MACHINES OF MERCY Maryland companies have designed lifesaving medical equipment. But they get little respect as biotech.

THE BALTIMORE SUN

The year is 1992. A terminal liver cancer patient, with no other hope in sight, turns to a new type of surgery.

The patient is wheeled alongside a big, boxy machine about the size of a large office photocopier. The surgeon, using ultrasound, finds the boundaries of the tumor and inserts a sharp probe. The probe marshals liquid nitrogen chilled to minus 196 degrees Celsius.

The ultracold shock tears apart the blood vessels within the tumor, strangling the malignant cells they feed.

The tumor dies. The patient lives. And the company that made the probe makes a fortune.

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At least that's the way J. J. Finkelstein hopes it turns out. He runs Cryomedical Sciences Inc. of Bethesda, the company that makes the new surgical probe. And if the CMS Oncoprobe is a success, his company not only will make a great deal of money, but it also will be able to plow the profits into developing other medical breakthroughs -- and, along the way, build an empire.

For now, however, Cryomedical Sciences is nothing much -- a no-profit start-up company from the least glamorous niche of the biotechnology industry, medical technology. But while the gene splicers and developers of wonder drugs command more capital and headlines, Cryomedical and other manufacturers of new medical devices and diagnostic kits are no less promising sources of potentially lifesaving discoveries and economic growth.

In the Maryland biotech universe, medical technology manufacturing companies rank a poor third in visibility behind drug development companies and custom research firms, which supply laboratory services to support other companies' product development work.

There are a lot of reasons for this -- as many as there are experts. Universities in the Baltimore-Washington corridor were slow to embrace the notion that university research should be turned into business opportunities. The area lacks the big medical-technology firms that spin off small med-tech companies. The area has only a few top-notch engineering schools. Prospective returns aren't as high as with drug companies, and survival isn't as easy as it is for custom research companies, which can live off the government subcontract work that is so abundant in the region.

But high-tech medical manufacturing companies are out there, small for now, and hoping to make a mark. Cryomedical Sciences is typical.

The company still hasn't introduced its first product yet, though it was founded in 1987. It runs on the founding partners' initial investment and the $5 million-plus raised in a 1989 public stock offering. It has only seven full-time employees, its headquarters are in subleased office space in Bethesda Metro Center, and its research is farmed out to teaching hospitals from Pittsburgh to Arizona.

Its first product, the CMS Oncoprobe, is set to go on the market later this year. Its other product line, a blood substitute designed to allow surgeons to drain the body of blood and cool it down while they perform complicated operations, won't be ready for years to come.

But Mr. Finkelstein, Cryomedical Sciences' chief executive, swears his company won't be one of those companies written off the biotech world's version of the good-field, no-hit shortstop -- "nice science, no business."

"The market for this machine is at least $100 million," he said of the Oncoprobe. "We're going to have a business. We're going to develop this business. We're going to manufacture it -- hopefully in Maryland."

Like other products of cryobiology -- low-temperature medicine -- the Oncoprobe attempts to tap the power of extreme cold to heal. At first it will be used to treat liver cancer and prostate cancer patients, Mr. Finkelstein said, but as the technology evolves it will also be applied to brain and pancreatic cancers.

The company points to a study led by Dr. Gary Onik, a Pittsburgh radiologist who is on Cryomedical Sciences' scientific advisory board, as evidence the machine works. According to a just-published medical article, Dr. Onik used the Oncoprobe on 27 patients who had inoperable, terminal liver cancer, and of the first 18 patients, five were still free of disease four to 53 months later.

"Liver cancer is 100 percent terminal if it's inoperable, which these all are," Mr. Finkelstein said. "If you can save 25 percent of the group, that's a very good [result]."

Cryomedical Sciences has come a long way even to get this close to its first product introduction. It was founded in 1987 when a trio of California scientists hooked up with Martin Weissman, the president of a Long Island-based temporary help firm for medical personnel. The scientists were working on the blood-substitute formulas that Cryomedical Sciences is still trying to perfect. The business of Mr. Weissman and his investment banker son, Jeffrey, was money. It was a match.

