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Fledgling biotechnology sector gains momentum

It wasn't that long ago, Jim Hengst recalls, when the business he leads was one of the only biotechnology firms in Buffalo. At that time, a technology company locally meant the likes of Greatbatch or Moog.

Today, he has plenty of company. And even though they could be potential competitors, he's happy to see it.

That's because after many years and millions of dollars of investment in infrastructure, technology, research and marketing, Western New York is starting to develop the biotechnology cluster that economic development boosters have long touted as critical for the region's future.

"You're starting to see some smaller companies sprout up here and there," said Hengst, president and CEO of ZeptoMetrix Corp., which makes viruses and test kits for research. "It's definitely happening. There's going to be more that needs to be done. But I think things have worked so far."

Since 2001, about 30 start-up companies have emerged in the region, while older firms have expanded or moved into the area. That's created about 1,200 new jobs in the biotech sector, according to the Buffalo Niagara Enterprise economic development group.

At the same time, research institutions like Roswell Park Cancer Institute, Hauptman-Woodward Medical Research Institute and the University at Buffalo have stepped up recruitment in related fields, while their work spawns companies.

"That's a good barometer of our progress," said David Tyler, business development manager for life sciences at Buffalo Niagara Enterprise. "It says we have the reputation and ability to attract these kinds of people from other competitive institutions. We're now starting to become nationally recognized."

UB also launched an MBA program in biotechnology and offers training for would-be entrepreneurs in how to start and run a company. Advisory firms like Buffalo BioSciences and First Wave Technologies have been formed to help scientists turn research into products. And overall research spending in the field has soared 40 percent in five years to as much as $270 million a year, economic development officials say.

Industry and government leaders cite the formation of the Buffalo Niagara Medical Campus as key to their success - particularly the creation last year of the Center of Excellence in Bioinformatics and Life Sciences and Roswell's Center for Genetics and Pharmacology.

Proposed five years ago by former Gov. George E. Pataki and funded in large part with government money, these facilities provide physical space to house research laboratories and start-up companies, while bringing multiple disciplines and scientists together for better collaboration.

"There's nothing like having a firstrate research facility that brings together people with different ideas," said Allen Barnett, president and CEO of Kinex Pharmaceuticals in Buffalo.

> A long process

No one says Western New York is going to be the new Boston, San Diego, Research Triangle Park or Silicon Valley. Those and other major hubs already have a concentration of companies and jobs that Buffalo is unlikely to match, experts say.

"San Diego is definitely a hotbed for biotech," said Tom Basinski, the Getzville- based Great Lakes regional sales director for San Diego-based Biogen IDEC. "The efforts to grow a biotech corridor in Buffalo are in the very earliest stages of infancy."

But they say Western New York can develop areas of expertise where it has experience, such as in medical devices, medical informatics, research products and tools, and therapies for cancer, neurology, infectious diseases and cardiology.

"By no means are we going to say we're going to be exactly like them," Tyler said. "But we can be very good in some niche areas that will attract the best and brightest."

Nevertheless, proponents caution it won't happen fast, even with the support of Pataki and Gov. Eliot L. Spitzer, who backs stem cell research and the creation of a state innovation fund for promising developments.

"There's momentum there, but this stuff takes a long time to incubate," said Michael J. Relyea, executive director of the New York State Office of Science, Technology and Academic Research.

And many challenges remain. While word is out within the field about Buffalo's progress, proponents say they must still convince companies that the area can meet their needs.

That's meant a dedicated effort for two years by politicians, businesses and local leaders to tout every local product innovation, grant, start-up company, scientific recruitment and economic development win.

"We want to make sure everyone knows about it," said Thomas Kucharski, president of the Buffalo Niagara Enterprise.

It also means overcoming physical limitations. Even with the new buildings downtown, space around the medical campus is somewhat limited. So supporters are working to find and clear land, while subsidizing it for start-up companies that can't afford a big investment.

> Venture capital needed

Finally, it means finding or creating a means to support the start-up ventures financially. While the state government has provided some seed money to help, all sides agree that the companies can't succeed without a private venture capital community willing to put up capital to back them.

"That's the one area that still needs to be worked on," Barnett said.

Barnett noted, for example, that Rochester, Albany and Ithaca have early-stage venture capital firms to invest in start-ups.

"Buffalo is the second-largest city in New York State, and yet you have venture funding in all these other areas, but you don't in Buffalo," he said. "The elements are there, but the funding and in part the mindset isn't there yet."

So efforts are already under way to educate venture capital firms about life sciences and encourage their participation.

Western New York is one of countless regions around the country that have proclaimed biotechnology or similar fields to be their economic development savior. All of these areas are pouring their financial and other resources into the effort to attract companies that are seen as tomorrow's growth engine, for a variety of reasons.

"It's a growth industry. It's a highskill, high-wage industry. It's a clean industry," said Patrick Kelly, vice president for state government relations and alliance development at the Biotechnology Industry Organization, a Washington-based trade group. "It allows you to retain some of your best and brightest students."

However, the popularity of biotech nationwide also means Western New York now has to set itself apart.

New York has been one of the more aggressive states, Kelly said, but only after a pair of reports in the 1990s criticized the state and New York City for letting the industry get away.

In response, Pataki in 2001 proposed creation of high-technology "centers of excellence" around the state as a means of boosting the state's economy and job growth. The state last year also implemented a "qualified emerging technology tax credit" that Kelly said has been "received very, very favorably on a national level as a very rich credit and a very significant reason for doing business in New York."

"The state has done a great job of trying to compile its assets and really get out and aggressively pursue life sciences companies," Kelly said.

The efforts have led to an explosion of new companies here in recent years, with names like Kinex Pharmaceuticals, American Pharmaceutical Partners, Contract Pharmaceuticals Ltd., SmartPill Corp., Gaymar Industries, Nutricyte Corp., Invitrogen, Abraxis Oncology, Buffalo BioBlower Technologies and Empire Genomics.

> Facilities are good

Finally, local leaders say, the infrastructure is coming together, with the formal opening last year of the bioinformatics and genetics centers on the Medical Campus, offering modern laboratories for researching treatments for cancer, multiple sclerosis and Alzheimer's disease.

Together, the two buildings have nine stories and 300,000 square feet of space, and will house about 400 researchers and staff. Along with the new Hauptman-Woodward building that opened in May 2005, they make up what's called the Buffalo Life Sciences Complex on the campus. In total, the project was built with more than $225 million in state, federal, philanthropic and industry money.

"That in and of itself is a real positive step," Tyler said. "It certainly helps having something like that to be able to act like a magnet and say we're a legitimate player."

Besides space, the centers present an opportunity for networking between and among scientists and businesses, and offer programs to teach entrepreneurs about starting a business.

And Relyea said Buffalo has to keep that up. "We need to develop the people and equipment necessary to take ideas and move them forward to industry," he said. "The world doesn't focus on Buffalo if they don't have the infrastructure."

So far, it's paying off, attracting Cleveland BioLabs, a biotech development company in Cleveland that focuses on cancer research. Its founder, Andrei Gudkov, was recruited by Roswell Park, and the company will be on the medical campus.

That's also the new home of Kinex, a two-year-old start-up that licensed its anti-cancer technology from UB, and moved into the bioinformatics center in July. The company now has a drug ready to enter clinical trials.

"This is something the area has needed because it presents more of a united front," Barnett said. "It clearly establishes that there is a commitment to the area and that this is an area to build on for the local economy."

e-mail: jepstein@buffnews.com