By Ellen Jensen

Kansas City knows what it wants to be when it grows up-a major player in the life sciences industry. Although Kansas City is far behind bioscience strongholds such as Research Triangle Park, N.C., Boston or San Francisco, area companies, research institutions and governments are trying to close the gap.

How does all this focus and activity around bioscience affect small business? If you can build a strong infrastructure-including fertile ground for great ideas, research facilities to formulate them and a means to transfer the workable ideas to the commercial market-you can create many opportunities for savvy entrepreneurs, both within the bioscience industry and serving it.
 
Barriers
Although there is much life sciences activity in the region, there is no instant gratification. Building a bioscience infrastructure takes time, and there are hurdles to overcome.

"From a timing standpoint, Kansas City is getting into the game late," said Joe Kessinger, president of Innovia Medical, which was founded to commercialize products based on technology to detect middle ear fluid. "We need to look at what we do well, and focus on it."

If Kansas City is going to have a vibrant bioscience community here, the infrastructure needs to be in place, he said. This means a stable of life science and pharmaceutical entrepreneurs who can become CEOs of these companies. It also means availability of wet lab space-a laboratory specifically geared for biology-so researchers can take discoveries and commercialize them.

Although research facilities are a critical need, Missouri legislators rejected Gov. Matt Blunt's plan to transfer student loan assets to capital improvement projects on the state's university campuses. Projects included plant and health science research centers and an incubator on the UMKC-Volker campus.

"It made a lot of sense, and would have benefited researchers on both sides of the state line," said Kelly Gillespie, president of Missouri Biotechnology Association. "Unfortunately, the legislature ran out of time and did not finish up that proposal."

Gillespie said there is still activity moving that plan forward either through the executive branch or during the 2007 legislative session. He also said lack of incubator space in Kansas City is a critical failing, and MoBio is working on getting space to allow entrepreneurs a place to do business.

Incubators are particularly important for bioscience companies because of the growth timeline. Bioscience companies have a different type of incubation, said Joel Wiggins, president and CEO of the Enterprise Center of Johnson County, a technology company incubator. Wiggins said you can turn a software company around in one or two years, but it takes longer for life science.

Kessinger agrees. "Taking a discovery to a commercialized product as Stowers is doing is at least a 10-year horizon before you'd have a company that was up and operating with revenue," he said.

Kansas City also is hampered by regional political and social issues, such as the intelligent design debate in Kansas. These issues can make it more difficult as the region seeks to grow the bioscience industry, said Bill Duncan, president and CEO of the Kansas City Life Sciences Institute. The debates can affect public perceptions globally, causing the region to be viewed as not particularly science-friendly, or not in the mainstream of science thought.

The tide may be turning in Kansas. In recent primary elections, conservative Republicans who approved academic standards calling evolution into question lost control of the state board of education. Missouri voters will face the stem cell research issue when they go to the polls in November. The outcome likely will affect the amount of resources companies such as Stowers will invest in the area.

Access to Capital
Like most small businesses, access to capital and the ability to maintain cash flow is a critical need of bioscience companies, Gillespie said. However, those barriers can be intensified in the bioscience industry.

"A lot of the work is research intensive and based on finding the science and converting an idea into an invoice," Gillespie said. "Sometimes that takes longer than other industry sectors, so you have some time issues that play into that capitalization and cash flow to get each business headed in the right direction."

Some solutions have been developed, such as InvestMidwest, which brings together venture capitalists, investors, bankers and accounting and legal professionals for presentations by growth companies seeking funding. The main goal is to provide access to capital for emerging, privately held companies and to promote greater entrepreneurship, business growth and expansion in the Midwest.

Seven of the 15 life science companies that presented in April came from the Kansas City area.

In March 2004, the Kansas Senate passed the Kansas Economic Growth Act, which allows for income taxes collected from Kansas biotech companies to be funneled into the Kansas Biosciences Authority. In turn, the Biosciences Authority's 11-member board invests that money in recruitment of new biotech companies to Kansas and in promising biotech research that could lead to new business ventures.

The Kansas Technology Enterprise Corporation (KTEC) supports and funds entrepreneurs in high-tech industries through six business incubators and two venture capital funds: the Applied Research Matching Fund for early-stage ventures and the Technology Commercialization Seed Fund for later-stage ventures.

Some start-up technology companies also might attract angel investors. The ECJC recently organized the MidAmerica Angels network, which is a regional network of angel investors dedicated to identifying and funding the most promising start-up business opportunities in the Kansas-Missouri region.

Building on Opportunities
Many small businesses in the bioscience arena are spin-offs from the major universities and research institutions. For example, CyDex evolved from the University of Kansas, which had developed an advanced drug delivery technology. CyDex has developed into an emerging specialty pharmaceutical company with product-based revenue streams.
"There is increasing attention given to technology that can come out of area schools, hospitals and research institutions, and figuring out how to start or maximize the value of new-stage companies coming out of those institutions," Wiggins said.