"We knew nothing about the blood substitute business, so we hired some experts," said Martin Weissman, who is still a member of Cryomedical Sciences' board of directors. "They thought it could be the cutting edge of a new type of medical technology. . . . I thought it would be an interesting business."

It was indeed interesting, but it wasn't a profitable business and showed no signs of becoming one soon. The scientists were in California, the Weissmans were tending to their jobs in New York, and the company's affairs were run by its lawyer as part of the attorney's broader practice. In 1989, the company set out to fix that.

In less than a year, the company bought a product that was closer to commercialization, hired its first full-time chief executive officer and solved its financing needs for the next few years by going public.

Cryomedical Sciences bought the technology for the Oncoprobe from West Coast investors who didn't have the capital to develop the technology. The deal was made for Cryomedical stock, cutting the former owners in on the potential gains. The board also hired Mr. Finkelstein, a Texan who had been running a Washington biotech firm, as the in-house CEO and moved the headquarters to Bethesda to be near his home.

The company went public in November 1989, at the same time Mr. Finkelstein came aboard. The initial public offering raised $5.8 million.

As promising as the company believes its technology is, it's a long way from widespread acceptance. For instance, spokesmen for Johns Hopkins Hospital and University Hospital in Baltimore said their oncology departments don't use cryosurgery techniques. And with Dr. Onik's study of cancer patients having been published only last month, the company said, the technology is still little-known among researchers.

Sooner or later, every biotechnology company has to cross the line separating an interesting research proposition from a real business that makes real profits. A few in the young industry have crossed the line. Others have stumbled before reaching it. Most, like Cryomedical Sciences, are still struggling to make it.

Patrick Hervy runs several companies that haven't yet reached the stage of commercialization. A French citizen with an accent little diluted by almost 14 years in Baltimore, he is the chairman of three companies that hope to make a dent in the medical world by developing portable blood-testing equipment for doctors' offices and diagnostic tests for cervical and breast cancer.

Mr. Hervy's Chektec Corp. and Biocheck Inc. operate out of shared office space on Madison Street in Baltimore that belongs to a venture capital firm with which Mr. Hervy often invests jointly. Chektec and Biocheck are moving to Dome Corp.'s Bayview Research Campus in East Baltimore in March.

Like Cryomedical, Chektec, Biocheck and Medtest Systems Corp. of College Park (of which Mr. Hervy is also chairman) have only a handful of full-time employees and are all still awaiting their first product introductions. "We're hands-on, early-stage developers of businesses," said John Gill, president and chief operating officer of Chektec.

The products that Biocheck hopes to make, based on ongoing research led by scientists at the University of Maryland at Baltimore, would help doctors screen for the small minority of women with abnormal Pap smears who are most likely to develop cervical cancer. Chektec's diagnostic products would help doctors tell which breast cancer patients are most likely to suffer a recurrence.

L Both companies are based on a branch of medicine called immu

nohistochemistry. That science relies on using reagents and dye stains to identify proteins that either cause medical problems or frequently accompany them. "It's like a photographic reaction," said Mr. Hervy, who first moved to Maryland to run a medical imaging company in Columbia and decided to stay in the area when the business was sold in 1984.

Biocheck is planning to introduce its first kit to test for cervical cancer this year but is only planning limited sales to other researchers, so that the test gets a broader clinical tryout while it's refined. "You need the method to be well established," Mr. Hervy said. "We need the clinical data to back it up."

The company thinks that by 1994, reference laboratories will double-check 75 percent of cervical biopsies with a kit using technology like the tests Biocheck is developing. The company estimates the potential market at $4 million a year.

A more advanced test now under development could be used to monitor cervical cancer patients' recovery and predict recurrence. Biocheck thinks that test could be sold to doctors treating 60 percent of the 2 million to 4 million U.S. women annually who have atypical Pap smears. That would be worth about $25 million a year in sales, the company says.

Chektec is working on a test for a different protein that Hopkins researchers believe can identify those 10 percent to 25 percent of breast cancer patients whose tumors are likely to come back after surgery. The company expects $4 million in sales for this test by 1994 as well, and that potential could double if indications that the same protein may also be a predictor of prostate and colon cancer pan out.

