It is 11 a.m. on Wednesday and there’s a fire under my feet.

My MidwestBusiness.com editor, Adam Fendelman, has asked for this column by 1 p.m. As teenage parlance would go, I need to “get busy”!  Adam is a great editor. He gives me writing freedom and edits gently yet masterfully. He runs a tight ship, too, and if people don’t deliver, he’s not happy. While this column usually appears biweekly, the topic of putting a fire under biopharma and medical tech development justifies a double dose this week. What will it take to accelerate biopharma and medical technology development? What kind a fire can we light under the feet of already highly motivated clinicians, scientists, investors, government and business folks? Is there more we can do?

A related problem is the relative dearth of biopharma initiatives in Illinois and the Midwest. Of course, we have Abbott Labs and Baxter along with GE Healthcare up in Wisconsin and Eli Lilly down in Indianapolis. Certainly there is no dearth of start-ups in the area as well. More than a year ago and right after the mega BIO 2006 conference in Chicago, I wrote a column about the Midwest as innovation central. Even so, most people will cite San Francisco as the nation’s focus for biotech while route 128 outside Boston, the Research Triangle in Raleigh-Durham and the pharma alley in New Jersey remain recognized leaders in the life sciences.

Accelerating Life Sciences Development

Even these storied bastions of biopharma and medical technology still grapple with the innovation gap problem written about on Tuesday. I’ve also previously written about how the private equity boom has potentially shunted funds from early stage innovation, in agreement with others such as professor Gary Pisano of the Harvard Business School about how conventional venture funding paradigms may not fully meet the needs of fledging biotech businesses and about the need for new business models to accelerate development.

I have mentioned how efforts by groups such as Michael Milken’s FasterCures organization could potentially help accelerate the path to cures and solve such problems as the innovation gap. Even FasterCures – with millions of dollars from major players such as the Gates Foundation and the Sumner Redstone Charitable Foundation – has accomplished little with its millions.  FasterCures apparently hasn’t given a speech since January and its last posted publication was in Oct. 2005. Its most recent president’s letter was issued last fall, which was cloaked in an underhanded way as a politicized critique of the war in Iraq. While Iraq is an important issue, let’s not confuse our priorities. It’s easy to be negative. Here’s where the fire under my feet is leading me. I would like to share with you a proposal to help accelerate biopharma and medical technology development in Illinois. Because the problem is so deep and so important, Illinois making headway on a solution can effectively position the state to lead the nation.

Bridging the Innovation Gap with new business models

In Tuesday’s column – a Memorial Day parable headlined “The ‘Innovation Gap’: Preventing Ideas From Untimely Deaths” – it was pointed out how the innovation gap constitutes the rate-limiting step in the path from bench to bedside and from fledging idea to saving lives. Tuesday’s column also discussed how conventional “incubator” models may not completely solve the problem.  For one thing, a business model built around extracting rents from cash-strapped start-ups has its challenges.

While many incubators are quite successful – there are about 1,500 business incubators operating in North America, according to National Business Incubation Association CEO Dinah Adkins – there may be significant incentives for fledging tenants not to leave and to move along at a slow enough pace to ensure a comfortable rental income stream. Please don’t get me wrong. Dedicated entrepreneurs in the life sciences are among the most highly motivated people on the planet. This is not a critique of them. Still, when the system is stacked against you, even a will of Arthur Schopenhauer proportions is but a whimper in the silence.

The Life Sciences Accelerator

In the Memorial Day column, I hinted at a new model for life sciences development: a life sciences accelerator. The concept would involve several components that have been developed in greater detail in previous columns. Let’s outline these in more detail:

1.      Development of a highly functional laboratory facility that is partly subsidized by a combination of government funding, philanthropic donations and/or simply buying into existing facilities at a low cost.

2.      The presence of an in-house contract research organization (CRO) that would help service the needs of accelerator tenants but would also have external clients so the business alone would be viable in its own right. The CRO would also manage most of the equipment in the facility and offload these tasks from the tenant companies.

3.      A management company within the facility that would provide operational management expertise to the tenant companies. In this regard, it would be important to select the companies in such a way that conflicts of interest would not arise. If so, management resources would need to be realigned.

4.      This life sciences accelerator facility would offer below-market rental rates to its start-up and development-stage tenants. In return for subsidized rent, the management company would be granted a certain degree of non-controlling equity in these tenants. Because of the combination of low rental rates and high-end facilities, the accelerator would experience high demand for its space and allow it to be selective about its tenants and aggressive about moving tenants out.

Here’s the kicker. Even though the management company would not have a controlling interest in its tenants, it still would determine whether its tenants stay or go.

Like the “up or out” philosophy that has worked so well with the blue-chip management echelons of GE and the competitive brilliance of McKinsey consultants, companies would have to reach aggressive milestones or find somewhere else to putter along. While this may be cruel, ultimately by accelerating biopharma and medical technology development lives will be saved.

Is this pace-setting life sciences accelerator based in Illinois just a dream? I wouldn’t be writing about this unless there was a specific plan in the works. If you are interested, please e-mail me.

As it’s now 11:45 a.m., I’m ready to hand this off to Adam. It’s nice to see what a little fire can do. I look forward to your calls and e-mails.

Ogan Gurel, MD MPhil
gurel@aesisgroup.com
http://blog.aesisgroup.com/

Innovation Life Sciences Accelerator Excellerant Incubator Illinois Aesis Research Group Ogan Gurel MD