Biotechnology Round Table April 2014

Alternate formula

The biotechnology industry needs workforce development, research partnerships and entrepreneurs to continue its powerful contributions to the state economy.

Nearly every aspect of our lives is touched by biotechnology. Many of its discoveries and products are made in North Carolina, where it contributes $59 billion to the state’s economy each year — second only to agriculture — and supports 237,000 jobs. It has established an important role, but economic and political changes have affected how the industry’s business gets done. What role will biotech play in North Carolina’s future? What does it need to get there? Business North Carolina recently gathered a panel of experts to answer these and other questions.

Participants:
Steve Butts,
president and chief operating officer of Morrisville-based Aerial BioPharma LLC
Lawrence DeGraaf,
director of worldwide business development transactions for England-based GlaxoSmithKline PLC
James Hayne,
shareholder and technology and life-sciences practice leader at Greenville, S.C.-based accounting and consulting firm Elliott Davis LLC
Phil Hodges,
manager of Nano Ventures LLC and founder of Greenville-based Metrics Inc.
Machelle Sanders,
vice president and general manager of Cambridge, Mass.-based Biogen Idec’s manufacturing plant at Research Triangle Park
Kenneth D. Sibley,
shareholder at Raleigh-based law firm Myers Bigel Sibley & Sajovec P.A.
Eric Tomlinson,
chief innovation officer at Wake Forest Baptist Medical Center, president of Wake Forest Innovation Quarter and physiology and pharmacology professor at Wake Forest University School of Medicine
Michael Weeks,
U.S. registration manager at Bayer CropScience, which is part of Germany-based Bayer AG
E. Norris Tolson,
president and CEO of the North Carolina Biotechnology Center and moderator of this discussion

It was hosted by the center, which joins Biogen Idec, Elliott Davis, GlaxoSmithKline, Myers Bigel and Wake Forest Innovations as gold sponsors. Denmark-based Novozymes AS also provided support. The following transcript has been edited for brevity and clarity.

How does being in North Carolina benefit biotech companies?

Weeks: N.C. State University is one of the top U.S. land-grant universities doing agricultural research, and there are two other fine universities in the Triangle. They produce the skilled workers that companies need. Bayer CropScience works with many Tar Heel growers who are eager to use its innovations in their fields and businesses. North Carolina also is a fantastic place to live, making it easy to recruit and retain talent.
Sibley: The universities support many disciplines. The ag-biotech industry isn’t just plant biotechnology; it covers many industries. The veterinary school and entomology programs are important, too. Durham-based Advanced Animal Diagnostics Inc., for example, needs workers trained in chemistry, biology, animal science and computer science.
Sanders: Biogen Idec started its operations here largely because of opportunities to partner with universities and the talent they provide. Since it opened in the 1980s, the North Carolina Biotechnology Center has made the state a leader in the industry. It is the No. 3 employer in the state. North Carolina is where companies collaborate and innovate. With the right policies, the industry will develop further.
Hodges: I started Metrics in Greenville in 1994 after leaving Research Triangle Park-based Burroughs Wellcome Co. Many people asked if I could be successful there. I believed I could. East Carolina University trains a workforce there just as Triangle universities do for RTP. But I had Greenville mostly to myself. Workforce was key.
DeGraaf: Just like most companies have over the past few years, GSK has examined its costs, searching for efficiency. We want to collaborate with innovative companies that do things smarter, quicker and cheaper than GSK. To do that, we develop partnerships with North Carolina-grown companies. There are plenty of them. The world — specifically science — is changing quickly. We recognize that we don’t know everything. There are many smart scientists with better ideas out there.

What do biotechnology companies need to keep growing?


Butts: The first need is attracting and developing more operators, people who can start and grow companies. I see them most often on the West Coast and in the Northeast. Operators could help scientists here translate their research into businesses. But they need funding. Folks usually ask about funding first, but I think funding follows good ideas, good operators and good management teams. The second is the Qualified Business Venture, a state program that allowed investors to take about half of their investment in the first year as a tax credit. Unfortunately, it ended Dec. 31. Aerial BioPharma LLC was a QBV. That gave us momentum. If investments can be encouraged through incentives, companies won’t need more government money. There’s a lot of private money on the sidelines. Let’s figure out what motivates investors to put their money in Tar Heel companies.

