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Bio-tech startups in the bay area cope with bare-bones labs and a paucity of investors

By Madhusmita Bora, Times Staff Writer
Published April 1, 2007


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For two months now, Gitimoy Kar has been scouring to add three employees at his bio-tech start up.

The requirements are simple: experience in bio-tech, a passion to raise a fledgling enterprise, and willingness to work for a modest sum.

So far Kar hasn't been successful.

"It's not always easy to find people willing to take risks," said Kar, a chief operating officer at Transgenex Nanobiotech Inc.

That's the least of Kar's worries.

Transgenex, like other nestling biotech companies in the Tampa Bay area, is also battling inadequate infrastructure and elusive funds. Without investors, they can't pay for expensive experiments, buy lab equipment or fly in prospective employees from different parts of the country.

The company's laboratory at the Tampa Bay Technology Incubator at University of South Florida sports a vacant look.

There are no intricate lab devices, bio hoods or scientists in lab coats conducting chemistry experiments.

Instead, Transgenex has to contract much of its work to USF. The company uses the university's better-equipped labs outside the incubator for developing nanoparticle platforms for diagnosing and treating diseases such as cancer and asthma.

About 80 percent of the funds that Transgenex raises is devoted to research and development; most of that money now goes to USF.

"The quest for funding is a never-ending battle," said Nicole Luzmin-Nichols, senior vice president for corporate development and operations at Saneron CCEL Therapeutics Inc., a firm in the race to lure investors. "Geography is part of the reason."

Some companies such as Intezyne Technologies and Nanopharma Technologies Inc., also located at the USF incubator, have been successful in raising money through individual investors.

"We fortunately have not had that problem," said Rebecca Breitenkamp, co-founder and CFO at Intezyne.

The company hasn't approached angel investors or venture capitalists yet, but has been able to raise enough capital to expand their lab space, buy equipment and add employees.

"It's not all gloom and doom," Breitenkamp said.

She's right if you look at national statistics.

Nationwide, venture capital investing hit a five- year high last year, touching $25.5-billion, according to the MoneyTree Report by Pricewaterhouse Coopers and the National Venture Capital Association. The Life Sciences sector, which includes bio-tech and medical devices industries, raised $7.2-billion in 731 deals compared to $6-billion and 647 deals the previous year. Florida's share last year was $4-million spread over three deals, earning the Sunshine State the 30th rank in the country.

The state's location has been a problem, said Mark Heeseen, president of National Venture Capital Association.

"Investors like to be closer to their investments and they live in California and Boston," Heeseen said. "They have to have a very compelling reason to get on a plane to Florida."

The funding drought is more prominent for early-stage companies, said David Day, director of technology licensing at the University of Florida.

"There's a terrible shortage and the problem is the companies haven't advanced to a point where investors are willing to invest," he said.

Since its launch in 2002, Transgenex has pitched its work to numerous funding companies. So far, the company has strictly relied on federal and state grants and monies from the Florida High Tech Corridor.

"Not once but several times, we've been asked if we've considered moving to Boston or California," Kar said.

But the founders are USF employees, and they are wedded to the area.

USF officials stress it's not all about location.

"Finding funding for bio-tech is never easy," said Rod Casto, associate vice president for research and economic development at USF. "It's not the technology that gets a company funded, but its management team. In my opinion too much has been made out of the regionalism advantage."

So, what do venture capitalists look for?

Quality of scientists, market opportunities for the technology, and the company's intellectual properties are some of the key elements that pique their interest, said Garheng Kong, a partner at Intersouth Partners of North Carolina, which invested in two Florida companies last year.

"At the early stage, the quality of scientists is most important," Kong said.

Robin Kovaleski, executive director of the Florida Venture Forum, said her group always encourages companies to get their elevator speech right.

"You have to be able to tell quickly what you do," Kovaleski said.

Kovaleski and others say the arrival of new research centers by Scripps Research Institute and the Torrey Pines Institute for Molecular Studies in the Palm Beach area and the Burnham Institute in Orlando will help lure more investors into the state.

"I think it bodes well for the state," she said. "There will spinoffs, and tech transfer initiatives."

Such optimism, however, has yet to rub off on companies such as Transgenex.

"The challenge is really to survive in this area for the next several years," Kar said.

What startup executives are saying

Transgenex Nanobiotech Inc.

Developing nano-particle platforms to diagnose and treat diseases.

"The challenge is to really survive for the next several years in an area where it's difficult to attract investors and there's lack of appropriate infrastructure."

Gitimoy Kar, COO

Nanopharma Technologies Inc.

Researching and developing new antibiotics and biomaterials to treat and prevent drug-resistant hospital infections. It's also developing antibioterrorism agents against anthrax and seeking new anticancer therapies including designing nano-sized vehicles to provide improved antibiotics passage to infection sites.

"Compared to other states, this area is in the early stage of developing bio tech ... I couldn't find any American investors."

Seyoung Jang, CEO

Saneron CCEL Therapeutics Inc.

The company focuses on neurological and cardiac cell therapy for early intervention and treatment of several diseases.

"The quest for funding is a never-ending battle. Geography is just a part of the challenge."

Nicole Kuzmin-Nichols, senior vice president, corporate development and operations.

[Last modified March 30, 2007, 19:58:39]


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