BIOTECH INCUBATORS GROW COMPANIES IN SOUTHERN CALIFORNIA:
Interviews with Christian Behrenbruch and Bruce Blomstrom

4entrepreneur.net and Axon Intelligence Media teamed up to interview leaders from two local biotechnology incubators.

---

MOMENTUM BIOSCIENCES
4entrepeneur interviews Christian Behrenbruch

In addition to his managing role at Momentum Biosciences,' Christian Behrenbruch, PhD MBA, is a Professor in the Crump Institute for Molecular Imaging, Department of Medical and Molecular Pharmacology, David Geffen School of Medicine and "Entrepreneur in Residence" at UCLA.

4entrepreneur: What is the origin of Momentum Biosciences?
CB: Momentum Biosciences (www.momentum-biosciences.com) was formed in 2007 to really address the lack of life sciences commercialization in the Los Angeles basin. It's a very unique concept in that it is an incubator that is founded and funded by UCLA and Caltech faculty who have extensive commercial experience and want to provide an environment of facilities, service and expertise to foster early stage companies. A fairly large percentage of the technologies under development by Momentum Biosciences and its "daughter" companies come from UCLA and Caltech, although we have licensed IP from many other institutions, hospitals and universities in the US and internationally. We are also actively working with companies from UC Santa Barbara, UC Irvine and USC.

We enjoy a close working relationship with both UCLA and Caltech technology transfer offices and we have a pretty transparent relationship with the university administration. Because we're faculty, we have the opportunity to see a lot of good technology in an early stage - but we also have to balance the way in which we take projects out into the commercial domain, and our obligations and responsibilities as members of an academic community. It can be tricky, but so far we've managed to do things well.

4entrepreneur: Why was it formed?
CB: By any metric, the greater LA area should be a mecca for biotechnology, nano-bio and medical devices. UCLA, Caltech, USC and slightly further afield - UC Santa Barbara and UC Irvine - are fantastic research universities. The combined grant funding in the life sciences, nature papers, patents, Nobel prizes, etc. is almost unparalleled anywhere else in the country. Yet despite this, most technology either flows north to the Bay Area or south to San Diego.

Technology has not traditionally been LA's economic focus. Entertainment, logistics, the aerospace industry, real estate and energy have been the growth engines. We see a real opportunity to harness the talent and ideas that are created in our local institutions, utilize one of the finest public hospital systems in the US (for example, for clinical trials of new devices, therapeutics and diagnostics) and tap into a really well trained pool of scientists who are increasingly interested in being local. There have been a lot of changes in LA's economy and although companies like Amgen have not "seeded" entrepreneurial environments in the way that, say, Genentech did - there are starting to be signs of movement and interest in starting new ventures. We've just heard about a new incubator getting started up in the Ventura / Woodland Hills area and we're pleased to see that others also recognize this need.

4entrepreneur: Describe how the Momentum Biosciences company portfolio reflects its mission and it focus.
CB: There are really two parts to our portfolio. The first part is the "operational" part of our business. We run a fully equipped incubator in Culver City, about 7 miles from UCLA. Culver City isIt's an "up and coming" part of Los Angeles and a lot of professionals, scientists/engineers and academics are starting to take root in Culver City. Given LA's notorious traffic, our incubator is considered "accessible" and we have a lot of enthusiasm for its proximity to UCLA, Caltech, Airports, etc.. Culver City has been fantastic to work with to set up this kind of a facility and is certainly worth considering for new LA-based biotechs looking for a supportive and responsive local administration.

Momentum Biosciences is the first incubator on the west side and really the only incubator of its type in LA. It's staffed, heavily equipped (clean room, molecular biology labs, chemistry space, tissue culture room, radiation biology facilities, etc.) and we provide a full set of business services to the 8-10 companies we incubate at any one time. We have a small seed fund seed money to make investments into our start-ups (typically $500k, not usually exceeding $1m) and we also have a PEO (professional employment organization) that staffs all our early stage companies and provides cost effective payroll administration, healthcare, 401(k) administration, etc. The idea is that founders of a new company essentially need to turn up and do "science". The fund, the PEO and the incubator are essentially three different businesses that work together to provide something unique and significantly de-risks an early stage venture.

