Washington region poised for biotechnology breakout

WASHINGTON (Map, News) - Charles Fleischman’s company is a textbook example of how to take a start-up biomedical firm and turn it into a multimillion-dollar corporation.

“We were an instant, overnight success that took 15 years,” said Fleischman, who is the outgoing president, chief financial officer and chief operating officer of Gaithersburg-based Digene, a company that last year pulled in more than $150 million on sales of its HPV test, which screens for the cervical cancer-causing human papillomavirus. “The first half of the 1990s, we focused on creating the technology platform. The second half, we were validating the (product) in clinical trials worldwide. The first half of this decade was spent running the gauntlet of FDA approval, and now we’re in full commercialization mode.”

Today, Digene is the third-largest revenue-generating bioscience firm in the Washington region, employing 500 people and moving forward with research and development on a host of other diagnostic tests that have similar promise for profitability.

The key to turning the Washington region’s growing biotechnology industry into a true economic powerhouse lies in cultivating more success stories like Fleischman’s, industry experts said.

“I really think (success) is when you have more publicly traded companies,” said Tim Priest, executive director of the Greater Washington Initiative, a regional organization that markets the Washington area to potential biotech companies looking for a home. “We have a handful of companies that are forces in their industry ... but there’s a deficiency in this region. We don’t commercialize as much as we should.”

Although it’s true the region has only had a handful of runaway successes in the past 15 years, there are signs Washington is on the verge of a tipping point that could pump billions more into the local economy.

The No. 1 indication the Washington region has become a lead contender in the biotech race is money.

Venture capital investments in Washington-area biotech companies increased by 168 percent year-over-year in the second quarter of 2006, according to data from PricewaterhouseCoopers’ quarterly MoneyTree report. Investments spiked from $54 million to $145 million — the second-highest quarterly investment in the region’s bioscience industry ever — and outpaced both telecommunications and software, industries that typically garner the most investment dollars.

Although the spike in investment was largely due to two large, multi-million dollar deals, it is still notable because unlike software and telecom firms, where several million or even thousands of dollars can get a firm off the ground, biotechnology companies typically need multimillions in start-up funding and years of patience before venture capitalists see a return on investments.

For example, it took Digene $100 million and 15 years to get its first product to market.

“Biotech has the longest time frame and is one of the biggest risks, but at the same time it provides great returns,” said Linda Powers, managing director of Toucan Capital, a Bethesda-based venture firm focused on investments in early stage biotech companies in the Washington area. “And we recognize there have been good successes in the biotech world and the industry overall has been progressing steadily.”

Unlike industry leaders Boston and San Francisco, which have been heavily involved in bioscience since the 1970s, the Washington region didn’t enter the biotech race until about 1990, when the National Institutes of Health launched the Human Genome Project. The federal government invested billions in private biotech firms — many of them along Montgomery County’s I-270 Technology Corridor — to complete the research, and effectively launched the industry in Washington. Today, much of the research that started with federal funds has been transferred to the private sector.

“I think (the industry) has gone through a great period of growth and expansion,” said Rachel King, CEO of Gaithersburg-based GlycoMimetics, Inc. “When I moved here about 18 years ago, there were just a handful of companies working in what might be considered biotech. ... You’re seeing very strong companies starting to get through.”

GlycoMimetics, which received $15.4 million of the record $145 million second-quarter investments, is still in the pre-clinical phase with a number of therapeutics to treat inflammatory diseases and several types of cancer — and might be years from commercial viability. But there are numerous local companies well into the FDA approval process, meaning that sooner, rather than later, revenues from marketable drugs and medical devices could start flowing into the region.

And even just a few more success stories could turn the Washington region into a major force in the industry.

“In this business, when you do get a hit, the hits can be very big,” King said. “If you have a blockbuster drug — and only a few companies have been successful at that — you get huge rewards in the market.”

Venture capital investments in region

In the second quarter of 2006, venture capitalists invested nearly $145 million in area biotech firms. That figure represents the second-largest quarterly investment in the region’s history. Investments hit $162 million in the fourth quarter of 2004.

Second quarter ’06 biotech investments:

» CoGenesys Inc. (Rockville): $55 million

» MacroGenics Inc. (Rockville): $45 million

» GlycoMimetics Inc. (Gaithersburg): $15 million

» Panacea Pharmaceuticals Inc. (Gaithersburg): $9 million

» Intradigm Corp. (Rockville): $7 million

» MaxCyte Inc. (Gaithersburg): $5 million

» Sucampo Pharmaceuticals Inc. (Bethesda): $5 million

» Profectus Biosciences Inc. (Baltimore): $3 million

» NanoVec LLC (Ellicott City): $150,000

» Canton Biotechnologies Inc. (Baltimore): $75,000

» Excimus Biotech Inc. (Savage): $75,000

» GeneTrade LLC (Baltimore): $75,000

» NeoDiagnostix Inc. (Rockville): $50,000

Biotechnology Investments by quarter, 2004 through Present

2004

Q1: $29 million

Q2: $31 million

Q3: $36 million

Q4: $162 million

2005

Q1: $6 million

Q2: $54 million

Q3: $69 million

Q4: $64 million

2006

Q1: $40 million

Q2: $145 million

Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree Report with data provided by Thomson Financial

kwilmeth@dcexaminer.com

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