As life sciences sector grows, so does the need for capital

2013-02-22 16:05:34

By Stephen T. Watson

Updated: January 27, 2012, 6:08 PM

IMMCO Diagnostics, founded three decades ago, has a manufacturing facility and offices in Amherst, but is moving its testing services to the Innovation Center on the downtown Buffalo Niagara Medical Campus as part of a company expansion.

Medical Acoustics was formed in 2002 on the basis of its “lung flute” technology for the treatment of chronic obstructive pulmonary disease. The company is in incubator space at the Innovation Center but looks to hire more sales people, clinicians and engineers in 2012.

And Empire Genomics, which in 2006 was spun off from research conducted at Roswell Park Cancer Institute, expects to become profitable later this year.

These three companies, all at different stages of development, together serve as a snapshot of the region’s life sciences sector.

The region has a lot riding on the biotech industry, with millions and millions in public and private money invested in basic research and commercialization efforts.

“I’m a huge Buffalo backer, and I love what’s happening here in the corridor,” said William J. Maggio Jr., from the medical campus offices of IMMCO Diagnostics, which he joined in 2005. He has served as president and CEO since 2010.

Officials connected to the industry say Buffalo Niagara offers low overhead costs and access to top-notch scientists, along with the critical mass of researchers and spin-off companies gathering on the city’s medical campus.

However, the region lags in finding investment capital and, sometimes, executive talent for the companies. Life-sciences boosters say the year ahead will bring new efforts to address those interconnected issues.

“Talent begets money begets talent,” said Marion “Marnie” LaVigne, director of business development for the state Center for Excellence in Bioinformatics & Life Sciences.

The Buffalo Niagara region is no San Diego or Boston when it comes to national rankings of the biggest life sciences hubs.

This region adds about five to 10 new biotech companies each year, though it also loses some existing companies, she said.

Buffalo Niagara Enterprise said 6,500 people are employed at the region’s 130 companies in this sector.

“I think Buffalo’s as good a place as any to start a business,” said Anthony Johnson, president of Empire Genomics.

Government, academic and business leaders have looked to life sciences as a key potential growth industry for this area.

Boosters say biotech is an ideal fit for this region given the presence of the University at Buffalo and other colleges, as well as all the hospital and medical research centers. LaVigne said half to two-thirds of life-sciences companies located in this area spun off from research conducted at those institutions.

So, biotech officials say, the foundation of innovative ideas is here, but the harder parts are raising enough money and finding the right business executives to help a spin-off company get off the ground and get a product to the market.

This region has a number of angel capital investors—people who invest in a company on an individual basis, or as part of a loose group of investors.

But the area doesn’t have as much available venture capital, which typically comes from funds that invest in companies as part of their main business strategy and that often are unwilling to risk putting money into an unproven company.

“The capital has been one of our big issues,” LaVigne said.

Last June, organizers held the third-annual Bright Buffalo Niagara investment conference, which saw representatives of more than 50 companies make sales pitches to an audience of investors and business officials.

At this year’s forum, La- Vigne said, the emphasis will be on getting more venture capital investors involved and getting them to commit money earlier in the companies’ development.

The state and federal governments also are beginning to work to encourage commercialization of basic research.

New York received a $25 million pot of money from the federal government to parcel out as equity capital in seed-stage companies across the state. The money, in chunks of as much as $750,000, should begin to be be handed out by the end of the second quarter, LaVigne said.

After finding the right idea, and the investment money, the third component is finding executive talent. Officials said the scientist who conducted the research isn’t always the best person to run the business.

“We don’t have these people just walking the streets of Buffalo, so we need to find them,” LaVigne said.

Launch New York, modeled after a program used successfully in Cleveland, will hire entrepreneurs- in-residence to assess a start-up company’s likelihood of success, mentor the founders of the company and identify other executives who should be hired by the company.

Launch New York’s founders plan to raise $5 million to fund the project, with another $5 million coming from JumpStart America, an outgrowth of Cleveland’s JumpStart Inc.

At IMMCO Diagnostics, Medical Acoustics and Empire Genomics, executives say they believe 2012 will bring continued growth and expansion.

IMMCO Diagnostics in February 2011 relocated a former laboratory division of Upstate New York Transplant Services to the Innovation Center.

That IMMCO unit performs tests to determine the highest probability for a match between an organ donor and recipient.

Maggio said IMMCO also is moving its diagnostic serology and pathology testing services from its facility on Pineview Drive in Amherst to its space in the Innovation Center.

Manufacturing operations will stay, and expand, at the Amherst location, as will research and development and administrative functions, Maggio said. The company has 125 employees now, but in 2012 could add up to 15 employees at the Innovation Center and up to 15 more at Pineview Drive.

IMMCO Diagnostics manufactures diagnostic kits that are used in the testing of blood, skin or tissue samples and shipped to hospitals, research centers and laboratories.

The kits are used in the testing of autoimmune diseases such as celiac disease, Crohn’s disease and multiple sclerosis.

The company also does some testing itself, using its own diagnostic kits, of samples taken from patients for doctors, hospitals and national labs. And its contract research division conducts testing as part of clinical trials required for the approval of new drugs.

“I think the future of our industry is very good,” Maggio said.

Frank Codella in 2002 cofounded of Medical Acoustics with Sandy Hawkins, inventor of the “lung flute.” The device is used in the treatment of chronic obstructive pulmonary disease, or COPD, such as chronic bronchitis or emphysema.

Users lightly blow through a mouthpiece, over a reed, and a low-frequency sound wave stimulates the thinning of sputum so that patients can cough and clear these secretions.

In this country, most of the patients with COPD are former smokers, but in other, Third World countries, people develop COPD through burning wood, dung and other materials, Codella said.

“We built the company to be global, because COPD doesn’t know any borders,” he said.

Medical Acoustics out-sources the production of its lung flutes to Polymer Conversions in Orchard Park and distributes the flutes through third parties.

The company has six employees at the Innovation Center and two at offices in Clarence and hopes to hire eight more employees in 2012, depending on sales growth.

Empire Genomics grew out of research conducted by Norma J. Nowak, now director of science and technology for the bioinformatics center.

The company uses genetic tools to develop better, non-invasive tests for cancer and hard-to- diagnose forms of Down Syndrome and markers for autism.

Empire Genomics works with groups developing pharmaceutical drugs to determine the best treatment approach for each patient, Johnson said.

Empire Genomics has nine employees, including Johnson, who since the beginning in 2006 has been CEO of the company, which is located on Michigan Avenue in the Western New York Medical Arts Building on the medical campus.

The company hopes to open a clinical lab so that it can begin processing patient samples and giving disease diagnoses itself. Empire Genomics hopes to hire five to 10 employees for this clinical lab and the company’s clinical trial partnerships.

“We expect to continue our growth,” Johnson said.