Hodges: Last year I was raising money for a QBV, and it was hurry up and finish by Dec. 31. I explained to several politicians that it’s crucial because it made investors excited about North Carolina companies. I hate to see that disappear.

Hayne: Many of our tax clients participated in the QBV program, as investors or as companies seeking funds. There was a huge push at the end of the year to close deals. Some of them took till the last day. For others, Dec. 31 was like a cliff, and they lost momentum when their deal went undone. The state also needs a friendlier business-tax environment. The corporate- and personal-income tax rates did drop this year. That helps, but more is needed. There’s competition from neighboring states that also see biotechnology as part of their future.

Tomlinson: I believe that management needs to work alongside innovative scientists and the folks who translate their inventions into worthwhile technologies that companies such as GSK can develop. That is the train that Wake Forest is riding. There is so much application in the laboratory phase of regenerative medicine that something significant is going to happen. We recently announced the $75 million Wake Forest Wounded Warriors Grant, which will fund research of technologies that will help injured soldiers and eventually civilians. It will unleash a legion of technologies at Wake Forest and other universities across the country. The grant represents a change in business because now it’s about looking for capital outside traditional sources. Wake Forest has 1,000 faculty members, about 250 of them are scientists, and their focus is engaging new sources of financing and different industries, whether it’s medical technology, biologics or regenerative medicine. Wake Forest sends many of its folks to conferences and companies to understand how this change in funding will affect the university.

How should biotechnology companies work with schools? How will they benefit?

Sanders: Biotech companies need to support, fund and provide infrastructure to train a workforce, specifically science, technology, engineering and math — STEM — education. A talented workforce with critical and analytical, problem-solving and soft skills is needed. That workforce is vital to Biogen Idec. We have the talent today, but will we still have it in five or 10 years? Will we have graduates who are able to deliver the cutting-edge science and technology required? And, most important, are there students in high school today who will eventually help us provide the therapies and cures for the debilitating illnesses that affect so many people? They are the workers Biogen Idec wants. Encouraging children to ask questions and be excited about the possibilities needs to start as early as pre-K. Biogen Idec believes that STEM education is critical to meeting its long-term workforce needs. We opened a community lab at our RTP manufacturing plant. A qualified teacher, who will design and create experiments, staffs it. It’s where science is cool, and children have the opportunity to learn a variety of things. It’s our commitment to early science education and STEM. It also is a way to pay forward the excitement others shared with us.

DeGraaf: Many places in the country have access to funding and other necessities, so North Carolina has to find ways to differentiate itself. We need to make science cool, because it’s not seen as cool. We need to invest earlier in students’ careers. By just focusing on high schools, which is typical of today’s approaches, you’ve already lost many students who could become great scientists. I’m doing everything I can to engage my daughters, age 10 and 13, in science. We need to let younger students experience its excitement. But that requires teachers who can provide that spark. More than 90% of North Carolina elementary-school teachers have liberal-arts degrees. We need more teachers who love science and math and can make them exciting. We need them in middle and elementary schools as well as high schools. We need to pay close attention to STEM education. GSK recently made a $10 million grant to North Carolina New Schools, a public-private partnership that brings schools and companies together to train educators. We need smart, highly skilled workers, and we’re going to continue to need them well into the future.

Sibley: Workers need soft skills. They are an important part of building collaborations and management teams. My colleagues and I write patent applications for inventions. The popular notion is that we receive them completely described in writing or inside a little black box, only needing to jot down what we see inside. Neither are the case. Most inventions are at a conceptual stage when we first see them, and the quicker we can bring clients, management and business developers together to decide what that product or service will be the better intellectual-property position we can create for them.

How can North Carolina be more inviting for biotechnology entrepreneurs?