The second part of our "company portfolio" are the start-ups themselves. We nurture a fairly broad range of companies in the life sciences, biotechnology, devices and materials science. We are interested in pure nanotechnology/materials opportunities as well - especially since many of the innovations in this space are relevant to biology. The interests and strengths of our Scientific Board are well represented in our companies - Dr. Jim Health from Caltech, Drs Michael Phelps, Owen Witte and Johannes Czernin from UCLA. We particularly like diagnostic technologies (IVD, imaging, biomarkers) because we believe that targeted molecular therapies will increasingly require more sophisticated patient selection and response assessment. We are very motivated by "theranostics" (a term I personally don't like - but useful descriptive). Drug delivery systems and formulation strategies to improve the performance of existing therapeutics are also of strong interest to us. We do some more traditional devices and therapeutics too.

We'll typically incubate a company for 12-24 months. Our goal is to de-risk a company by providing our infrastructure so that their primary "burn" is for headcount, IP and consumables (and a few regulatory costs perhaps). By the time a company leaves our incubator, we've stress-tested the IP, demonstrated that the technology works and have identified prospective corporate business development or licensing opportunities or - further financing. Our current "crop" of companies are doing very well - although our standards are high. We've reduced over 100 prospective opportunities down to 8 that we really like … we expect to see in vivo data in animal pre-clinical models and some of our start-ups have even progressed further towards Phase 0.

… of course, a lot of this is speculative. It's our first batch of baby companies. We'll tell you how things are a year or two from now!. The level of support we've had is amazing, however, and we have a lot of supporters in both the scientific and business domain who have stepped up to lend a hand and provide expertise and capabilities to what we are doing. It's very heartening.

4entrepreneur: What would you like entrepreneurs to know about Momentum Biosciences?
CB: Well, we're always interested to hear about good science and to meet with innovators who are committed to taking their technology to market. We don't deal exclusively with LA-area inventors but we like people to come to us who see the value of the UCLA/Caltech/USC hub from the vantage point of conducting clinical trials and accessing the local talent pool. We are pretty innovative in the way that we finance companies and will often work alongside the founders to look at a variety of funding options and partnerships, probably beyond what a traditional "angel" does.

We are definitely "hands on". We help run a business. We take a little "sweat" equity that we have to earn - this means that our interests are well aligned with that of our founding scientific partners.

BIOTECHNOLOGY INDUSTRY

4entrepreneur: How would you describe the overall health of the biotech industry in the USA, California, and in the Greater Los Angeles area?
CB: LA has had some recent successes - for example, the acquisition of Agensys by Astellas. Cougar Biotech is doing some nice work, a few new start-ups from ex-Amgen executives are also making progress. LA, however, is still pretty small compared to say Boston or San Francisco (although Irvine/OC is building a very healthy medtech corridor and the bioengineering groups at Irvine are just top-class).

I don't think California overall needs much of an introduction. Boston is very dynamic in biotech, Minneaopolis' "Life Science Corridor" is pretty well known for devices, but California is essentially king for biotech overall. 2007 was still a record year for raising venture capital but it will be interesting see what the current market dynamics will do to the availability of VC funds in 2008. A lot of the money that is currently available was raised in the past… and a lot of people have lost their shirts lately. This may not impact "middle" level funding as much, but the big dollars for pre-IPO and the bottom of the market for Angels will almost certainly be hit.

It's a very competitive climate still and anecdotally, there seems to be still good deals getting done. There is little doubt, however, that the "closed" IPO market is causing a lot of the VCs to take a hard look at their deals. Big Pharma/Biotech has made it clear that they are no longer taking the lead for research in-house (the vast majority of biotech drugs came come from academia anyhow) and there seems to be more of a focus on purchasing pipelines than companies going through to public funding to raise the necessary funds required to advance clinical trials. I think this is going to have a huge impact - and I really feel for all those publicly traded biotech companies who are way below their IPO valuations. It kind of sets the timbre for the whole industry. Big changes ahead.

