While the hurt is on other sectors of the economy, the biotech industry is booming, and Madison has established itself as a hub.
"Wisconsin and Madison have a unique combination of resources," says Tom Still, president of the Madison-based Wisconsin Technology Council. "It begins at the University of Wisconsin-Madison and other research institutions and progresses to technology transfer and intellectual property mechanisms and includes vibrant investing and corporate communities."
Biotech in Wisconsin is an $8 billion-a-year industry that employs more than 28,000 workers. And Madison is at the epicenter. The University Research Park, now celebrating its 25th anniversary, has 115 companies withmore than 4,000 employees with an average salary of $62,000. More than half of those companies have someconnection to the UW-Madison.
"The Madison area and Wisconsin can stand up to competition from around the world," says Still. "This region has established resources for entrepreneurs, which in many cases didn't exist five years ago and isn't found in other places."
Biddy Martin, the new UW-Madison chancellor, last week called the university "a research powerhouse," noting that it brings in $905 million a year in research funding, second only to Johns Hopkins. Researchers here have held their own against, and in some cases surpassed, scientists on the East and West coasts. The university is credited with spawning more than 200 high-tech start-up companies, nearly half of which are direct spin-offs of UW research.
Madison was the smallest city on an international hot list of "Startup Hubs" compiled last year by Fast Company magazine. It ranked higher on the list than London.
The biotech industry supports well-educated people with scientific and advanced degrees in high-paying jobs, which creates wealth in the community. Plus the research being done promises to improve the health and lifestyles of people throughout the world.
John Neis, co-founder and managing director of Venture Investors LLC, an early stage venture capital firm with offices in Madison and Ann Arbor, likens the three prongs of biotech to those of an internal combustion engine.
1. Spark: Ideas and discoveries.
2. Fuel: Investment capital.
3. Air: A highly educated workforce.
The purpose of Venture Investors is to provide the fuel. It has backed 16 Madison companies engaged in research in such areas as Alzheimer's, cancer, cardiovascular disease and osteoporosis.
For instance, Venture Investors provided the first funding for TomoTherapy, a manufacturer of radiation therapy devices. Today, about 700 people work at the firm's Madison headquarters.
Meaningful milestones come in stages, such as completing a phase of clinical trials or the first product sales. Says Neis, "We've certainly seen those successes here in Madison."
But the challenges are enormous, notes Ralph Kauten, CEO of Quintessence Biosciences, who has led other successful Madison biotech companies, including 13 years at Promega, a manufacturer of medical devices.
"The [biotech] field is crowded," he says. "There's a lot of competition. Anything we are trying to do here in Madison, someone else in the world is trying to do."
What does it take to succeed in the world of biotech? To answer that question, it helps to look at individual companies. Here are profiles of three of them.
University Research Park, 505 Science Dr.
Number of employees: 12
Products: One drug past the pre-clinical safety phase into Phase I; two phases to go before approved by the Food and Drug Administration. Also has a series of drug leads in the research lab.
With the advances in medicine and technology, more Americans are celebrating birthdays well into their 90s.
Yet physicians are diagnosing more cases of Alzheimer's - a devastating disease that causes memory problems, confusion and impaired judgment. And while a variety of drugs approved by the Food and Drug Administration (FDA) provide modest relief for Alzheimer's sufferers, a Madison company is developing medicines designed to improve memory and thinking, as well as halt or slow down the disease process.
In July, officials at Madison's Mithridion Inc. announced that their first drug has successfully completed pre-clinical development and has entered Phase I clinical trials.
"It's been a long haul to get this far," says Trevor M. Twose, Mithridon's chief executive officer. "Our job now is to move that one quickly through Phase I and Phase II and bring another [drug] along behind it."
These clinical trials are extremely costly.
"We estimate it will cost $15 million or more for each drug in clinical trial," says Twose. "We have to raise the money to do that."
According to the national Alzheimer's Association, headquartered in Chicago, as many as five million Americans have Alzheimer's disease. That number is expected to increase as the population gets older.
Twose, 61, who holds a doctorate in biochemistry from the University of Manchester in England and did postdoctoral work at the UW-Madison, co-founded Mithridion in 2006. He has more than 30 years' experience in the biomedical field, including service on various boards and roles in six start-up companies. He is now working to build the company's management team as it competes for financing from venture capitalists and angel investors nationwide.
John Neis, co-founder and managing director of Venture Investors of Madison, says effective medicines for the treatment of Alzheimer's have the potential to generate as much as $10 billion a year.
