D. Vermont Biotechnology Center

Introduction

The discovery of the structure of the DNA molecule by Watson and Crick in 1953 had an effect on the development of biotechnology similar to the impact that the discovery of the transistor in 1948 by Bardeen, Brattain and Shockley had on the development of the microelectronics and computer technology. With this event, biologists, biochemists, biophysicists, and physicians gained access to the technologies and physical laws by which nature provides us with nourishment, protects us from infections, cures our diseases, or transmits vital signals between our various organs. Using these new discoveries, scientists together with far seeing entrepreneurs proceeded to build a biotechnology industry in just the last / 21 / two decades which not only shows the fastest growth rates of all industrial sectors in the United States, but which at the same time has created many thousands of new high quality research development and manufacturing jobs across the nation.

Growth of the Biotechnology Industry (with dollar figuros in
billions):

			1989	1990	1991	1992	1993

Product sales		$2.7	$2.9	$4.4	$6.0	$7.0

Total revenue		$3.6	$4.7	$6.3	$8.3	$10.0

R & D spending		$2.5	$2.8	$3.4	$5.0	$5.7

Net loss		($2.1)	($2.2)	($2.6)	($3.4)	($3.6)

Market capitalization	$26	$35	$49	$48	$45

Companies		1,095	l,100	1,107	1,231	1,272

Employees		59,000	66,000	70,000	79,000	97,000


Source: Ernst & Young
Wall Street Jounrnall, May 20, 1994, section R4

These new biotechnology industries operate in a wide segment of the economy. The main focus of the biotechnology enterprises clearly is the support of general health care delivery, in itself the fastest growing segment of the service sector of our economy. New pharmaceuticals developed by biotechnological processes to cure a wide spectrum of diseases and the development of new diagnostic methodologies for the early detection of diseases were the primary initial targets. But soon the scientists discovered means by which they could copy the same processes used by nature to achieve very desirable products and methods beneficial in other sectors of the economy.

Examples close to the interests of Vermont's economy would be new enzymes to make the production of high quality cheeses more efficient and more reproducible, or methods for the cleanup of environments or human wastes with the help of friendly living organisms. At the same time, the new biotechnology has already changed and is still in the process of revolutionizing the delivery of health care. With the understanding of how human disease states are developing on a microorganism level, diagnostics and cure are also moving from a macro level of the human body directly to the affected body cell structure or the individual body cell. Traditional diagnostic procedures, like x-rays or simple blood tests, are being augmented by sophisticated microbiological analysis of the biochemical processes of the diseased body parts, and biochemical pharmaceuticals are being dispensed / 22 / directly to the diseased area with the help of cell transport mechanisms which seek out their specific targets.

We are clearly at the beginning of a major biotechnology revolution that will affect all our lives in a very similar manner as microelectronics has changed our world. There can be no doubt that biotechnology will be a key driver for economic development for the next few decades.

Background

With respect to using biotechnology as a leverage for economic development, Vermont finds itself in a very interesting bimodal situation. The University of Vermont with its College of Medicine, College of Agriculture, and Department of Microbiology is at the forefront of the scientific research in the area of biotechnology in the United States, as well as in the world. The researchers at UVM have, in a very competitive scientific environment, succeeded to attract life science and medical research funds at a very high and constantly growing level.

University of Vermont

Life Science/Medical Science Related Research Grants and
Contracts


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	~  1985  1986  1987  1988  1989  1090  1991  1992  1993  1994

					fiscal year

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In terms of total research dollars awarded by federal agencies, UVM ranks the top 100 in the nation. If these research funds were measured in dollars awarded per citizen, Vermont's position among the states would even be more prominent.

In terms of its economic contribution, this biotechnology research in itself has become a very important industry for Vermont, and keeping this research industry viable and productive has to be a very important economic development objective. To achieve this goal, the university has built a very strong research strategy which will focus its resources in four key life science research areas, three of which are biotechnology areas. These three focus areas are: cardiovascular research, oncology, and psychiatry. The fourth area is the discipline of family practice medicine.

The research at the University of Vermont is supported by a number of important institutions which are in direct support of the basic university science. Examples are the Medical Center Hospital of Vermont, one of the foremost teaching hospitals in the United States, the University Health Center, where the UVM researchers maintain the direct contact with the world of patient treatment, and through which much of the research and the education programs at the University are funded, and specialty centers, like the Vermont Cancer Center, where research and patient treatment are focused on a particular medical subspecialty.

In order to make these institutions more synergistic and more competitive, the governing bodies of UVM, the University Health Center and the Medical Center Hospital of Vermont, together with the Fanny Allen Hospital, have just concluded a set of affiliation agreements, by which they will henceforth act as one organization, for the benefit of the advancement of medical science and for the benefit of all patients. This concentrated activity will provide another major stimulus for biotechnology research and development in Vermont.