Although California is ahead of other parts of the US in important "leading edge" applications like stem cells research, it is still very far behind the rest of the world. Can it catch up? I think so - but it really needs a lot more investment both on the academic and commercial side and the Government needs to re-affirm it's commitment to healthcare research. Perhaps a more enlightened administration will look more aggressively at NIH funding. Again, the problem with this is that the capital requirements to get new stem cell and nanotechnologies out to market are tempered by the overall (poor) level of activity in the IPO space. There are, however, always exceptions… let's hope that they can rejuvenate the industry.

4entrepreneur: According to Gary Pisano's book Science Business (Harvard Business School Press, Boston, USA, 2006) the biotechnology industry suffers from not having appropriate business models for a science-based business. What is your opinion?
CB: I liked Gary's book a lot - he did a great job of capturing the interplay between financing, science and our regulatory climate. There is no doubt that the FDA needs to change dramatically beyond where it currently lies - but then there are little real glimmers of hope that this is happening. Financing risk is a major issue and it's really not just about the business model or the "knowledge lifespan" of technology (which is certainly not 10 years any more) but really about how we let science transform clinical care.

I'm a simple guy - I see this as a knowledge management issue. We are forced to repeatedly demonstrate scientific principles that are well understood. A lot of the success of the biotech industry has been intrinsically about building platform technologies, yet "serial" monetization of those technologies has often proven difficult. It's a tough call - but it will have to change. Our healthcare system is in ruin and if we don't get it right pretty quickly, we're not going to continue to make the exceptional progress we've made over the last 10 years. Certainly, if one compares what we "can do" versus what we "do", it's pretty shocking and a lot of lives are being lost to bureaucracy.

4entrepreneur: What are the unique challenges of being an entrepreneur in the life science industry in Greater Los Angeles?
CB: We're pretty alone here.

There isn't a lot of infrastructure. Not many places for an early stage company to set up in a cost-effective way. There is no shortage of scientists, entrepreneurs and great ideas - but we definitely need more management talent, something that is much more abundant in the "circulating" economies of Boston and San Francisco. We tend to have to offer much more aggressive compensation and guarantees to executives who want to come to LA and get involved with a start-up (no matter how impressive) because if the company goes out of business, they can't just walk across the road.

Real-estate is expensive here, some of the cities (LA is quite fragmented) are not that easy to work with in terms of regulatory approvals, planning, etc. We are pretty lucky - we work with Culver City - one of the "boroughs" of LA that is proactive and engaging with science-based industries.

Traditionally, part of the problem has been getting technology out of local universities. Caltech was always very proactive about supporting entrepreneurs and making it fairly easy to license/option technology and run with it - it's a very entrepreneurial climate. UCLA was traditionally a nightmare. Having been on the licensing side of the fence (in the past), I've experienced it first hand. Fortunately, there is a "new generation" of people in the research administration led by Dr. Kathryn Atchison, the most recent Vice Provost for Intellectual Property and Industry-Sponsored Research. She's built a dynamic team that consists of entrepreneurs, ex-VCs and, experienced tech transfer officers … in short; people who believe in building a local technology economy and - within the practical limits of the UC system - really help to get new enterprise started.

It's been very motivated to have their encouragement.

BACKGROUND

4entrepreneur: What motivated you to become an entrepreneur?
CB: Its fun and when I was a Ph.D (well, we call it a D.Phil) student at Oxford, my grant didn't cover enough money to really stand much of a chance of dating women girls in any kind of style.

Actually, in truth, I realized that despite a fair bit of science education and love of technology, that I was never going to be the guy writing the Nature Medicine paper. But I enjoy working with that person to find innovative ways to fund research and get it out the door. I'm a people-person, who is fond of geeks.

4entrepreneur: How did you learn the skills necessary that helped you to become an "Entrepreneur in Residence" at UCLA?
Mostly luck. I've had a series of start-ups, some that were successful and some that failed pretty spectacularly. I don't really talk about the successes much - it's the failures that have real impact and help you to try and look around the corner. I've never claimed to have all the answers, so part of what weI do involves bringing people into a project who have really deep knowledge and experience in financing, strategy, risk management, IP and product development. I've been fortunate to have met and worked with some of the best people in the industry.