"A lot of people are desperate for meaningful help," says Neis, whose firm invests in early-stage life science and technology companies in the Midwest. "We have reason to believe this drug is efficacious."
In June, Mithridion merged with Cognitive Pharmaceuticals Ltd., in Toledo, Ohio. Cognitive, which is working on additional medicines aimed at improving brain function to combat Alzheimer's, brings to the partnership an experienced management team, a robust drug-development team and new funding. Mithridion will maintain its headquarters in Madison.
"Venture capitalists introduced us to Cognitive," says Twose. "It's better to join forces rather than go it alone."
University Research Park, 510 Charmany Dr.
Number of employees: Nine
Products: Two products in Phase II clinical development; three products in the pre-clinical stage.
Hector DeLuca's father, a Colorado truck driver, never went to school but taught himself to read and developed his own system of mathematics. His mother attended school through the eighth grade. But both Italian immigrant parents stressed to their three children the importance of education.
"Education raises your economic and social standing and greatly improves your life," DeLuca remembers his parents saying. "They always encouraged learning."
Hector, the youngest, took this message to heart. Today he's considered the world's foremost expert on vitamin D. He holds nearly 1,500 patents worldwide and is credited with breakthrough treatments for osteoporosis, kidney disease and psoriasis. He served for 30 years as chairman of the UW-Madison's department of biochemistry, before stepping down in 2004 for health reasons.
"Hector is a prolific inventor who has been incredibly successful," says Andrew Cohn, director of government relations for the Wisconsin Alumni Research Foundation. The nonprofit organization, commonly known as WARF, patents the discoveries of UW researchers and licenses the technologies to leading global companies. "The number of [his] patents changes almost monthly."
Scientists, researchers and former students around the globe have repeatedly nominated DeLuca for the Nobel Prize for medicine.
"Hector is very deserving," says Henry Lardy, a biochemistry professor who retired in 1988. "His research contributions are solidly based on chemistry, and the application of his new compounds derived from vitamin D to practical human health problems is unsurpassed."
Vitamin D helps the body build strong bones and teeth and maintain muscle strength. It also helps protect against such chronic diseases as breast and colorectal cancers, type 1 diabetes, rheumatoid arthritis and multiple sclerosis. The newest research shows it reduces the risk of heart attacks.
"Hector has shown that people on kidney dialysis need a special active form of vitamin D," says Lardy. "The kidney doesn't function properly without it."
With his wife, Margaret Clagett-Dame, DeLuca, now 78, is co-founder of Deltanoid Pharmaceuticals, with nine employees. He also co-founded Bone Care International, a Madison drug-development company that was sold to Massachusetts-based Genzyme International in 2005 for $600 million.
"A lot of great university inventions never get developed," says DeLuca. "You have to have a need. Then market the disease, documenting that it's feasible to make a profit from the product, and convince the scientists and the industry that it's a good product."
Two Deltanoid products - a postmenopausal medication for osteoporosis and a topical treatment for psoriasis - are in Phase II clinical development with the FDA. Three products, including a pair of compounds that will help kidney patients on dialysis, are in the pre-clinical stage.
"One will end up in Phase I by next year," DeLuca says. "I'm not sure which one. It depends on the manufacturer. My patents are licensed out to different places like Abbott Labs."
It all costs money. And while pharmaceutical giants like Eli Lilly and Merck have the wherewithal to run multimillion-dollar studies, small biotech companies like Deltanoid must raise their own venture capital. It's tough, says DeLuca, because most investors want a return on their money within 10 years: "It's not a long-term investment."
To attract investors, a company needs good science, a solid business plan, a feasible product, a believable timeline, a realistic vision and engineering confidence.
"A lot of products in the pharmaceutical industry don't work," he says. "In our business, if the product doesn't work, the company is dead. Venture capital is risky, but if it works, you get a big benefit."
DeLuca came to Madison in 1951, after obtaining an undergraduate degree with honors in chemistry from the University of Colorado. He passed up acceptance letters to graduate programs at Harvard and the University of California-Berkeley, because he was eager to study with UW biochemistry professor Harry Steenbock.
It was Steenbock who discovered that exposure to ultraviolet irradiation boosted the vitamin D content of specific foods. He's also credited with the discovery of vitamin D-enriched milk, which wiped out the rickets epidemic. And when Quaker Oats offered Steenbock $1 million for the rights to his discovery, he pumped the money into further research by establishing WARF in 1925.
When Steenbock retired in 1955, he asked that DeLuca, his last student, take over his lab. "I was interested in how vitamin D built stronger bones," says DeLuca. "That's how it all started."
