Entrepreneurs hope to make this region a star in the biotech constellation
David Nicklaus Of the Post-Dispatch Staff

Torrey Munger, an engineering physicist, installs an image-driven, computer-operated surgical device — the first of its kind in the world — at Barnes-Jewish Hospital. (Larry Williams/P-D)

Money and infrastructure are obstacles to our reaching this stellar economic future. But promoters of the industry believe existing enterprises, a new plant sciences center and strong university support will clear the way.

Dr. Bhaskar Banerjee is confident that his cancer-detection technology can save lives. He hopes it also can create jobs in St. Louis.

Banerjee, an associate professor of medicine at Washington University, is among a few dozen St. Louis entrepreneurs hoping to make commercial successes out of discoveries they've made in the region's medical and agricultural research laboratories.

The promise of the "life sciences" -- as agriculture and medicine are often lumped together these days -- is so great that the Regional Chamber and Growth Association is making them a centerpiece of its job-creation strategy.

Experts from the Ohio-based Battelle Memorial Institute, hired by the RCGA to study the region's potential in the life sciences, say St. Louis has plenty of research going on at its universities, at companies like Monsanto and at other institutions like the Missouri Botanical Garden and the new Donald Danforth Plant Science Center.

But St. Louis is missing some of the elements that have made the life-sciences industry an economic star in cities like Baltimore, San Diego and the Raleigh-Durham area of North Carolina. Among those elements are money, infrastructure and an intangible factor that might be called buzz or public awareness.

The entrepreneur's big hurdle is money

Money is the big hurdle right now for Banerjee's company, Surjo Medical Technologies Inc.

Banerjee's product is a diagnostic instrument that consists of a fiber-optic probe connected to a box the size of a small book. The probe, inserted into the digestive tract, emits ultraviolet light of a very specific wavelength, and measures the light coming back. Cancerous and pre-cancerous cells reflect back a different wavelength, or color, of light than healthy cells.

"It not only picks up cancer, it picks up the very beginnings of cancer," Banerjee said. And, unlike biopsies and other current diagnostic techniques, "it gives you the information instantly, in a fraction of a second."

Though the device represents a scientific breakthrough, is noninvasive and would appear to present few risks of side effects, getting approval from the Food and Drug Administration could take at least two years. That's where Banerjee's need for money comes in.

He estimates that he needs $400,000 this year to hire some essential people, do tests on animals and design a clinical study. That will take about $400,000. Getting all the way through clinical trials to FDA approval will cost about $2 million, Banerjee estimates.

That's just for the initial version, which is designed to detect cancer in the stomach and gastrointestinal tract. The device's potential is immense, Banerjee said, because the technology can detect any type of cancer in any organ.

"The biggest roadblock that I have is getting investors to fund this," he said.

Banerjee is new to St. Louis, having joined Washington University last year from the University of Missouri at Columbia. He senses that this would be a good place to build his company, but he also has heard about other promising researchers who ended up moving their businesses to California or the East Coast.

"I get the impression that there's a lot of talent in this city," Banerjee said. "But what has happened before is investors have pulled some of that talent to the coasts.

"I certainly would love to stay here and develop my technology here and look down the road at having a manufacturing plant that would put together these devices and sell them throughout the world."

Heroes -- in other places

In San Diego, researcher-entrepreneurs like Banerjee are treated as local business heroes. Roger N. Beachy, who left San Diego's Scripps Research Institute to become director of the Danforth Plant Science Center here, recalls that the San Diego Padres' scoreboard would show a "stars of biotechnology" feature during the seventh-inning stretch. The display would show an entrepreneur's photo and a description of his or her company.

San Diego has plenty of stars to choose from. It has more than 250 biotech companies. Twelve years ago, Beachy said, it had just three.

Short of seeing biotech replace Budweiser as an advertiser at Cardinals games, how will St. Louis know it has arrived as a life-sciences hub?

Robert J. Calcaterra, president of the Nidus Center for Scientific Enterprise, says it will take a couple of spectacular success stories to get the buzz going. That would mean companies that grow from the startup stage to 250 or more employees, complete a successful public stock offering and get a lot of national press for their scientific breakthroughs.

Asked to name a life sciences company now, most St. Louisans would think of a large business like Monsanto Co. or Mallinckrodt Inc. A decade from now, names of successful small companies might come more easily to mind, suggests Marcia Mellitz, president of the Center for Emerging Technologies.

If St. Louis' development mirrors that of other cities, the life-sciences industry would be served by a network of service providers, from lawyers to accountants to real-estate developers, that specialize in serving biotech firms. Venture capitalists, the folks who make highly risky, but often lucrative, investments in new companies, would also become more numerous and more prominent here.

St. Louis' prominence, especially in agriculture, may attract U.S. offices of some major European life-sciences companies. Stung by the European backlash against agricultural biotechnology, several of these companies may move much of their research to the United States. Richard Fleming, president of the RCGA, says some European agricultural firms already are looking at St. Louis as a possible base for their U.S. operations.

We have to grow our own <

But, mostly, we're going to have to grow our own life sciences firms. And trying to predict the future of the industry can be a chicken-or-egg proposition. Entrepreneurs need venture capital to grow and thrive, but venture capitalists are going to congregate in areas where they've already seen plenty of success stories.

So, if St. Louis wants to develop an industry like San Diego's, where does it start?

One answer is that we start with $231 million a year of life-sciences research being done at Washington University, $44 million more than is done at San Diego's major university, the University of California-San Diego. And the Battelle consultants found that life sciences account for nearly 90 percent of the university research here. That shows a singleness of purpose that should appeal to scientists.

And those figures don't count the work that will be done by 200 scientists at the new Danforth Center.

"We may have a problem in figuring out how to take that research from a lab to the commercialization stage. But as far as research, we've got it happening here," Calcaterra said.

