Burrill to Lead $1B VC Fund at Bio Park in Minnesota

This is great news for Minnesota!

Rochester biotech park may get $1 billion capital boost

By THOMAS LEE, Star Tribune

February 23, 2009

The developer of an ambitious biosciences park north of Rochester in southeast Minnesota is close to a deal with a major investor in California to create a $1 billion venture capital fund to lure biotechnology start-ups to the state, sources say.

Steven Burrill, a prominent biotech venture capitalist based in San Francisco, will be the lead investor in the venture fund that will offer money to as many 30 companies that agree to move their operations to the Elk Run facility. Tower Investments, a California-based real estate investment firm that's developing the project in Pine Island, will contribute another $100 million to the fund.

Burrill did not return a phone call seeking a comment Monday; a Tower official declined to comment.

The Mayo Clinic in Rochester will also collaborate on the project, according to two sources who have knowledge of the project but are not authorized to speak for it. Gov. Tim Pawlenty and Tower Investments could call a news conference as early as this week, these sources said. Brian McClung, a Pawlenty spokesman, would confirm only that the governor spoke with Burrill about the project.

The renowned hospital and research center will steer start-ups founded on its technology to the biosciences center. The Mayo board of governors met last week to approve the initiative, according to sources.

Once the deal is completed, state leaders will use $50 million in federal stimulus money to renovate Hwy. 52 near the facility and issue another $2 million bond for improvements to water and sewer lines.

The planned 1.7 million-square-foot biotech park is on an elk farm off Hwy. 52 near Pine Island, about 15 minutes north of Rochester. As envisioned by Tower, start-up companies could test and manufacture biotech products such as medical devices, pharmaceuticals and animal vaccines.

A biotech jump-start

A $1 billion fund would significantly boost Minnesota's nascent biotech industry. The state, known mostly for medical devices, has struggled to attract venture capital money for biotech and pharmaceutical companies, forcing some start-ups to move out of Minnesota, experts say.

From 1995 to 2008, the state's average annual share of biotech venture capital investments was $4.4 million compared with the average of $8.1 million for all states receiving biotech funding, according to the MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association based on data provided by Thomson Reuters.

"Minnesota policies that incent private investment in higher-risk start-up companies are lagging many competitor states and nations that support a growing biologic and biopharmaceutical industry at home and aboard," according to the Destination 2025 report released in January by the BioBusiness Alliance of Minnesota. "This is leading some companies to leave Minnesota or the country."

Tower executives and state and local officials say such a facility could help establish a biotech corridor along Hwy. 52, which connects the Mayo Clinic, the University of Minnesota Rochester and IBM Life Sciences research and development labs with the U's Twin Cities campus and the major medical companies in the metro area.

In 2007, the Mayo Clinic and the University of Minnesota inaugurated a $25 million, three-story genomics research facility at a Mayo building in Rochester. The collaboration, called the Minnesota Partnership for Biotechnology and Medical Genomics, hopes to speed the research and commercialization of projects such as anti-cancer drug development and treatments for heart disease, pancreatic cancer, neuromuscular diseases, auto-immune diseases, transplant rejection, drug addiction and tuberculosis.

Sources say Burrill, whose venture capital firm Burrill & Co. has $900 million under management, agreed to the project because of Mayo's participation. Widely considered one of the nation's most prominent biotech investors, Burrill has long wanted to work with Mayo, which owns a venerable brand and deep pool of intellectual property.

Since 1986, Mayo has signed more than 660 license agreements, filed more than 1,350 patent applications and received more than 300 patents for technology developed by its physicians. The hospital recently spun off Muve Inc., which is developing a device to closely monitor a person's movement and how many calories he or she burns.

Adam Brase, a Mayo spokesman, referred questions about the venture fund to Burrill. He denied that the hospital has any formal relationship with Tower and the Elk Run project.

"Mayo has had dialogue with Tower Investments throughout [a] period of time," Brase said. "When it comes to bioscience, Mayo is very supportive of any effort to expand bioscience development not only in southeast Minnesota but the [entire state]. We have a number of bioscience projects we're working on with a number of different partners. We continue to be committed to each of them."

Staff writer Norman Draper contributed to this report.