-off and start-up companies that add to biotech industrial community.

Weaknesses As is the refrain in many Midwestern states, the major problem in Wisconsin is a lack of venture

capital. According to a study by the Brookings Institute, there are three main types of biotechnology

research marketed for medical use: life science research, diagnostics, and therapeutics. Wisconsin is

very strong in life science research—life science research requires less funding but the market is small in

potential income when compared to the other two types. Thus, Wisconsin has some world-class

research being done there, but, by necessity it is mostly of the sort that requires relatively lower capital

investment. Therefore, on the back end, there is less income being generated to roll over into new

technology development. By contrast, clusters such as San Diego and Boston excel diagnostics and

therapeutics, create huge amounts of income which fund further research and create new jobs and so on.

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Madison

As was stated above, Madison is the biotechnology cluster in the state of Wisconsin, and is the state

center for research, business incubation and technology licensing.

University of Wisconsin, Madison

In the field of biotechnology, the University of Wisconsin is perhaps best known for its innovative

stem cell research. While this remains a focus, it should be noted that the UW is one of the broadest

and well-funded research institutions in the US, with particular emphasis on the biological sciences.

Approximately 800 faculty members and 2,000 graduate students belong to the 60 departments and

research centers at UW involved in the biological sciences. Of these, the departments of biochemistry,

molecular biology, molecular and general genetics, computer science and biostatistics were all ranked in

the top ten nationally by the National Research Council. UW ranks 3rd in the country in research

expenditures at over $500 million annually, and over half of that amount goes to the biological sciences.

UW researchers in the biological sciences received outside funding in excess of $200 million in 1998-99,

with $57 million going to genetics and genomics alone. The early 1990s saw the advent of the BioStar

initiative, a public-private partnership that dedicated $317 million to the construction of new biological

science related buildings on campus. So far, this program has resulted in the construction of the UW

Biotechnology Center, as well as a variety of other buildings.

University Research Park

URP is a research park founded in 1984 using land formerly used for agricultural research. The park

is a self-sustaining private entity that houses an incubator to help nurture UW spin-off companies.

Once companies have outgrown the incubator, they have the option of buying a parcel of land from URP

and building their own facilities. Including the incubator, there are now 34 buildings on the URP

campus. The URP turns a profit every year and pumps that money back into UW research programs,

helping to fuel the cycle of discovery, development, and commercialization. The URP serves another

important function by keeping many of UW’s talent and technology in the area to build the cycle of

research and reinvestment in Madison, not in one of the clusters on the East or West Coasts.

Wisconsin Alumni Research Foundation (WARF)

Founded in 1925, WARF is truly a global pioneer in the area of technology transfer. Along with URP,

it is one of the driving forces that takes UW-developed technology out of the University and converts it

into funding for additional research. WARF ranks 11th out of 143 U.S. universities in terms of revenue

38

generated through royalties and the licensing of UW technology.

Conclusions

The biotechnology industry in Wisconsin is very good at doing what it does: creating technology and

developing businesses to market it. It’s major entities work well with each other through organizations

such as the Wisconsin Biotechnology Association, and they enjoy the support of the state and local

governments. To increase in stature, however, the state will have to parlay its strengths into ventures

that get the attention of outside venture capital.

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Chapter 7

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Illinois

There are many types of industries in Illinois. However one industry that has experienced

tremendous growth in the last several years is the biotech industry. This is because Illinois offers

biotech firms great opportunities for research with its state of the art technology and infrastructure.

Source: A New Economy Growth Strategy For Chicagoland.

40

Source: Chicago Technology Today (CTT)

41

Strengths The health care industry has a bright future in the Illinois economy. According to the State of

Illinois Business and Data Center those who are 85 and older increased approximately 35% between the

year 1990 and 2000. This means the demand for health related products will continue to increase in the

future. The industry already has a strong presence in Illinois. For example, clinics and offices of

medical doctors is the seventh largest industry totaling 61,711 employees in the Chicago Primary

Metropolitan Statistical Area (PMSA). Jewel/Osco, which sells food as well as pharmaceutical

products, is the third largest employer in the Chicago PMSA with 35,800. It takes time for small

businesses to take advantage of economies of scale because of relatively low demand. However,

companies such as Jewel/Osco help them expand because they create demand for their products.

Advocate Health Care ranks eighth with 22,600 and Abbott Laboratories ranks twelfth with 16,000.

This large concentration promotes spillover effects and opportunities for urbanization economies.

Urbanization economies occur when firms in similar industries benefit by clustering. These benefits

include access to human capital and economies of scale.

Weaknesses The Illinois bio-cluster’s inherent weakness is overcapacity in the industry. Large companies like

Baxter Healthcare, Pharmacia Corporation, and Abbott Labs employed thousands of scientists and

dominated the Chicago life science sector for decades. The financial structure in Illinois supported large

pharmaceutical companies, not small and medium size enterprises (SME). No financial institution in

the state would lend money to a biotech start-up during the early 1990s.

However, in later years, Chicago’s large pharmaceutical companies restructured and some of their

talented business executives and scientists were given financial compensation and permanently laid off.

These talented ex-pharmaceutical executives and researchers utilized their networks in business and

science and formed their own biotechnology companies in San Diego.