Walter H. Plosila, the Battelle vice president leading the St. Louis study, says research institutions have to change their mind-set if they want to be full participants in the life-sciences industry.

"University leadership can't be benign leadership anymore," Plosila said. "Faculty have to be encouraged to work with companies, and to do research that has commercial applications. The university community has to see that doing this kind of (entrepreneurial) activity is important, and is rewarded."

A growing industry needs more than just biologists with doctorates. It also needs plenty of lab technicians with two-year and four-year degrees. In today's economy, a trained work force is the most precious resource for any industry.

St. Louis has a good start at building a life-sciences work force, Calcaterra said, but needs to do more.

He says that technology companies and economic planners "have not done a good job of engaging two-year colleges and getting them involved in our programs." He also says discussions of research universities too often begin and end with Washington University, when St. Louis University and the University of Missouri-St. Louis also make important contributions.

Competing with dot-com

Then there's venture capital, the money that helps inventors like Banerjee get their products to market. One problem faced by medical and agricultural entrepreneurs is that they're competing with the money-making power of the Internet. Internet companies can often be built in months, while biotech companies need years to develop their products and get them approved by regulators.

"A lot of the funds that used to invest in life sciences have decided they want to make some quick money on Internet and e-commerce and telecom companies," Mellitz said.

St. Louis has three established, active venture-capital companies -- Advantage Capital, Gateway Venture Partners and Capital For Business Inc., an affiliate of Commerce Bancshares. None of them has a biotech focus.

But sources in the life-sciences business say at least two groups are trying to raise money for biotechnology-focused venture funds. One is led by A.G. Edwards Inc. and Capital for Business; the other is led by Thomas Melzer, former president of the St. Louis Federal Reserve Bank, and Andrew Craig, former chairman of Boatmen's Bancshares Inc.

In addition, the Missouri Legislature last year approved $20 million in tax credits for investors in a new seed capital fund, which will be run by private money managers. Entrepreneurs say that seed capital, the money invested in companies at a very early stage of development, is in especially short supply here.

"I'm really very excited about all the things happening in venture capital here," said Calcaterra. If all the groups seeking to raise money are successful, he said, the local venture funds will be credible enough to attract leading East Coast and West Coast funds as co-investors in local companies.

Infrastructure is the biggest problem

While individual entrepreneurs might list money as their biggest problem, Calcaterra says infrastructure is the biggest problem for the area as a whole.

Outside of incubators like the Nidus Center in Creve Coeur and the Center for Emerging Technologies in midtown St. Louis, laboratory space is scarce here.

The Nidus Center just opened last year. It houses three companies as well as temporary offices for the Danforth Center, which is being built just across Olive Boulevard and is scheduled to open next year.

"Let's say I'm a year or two down the pike and I had a couple of firms ready to graduate from the incubator into 3,000 or 4,000 square feet somewhere," Calcaterra said. "I don't know where I'd send them."

Calcaterra hopes to convince local real-estate developers that they should be building speculative laboratory space for the growing life-sciences industry, just as they develop speculative office buildings because they know the office market is growing.

In San Diego, Calcaterra said, at least five developers include speculative lab space in their plans. "At first they were taking risk, but now it's such a robust business in that area that it's not risky any more," he said.

For Mellitz, at the Center for Emerging Technologies, the shortage of lab space is becoming a real problem. Several of the 10 companies at the center will need more space soon, so she's trying to nail down financing to buy the building next door and expand her incubator.

Beyond that, she envisions working with private developers to create a "Technopolis St. Louis" in the area around the center.

Most of the companies at the center want to be in the city, Mellitz said, to be close to the Washington U. and St. Louis U. medical centers.

"We want to keep them here in the city," Mellitz said. "You have to think about what their needs are to get them started, and then you have to stay two steps ahead of them."

And running out of space for these firms is a scary prospect, she said. "Once they decide to move, then it's up for grabs. As long as you're moving your whole operation, do you move to the suburbs or do you move to the West Coast?"

Besides lab space, another thing that St. Louis lacks is a contract pharmaceutical manufacturing plant that can make small quantities of a drug for clinical testing, and be able to scale up production quickly once a product is approved by the FDA.

Maryland and North Carolina both used state funds to help build drug manufacturing plants when they were trying to jump-start their biotech industries, Mellitz said.

"If we're really going to build an industry here, manufacturing capability is the next step," she said. "We could start the companies here and develop the technology, but once they develop it they've got to produce it somewhere, and right now there is nowhere in St. Louis."

We have many competitors

As our region's leaders set out to build a world-class life sciences industry here, they have plenty of competition. Michigan, for instance, set aside $1 billion for life-sciences research from its share of the national tobacco settlement. Missouri has yet to decide what to do with its tobacco money, although the RCGA, the University of Missouri and others are pushing for a similar $1 billion research fund.

Plosila, the Battelle consultant, also cautions against taking a shotgun approach, throwing money at anything remotely connected to the life sciences. "Every teaching hospital thinks it's going to become the next center of biotech," he said.

The Battelle report will identify several "core competencies" for St. Louis, including:

• Plant science, because of the research being done at Monsanto and the Danforth Center.
• Genomics, because of Washington University's role in the Human Genome Project.
• A few branches of medicine that are particularly strong here, including neuroscience, virology, cardiology and biomedical engineering.

Plosila says St. Louis is starting with a lot of strengths, but he cautions against expecting immediate results from an industry where some firms need 10 or 12 years to get a technology from laboratory to marketplace. North Carolina took about 25 years to develop a pharmaceutical industry, and Baltimore's biotech businesses grew up over about a dozen years.

"The rapid changes in technology mean that it may not take that long," Plosila said, "but this is not a one-year or two-year effort."

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