DeLuca has furthered Steenbock's dream and his own vision with additional research on the uses of vitamin D.
"I run a big research lab," he says. "I have chemists making vitamin D compounds and a staff that tests it. As you dig into it, you find other places you can apply it to.
"Learning new information is always exciting."
University Research Park, 505 S. Rosa Rd., Suite 166
Number of employees: Eight
Products: QBI 139, a cancer medicine to treat solid tumors found in pancreatic, prostrate, ovarian, colon and lung cancers, as well as melanoma and leukemia; developing two more novel cancer therapies.
Ralph Kauten predicts the FDA will approve moving a new drug into the first of three phases of testing before the end of December.
The drug, QBI 139, is designed for the treatment of solid tumors in pancreatic, prostate, ovarian, colon and lung cancers, as well as melanoma and leukemia. It would be the first of more than 200 products created by researchers at Quintessence Biosciences Inc., a pharmaceutical company developing new cancer treatments, to reach this platform.
"We hope we have something that has the broad effect of chemotherapy but doesn't have the side effects," says Kauten, the company's CEO.
QBI 139 is similar to Avastin, a drug developed by the San Francisco-based Genentech to treat colon, rectum, lung and breast cancers (see Isthmus "Your Money or Your Life," 8/15/08). It's part of a class of drugs that allows patients to lead normal lives during treatments, without such traumas as hair loss or stomach pain.
Unfortunately, says Kauten, some of these new medicines don't work for the majority of patients. Herceptin, for example, is widely prescribed for breast cancer patients, but it only works for patients with the HER2 receptor.
"Only about 20% of the people with breast cancer have that protein," says Kauten. "Our product attacks the RNA (an acid) in cancer cells. It's almost 95% identical to the protein inside our body. We are expecting it to be broadly effective, yet safe."
Most older cancer drugs are chemotherapy chemicals with negative side effects. "The newer drugs are much safer," says Kauten. "They don't have the harsh side effects, so people don't have to turn their lives upside down."
Kauten expects it will take 18 months to complete the first trial phase and another two years to complete the second phase, which measures the drug's effectiveness in patients.
"The bottleneck is getting patients enrolled to participate in the trial," he says. "When it's a more common cancer, more people enroll." And he reports "high levels of interest" in QBI 139, which should help move things along.
Quintessence was founded in 2000 by a pair of UW biochemistry professors, Ronald T. Raines and Laura Kiessling. The pair were among a group of scientists who tested 40 drug candidates developed in Quintessence laboratories before focusing on QBI 139.
Kauten served as chief financial officer of Promega for 13 years. He started at the Fitchburg-based company in 1979 as one of two employees. Today, Promega has more than 900 employees working in 12 countries.
In 1992, Kauten moved to PanVera, which provided products and services designed to accelerate the discovery of new medicines. After 10 years at the helm there, after being awarded the Ernst & Young Entrepreneur of the Year Award, Kauten left to direct Quintessence. PanVera was acquired the next year for $95 million by Invitrogen, a California-based global provider of biotechnology research products.
Acquisitions, reorganizations and mergers - those are everyday happenings in the business world.
"I wanted to build a company that created value, an organization that employed good people," says Kauten, 57, who's proud that Promega and PanVera/Invitrogen are "still in operation and employ even more people and continue to contribute greatly to the local community."
When Kauten moved to Quintessence in 2002, he was back to square one, faced with the challenge of raising capital.
"It was not a good time to raise money," he recalls. "Like today, financial markets were in a decline. A great deal of people were taking money out of stock. People were hoarding cash."
Yet in less than a year, Kauten raised $2.6 million from local investors. This allowed him to start hiring people and equipping the lab in University of Wisconsin Research Park.
"It's taken us longer than we planned to get this far," he says. "We can think through problems a lot faster than we can actually fix them."
Other Madison biotech leaders
TomoTherapy is a manufacturer of radiation therapy machines. It has completed a public offering and formed strategic alliances with a pair of German companies, and is in talks with a Japanese company.
Bone Care International is a developer of drugs to treat a condition that leads to bone damage in kidney patients. It was acquired for $600 million by Genzyme International, a Cambridge, Mass., company, in 2005.
NimbleGen is a gene-chip maker. It was purchased in 2007 by the Swiss pharmaceutical company Hoffman LaRoche for $272.5 million.
Third Wave Technologies makes diagnostic and genetic tests and research products that can detect a variety of conditions, including cystic fibrosis and the risk factors in cardiovascular and infectious diseases. Acquired earlier this year for $580 million by Hologic, based in Bedford, Mass.