For Hawaii to grow a life sciences industry and support the new medical school’s ability to recruit key biotech researchers, we must show that funding is available to commercialize laboratory successes. There is a limited supply of talent in the biotech arena. Some states such as Massachusetts and Maryland are losing talent because of the lack of funding in those states whereas other states such as North Carolina, Michigan and Pennsylvania are gaining talent because they have enacted policies that demonstrate a commitment to providing needed funding. In Pennsylvania, legislators carved $180 million out of their tobacco settlement to create three biotech greenhouses and a life science focused venture fund. In Michigan, a very small portion of that states employee pension fund has provided significant dollars to invest in biotech.
States that have been stalwarts in producing high profile biotech companies are starting to fall behind. According to a report released by the Massachusetts Biotechnology Council and the Boston Consulting Group, that state is already falling behind in the competition to be the premier center of biotechnology, and if it doesn’t act soon to reverse the trend, it stands to lose out on nearly 100,000 new jobs and $1 billion in tax revenue in the next eight years. A $20 million seed fund for biotechnology companies in southern Pennsylvania has renewed the worries of Maryland biotech advocates, who say such measures are sorely needed to keep Maryland in the biotech forefront.
The new Philadelphia-based fund, called BioAdvance, draws on tobacco settlement money to pump up biotech businesses. Maryland, meanwhile, has only small investments and grants to offer through state programs, and ranks ninth among biotech leaders in private venture capital available — about $25 million a year — according to an Ernst and Young study published last December.
The lack of private funding in Maryland means companies must either go out of state to find money, or turn to the sparse state-funded programs.
For Hawaii to succeed in growing its life sciences industry, we must show that there is funding available to commercialize laboratory research. We can build the best research facilities in the country, but if we do not make funding show up, we will simply not be able to fill those facilities with top-notch researchers and biotech entrepreneurs.
When Hawaii’s Employee Retirement System was authorized to put 3 percent of its then $10 Billion corpus into alternative investments, not one penny found its way into local venture funds. One half of one percent of today’s $7 Billion balance would go a long way toward establishing Hawaii as a State committed to biotech. Forty other states have established initiatives to build, attract and grow biotech industries.
North Carolina, for example, supports an office of 53 people dedicated to economic development efforts geared at the biotech sector, compared to a single person in the Massachusetts office of business development who also has other responsibilities. The Massachusetts Biotechnology Report also recommends that companies, research institutions, hospitals, and academic centers collaborate more effectively, by establishing cluster-wide initiatives and associations, committing to public outreach efforts, and developing guidelines that lay a clear foundation for industry and academic researchers to work together to discover, develop and test new drugs, medical products, and other advances. So what should Hawaii do?
Hawaii has a tremendous opportunity to look forward and carefully plan how to grow and sustain its fledgling life science industry. The medical school will serve as the catalyst, but it will take highly skilled people and significantly more venture capital than what is available today to complete the picture. Clearly, for Hawaii to succeed, we need to be able to attract researchers and companies from states where funding support is waning. But to do this, we need to have funding available. The private sector and mechanisms such as Act 221 may work together to make some funding show up. However many of our institutions and private trusts must elevate their commitment to investing their risk capital in Hawaii venture capital firms, rather than letting mainland investment advisors direct those resources to firms in other states, which to date has been the norm. We have already lost opportunities that could have put Hawaii on the life science map by letting promising companies slip through our grasp.
For example, Hawaii Surgical, a medical device company founded by local heart surgeon Francis Duhaylongsod, left Hawaii for California for lack of a couple of million in venture capital and an animal lab at the medical school that would have allowed completion of pre-clinical trials. The company has subsequently licensed its technology to San Diego based Edwards Lifesciences which expects to make more than a half a billion dollars in annual revenues from Dr. Duhaylongsod’s invention.
There is money in Hawaii that can be used to fund investments in the life science sector. The life science sector, which includes biotech, drug discovery, health services, health care information technology and medical devices is clearly much better understood by potential sources of funding than other high tech enterprises. The opportunity to find a cure for cancer, create new medicines or machines that can improve the quality of life are core values that resonate deeper than building the next generation of network switches.
For Hawaii to participate in this sector, however, we have to start marshalling venture capital resources now or else we will be at the end of yet another list. For the new medical school to be successful, we must show that there will be funding available to commercialize the results of research being conducted by the talent we recruit. We cannot just build a world-class medical research institution and expect to be able to attract top talent unless we can finish what we start. This means showing the people we recruit that Hawaii has the resources to close the loop and fund promising companies that emerge from the results of this research.
”’Bill Spencer is the president of the Hawaii Venture Capital Association. He can be reached via email at”’ mailto:spencer@mdster.com