In San Diego, Chicago life science executives went for the necessary finance and support

infrastructures to develop their companies. There is a frequent quote used by the President of the

University of Illinois, ‘the biotechnology businesses in California were built on the brains from The

University of Illinois.” To some extent this is true as many talented university researchers and former

Illinois pharmaceutical executives left the state to set up their biotechnology companies in places like

42

San Diego and San Francisco. The main obstacle for the state is to prevent the leakage of human

capital such as its top life science researchers. It must also encourage those who left to return to the

Chicago area to build-out their companies. Unfortunately, the Illinois policymakers have not come up

with any solution.

The second problem is the sheer size of Chicago’s life science community, which prevents

communication among the players. There is minimal communication and interaction between Chicago’s

life science research institutes [Argonne Laboratory] key universities [Northwestern University, The

University of Chicago and the University of Illinois] large pharmaceutical companies [Baxter

Healthcare] and the emerging biotechnology company sector. This has also led to the lack of

collaboration in joint research and commercialization of innovation that exists in areas such as Boston

and San Diego.

Universities

In the U.S universities’ R&D has strong links to the private sector. Illinois Institute of Technology

(IIT) specializes in science, engineering and psychology. The university and its contract research

affiliate ITT Research Institute’s annual research volume is about $130 million. The ITT Research

Institute provides safety assessment testing and advisement to pharmaceutical companies. University

of Illinois at Chicago allocates $108 million in life/health sciences research and $4.5 million in clinical

research annually. The College of Pharmacy at the university is the third oldest in the U.S. The

Biotechnology Center at the University of Illinois at Urbana-Champaign boasts 150 faculty and service

facilities for DNA, protein and flow cytometry. Northwestern University in Evanston, Illinois has a

research budget of $210 million and has several prominent research centers such as the Office of Clinical

Trial and Training, which performs clinical trials for Alzheimer’s disease, depression, diabetes and

Parkinson’s disease. The Biotechnology Laboratory focuses on DNA sequencing and isolation. The

University of Chicago has a life science research budget of over $250 million per year and its hospital

has consistently been selected as one of the best in the nation by the U.S news and world report. The

Division of Biological Sciences’ specialties at the University of Chicago includes pediatrics, family

medicine and psychiatry.

43

Research Parks

There are also three major research parks in Illinois. The Northwestern University Evanston

Research Park for example includes R&D center for Evanston Northwestern Healthcare. Its purpose is

to promote strong relationships between the University and fast-growing businesses. University of

Illinois Research Park is an early-stage incubator program that provides new synergy for

technology-based economic development in Illinois. The Chicago Technology Park (CTP) Research

Center is home to 22 major companies’ R&D and has plans for further expansion. The CTP has a lot to

offer to Japanese biotech companies. Currently it has fully equipped wet-labs, university resources and

custom lab space. It also receives $20 million in federal small business research grants and state

challenge grants. In the future it will offer start-up companies assistance in grant writing and

knowledge to apply for state and federal funding for their research.

Venture Capital Firms

One of the major strengths of the U.S economy is the existence of SMEs, which help diversify the

economy. Venture capital firms assist them by providing capital. There are several major venture

capital firms that have strong relationships with pharmaceutical companies in Illinois. Gaebler

Ventures LLC is a business incubator and holding company that develops and nurtures companies that

are shaping the future. With an emphasis on seed-stage and early-stage investments, the Chicago-based

partnership has invested in companies since 1999 and has established numerous innovative and

market-leading enterprises. Adams Street Partners has $10.4 billion worth of capital and its portfolio

includes four biopharmaceutical companies. These are CombinatoRx Inc., Galieo Pharmaceuticals Inc.,

Myogen, Inc. and Eligix. GTCR Golder Rauner LLC has $4.5 billion in capital and its portfolio

includes Morton Grove and Ovation Pharmaceuticals. ARCH Venture Capital has invested in 90

companies nationwide and specializes in life and physical sciences. It currently manages five funds

worth more than $700 million.

Private Sector

There are three major pharmaceutical companies in Illinois. Batelle develops new technologies,

commercializes products, and provides solutions for industry and government. Its innovations range

from medical products and pharmaceuticals to products for the automotive, chemical, and agrochemical

industries. It has 16,000 scientists and allocates $2.7 billion annually for R&D. Baxter specializes in

44

medication delivery, kidney disease and blood therapies. In 1999, the company invested $332 million

in R&D. Abbott Laboratories specializes in pharmaceutical products and invests $1 billion annually in

R&D.

State Government Initiatives

Small Business Assistance (SBA) provides one-on-one business counseling and management

assistance. It also assists with financial analysis and planning, and provides access to business

education and training opportunities. Technology Development Bridge has been the state’s most active

and successful seed-stage venture investment fund. The fund, which rates in the top quartile of all seed

funds nationally, has invested in 29 companies statewide, leveraged over $12 million in private

investment and created over 250 new jobs. SCORE a non-profit organization in Peoria, Illinois offers

consulting services to small businesses. It counsels more than 250,000 individuals annually and has

presence nationwide.

National Laboratories

One of many prominent national laboratories in Illinois is Argonne National Laboratory, operated

jointly by the U.S. Department of Energy and the University of Chicago. The laboratory has more than

4,000 employees, including about 1,400 scientists and engineers, of whom about 700 hold doctorate

degrees. Argonne's annual operating budget of more than $475 million supports 200 research projects.

Since 1990, Argonne has worked with more than 600 companies and numerous federal agencies and

other organizations.

Conclusions

There is already a recognizable cluster of biotech companies in Illinois and this will continue in the

future. All the necessary ingredients for start-up companies exist in that there are research parks,

university R&D and venture capital firms.

For Inquiries:

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