NeoPharm Inc. has big plans for fighting cancer. And some representatives of this state’s biotechnology community have high hopes for NeoPharm. In fact, the regional biotech industry’s long-term stability, not to mention its growth, could depend on such a firm’s success.
And NeoPharm appears poised to meet expectations. The Lake Forest company’s scientists pair existing chemotherapeutics with lipids, or particles of fat, which protect the drug from the body’s natural defenses against foreign invaders and appear to tumor cells as a potential source of nutrition. This much is not new; lipids already have been used to transport drugs. But NeoPharm has moved a step forward: The company is taking advantage of a drug’s naturally occurring electrical charge and giving lipids the opposite charge, ensuring that the substances attract. The resulting entity, say NeoPharm officials, is more stable.
“What you’re doing in terms of developing these drugs is taking something like paclitaxel or mitoxantrone or another cancer drug that everybody knows works and putting it into a new delivery vehicle to improve the delivery of the drug to the tumor,” says Larry Kenyon, NeoPharm’s chief financial officer. “What we see is [that] by getting more drug to the tumor, you get less side effects from the chemo. And there’s the potential to give more drug, which can lead to better efficacy.”
This NeoPharm product, called an electrostatic liposome encapsulation platform, is still in the development phase and has yet to be approved for use by the U.S. Food and Drug Administration. Kenyon says it’s three or more years away from the market.
But the firm already is getting a lot of attention in the Chicago-area biotech community, which is searching for a much-needed industry star. And NeoPharm has plenty of potential to rise to the top of this emerging field. Beyond the liposome encapsulation platform, the firm has other cancer-fighting tools in the pipeline that give it even more promise to become a regional success story. That’s unusual. Most biotech entrepreneurs have one product, and they spend every penny to get that product through research and development and onto the market, a process that can take 10 years or more.
“We’ve kind of hedged our bets, and we feel that the more shots you have on goal, the better chance you have to score,” Kenyon says. “And we’ve got technology that we think is reusable, evergreen so to speak, where you can just drop multiple products into it and get advantages over existing chemos.”
The nation’s biotech industry is flourishing. Applications have moved beyond health care to such industries as agriculture, chemical production and environmental management. That means more jobs, revenue for states, and, in the case of health care, the promise of better pharmaceutical drugs as baby boomers approach their golden years.
Illinois’ biotech industry also is growing. Investors are risking more dollars in the race to commercialize new technologies that are being developed in universities and other research institutions. Chicago-based Litholink Corp., for example, is extending kidney stone treatment and prevention techniques to urologic and internal medicine practices to reduce the recurrence of stones. Vysis Inc., a Downers Grove biotech firm, produces tests that aid medical labor-atories in the early detection of cancer and genetic disorders. Lake Forest-based DOR BioPharma Inc. is developing oral drug delivery devices and compounds for drugs that previously had to be injected.
But this state’s industry is modest compared to counterparts in California’s Silicon Valley and Boston — the nation’s two major biotech centers. Of some 1,500 biotech firms nationwide, only about 70 are based in the Chicago area, according to the Illinois Biotechnology Industry Organization.
Moreover, some biotech firms are fleeing Illinois to other states, including Michigan, which has pledged to spend $50 million a year for 20 years to support biotech startups. New Jersey permits biotech firms, which tend to operate in the red during their infancy, to “sell” their operating losses to other companies, which in turn can write off the losses on their taxes. And struggling biotech companies get cash — at least 75 cents on the dollar — to fund operating expenses.
Some of this state’s industry players worry biotech firms will continue to flee Illinois if they aren’t offered similar startup incentives.
“There are many things that are happening now in Chicago, and, for the first time, I am feeling some hope,” says Alicia Loffler, director of Northwestern University’s Center for Biotechnology. “But the windows close very fast.”
Like others in the Chicago-area biotech community, Loffler says the region is failing to retain quality biotech managers because they’re attracted to the biotech bastions on the West and East coasts. In addition, Loffler and others argue that investment in this state’s biotech community has been inadequate because investors tend to follow industry clusters.
Yet venture capital investment in Illinois’ biotechnology is consistent with overall investment in the state: The capital pools on the coasts are simply much larger than in Illinois. According to the National Venture Capital Association, venture capital firms nationwide had $209.8 billion invested or available for investment at the end of 2000. That includes $81.9 billion in California, $37.2 billion in New York, $34.2 billion in Massachusetts and $4.2 billion in Illinois.
