Medical technology sector needs more companies

With its research talent and companies, Rochester has strong ties to the medical technology sector, but the area needs to attract more businesses and fuel startup activity to gain prominence.
The business of health has different facets, including the promising pharmaceutical and biotechnology industries and the medical devices and services sectors.
From Eastman Kodak Co.’s $2.27 billion health imaging group to Harris Interactive Inc.’s health care market research offerings, local firms of all sizes are involved in various fields related to medical technology.
Other firms include Bausch & Lomb Inc. and CooperVision Inc., which focus on the eye. Getinge USA Inc.’s surgical tables and sterility products are tailored for the health care and scientific markets.
More than 5,000 people are employed in bioscience, which includes drugs, medical instruments and supplies and research, writes Kent Gardner, director of economic analysis at the Center for Governmental Research Inc., in a recent report.
But a strong cluster requires a critical mass of companies, access to venture capital and laboratory space and other elements for growth.
“What we find in this particular region is that companies don’t really match up well. There isn’t really a core cluster where you can spin people in and out and transfer one scientist from one company to another before they are let go,” says Todd Comfort, Rochester-based director of business operations at Aerotek Scientific LLC, a subsidiary of staffing firm Onsite Companies Inc.
Wyeth Lederle Vaccines & Pediatrics’ facility on Bailey Road is slated to shut its doors on July 31, displacing roughly 200 workers.
Aerotek’s Comfort says the company’s parent, Wyeth Pharmaceuticals, a few years ago was looking to expand in Monroe County. Instead, the company established a manufacturing facility in Raleigh, N.C.
“We could have had it right here in Henrietta,” Comfort says. “The state needs to be more aggressive about tax breaks.”
Despite issues like high taxes and lack of adequate funding, Rochester is home to a few big names in the medical arena. Also, some companies like Getinge base their U.S. headquarters here.
Celltech Americas, known locally as Celltech Pharmaceuticals Inc., manufactures and distributes prescription medicines for the treatment of central nervous system conditions and respiratory diseases such as the common cold, sinusitis and bronchitis. It makes up more than 50 percent of parent Celltech Group PLC’s revenues.
Johnson & Johnson’s Ortho-Clinical Diagnostics Inc. is another big player in the health sector. The company steadily has expanded its local presence. In late 2001, it announced plans for expansion with the move of its Raritan, N.J.-based software and engineering research and development division to Rochester.
The move was expected to add more than 20 employees to the 1,200 people who work at the firm’s 24-acre Canal Ponds facility. A need for space and room for growth in Rochester were cited among the main reasons for expansion.
“Rochester has a very powerful engine for innovation. It has a very high-density, medically-oriented population,” says Stephen Curry, founding partner of PharmaNova LLC, a drug-delivery development firm. Curry formerly was employed by AstraZeneca PLC, another major player in the pharmaceutical industry worldwide.
Brighton-based market research firm Harris Interactive conducts research on a regular basis for pharmaceutical firms, non-profit foundations and other players in the health care area.
“We have built up substantial domain knowledge, hiring people from industry, and built a good physician panel. It is our largest vertical market that has seen the largest growth,” says Art Coles, group vice president for health care and policy research at Harris Interactive.
The lucrative nature of the medical sector is tough to ignore. Sales of pharmaceuticals alone crossed the $400 billion mark in 2002, with North America as the strongest performer, a recent IMS Health Inc. report shows. IMS Health partners with Harris Interactive to create market intelligence for the pharmaceutical and health care industries.
“Health is something that is not going to go away, is it? It is something that is going to endure through every generation. It has scientific appeal, market appeal and is something that everyone is going to be concerned about,” says Rodney Brown, also a founding partner of PharmaNova.
Formed last year by three former Celltech Pharmaceuticals and AstraZeneca executives, PharmaNova offers patented technologies expected to create new opportunities for the delivery of existing pharmaceuticals.
Biotech firm Genencor International Inc. a few years ago revamped its strategy to enter the health care market. The company’s health care segment is focused on expanding its technology and product platforms in disease areas such as cancer therapeutics and hepatitis.
“The area had an unmet need. We do think it was the right decision; the idea remains valid. As we move forward, we plan to focus more and more on product and product opportunities,” says Mark Goldsmith, senior vice president of health care at Genencor’s offices in Palo Alto, Calif.
Genencor is in the process of expanding its presence in Monroe County.
Even homegrown startups and midsize firms find the medical sector an area of opportunity for growth.