Butts: That’s a tough task because there’s no playbook. It’s important to create an environment that is friendly and supportive, such as the guidance available from the biotechnology center. Much of it comes back to having the right people along the way to steer them in the right direction. That gets back to building better management teams and having experienced entrepreneurs support those just starting. It also includes using new funding formulas. When I talk to people who want to start a business, they say, “I need to go out and get venture capital.” That’s difficult, because there is less venture capital and fewer venture-capital firms today. It can be disheartening to hear venture capitalists describe how many business plans they receive and how difficult it is to make the model work. Entrepreneurs must understand that funding alternatives exist. My company has pulled together significant amounts of capital from family offices, wealthy individuals and foundations. Entrepreneurs don’t have to travel the traditional venture-capital route to be successful.

Hodges: I’ve been asked countless times: “How do I duplicate what you did at Metrics?” Well, you can’t. I did that. It’s a tough thing to pull off at the ground level, finding the people who have the spark and ability to make a dream a reality. There were programs on how to encourage entrepreneurs, but it’s all about finding the person who’s bored at his job, knows how to do something and just needs some support to get out and try it. I left a great job at Burroughs Wellcome. People asked if I had lost my mind. But in the end, I went from idiot to visionary overnight.

Tomlinson: There is much opportunity in North Carolina for people to step out on their own. It has been well-documented, and it’s because of the value hidden or not acted on within Tar Heel companies. The Biogen and Idec merger, for example, exposed some of that value. The Wake Forest School of Business’ entrepreneurship program works with students and entrepreneurs. They come into our commercialization arm, Wake Forest Innovations. It started seven companies in the last 12 months in addition to helping entrepreneurs work on licensing deals or startups. We also are vigorously funding entrepreneurs in residence at the university. They’re from Winston-Salem, this state and others. They tell it as it is. We learn from them. You certainly have to be able to reach the outside, but what we’re trying to do is be disruptive and make sure the value that’s locked inside the university and the medical center sees daylight.

Weeks: Agriculture is an entrepreneur’s game, so it’s a great breeding ground for companies and ideas. Many small ag-biotech companies have great ideas and solutions to growers’ problems that are fundamentally different from traditional models. As we search for solutions, whether they are biological or traditional chemical crop protection, seed or trade, we will keep reaching out to other companies.

Tolson: The biotechnology center’s BATON program matches a CEO to an innovator; it has helped about 35 companies in the last four years. They don’t all make it, but some do. The center makes a small inception loan — $35,000 or $40,000 — to an entrepreneur who then can leverage that money 10 to 15 times through the center’s network of industry connections. Much time is spent coaching, counseling and helping them understand that they may not be the best CEO for their business despite it being their idea. We also help link them with lawyers who can deal with their IP challenges.

How can biotechnology companies leverage other industries for growth?

Tomlinson: There will soon be more than 3,000 employees at Wake Forest Innovation Quarter, the downtown Winston-Salem research park. It has biomedical science, materials science, biomechanical engineering and information technology plus a workforce-development component. It’s where all those disciplines can integrate. In terms of economic development, every new high-tech job creates five service jobs, from physicians to car mechanics. The other aspect is — particularly for Winston-Salem — that the number of equivalent jobs in growing cities are two to three times more than in a city that is stagnating or regressing. It makes sense to be innovative. Wake Forest is investing heavily in translating ideas and inventions into investment-ready technology. We are enabling professional-investment teams to come into the university or the medical center to be close to what’s going on. The university has six innovation facilitators — MBA and Ph.D. folks in, for example, medicine or nanotechnology — embedded in different departments. They build business cases for technologies, synthesize ideas and open investment in approved concepts and prototypes. Their work is milestone-based, which is different than the typical university course of action, which has been here’s your grant, and let us know when you have data. That cultural change is paying dividends. We’re active, finding what companies want or need, what their interests are and engaging them through normal business development. We’re being deliberate about IP. We have 750 invention disclosures. What do we do with them? We can’t afford to prosecute to market all of them, so we have to analyze the business opportunity of each early on and decide which merit further attention. At least once a month an entrepreneur comes to us needing $5 million to launch his $1 billion opportunity. We help them refine their business plan, define the opportunity and address IP concerns. Some of them return with requests for maybe $200,000.

