VA Business: State Support for Biotech Poor vs. Neighbors

From this month's Virginia Business Magazine.

This article, probably written about a month ago, captures the general attitudes of the state's bioscience-focused economic developers regarding the Commonwealth's history with this industry. There is guarded interest in what comes out of this Virginia General Assembly panel chaired by Delegate Mark Sickles and Senator Janet Howell.

Support for biotech pales in comparison with leading states
September 01, 2008 12:01 AM
by Robert Burke

Backers of Virginia’s biotech industry went to the 2008 BioInternational Convention in San Diego in June hoping to show off in front of thousands of companies and industry insiders. The four-day convention, which pitches itself as the world’s largest biotech event, featured elaborate exhibits from dozens of countries and 30 U.S. states.
But Virginia wasn’t among them. Gov. Timothy M. Kaine attended the event but was relegated to walking the exhibit floor and schmoozing with the masses instead of hosting guests in a Virginia pavilion. “We had nothing,” says John Avellanet, a Williamsburg consultant who attended the event.
Now in October comes the 2008 Mid-Atlantic Bio conference, a three-day event co-sponsored by the Virginia Biotechnology Association, the MdBio/Tech Council of Maryland and Mid-Atlantic Venture Association, which has offices in Northern Virginia and Maryland. This is the event’s first time in Virginia — at the Westfields Marriott in Chantilly.
The commonwealth might feel like a weak sister, though, because in many ways Maryland far outpaces Virginia. In the past six years, for example, Maryland firms garnered $1.96 billion in venture capital, compared with $193 million in Virginia over the same period, according to a report released in June by the Biotechnology Industry Association. Virginia outpaces many states in some areas — it ranked 14th in the number of bioscience-related patents during that six-year period, with 2,884 patents. But Maryland ranked seventh, with 3,680 patents. It has built a thriving, centralized biotech community on anchors such as the National Institutes of Health and Johns Hopkins University.
And in July, Gov. Martin O’Malley unveiled a $1.1 billion Bio 2020 Initiative, designed to boost the life sciences industry through tax credits, money for stem cell research and new lab and incubator space.
Don’t expect a similar plan in cash-strapped Virginia.
Mark Herzog, executive director of the Virginia Biotechnology Association (VaBio), says even modest proposals fall flat here. Three years ago a 43-member Governor’s Commission on Biotechnology, which included legislators, businesspeople and educators, recommended steps the state could take, such as funding efforts by Virginia universities to find commercial applications for bioscience discoveries. “We all spent about four years on the initiative and nothing came out of it. Not even a press release,” Herzog says.
Lackluster promotion
To Herzog and others, the state’s effort to promote its biotech sector is listless at best and is starting to hurt. “The general industry feeling seems to be that Virginia is well positioned … to be a player in the biosciences,” says Robin Sullenberger, CEO of the Shenandoah Valley Partnership, who also attended the San Diego event. “But there is some amount of confusion in regard to the political will and the commitment to invest to make that happen.”
Virginia obviously offers some significant assets. Northern Virginia has the Food and Drug Administration at its doorstep in Washington, D.C., for example, and that access is invaluable for companies trying to navigate federal regulations. Also, the Janelia Farm research campus that recently opened in Loudoun County is a one-of-a-kind facility with the potential to produce breakthroughs that could spawn new companies. Plus, there are growing biotech clusters and advanced university-based research in places such as Charlottesville, Richmond and Blacksburg.
Skeptics, though, say that’s not enough. There is intense competition among states and even nations to grab a share of the action in life sciences, and Virginia isn’t keeping up. “There are states that are already well-positioned players,” says Sullenberger, such as Maryland, Massachusetts, North Carolina and California. “I think it’s very obvious we send a mixed message.”
Part of the reason stems from the state’s generally conservative approach to spending. “Virginia tends to be relatively cautious and tends to want to see some evidence before it necessarily strikes out in a bold direction,” says Jerry Giles, director of finance with the Virginia Economic Development Partnership.
That’s not necessarily a bad thing. Massachusetts Gov. Duval Patrick proclaimed in January that his $1 billion life-sciences initiative would create 250,000 jobs in the next decade. An unrealistic goal, perhaps, since, as skeptics noted, that is twice as many jobs as the state had added from all sources in the past 10 years. So bold isn’t always beautiful.

Bottom of the list
Neither is lagging behind the pack. The June study cited 25 state-supported funds that provide seed and pre-seed investments to help biotech firms get started. Nearly all the other states on the list had multimillion-dollar funds, led by Ohio’s $263 million Third Frontier Pre-Seed Fund. Down at the bottom of the list was Virginia’s $500,000 GAP BioLife Fund, handled by the Center for Innovative Technology.
Giles responds with two points: first, the life-sciences sector overall has thus far not turned a profit, so some caution is warranted in terms of investing money. It is time-consuming and expensive to bring a discovery from the lab through the regulatory maze and to the marketplace, and the risk is substantial. Secondly, there are many factors that determine why a company succeeds and where it takes root. “The cost of doing business, the cost of living … the cost of hiring highly qualified biotechnology workers — all of that has to be factored into the equation,” he says. “There’s a lot more that goes into making a good strategic business decision than how much money the state is willing to give.”
But Herzog can tick off examples of entrepreneurs that did their research here but ended up launching the company somewhere else, lured away by venture capitalists or the availability of facilities such as wet labs, which have the plumbing and equipment to allow hands-on scientific research. Two years ago, for example, a pair of researchers at George Mason University in Fairfax County launched a company called Theranostics Health, but put it in suburban Maryland instead of Northern Virginia. VaBio, the state’s biotech industry association, this year backed legislation to use public-private partnerships to spur construction of wet lab space, a critical need for young life-science companies, but it failed. “We’ve become an incubator for other state’s biotech industries,” Herzog says. “There have not been major investments in life sciences in the past eight years, and it’s really starting to catch up to us.”
Avellanet, however, thinks the companies and the supporters of Virginia’s biotech sector are looking in the wrong direction. He is the co-author of the book “Best Practices in Biotechnology Business Development.” “There’s a lot of waiting for the government to bail them out,” he says. A better approach would be pulling together all the players and coming up with a strategy that recognizes their shared interests in building a sector with critical mass. “Anything less than a 10-year plan is just a crisis mode,” he says. “What it needs to say is, ‘Here’s the overall umbrella of biotech in Virginia, here are the components, and these are the people who need to be leading the charge.’”
Avellanet also asks why the state biotech association doesn’t try to encourage other companies to come here by getting its current members to provide discounts for the new arrivals. He worries that without a statewide initiative, parts of the state such as Northern Virginia will be pulled into other regional clusters and leave other parts of Virginia out in the cold. “Virginia has got to get its act together first and start to get some traction, and then talk to Maryland and D.C.” about creating a true multi-state life sciences cluster, he says.
Herzog notes that VaBio does help companies find the support they need to grow here, and it has group-purchasing programs to help members cut costs. “If we had better luck working with our state-policy partners, we’d feel better about what we’re doing,” he says.
Now, there’s a new chance. The General Assembly this year created the Commission on Bioscience and Biotechnology, with members from industry and the legislature. Its goal: to come up with the top three things the state should do to grow the biotech industry and craft recommendations for next year’s session. The lack of venture capital and facilities are two major issues, Herzog says, but he’ll be glad to see any substantial support. “Virginia in a lot of ways is suffering from this idea of ourselves as being the ‘best state for business,’” he says. “But we could have so much more.