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Already, Scripps helps biotechs

The biotech research institute has found "hidden gems" in Florida, illustrating what might come in the future.

By KRIS HUNDLEY
Published February 23, 2005

Russell Kerr was a chemistry professor at Florida Atlantic University's Boca Raton campus, anxiously planning the launch of his first company.

Mark Emalfarb was running Dyadic International, a successful biotech that had been in Jupiter for 15 years but was scrambling for investors.

Both men saw their situations improve dramatically after they hooked up with faculty from Scripps Research Institute soon after news of its expansion to Florida.

In K.C. Nicolaou, a renowned Scripps chemist who has started five companies, Kerr's Tequesta Marine Biosciences got a partner with scientific expertise and supreme self-confidence.

With Scripps' president Richard A. Lerner as head of its advisory board, Dyadic won immediate entree to the financial community, allowing it to go public and raise more than $32-million last year.

"Florida has had an orphaned biotech industry," said Emalfarb, who endured years of blank stares and unreturned calls from investors. "When Lerner and Scripps turned up and started sniffing around, they found hidden gems."

Dyadic and Tequesta are early examples of the informal effect Scripps' expansion from La Jolla, Calif., has had on Florida's anemic biotech industry. They are the first inklings of the Midas-like transformations Gov. Jeb Bush predicted when he recruited Scripps to the state with more than a half-billion dollars in public money.

These two cases also illustrate how the complex process of technology transfer (the commercialization of research discoveries) plays out in the real world.

Lerner caused a minor brouhaha in late January when he told a conference of venture capitalists that Scripps would not open a tech transfer office in Florida, but would consolidate that activity through its La Jolla office.

The next day, a Scripps spokesman retracted that statement, saying the institute would have a Florida office for tech transfer as soon as the volume of work here merits it.

Scripps is moving about 40 scientists into temporary labs on Florida Atlantic's Jupiter campus while awaiting construction of a permanent campus elsewhere in Palm Beach County. On Tuesday, Scripps announced a seminar series, beginning in late March, intended to foster collaboration among its investigators and scientists at other Florida universities.

Rhys Williams, a partner with Kerr and Nicolaou in Tequesta Marine Biosciences and its chief executive, was at the venture capital conference in January when Lerner made his comment and had a mixed reaction.

"Tech transfer offices are very expensive to set up, so if you can do it from one location, you probably should," he said. "On the other hand, it's so important to deal face to face."

That's how Tequesta came to have its critical Scripps' connection.

Kerr, the Florida Atlantic professor, had spent about a dozen years looking for ways to replicate in the lab a molecule found in coral reefs that's used in anti-inflammatory drugs. By late fall 2003, he and his researchers had reached a point where their lab discoveries could be commercialized.

Kerr met Williams, a former venture capitalist with SI Ventures in Fort Myers, at the launch of Florida Atlantic's Marine Center of Excellence, which Kerr directs. The two began discussing business possibilities.

A few weeks later, those discussions were given a jump-start. Scripps said it was coming to Florida and Scripps' Nicolaou took a tour of Kerr's lab. "He sat down in my office and said, out of the blue, "Russ, I think you and I should start a company together,' " said Kerr, who quickly brought Williams into the discussions. "(Nicolaou's) thing is producing molecules by chemical methods, and I produce them by biological methods. We both saw an obvious marriage to combining these approaches."

Nicolaou, who is chairman of Scripps' chemistry department in La Jolla, said, "What I saw in Russ' research was what I was missing in mine and vice versa. The complementarity of our expertise and research activities is a powerful mix for discovering new science and inventing new technologies."

Williams, who has headed three early-stage companies, said Nicolaou brought Tequesta a bolder scientific vision and an ability to make things happen.

"Maybe Kerr saw the core chassis of his molecule as a Lexus, whereas K.C. Nicolaou saw it could be a Maserati," Williams said. "Plus you get the impression the Scripps' people work 24-7. We discussed one concept and they turned it around in a week, having thought through all the angles. I'm not convinced we could have had the same results anywhere else."

Williams, who is working to secure grants so Tequesta can complete its development work, said there was one downside to bringing in a partner as experienced as Nicolaou.

"These scientists have been around the block and they are exceptionally good negotiators," said Williams, who hammered out the co-founders' agreement and joint investment of $100,000. "That's not to say it was necessarily easy, but it was direct, honest and competitive and we all got a deal we were happy with. But it probably would have been easier for me to deal with folks who were less experienced."

Up the road in Jupiter, Dyadic International had experience and revenues, but was desperate for greater visibility among the investment community. For years, Dyadic had been helping apparelmakers give their fabrics a stone-washed finish, initially by supplying pumice stones, then by manufacturing a proprietary enzyme or fungus that produces the same look.

"Like the fungus, we've evolved," said chief executive Emalfarb, who said Dyadic had sales of $16.5-million in 2003 to industrial users like jeansmakers and paper manufacturers.

About six years ago, Emalfarb started exploring the application of his company's technology to drug development.

"One of the biggest challenges in drug development is making enough protein to test antibodies," Emalfarb said. "We're working to refine our fungus so we can make large volumes of proteins affordably, which will open up the pipeline for making more drugs at lower cost."

Emalfarb, frustrated at the lack of interest from investors in Florida biotechs, was thinking of leaving the state when he heard Scripps was coming to Palm Beach County. He immediately called Lerner, an eminent chemist whom Emalfarb calls "an antibodies guy, a guy right in our sweet spot."

His pitch intrigued Lerner enough to land him a meeting in La Jolla. A few months later, after Lerner and his associates had reviewed the company's technology, Lerner agreed to lead Dyadic's scientific advisory board.

"It takes time for them to get to know you," Emalfarb said of the Scripps' review process. "This is South Florida, after all. There are a lot of flimflams."

Once Dyadic received Lerner's imprimatur, however, doors started opening. Four investment funds helped the company go public through a reverse merger, raising money that will allow the company to continue refining its enzyme-producing process.

Lerner's connections have given Dyadic access to top scientists around the world.

"He can get on the phone and call the brightest researchers in the world," said Emalfarb, whose company has about 90 employees and an equal number of scientists working on contract at universities around the world. "We can work together to develop the holy grail of fungi. We're making great strides, but we're not there yet."

Kris Hundley can be reached at 727 892-2996 or hundley@sptimes.com

[Last modified February 23, 2005, 00:34:19]