Sibley: People might think it’s better for lawyers to have more patent applications. But a big part of a patent lawyer’s work is bringing ideas into focus. Unfortunately, the way the statute is set up, you can’t do that by shortchanging patents at the start. There are ways to narrow them down as time goes on, but that takes a collaborative effort. One of the most prominent judges in the early 1960s said that betting on patents is like betting on horses: Very few win, but those that do make it interesting.

Hayne: We see a lot of blending of industries. Biotechnology is the recipient of innovation in semiconductors and IT such as greater computing power and advanced modeling that can help sort through innovations to find the most promising ones. It all flows together. I do a fair amount of workforce recruiting at universities, and I see the joint-degree programs that are now available, such as pairing business school with technology courses at undergraduate, master and Ph.D. levels. That blending teaches students how to interact, communicate and work as a team. The availability of technology today has the potential to make them introverts, but them — computer-science, biology and other majors — working together is a positive thing for the future.

DeGraaf: Some of GSK’s largest investments are being used to examine its footprint. Companies will either collaborate or die. There isn’t much of a choice. That perspective has challenged our company’s culture, but it has unleashed lots of innovation. Our RTP research-and-development center, for example, has been reconfigured. It no longer has offices. Employees work together at tables in open spaces. GSK also has organized small R&D teams — Discovery Performance Units — and they compete for funding. Each unit focuses on a target, pathway or approach to a problem. They present a business plan every three years, when they compete for funding. Some live. Some die. We feel this approach recognizes milestones and allows success to be measured. Research must be focused on an endpoint. It’s not a done deal yet, but GSK is talking with a local university and a big pharmaceutical company about a joint venture at that university’s labs. It’s aimed at a health problem that GSK can’t solve on its own because of issues such as IP or research that would take it in a different direction.

Where can universities and biotech companies work together?

Weeks: Bayer CropScience needs the universities, and the universities need it. In agriculture, N.C. State is the trusted voice of the growers. The U.S. Land Grant system’s agricultural-extension program has done much for rural America. It’s how Bayer CropScience reaches its customers. It ensures our innovations are the products that we say they are. University labs often lack capacities — legal, regulatory, whatever it may be. Those are places where companies can help.

Sanders: It’s important for universities to understand the challenges companies face and vice versa. That sets a platform for collaboration on common challenges. Biogen Idec, for example, has seen its supply chain for commercial and other products become complex. We collaborate with N.C. State through its supply-chain consortium to build capabilities and uncover improvements to get products to patients anywhere and on time. Some societal problems are bigger than one entity can solve, so Biogen Idec collaborates with universities and other companies. Sometimes putting different ideas and perspectives around one table is the best way to expedite solutions. That, whether it’s with the health-care industry or a university or other providers, can solve huge problems such as developing cures, data sharing, big data and data management. Collaboration may be the way for North Carolina to remain a leader in innovation.

Hodges: Metrics helped ECU ensure that some of its graduates had a knowledge of the pharmaceutical industry. We secured a grant for a course about analytical chemistry used in good manufacturing practice. Chemistry majors who took the course, which takes about three months, might not know everything about every scientific technique they learned, but they learned a little bit about each, and they learned how to develop an experiment. Metrics hired
a lot of chemists out of that program. There are other types of specialized help that startups could find at universities, which know how to spin out a startup. But is there a way that a guy with an idea can be part of a university, especially in regards to IP? That can financially break an entrepreneur, but universities can afford it.

What’s needed to develop a workforce for the industry?

DeGraaf: There needs to be more guidance when it’s time for students to think about college and job training. Not everyone needs a four-year degree. There are great jobs that don’t require those skills. Enrolling at Wake Technical Community College in Raleigh and earning a biotechnology degree, for example, can give a graduate in-demand skills and lead to a rewarding career in advanced manufacturing. We need to make these other paths more acceptable.

Tolson: If you wait until they are seniors in high school, you’ve waited too long. It’s important for people who hear these stories to help us tell them. Then it gets home to parents, and they need to hear these stories. North Carolina owes the biotech industry a huge debt of gratitude for its involvement in education.  They’ve benefited from that, of course, because they get the workers they need, whether it’s in their manufacturing plants, laboratories or executive suites. Those companies step up when asked and continue to improve the education system in the state.