FLORIDA: Biotech Players Seek Capital
FAU professor joins the hunt
By Marcia Heroux Pounds - Business Writer

Posted November 14 2004

Chemistry professor Russell Kerr toiled for 13 years in a Florida
Atlantic University lab developing a topical drug for itchy,
irritated skin derived from molecules collected from Florida's reefs.
Over the years, more than 40 students have worked with him on the
project at the Boca Raton campus.

His plan -- to produce the molecule in the lab for therapeutic drug
production rather than take it from the environment -- is finally
being realized through collaboration with a business partner and a
chemist from The Scripps Research Institute in La Jolla, Calif.
Together they founded Tequesta Marine Biosciences and are now seeking
venture capital.

"It's very, very exciting. I'm delighted. Some very talented Ph.D.
students who like living in Florida can stay in Florida. In the past
students have gone off to California and the Northeast," Kerr said.

The FAU-born company is an example of the scientist-entrepreneur
partnerships that Florida is counting on in building a biotech
community. But ventures like Tequesta need money to finance their
plans.

Last week's SE Bio 2004 conference in Miami offered a look at how
investment money will match up with promising start-ups, now that
Scripps is planning to build a research campus in northern Palm Beach
County. The conclave was the first large-scale gathering of venture
capitalists and biotech entrepreneurs in South Florida since plans
for Scripps began moving forward.

At the conference, Tequesta was allowed 12 minutes to make its pitch
to raise $1 million to $2 million. The company wants to hire key
employees, obtain licenses for patents held by other universities,
and start making drugs for the over-the-counter and prescription
market. It expects to have an over-the counter product on the market
in three to five years -- a relatively short time frame for a biotech
venture.

Tequesta was founded shortly after Scripps signed its deal to come to
Palm Beach County last year. Scripps chemist K.C. Nicolaou came to
visit FAU in search of collaboration. Kerr already was working on a
business plan with Rhys Williams, a venture capitalist and lawyer who
was introduced to him by FAU's technology transfer director Jeanie
McGuire. Williams, now CEO, was formerly vice president of finance
for Ixion Biotechnology, an adult stem cell firm near Gainesville
that is researching therapies for diabetics.

The Scripps connection was exactly what was needed to raise the
profile of the new company, which is the first to come out of FAU's
Center of Excellence in Biomedical and Marine Biotechnology. For Gov.
Jeb Bush's vision of a Florida biotech cluster to be realized, such
collaborations need to happen thousands of times over. Then they need
to progress to companies that can take hugely profitable products to
the marketplace.

Nearly 400 people showed up at the conference. Venture capital firms
came from the hottest biotech markets around: North Carolina,
California, New Jersey, New York City and Washington, D.C. Venture
capital firms raise money from wealthy individual investors,
investment banks and other financial institutions to invest in high-
growth startups. In biotech, investors look for ventures that involve
top scientists and novel ideas.

The big players who were there included Cardinal Partners of
Princeton, N.J., and Intersouth Partners of Durham, N.C. They were
curious about Florida's plans and were hungry for deals.

"We have our eye on Florida," said Garheng Kong of Intersouth. "The
dollar-to-idea ratio is very good. Florida is untapped." He said
Intersouth would be looking at biotech ventures that offer multiple
applications and have a short time frame to clinical trials.

Cardinal Partners also is scouting for investments in the state.
Cardinal partner John Clarke has started four companies over the
years with Scripps scientist Paul Schimmel, who has joined Scripps
Florida. "When he decided to make the big jump, he said I had to pay
attention to it, and I always pay attention to Paul," Clarke said.

Florida has laid the groundwork for a biotech cluster with a $310
million investment in Scripps Florida, which plans a northwestern
Palm Beach County campus for research. The investment in Scripps is
designed to attract new biotech business -- from
scientist/entrepreneurs to large pharmaceutical companies. Florida
also is investing $350 million to $1 billion of pension funds through
venture firms in bioscience and other investments.

"It's a long-term process, building a biotech community," Clarke
said. The challenge, he said, will be "keeping up the level of
enthusiasm."

Ongoing investment

One obstacle is a funding gap, according to David Day, director of
technology licensing at the University of Florida and the chairman of
SE Bio 2004. Day said there's a gap for taking science from the petri
dish to the animal testing stage. "There's nobody who funds that," he
said.

To be successful, there has to be a continual investment, Day said.
"[Florida] has a chance to be in the top dozen. We don't have a
chance to be one of the top two," he said.

There will be competition from more established biotech areas such as
North Carolina's Research Triangle Park. Some Scripps scientists will
want to stay in California, which is establishing itself as the U.S.
center for human embryonic stem cell research with a state-backed
initiative to spend $3 billion over the next decade. Many scientists
think stem cells could someday be used to repair crippling spinal
cord injuries and treat an array of diseases, including diabetes and
Parkinson's.

"That's going to help them retain talent," Day said. "Stem cell
research was in danger of going overseas."

Making the pitch

In Florida, as in any biotech community, companies will have to prove
themselves worthy of financing. After so many investors got burned in
the Internet bubble, venture capital firms are looking for firms that
generate a steady stream of revenues.

But in the biotech world, revenue and profitability are often lacking
for a number of years. Companies most likely to attract venture
capital are those that hold patents and whose products show broad
marketplace potential.

One such candidate could be Boca Raton-based Intercept Biomedical
Technology, which presented at SE Bio. The company is a competitor to
Medtronic in the field of implantable drug delivery systems.
Intercept has come up with a flexible design for its implant that
Chief Executive G.L. "Jud" Carlson thinks will be more palatable to
patients.

Carlson, who has 20 years' experience working for competitors
including Medtronic, sees a $400 million market for Intercept's
product, in sufferers of chronic pain and liver cancer. Intercept
expects to market the device to physicians first in Europe, where the
implant already has regulatory approval. There also could be a quick
exit for investors: He expects the company to be acquired within five
years.

From its broad market to experienced management, Intercept would
appear to be a classic candidate for venture capital investment, but
competition from other ventures and other states is stiff. "If we
raise $6 million, that may be all the company needs to raise,"
Carlson told investors at SE Bio.

If Intercept and Tequesta use their seed money wisely, they may be
able to grow flourishing businesses. And Florida, which has sunk
hundreds of millions into a bet on biotech, can only hope that scores
of others won't be far behind.

Marcia Heroux Pounds can be reached at [log in to unmask] or
561-243-6650

SOURCE: Fort Lauderdale Sun Sentinel, FL
http://tinyurl.com/6s34t

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