“We appreciate this sector because of its strong performance in the financial markets. Also, this is a more personal market; people can relate to the market on a personal level,” says Stanley Holland, vice president of finance and chief financial officer of Vaccinex Inc., a University of Rochester spinoff.
Vaccinex’s expertise lies in antibody discovery and treatments to fight cancer. The company’s recent deal with Switzerland-based Lonza Group Ltd. could be the harbinger of multimillion-dollar revenues for the local firm.
Vaccinex also plans to operate in the $3 billion antibody market by assisting the development of antibody-based therapies.
Integrated Nano-Technologies Inc., a Henrietta-based nanotechnology firm, expects to grow from 30 employees to more than 100 staffers by mid-2004. The company has developed an electronic-based DNA detection system that can be used to detect biowarfare agents such as anthrax.
Like many other young firms, INT had to find talent, raise venture capital and construct its own laboratories.
“There is a lot of talk in Rochester about how biotech is one of the key areas. But we haven’t seen a lot of specific programs to support it. We couldn’t find wet lab space anywhere in Rochester,” says Michael Connolly, CEO and founder of INT.
For starters, venture capital is a nagging problem for small companies. And in Rochester the list of firms looking for funding in the medical technology area is a long one.
Drug-delivery technology firm Medisperse LLC, PharmaNova, Vaccinex, medical device and informatics startup Med Graph Inc. and many others have sought or actively are seeking funding to peddle products and develop new technologies.
“We probably have more things sitting on the shelf because people don’t know where to get funding,” Aerotek’s Comfort says. “But the technology, people, cost of living, quality of life-the other things you would need to keep your company in Rochester are here.”
Funding and attracting the right talent are vital ingredients for success.
“Rochester is very fortunate to benefit from a great research base,” Vaccinex CFO Holland says. “The question is how do you get those ideas commercialized? It takes funding and talent.”
Attracting talent, however, can be an arduous task. Scientists and management executives usually prefer to work in a community with multiple job opportunities.
“We have had some people who were very interested in us but ended up going to Boston because there is a lot of opportunity there, just in case they didn’t want to continue with us,” INT’s Connolly says. “So it would be nice if there was more support for the startup community. Even though it might not benefit us directly…indirectly it would help to create a critical mass.”
A critical mass is the building block for any industry sector to gain prominence, economists and other experts say.
“It is important to grow locally owned companies and get a baseline strength there that is not susceptible to external pressure and decisions,” PharmaNova’s Brown says.
Rochester has witnessed both the influx and outflow of companies. And some firms like Celltech Pharmaceuticals have seen a stream of different owners.
“I have seen pharmaceuticals kind of wane in Rochester,” Harris Interactive’s Coles said. “But our major asset is the University of Rochester Medical Center.”
So Rochester does possess the ingredients for success. Many local and state government officials have predicted the area will grow into a biotech hotbed, based on the research and talent.
“Biotech without question is a growing industry,” says Jeffrey Goater, CEO of LAGet Inc., one of UR’s latest spinoffs that focuses on gene therapy.
Rochester has the beginnings of a bioscience cluster. The total numbers still are too small, however, to stimulate the growth of all-important cluster synergies such as specialized ancillary services and venture capital, CGR’s Gardner writes in his report.
Local firms are trying to stimulate discussion through groups like the Greater Rochester Bio Cluster formed under the sponsorship of the High Tech Business Council.
“Since the cluster has been formed, we are seeing more (partnership discussions),” Aerotek’s Comfort says. “People are talking to each other. (But) I would challenge the larger companies to get their scientists involved into groups like our cluster.”
“I think a more active participation on the part of larger companies is needed to build a cluster here,” Vaccinex’s Holland says.
Worldwide, the prospects for the medical technology sector look bright, especially in pharmaceutical and biotech industries.
Aging populations and the ongoing demand for innovative therapies are expected to effectively sustain pharmaceutical growth in 2003 and beyond, the IMS Health report states.
“The bottom line is people will continue to develop medical problems,” Genencor’s Goldsmith agrees. “There are numerous unmet needs, and from that perspective things remain pretty healthy.”
And area companies expect to reap the benefits of the health-related industries. But local experts say it will take a consistent, coordinated effort before Rochester becomes a prominent player.
“One in nine people in Rochester has a medical background,” Aerotek’s Comfort says. “Those are the numbers that say the talent pool is here. We just have to tell the rest of the country (and) get them to come to this area.”
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07/18/03 (C) Rochester Business Journal