State's biotech industry progressing, but needs more capital
BYLINE: Angela Gonzales
While Arizona's bioscience industry continues to make strides, more work is needed to attract capital to compete nationally.
So says a 2006 progress report on Arizona's Bioscience Roadmap conducted by Battelle Technology Partnership Practice, which helps states and regions build technology-driven economies.
Last year, Arizona biotech startups had a great year in attracting venture capital, said Walt Plosila, vice president of Battelle Technology Partnership Practice. "But it's moving in the wrong direction this year, which is why we need to galvanize others to address capital."
Daniel Wood, managing director of Mesa Verde Venture Partners in San Diego, said there aren't enough venture capital companies making investments in the Arizona biosciences industry.
"There is nobody in Arizona that I know of doing early-stage bioscience deals today," Wood said. "I don't think a lot of people realize that. It's been very frustrating to see all this wonderful infrastructure, all these new research facilities, talent and great scientists moving in, new grants money, but there's no venture capital money."
Two neighboring states, Utah and New Mexico, however, have set aside $100 million in funds for venture capital, he said.
Wood is interested in investing in the Arizona market.
"I see it as an emerging sector in biosciences," he said.
Wood made his first Arizona investment nearly six years ago when his fund, Inglewood Ventures, invested in Cylene Pharmaceuticals, which was created by Dan Von Hoff in Tucson.
Wood said he moved Cylene to San Diego at the time because Arizona didn't have the bioscience infrastructure it has today.
Today, the company is in Phase I clinical trials for cancer therapeutics and has raised $33 million in venture capital and is about to close on another $40 million in VC funding.
David Mallery, who is president of Molecular Profiling Institute Inc. in Phoenix, works part-time with Wood to help him find new bioscience startups in need of VC funding.
Three years ago at a cancer conference, Mallery introduced Wood to his father, Dick Mallery, and they got to talking about the Translational Genomics Research Institute. With George Poste heading up the Biodesign Institute at Arizona State University, Arizona soon became a stronger blip on his radar.
When a venture capital firm backs a bioscience startup, high-paying jobs are created, Wood said.
For example, a $1.5 million investment in San Diego-based CardioNet eventually generated $75 million in VC funding for the company that now employs 250 people.
A $750,000 investment in another San Diego company, Conforma Therapeutics Corp., ended up generating $75 million in additional funding.
While Arizona is no San Diego when it comes to measuring bioscience hubs, the Grand Canyon State is making strides in employment.
From 2001 to 2005, Arizona added 10,700 jobs in bioscience-related fields (including hospitals), a 16 percent gain.
In non-hospital biosciences, job growth of nearly 17 percent overshadowed national growth of less than 4 percent, according to the Battelle report.
Research, testing and medical labs led the sub-sector job growth during this period, with a 32 percent increase.
"The numbers would look even more spectacular if Arizona's population hadn't grown so much," Plosila said.
TGen is expected to generate 3,125 jobs by 2025, creating a $202.4 million annual economic impact and $16.6 million in total tax revenue.
These findings were released this week by Tripp Umbach, which had conducted an economic impact study for the University of Arizona's medical school in downtown Phoenix.
Today, TGen generates $21.7 million in total economic impact each year, 220 total jobs and $1.9 million in total tax revenue.
Also during the period of 2001 to 2005, biosicence wages increased by 13 percent. Bioscience professionals in Arizona earn an average of $45,182 compared to the private-sector average of $37,709.
Plosila was in Arizona this week, presenting his findings in Phoenix, Tucson and Flagstaff.
Also this week, the Greater Phoenix Economic Council teamed with the Arizona BioIndustry Association and The Business Journal to present a spotlight on bioscience and its impact on economic development in the Phoenix area.
Featured at the event, along with Wood, were two publicly traded companies that recently established a major presence in the Phoenix area.
Princeton, N.J.-based Covance just closed on a 50-acre parcel at the Chandler Airpark with plans to build a facility to conduct preclinical trials using animals. The center faces opposition from some animal rights groups.
Covance Senior Vice President Wendel Barr said officials chose the Phoenix area to be near the strong cluster of biotech companies on the West Coast and to be part of the growth in Phoenix.
He said the company will invest $100 million to build its Chandler research center and initially will employ between 300 and 500 people.
Eventually, the firm will employ 2,000 people here, he said.
"Customers will be coming to your city from all over the world," he said.
One of his customers could be InNexus Biotechnology, which also was featured at the GPEC breakfast this week.
Jeff Morhet, president, chief executive and chairman of InNexus, said the speed of conducting clinical trials is important, which allows the company to take on more projects.
"Create jobs, that's what we do," he said.
Jon McGarity, president and chief executive of the Arizona BioIndustry Association, who moderated the Spotlight on Arizona panel discussion, said Arizona has moved further and faster than any other section of the country.
Get connected
GPEC: www.gpec.com
Arizona BioIndustry Association: www.azbioindustry.org
Covance: www.covance.com
InNexus Biotechnology Inc.: www.innexusbiotech.com
FAST FACTS
Arizona's bioscience industry employment has grown 16 percent since 2001. Here's a look at the latest statistics on the sector:
Industry subsector2005 employment
Non-hospital - 12,665 Agricultural feedstock/chemicals - 535 Drugs/pharmaceuticals - 1,001 Medical devices/equipment - 4,502 Research, testing, medical labs - 6,627 Hospitals - 64,602 Total - 77,262
Source: Battelle analysis of Bureau of Labor Statistics, QCEW data