I meet a lot of graduate students and young faculty who want to become entrepreneurs and wonder how to make the first step. Actually, I think the first step is just getting into non-academic organizations (e.g. industry) and seeing how other types of organizations work, making contacts and learning the basic skills required to take a product to market. I think once you have some of those perspectives, it's easier to see something come along and go "hmmm… that looks interesting". But you also have to put yourself into a dynamic environment where people around you encourage this. It always amazes me how Genentech spawned a whole genesis of entrepreneurs and start-up companies, but Amgen did virtually nothing (except get rich, dumb and happy). Culture plays a big part and this is why San Francisco and Boston still attract a lot of the best talent.

4entrepreneur: Who were your entrepreneurship mentors?
CB: I was very lucky to have met some "industry retreads" (I say that in the nicest way) early in my professional life, who had really walked the halls of hospitals and universities in the "early days" of med tech and life sciences. One of my very first mentors was a guy who sold the first MRI scanner to MGH. This gent had 30 years of experience in selling and business development - and could explain that no matter how great your technology - if you don't understand your customer and the market dynamics of a particular product or service, you're out of business.

Amazing how brutal a lesson that can be. I encounter entrepreneurs all the time who have great ideas and wonderful inventions, but simply don't get that the market (reimbursement, regulatory, patient "ownership", physician dynamics) will never enable them to be successful.

My most inspirational mentors were probably my first customers who took an active interest in technology, making money, changing healthcare… it's wonderful to take a crude idea and watch a practitioner mold and sculpt it into something that is really useable and transformational to care. It really serves to highlight the fact that there is no "I" in "team" - it's a lot of complimentary skills to bring a product to market.

4entrepreneur: What are your impressions of biotech entrepreneurship around the globe?
CB: Again, I've been really lucky in this regard. I've been involved with companies in China, India, Russia, France … even Australia. It's amazing how entrepreneurs are kind of a common breed - despite the cultural differences. Most of my international experience has been with medtech and health services, but I see great things happening with biotech in other parts of the world as well. We are foolish to believe that only in the US or the UK, can we do really effective biotechnology. We should pause and consider facts like ~50% of graduate students at top-tier US universities come from Asia. With the growth in biotechnology in India, China, Korea and other parts - they are no longer focused on staying in the US. They want to go home and do great things and make real money.

As a Canadian/Australian (I'm a dual-national) living in the US, I'm sensitized as to how difficult it is to come here to the US, get trained, innovate and then want to stay. It's hard. Immigration is difficult - and we have a massive "brain drain" here in the US. We're literally training the smartest people in the world who are still attracted to a handful of institutions, and then we're letting them get away. I say watch out… I've met a lot of Harvard, MIT and Stanford-educated bioentrepreneurs outside of the US - especially in China and Singapore where "our" best people are being asked to come "home" to amazing salary, laboratory and clinical opportunities.

4entrepreneur: What advice do you have for bio-entrepreneurs?
CB: I think bio-entrepreneurs are, at heart, like any other entrepreneur. They want to create something new, make a difference, make some money and hopefully have some fun in the process. Biotech is great fun on the science side, but can be brutal on the business side. Network, get to know people, understand how commercialization really works and what the market dynamics are before going out and starting a venture. Find experienced advisors. Understand that Uunless your technology can disrupt markets, it almost doesn't matter how good it is. The problem is that knowing how to disrupt a market is a business skill, not really a function of technology.

My belief is that today's bio-entrepreneur is very unlikely to go out and license a new antibody, kinase inhibitor or microfluidics chip or something, and get rich. The big companies are buying pipelines and so they want to see well structured data, good pre-clinical results, often initial human data. It's about having enough financial runway to "package" a scientific solution that really shows sophistication in the understanding of regulatory, clinical development and marketing issues. In some ways, this is kind of expensive and boring, so choose your business partners carefully!