The good news for biotech and medical health firms is that their share of venture capital bumped up significantly during 2001. That share was 7 percent for 2001 overall, but 18 percent in the year’s fourth quarter, according to statistics compiled by the venture capital association Venture Economics and PricewaterhouseCoopers.
“It’s a chicken and egg issue:
What’s more important, the managers and investors or the technology? In general, if you have the technology the managers and investors will come,” Loffler says. “So the question is whether we have the technology here and whether the technology is attractive. And that’s why I’m a little bit hopeful here.”
There are other reasons to be hopeful that this state’s biotech community will thrive. In 2006, Illinois will host the national Biotechnology Industry Organization’s international conference at Chicago’s McCormick Place convention center. The event is expected to attract 25,000 participants.
In addition, Gov. George Ryan’s two-year-old VentureTech program was designed to spend $1.9 billion on technology initiatives over five years. But the dollars aren’t all earmarked for biotechnology, and it’s not clear how much will be spent on that industry. Some VentureTech funds will be used to expand Chicago Technology Park, a laboratory facility located on the city’s Near West Side in the medical district that houses nascent biotech firms and other startups. There currently are 40 labs.
The governor’s proposed budget also includes $67.5 million to complete construction of a post-genomics institute at the University of Illinois’ Urbana-Champaign campus that will aim to further agricultural and medical genome research.
“Before Gov. Ryan was here, there wasn’t any investment in biotech, or technology for that matter,” says Pam McDonough, director of the state Department of Commerce and Community Affairs. “To some degree, are we playing a little bit of catchup? Absolutely. But that doesn’t mean we’re not positioning ourselves to be front-runners on some other areas. Biotech is a pretty broad base, and any state that thinks they’re going to be everything to everybody is really grossly overstating what their capabilities are.”
McDonough says the state is taking a more holistic approach to fueling technology growth. Grants in her department’s proposed fiscal year 2003 budget, which begins July 1, include $13 million for a rare isotope accelerator at Argonne National Laboratory near Lemont, $5 million for a biomedical research building at the Illinois Institute of Technology in Chicago and $15 million for a biomedical research building at Rush Presbyterian St. Luke’s Medical Center in Chicago.
“I think we’re trying to be strategic and focused in what we’re going after and where we think our assets are the strongest,” she says.
To be sure, Illinois does claim a diverse industrial economy with strong capabilities in several sectors. A report completed last year by consulting firm SRI International of Menlo Park, Calif., for the state commerce department identified 10 “high potential niche industries that offer major growth potential,” including financial services, telecommunications and biotechnology.
“The industry diversity of Illinois is viewed as both a strength and a weakness. On the one hand, diversity has provided the state with a robust set of economic activities that allow for balanced growth and cushion the economy during cyclical downturns in specific sectors,” the report said. “On the other hand, Illinois has not benefited as much as certain states in the rapid spurts of growth witnessed in ‘gazelle’ industries (e.g., biotech) that are highly publicized in the media.”
There are those in the Chicago-area biotech community who contend that’s because government support has been insufficient. “If a state or city makes a determination that they want to be a biotech center, then they would make available to the sector either moneys or support for the companies’ different needs,” says Michael Rosen, vice chair of the Illinois Biotechnology Industry Organization and president and chief operating officer of DOR BioPharma. “That’s the issue: Do Chicago and Illinois want to be a biotech center?”
And there’s the much-needed regional industry star. If NeoPharm or another nascent biotech firm enjoys great success, that would propel Chicago onto the nation’s biotech map. The success likely would attract capital as well as talent to the catalytic firm and the industry as a whole. And the industry would spawn alumni who would go on to form their own businesses.
“I think Chicago is eminently well-poised to start becoming a major center. It’s got these great universities. It’s got the big national laboratory. It’s got big companies. It’s got a diverse and well-educated population,” says Steve Lazarus, a managing director at Chicago-based venture capital firm Arch Venture Partners, which invests heavily in biotechnology. “What it needs, in my judgment, to light the spark is a demonstration-proof company — one good successful company. And we just haven’t had that yet.”
