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HELPING BIOTECHNOLOGY COMPANIES PROVE THEIR IDEAS' WORTH State would provide manufacturing facility to make products

THE BALTIMORE SUN

Tom Stagnaro has a company he's sure will make lots o money someday. It's just that 70 percent of the money will be going to someone else.

It cost Mr. Stagnaro 70 percent of the stock of his almost 3-year-old company to get $2 million to build its first manufacturing facility. Even that won't buy the factory that will put Univax Biologics Inc. on the map -- just a pilot factory that can make enough of the Rockville company's experimental vaccines to get through clinical trials and Food and Drug Administration review.

The biotechnology industry is prodding the state to spend 17 million taxpayer dollars to build a solution to problems like Univax's. The industry wants the state to build a manufacturing facility where small companies like Univax can rent pilot production space -- enough space to make the quantities of their product they need for clinical testing and to satisfy the FDA, quantities too big to make in a lab and too small to justify full-scale manufacturing.

The center, and another one like it aimed at information technology companies and proposed for Montgomery County, are a central part of the local technology industry's bid to change their industries from neat little research propositions into real, live businesses. So live, in fact, that experts like the accounting firm of Ernst & Young say biotech companies nationwide will see their revenues grow 20 times during the next 10 years.

"They're strategic investments in what we've always talked about as the Baltimore-Washington corridor, which at times has been more myth than reality" said Thomas Chmura, deputy director of the Greater Baltimore Committee.

But because the bevy of promising biotech companies that were around 10 years ago has yielded only a few clear-cut 1990s success stories, entrepreneurs are under pressure to start showing a return on all the research dollars pumped in by state, federal and private sources over the last decade.

In short, behind the industry's talk of the 1990s being the "decade of commercialization," the next decade really is time to put up or shut up.

And the biotech industry is concerned that without help, many of the 200 mostly tiny biotech companies in Maryland will have to shut up, or sell out to better-financed partners who can put up for them, but who will take the profits from Maryland discoveries out of state.

"If we don't help our firms commercialize, we won't be able to capture the growth," said Patrice Cromwell, a consultant to the Bioprocess Facility Steering Committee, a group of industry, government and university experts that has banded together to promote the shared manufacturing, or bioprocessing, facility. "Maryland needs to invest in commercialization. It lags behind in commercialization efforts."

"Those parts of the country that are good at [commercialization] are going to do very well in the 1990s," said Mr. Chmura. "We're not good at that yet. . . . This is kind of a national problem. Those few places that develop this capacity and expertise ought to have an edge."

Maryland has built a biotech industry that is one of the biggest of any state, but it is dominated by companies that either don't have any products yet or are still well short of the commercial breakthroughs scored by biotech pioneers such as Genentech Corp.

While Maryland has more biotechnology companies than all but two other states, it ranks fourth in biotech employment and also lags in company revenues, according to a GBC report.

The state's best biotech asset is its strong research base, led by universities such as Johns Hopkins and the University of Maryland, but local companies have been slow to turn that base into companies, products and jobs.

Research institutions are trying to speed up their technology transfer, and the bioprocessing center is designed to clear the next obstacle out of the industry's way as more companies develop products and prepare to bring them to market.

By renting suites in the state-owned facility for short periods of time, the pilot manufacturing cost of nascent companies could be cut to thousands from millions, backers say. Promising biotech firms could raise their own capital instead of selling their technologies to big drug companies (almost none of them based in Maryland) that can afford pilot manufacturing -- or selling most of the company to venture capitalists, as Tom Stagnaro had to.

"Venture capital is the most expensive money you can borrow," says the Univax president and chief executive officer. "I wouldn't have had to borrow the money if the facility were up and running."

Lots of Maryland companies could face the same dilemma over the next few years.

Ms. Cromwell said that although the facility's purpose is to help biotech companies bring their products to market, the results won't show right away. The FDA's approval process for new drugs is slow, so it could be five years or more after the facility is built before drugs developed there reach the general market, she said.

The facility may also help attract new biotech companies to Maryland, or convince young companies to move here as they begin to prepare for commercialization, backers hope.

"I think it definitely could be used as a marketing strategy," said V. M. "Vic" Esposito, chief executive of Theracel Corp. in Bethesda. "It will also show the commitment of the state to the industry."

The plan calls for the facility to have three isolated suites that separate companies can rent to make their products, as well as equipment that will allow the manufacturing process to meet the FDA's strict quality-control standards. Clients could bring in their own scientists and manufacturing staff to design and execute manufacturing processes, but the center would also have a technical staff available for companies that need the help.

"If you look at the start-up companies, they're started by scientists or businessmen," Mr. Esposito said, and the businessmen are usually former venture capitalists or other finance specialists. "Very rarely do they have any manufacturing expertise."

Mr. Chmura said the facility will be at the Baltimore end of the corridor because that is where land values dictate that most of the local biotech industry's manufacturing capability will eventually have to go.

"Being realistic, as a company expands and needs a larger facility, the Montgomery County real estate market isn't where they want to be," Mr. Chmura said. "The manufacturing is more likely to be in Baltimore" because of the area's land availability, concentration of university medicine and science programs, and the Baltimore area's supply of programs to train medical technicians critical to biotech manufacturing.

The study estimates that 10 to 12 companies a year would use the facility; most would be from Maryland, and Mr. Chmura said out-of-state companies will probably be charged higher rates to use it.

The rates will be about $3,000 to $5,000 a day, according to the business plan. The companies' average stay is expected to be about three months. Cheap it's not, but it's not the $2 million Mr. Stagnaro needed either.

The study estimates that as many as 40 to 50 companies would want to use the facility over the next five years, largely driven by the lack of real alternatives.

Gov. William Donald Schaefer put $2 million in the state's capital budget this year to pay for design work on the bioprocessing center, which will be located either at the University of Maryland Baltimore County in Catonsville or at Dome Corp.'s Bayview Research Campus in East Baltimore.

The business plan calls for the state to pay all the $17 million cost of actually building the project, and says federal grants and private investment will also be needed for $5 million in start-up costs, but Ms. Cromwell said rents from the tenants will let the facility break even on an operating basis by its second year.

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