---

Pasadena Bioscience Collaborative (PBC)

Bruce Blomstrom is President of the Pasadena Bioscience Collaborative, an incubator for early stage life science companies. He has been involved in executive management at major healthcare organizations for nearly 30 years. Early in his career, Mr. Blomstrom held numerous management positions with Abbott Laboratories including General Manager of subsidiaries in Japan, South Africa and Southeast Asia as well as Director of Corporate Planning. Subsequent positions included President and CEO of Divisions of Fresenius Medical Care, UniHealth, and Sunrise Medical. Mr. Blomstrom also served as Vice President of Corporate Planning for Whittaker Corp. and Senior Vice President of Alpha Therapeutics. In the early 1960's, Mr. Blomstrom was assistant secretary in Uganda's Ministry of Commerce and Industry, representing Uganda when it became a member of GATT. A former MIT Fellow in Africa, he serves on the boards of the Pasadena Angels, Infinite Biomedical Technologies, Ikona, the Southern California Biomedical Council, Pacific Asia Museum, and the Pasadena Symphony. He is a member of the Pacific Council on International Policy and the Economic Round Table. He is also active in several MIT organizations. Mr. Blomstrom has B.S. and M.S. degrees from the Massachusetts Institute of Technology.

4entrepreneur: What is the latest news on the PBC?
BB: The PBC is more than doubling its size. It has leased about 3500 sq. ft. of new space and is outfitting a lab for one of its tenants, Neumedicines. Neumedicines has just received a contract from HHS BARDA for $13 million over the next 3 years.

4entrepreneur: Why was it formed?
BB: The PBC was formed to help develop the biotech industry in the greater Pasadena area. Its wet lab was the only one in the Los Angeles area from 2004 to now which offered low cost bench space with shared equipment. The PBC web site provides a good overview of what the organization provides. See www.pasadenabiosci.org.

4entrepreneur: Describe how the PBC company portfolio reflects its mission and it focus.
BB: The PBC tenant companies cover a wide variety of life science product categories including:
-- Cancer diagnostics and therapeutics
-- Antibody engineering
-- Continuous flow reactor technology
-- Adjuvant therapy to radiation
-- Ophthalmic drugs/treatment
-- nano-scale blood diagnostics

4entrepreneur: What would you like entrepreneurs to know about PBC?
BB: The PBC is a user friendly, low cost wet lab. We can provide access to technical assistance and interns as well as introductions to business, financial and legal advice. It is a collegial environment designed to help early stage firms develop their ideas quickly and economically.

BIOTECHNOLOGY INDUSTRY

4entrepreneur: How would you describe the overall health of the biotech industry in the USA, California, and in the Greater Los Angeles area?
BB: It is a vibrant industry with a mix between a small number of large mature firms and a multitude of early stage and developing companies. Overall, except for Amgen, the industry is in a growth mode. One problem is that the area is so vast that there is not one central point where the industry is located. The Southern California Biomedical Council is helping to solve this issue through regular meetings on subjects of interest to the industry. Interested readers should check out www.socalbio.org. Amgen is just now downsizing with the result that a number of well qualified people are interested in developing companies of their own.

4entrepreneur: According to Gary Pisano's book Science Business (Harvard Business School Press, Boston, USA, 2006) the biotechnology industry suffers from not having appropriate business models for a science-based business. What is your opinion?
BB: There are plenty of examples of well organized pharma and biotech companies. In addition, there is sufficient talent in the area to fuel the growth of the industry. What is not here, can be recruited

4entrepreneur: What are the unique challenges of being an entrepreneur in the life science industry in Greater Los Angeles?
BB: . One of the biggest obstacles to the development of the biotech industry in LA is the lack of large, well funded venture capital financiers with expertise in the life science area. Scientific talent abounds at Caltech, UCLA, USC and City of Hope. There is space available. Business talent can be easily attracted to the area, if it is not already here. But most of the funding sources are in Northern California or in the East. They tend to like to invest in companies closer to home or to want to move the companies from LA to their base of operations.