For the Illinois biotech community to flourish, there needs to be a confluence of events. Universities and other research institutions such as Argonne will need to continue to advance the science. And those research institutions will need to continue to move advances toward the marketplace. Ambitious entrepreneurs will need to continue to usher them through research and development, which can take years and several million dollars for even a single drug. Venture capitalists, investors who target startups at the early stages, will need to continue to back biotechnology. And federal, state and local governments will need to continue to provide research grants, tax breaks and other incentives to Illinois-based firms.
Ultimately, whether or not the Illinois biotech industry expands or contracts will depend on how well those factors work together.
“It’s difficult to know which thing to pull on first,” says Alan Thomas, director of technology transfer at the University of Chicago. “The venture capitalists will say they can’t invest here because there aren’t enough entrepreneurs. The entrepreneurs say they can’t work here because there aren’t enough venture capitalists. If there’s enough of both, then they say they can’t actually find the space to rent to operate, or they can’t find the legal help or the accounting help. So it’s a question of trying to jumpstart that process on multiple fronts.”
Technology transfer is the process by which innovations are moved from the research arena to the marketplace. As such, Thomas and other technology transfer officers are responsible for identifying promising advances in the research phase. Then they help secure patent protection for the advances and find entrepreneurs to take them through development to the marketplace.
In the case of biotechnology, drugs must go through several phases of clinical trials before the Food and Drug Administration will sign off. Thomas says for every drug that gets approved and makes it into the marketplace, biotech companies spend about $800 million trying to develop some 1,000 drugs.
Most of the drugs created in research institutions are in such early stages of development that big pharmaceutical companies won’t touch them. So the biotech community has become a virtual research and development laboratory that takes the drugs along the development path, deleting some of the risk involved. In the later stages of development, the biotech firms can license the drugs to the pharmaceutical companies for production and distribution.
But moving drugs from the university to Chicago-area biotech firms, Thomas says, can be difficult because there are not nearly as many firms jockeying for new developments as in Boston or Silicon Valley. “One of the things that would greatly assist the efficiency with which the universities and the research institutions are able to do this is if there is a flourishing biotechnology industry in the region,” he says.
That’s another chicken-and-egg scenario: Quick technology transfer depends on a thriving biotech community, but the biotech industry depends on increased technology transfer. A report completed last August for the city of Chicago by consultants from McKinsey & Co., a New York-based firm, said the rate of technology transfer must be increased in order to spark development in biotechnology and other high-technology areas such as software development. The report said the region’s major research universities license fewer technologies, launch fewer businesses and offer less assistance in building businesses than the national average. The University of Chicago, which has had its technology transfer program for years, was the exception.
The report said that “among the hindrances to the commercialization of technology is a heavy focus on longer-term pure research among professors, researchers and students.”
The report urged the high-tech industry to work with state and federal governments to increase research funding. The industry also must identify barriers within universities that hinder commercialization of technology and solicit funding from private and public sources to beef up research facilities and attract research professors, the report said.
“If you look at the University of Illinois, Northwestern University or the University of Chicago, these are some of the best minds in the world, and a lot of these minds have gone to other settings, where they’ve been able to take their ideas and commercialize them,” says Dennis Vicchiarelli, business development director at World Business Chicago, a public/private entity working to expand high-tech industries in the Chicago area. “Everybody wants to know why those ideas haven’t been commercialized here. So all the programs in the state basically are taking a serious look at how to better utilize their scientific minds, how to make it easy for them to be more entrepreneurial.”
Vicchiarelli acknowledges the Chicago-area biotech industry is behind those in Silicon Valley and Boston, but he disputes claims that the Chicago area lacks sufficient talent or capital to support biotechnology. Instead, he suggests, the region lacks the entrepreneurial spirit found in other regions of the country.
So how does government foster an entrepreneurial culture? Vicchiarelli says that comes down to marketing and networking. World Business Chicago, chaired by Chicago Mayor Richard Daley, is marketing the Chicago-area’s biotech industry. And strong industry organizations such as the Illinois Biotechnology Industry Organization are assisting in the exchange of ideas, talent and capital.
“There’s a lot going on here but the ships are sort of passing in the night,” Vicchiarelli says. “And we’re trying to set up a lighthouse, a point of reference that these guys can sort of touch base on.”
As for a biotech star, Vicchiarelli invokes a baseball analogy. “A home run would be nice; it’s one swing of the bat,” he says. “But at the same time, I’m not counting on it. There’s a lot of people hitting singles here. And who’s to say you can’t win the game playing singles. Our focus is making sure people get to bat.”
Illinois Issues,April 2002
