Rochester Biobusiness

Can Rochester become a world-class biobusiness center?

By Dan Emerson

As the home of the Mayo Clinic and several other world-class research facilities, the city of Rochester, Minn., wants to become the world's next great biobusiness center. To succeed, Rochester is banking not only on Mayo and other major institutions such as the University of Minnesota, IBM and the Hormel Institute, but also on nurturing the small startup companies that will create new products and generate job growth.

While major institutional clout is required, building a biobusiness hub is also a "from-the-ground-up" process. Consider the Twin Cities' medical device industry, which began not in corporate boardrooms, but in the Minneapolis garage where Medtronic founder Earl Bakken invented the pacemaker. Therefore, it's likely that startups will play key roles-for example, Rochester-based Mill Creek Life Sciences LLC.

Mill Creek
Using technology licensed from Mayo, Mill Creek makes cell-culture supplements used in growing stem cell and primary cells, for clinical and research markets. The company, founded by former Mayo DNA researcher Judy Lundy and entrepreneur Steven Dietz, hopes to execute a fundraising round this fall. Mill Creek already has one customer lined up and "we are anxious to get into production," Lundy says. Earlier this year, the company leased 4,192 square feet of space on the second floor of the Minnesota Biobusiness Center.

The MBC, developed by the city's economic development authority to provide space for biotech firms, could be considered the centerpiece of Rochester's effort. It's 80 percent occupied, with the first floor dedicated to retail businesses. The Mayo Foundation for Medical Education and Research, with its Office of Intellectual Property, is one of the anchor tenants in the building.

"The center is a functioning, viable symbol of what is to come," says Gary Smith, executive director of Rochester Area Economic Development Inc. (RAEDI). "It's been a process of evolution, four or five years in the making. We looked at a lot of different models. We knew that unless we had a partnership with Mayo and that they were the anchor tenant, we would be unlikely to build it."

Partnerships and Assets
Rochester's other key partners in the biobusiness effort include the Minnesota Partnership for Biotechnology and Medical Genomics, the new University of Minnesota Rochester campus, IBM's Life Sciences Research and Development Lab, IBM's BlueGene-the world's fastest computer-and the Hormel Institute research facility. In the number of patents filed annually, Rochester ranks as the third most innovative city in America.

Another prospective asset is the billion-dollar biobusiness park California venture capitalist Steve Burrill hopes to build in the Elk Run development, north of Rochester.
"We've got a critical mass of research institutions and IT capacity; when you combine it all, one plus one equals three," Smith points out. "Our whole strategy is built around growing from within as a result of our partnerships and collaboration.

"These partnerships all make a difference and provide fuel for future economic capacity to spring either from things that evolve out of those places and organizations or those that might come to our community because they are here.

"We're already talking about what comes next," Smith notes. One priority is developing an accelerator program for biotech startups that would provide low-cost office and lab space, as needed.

"Raising capital is a challenge for everybody; even the venture capitalists are having a hard time," Smith says. "It's just a sign of the times. Having said that, if the ideas are sound, the people are sound and the plans are in, our experience has been that you can start companies in Rochester, Minn., and get the funding you need to hit the ground running. Capital is the most mobile asset on the planet; it flows to where the people and ideas are."

No one should expect overnight success, Smith notes. "This is a long-term strategy. The speed will accelerate, but it takes time. We're not trying to hit every pitch out of the park. We're working to hit solid singles, get runners on base and score some runs."

Ensuring startup success
Earlier this year, the Twin Cities-based BioBusiness Alliance of Minnesota launched the Minnesota Angel Network, a nonprofit created to serve as a matchmaker for startup companies and angel investors. Entrepreneurs seeking funding up to about $4.5 million can submit business plans to the MNAN website for evaluation. MNAN will provide mentors, if necessary, to help companies improve their plans to the point they're judged ready to submit to potential investors. MNAN will then make those firms' business plans accessible to prospective angels.

Mill Creek is the kind of company the network created to help overcome startup hurdles and fulfill the promise of its technology. "A lot of dedicated people are trying to get startups going in tough economic times," Lundy notes. "We all want to create jobs, but there is basic infrastructure lacking. And people are being cautious because of a general lack of confidence in where economy is heading, and what's happening to the market."

The network will help companies like hers find investors and specialized business expertise, Lundy says. "For a startup, it takes a long time to find these resources," Lundy added.

"What we really need in southern Minnesota is an incubator-which involves more than just building a building and leasing it out. It's a matter of partnering with these start-up companies. People have to understand the true needs of start-up companies-such as affordable space and advisers. A lot of people want to sell their services, but as a start-up you typically can't afford them." RAEDI has identified developing an incubator as its next major step, according to Smith.

"RAEDI has been outstanding; if they are providing the resources to really incubate companies, there is great potential there; Gary Smith as well as the Southern Minnesota Initiative, have been very helpful to us.

"The initiative, desire and dedication is there in southern Minnesota," Lundy says. "But it takes money to make money." Building an industry-especially one as complex and capital-intensive as biotech-requires much more than just good intentions, but the fact that there is a "demonstrated commitment" in southern Minnesota will be helpful in attracting the necessary expertise and financing, she notes.

"It's one thing to be a good business, and another to be a good investment," Lundy says, noting that scientist-entrepreneurs need business savvy, too- "knowing where the funds are, how to get financing, what (information) investors are looking for and how to prepare. As an entrepreneur, I would have found it very helpful to have someone walk me through that process. When you are starting these entrepreneurial companies, that's the kind of expertise you need."

Mayo's Contribution
A few years ago Mayo revamped its approach to c0ercializing intellectual property, adopting the same team approach that is at the heart of the clinic's tradition of patient care, to get new medical technology to patients more quickly. Mayo formed "cross functional" teams in various practice areas, such as cardiology and gastroenterology, to "proactively look at solving unmet medical needs, to look at ways things can be done better, more cheaply, and faster," says Steve Van Nurden, chairman of Mayo's Office of Intellectual Property.

The teams include physicians, scientists, IP specialists and business-development staff, "We have 21 projects in various stages, in the cardiology area alone," he points out.
Mayo has launched 45 companies over the past decade, he says. "They rarely end up in Rochester; they usually end up in Boston, Palo Alto, Chicago or the Twin Cities." Why? Sometimes due to lack of necessary infrastructure, such as low-cost space for start-ups. "Also, the CEOs and serial entrepreneurs who start these companies tend to cluster in areas where the investors are," Van Nurden points out.

Mayo also has unique internal funding mechanisms, co-investing with venture capitalists "to help these companies stay and grow here," he adds.

Minnesota's physicians, medical researchers and device-makers have a long history of meeting daunting challenges. Rochester's leaders hope applying those same resources to the business and economic challenges of developing a world-class biotech hub will eventually bear fruit. 

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