Little Biotech on the Prairie

Abstract

The Midwest, formerly considered flyover country, is getting an increasing amount of attention and investment from East and West Coast venture capitalists. So far in 2007, Ohio companies received $244.3 million in healthcare investment. Minnesota, a traditional center of medical devices, garnered $126 million, and Wisconsin $16 million. According to Baiju Shah, president of Cleveland's Bioenterprise (www.bioenterprise.com), the Midwest generates $8 billion of national, peer-reviewed NIH research, but research institutions need to step up their rate of technology transfer if they want to commercialize their research. To combat the paucity of venture capital, the states are kicking in funding, such as Ohio's $1.6 billion Third Frontier Fund and Michigan's $2.1 billion 21st Century Jobs Fund. Shah cautions that states get in trouble when they make direct investments in companies, as the temptation is to make politically driven decisions. Awards in Ohio go through peer review by the National Academy of Sciences and then evaluation by venture capitalists from outside Ohio.Shah cites Copernicus Therapeutics (www.cgsys.com), which is developing a cure for cystic fibrosis, and Athersys (www.athersys.com), a Cleveland biotech and stem cell company that is going public through a reverse merger, both of which have benefited from state support in their development. “It is too early to declare victory.” Shah said. “We have notable exits in the Midwest, such as Esperion Therapeutics in Ann Arbor, which was sold to Pfizer for $1.3 billion after having gone public, but we still have a few biotech companies leaving the Midwest for late-stage development.”