"I'm not comfortable with using sales numbers. We don't want to build expectations," said Mr. Gill, who is also a consultant to Biocheck. "The important point is that there are probably 95,000 to 100,000 women a year who could benefit from the tissue test. . . . If we succeed on that front, we'll succeed as a business."

The market for diagnostic kits and products has attracted a fair number of Maryland entrepreneurs, though an exact count is hard to come by. Another young company trying to make a mark in the diagnostics business is New Horizons Diagnostics Corp. of Columbia.

New Horizons has been in the papers a lot lately because it makes kits that diagnose exposure to anthrax, a biological toxin that Iraqi President Saddam Hussein is believed to have in production. The company actually got the contract from the Army's Fort Detrick in Frederick before the invasion of Kuwait Aug. 2, but everything speeded up after the United States got involved in the conflict.

"It has stripped the research and development of other products, absolutely stripped. It has also affected production of our routine products," said David Trudil, vice president of the 11-year-old company, who said shelving other work to serve the Army "was a non-decision -- it took maybe two seconds. If there's an absolute need and they ask you to do it, you do it."

In normal times, the company's 32 employees are focused on making kits that diagnose strep throat and venereal diseases. And Mr. Trudil said the company hopes its test for plague, being developed for the Army, will have civilian applications in the Third World.

The company is led by President Larry Loomis, a former Becton Dickinson & Co. scientist who, Mr. Trudil said, grew tired of life in a big company. Mr. Loomis has projected that the company's sales, now about $1 million, will reach $6 million by 1993, with profits of $1.7 million.

With companies like New Horizons showing such promise, it's a legitimate question why Maryland doesn't have more small medical-technology companies, why areas such as metropolitan Boston, San Francisco and Utah are closer to industry leadership. Different experts give different answers.

"If you look at the industry it's been concentrated in certain places," said Thomas Chmura, deputy director of the Greater Baltimore Committee. "We don't have a base of medical technology like Hewlett-Packard in California or General Electric in New York. . . . A lot of next-generation companies end up being spinoffs. We don't have the large parent companies that spawn little children companies."

Mr. Trudil points to another difference -- the unwillingness of area banks to get heavily involved in biotechnology, a frequent sore point with heads of small medical companies. "I'd say the availability of financial resources is limited," he said. "You didn't have the boom and people getting on the bandwagon here like in California. We went to the banks in Maryland, and Maryland banks don't do this sort of thing."

Mr. Finkelstein said the scarcity of top-quality engineering programs in the Baltimore-Washington area is another barrier to developing a local medical technology industry. "All our engineers have been from outside the area," he said. "Our chief engineer on the Oncoprobe is in California."

Mr. Chmura said developing the medical technology industry demands, among other things, close cooperation between strong medical schools and strong engineering schools. It can't help, he said, that the medical and engineering schools at Hopkins are across town from each other, while the University of Maryland keeps its medical school in Baltimore and its engineering school in College Park.

But, it's not surprising to note, nearly everyone involved in biotechnology in this area thinks these obstacles can be overcome. Hopkins has become much more aggressive in recent years in commercializing research, and the Bayview Research Campus being built by Hopkins' for-profit affiliate Dome Corp. will provide a home for biotech start-ups.

The state of Maryland is working with the National Institutes of Health on developing programs to commercialize more NIH research through Maryland companies, said Kathryn Lindquist, senior international trade specialist for the Maryland International Division of the Department of Economic and Employment Development. And the state has already had an ongoing set of formal and informal programs designed to introduce biotech entrepreneurs, including medical technology executives, to potential marketing partners, joint venture partners, financing sources and service companies such as law firms and accounting firms, she said. "Everybody is trying to do their part," she said.

The raw number of scientific resources in the area, however uncoordinated or under-coordinated they are now, is the thing Mr. Finkelstein comes back to when he explains why he thinks biotech will still be a local growth business despite whatever problems exist.

"This town has a unique resource -- with the FDA [Food and Drug Administration] and NIH, there's a lot of technology constantly being evaluated," he said. "That gives people infinite chances to spin off. As long as the venture capital is there and the market will support that kind of activity, it will continue to grow."

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