Despite its prominent position in biotechnology research, Vermont has not yet been very successful in establishing a biotechnology industry which could extract the results of academic research and convert them into commercial value. There have been some isolated success stories. The foremost commercial success of biotechnology in Vermont is the company Bio-Tek Instruments, Inc. of Winooski, an outgrowth of the biotechnology research at UVM which over the last 25 years has grown into a multinational company that provides high-quality employment to about 200 Vermonters. Haematological Technologies, Inc. of Essex Junction and Receptor Technologies in Winooski are other examples of successful biotechnology transfer from UVM to a private enterprise. But except for these few examples, Vermont has not yet capitalized on the commercial promise of the high-quality biotechnology research at UVM, and we can aspire to the level of commercialization that can be found around other academic centers of biotechnology research, as for instance in Massachusetts, Maryland, or California.

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Mission Statement

The Science and Technology Committee tried to understand the reasons Vermont is lagging in the commercialization of its biotechnology research, but the anecdotal testimony received on this subject was not very conclusive. Thus the first mission of this Center is to identify results of UVM's biotechnology research that have the potential for commercialization (together with the UVM technology transfer officer); to sponsor research and development which takes a potential biotechnology product or process from the research to the product feasibility stage; and to act as facilitator to transfer this product or process to a suitable entity for commercial exploitation.

Scope of Services

A plan to use the leverage of the state's biotechnology research to stimulate economic growth must focus on the process of successfully extracting commercial value from the UVM laboratories into the private sector.

A second option, namely that of attracting biotechnology companies from outside the state to relocate a segment of their business to Vermont, was discarded by the Committee as not very realistic, at the moment. The committee also discussed at great length a proposal to focus a biotechnology initiative at a very small sub-segment of the overall biotechnology research. We felt, however, that setting such limits would eliminate too many potential commercialization candidates from consideration. Furthermore, in this young and fast moving field it was almost impossible to single out one area over another as having the optimum chances for commercialization.

In defining the scope of this Center's work, the Committee analyzed the various obstacles that would prevent the transfer of biotechnology to commercialization. They are:

1. Every successful technology transfer project requires a champion who has the motivation to bring the results of his or her research to the marketplace to create economic value. It is extremely difficult for an academic researcher to play this champion role. To be successful in biotechnology research is a full-time job.

2. The successful researcher has chosen that career because she or he likes doing research, and does not have necessarily the same inclination toward business management, financial management, or contract or personnel administration. In order to be successful as an entrepreneur, the researcher will- require a considerable amount of outside help, which can be either very expensive or may not be readily available at all.

3. Achieving basic feasibility of a biotechnology process or product in a research laboratory is only the very first step towards creating a marketable product or service. The capital required to travel this road is not readily available, because at the time of basic feasibility, any potential investor is faced with significant risk and very uncertain rewards

To commercialize Vermont's biotechnology research, the Center will address these obstacles with the following initiatives:

1. Stimulate the entrepreneurial activity of the biotechnology research faculty:

The University of Vermont has established a Technology Transfer Policy which to a large measure addresses not only the mechanism of technology transfer, but also creates a process by which promising research for technology transfer is identified, and provides the in-house resources to help the faculty member's first steps toward commercializing the results of research. The Technology Transfer Subcommittee of the Vermont Technology Council will monitor the progress of this technology transfer activity.

2. Secure high-risk capital for the initial commercialization of a biotechnology research result:

SBIR: The most effective source for the initial commercialization of a research result is the Small Business Innovation Research Program (SBIR) operated by the federal government. If a research result is found to be worthy of commercialization, and if it fits into the overall development objectives of a particular funding agency, then an entrepreneur can receive funding for a commercialization project.
Later Stage Financing of Biotechnology Enterprises: Vermont has created a process to provide the basis for venture financing of technology enterprises once they have reached a point where the product development is complete, the markets are defined, and manufacturing or distribution can begin.

These venture financing opportunities are important in terms of the direct financial resources they provide to entrepreneurs from their own partnership assets, and they are a very important factor for attracting out-of-state venture capital into the Vermont economy.

Nearly all of the funds provided by the initial venture capital structures are committed to support existing ventures, so they will not be able to respond to new demands for venture capital.

/ 26 / The Committee recommends that the State initiate a study to determine whether the formation of a follow-on capital fund is advisable. The Vermont Technology Council stands ready to assist in such a study.

3. Establish a new-enterDrise incubator-- A science and technology entrepreneur requires a considerable amount of assistance in business related subjects that are normally outside of the entrepreneur's area of expertise. A business incubator is normally a facility in which start-up businesses can obtain reasonably priced space for their operations, and where they have access to business services on a shared basis. These business services involve accounting, legal, patent and trademark issues, links to financial resources, liability and product insurance, etc. Such support is absolutely critical, if the fledgling enterprise is to survive.

There have been many discussions on the need for new-enterprise incubators in Vermont. But usually these discussions have revolved around real estate: where should an incubator be located; how big should it be; should it be built from scratch, or should it involve a reuse strategy for an existing facility; who should pay for it initially?

The Science and Technology Committee believes that to obtain affordable space is not a key obstacle for a new start-up technology business in Vermont. There is, at this time, ample affordable space available. What is key, however, is that the necessary business support is provided to the entrepreneur.

The Science and Technology Committee thus proposes the formation of a virtual incubator, in the form of an organization that can render the required business services to the entrepreneur at an affordable price, independent of where in Vermont she or he happens to establish the place of business.

The Vermont Technology Council will explore the organization of such a virtual incubator, and it is our hope that many of these services can be provided for a startup biotechnology company on a "pro bono" basis.