Patti Aspenleiter, president of ViraCor, a molecular diagnostic lab, said, "There are also a number of smaller commercial opportunities in Kansas City that are outcroppings from when Marion Labs moved to New Jersey-smaller companies started by ex-Marion people

To help ease the process from idea to commercial company, the University of Missouri-Kansas City (UMKC) has created an institute for translational research, which will advance the area's research institutions by translating their basic science discoveries into therapeutic products and services.

The institute will focus institutional resources, build critical mass to expand research and attract resources, coordinate efforts and train the next generation of researchers and clinicians. UMKC has applied for a $150,000 National Institutes of Health (NIH) grant to help with the planning of the institute, and will continue to apply for other multi-million dollar NIH grants that are available for new clinical and translational centers.

The Kansas City life science halo stretches westward to Manhattan. Kansas State University recently announced plans to build a satellite campus in Olathe for graduate programs that will initially emphasize the biosciences, food safety and security and animal health. K-State's proposed campus would be part of a larger biosciences research park, which would include an incubator and a wet lab.
 
Success Stories
While area start-up bioscience companies do face hurdles, Angela Kreps, president of KansasBio, said she is encouraged by the level of funding support that a couple of companies have received. For example, VasoGenix Pharmaceuticals Inc. received a second round of funding and formed a partnership with Cleveland Clinic to use the clinic's expertise on the application of its first drug, Calcitonin Gene Related Peptide, for the treatment of heart failure.
"It's exciting for a startup company in the Kansas City area to leverage partnerships to get this far, but also to be able to work within the broader region for advancement of clinical trials," Kreps said.

Another startup company with good traction is ImmunoGenetix Therapeutics, which is "developing advanced DNA immunotherapies for HIV infection."

ImmunoGenetix has exclusive worldwide licenses through the KU Research Institute.

"There's a lot of commercial opportunities that percolate out of that facility," said Jim Laufenberg, ImmunoGenetix president and CEO. 

ImmunoGenetix is in the run for an $18 million NIH contract, which would pay for developmental activities through Phase II of trials.

"We may get it and we may not, but the fact we are in the ballpark is indicative of what is happening here in town," Laufenberg said. "We are getting to the point where we can advance this kind of technology forward."

Advantages
One back-handed advantage for the region is that it's underserved by venture capitalists. So, as venture capital firms do come in to see what is available in the region, they are often pleasantly surprised by what they find, Wiggins said. The opportunities are not picked over.

"Kansas City is one of best kept secrets in industry," Kreps said. "We can move these companies along at half the cost that other markets could."

The quality of life and cost of living also can be a big advantage for companies that recognize the merits.

The venture capital members of the CyDEx board of directors wanted to move the company to the east or west coasts, partly because of the conservative environment in Kansas City. But chairman and CEO John Siebert convinced them that you can change the culture that Kansas City is a friendly environment for small companies and that it is cost competitive. He made the point that Kansas City provides a higher quality of life for the people who work in the company, and he made the case that there are many talented scientists in the area.

He told the board if they were to move the company to New Jersey, it would cost him three times as much in rent, and he would have to replace nearly everybody in the company.

"After I went through numbers and rationale, they told me I could keep the company in Kansas City," Siebert said.

Play to Your Strengths
"Bioscience" encompasses a range of industries, and historically Kansas City has dominated the animal health niche, with the presence of companies representing 27 percent of the $5 billion a year U.S. business and 30 percent of the $14.2 billion worldwide market, according to the findings released in August by Brakke Consulting, Inc, the Dallas-based management consulting firm specializing in animal health and related industries. Some of the major players located in Kansas City include Bayer Animal Health, Fort Dodge Animal Health, Boehringer Ingelheim Vetmedica, Hill's Pet Nutrition and Intervet Inc. Kansas City also is within driving distance of four leading schools of veterinary medicine in the nation.

A cluster of expertise gives you continued critical mass, Gillespie said.

"To be successful you have to have collaborations in this business," he said. "Going where you can find strengths in the marketplace only makes sense."

Aspenleiter said more collaboration among the small health science businesses in Kansas City would be positive for all of them.

"We are always in contact with other researchers and clients, and we all are looking to attract talent," Aspenleiter said.
"There are a number of researchers who may not want to live on the coasts, but they also don't want to feel isolated. We need to collaborate to improve our ability to promote what we do have here."

Everyone is doing what they do best to advance biosciences in Kansas, Kreps said.

"We are pulling together like never before, and we are on the national radar screen," she said. "We were covered in the Boston Globe business section front page above the fold. We are being featured in op-eds in New York. We have a lot to be proud of."

Feeder Companies
Building a strong infrastructure not only affects those companies directly involved in the life sciences industry, but it also creates opportunities for companies that serve the bioscience industry.

Information Technology
After the Sept. 11 tragedy, Greg and Karla Flax decided to focus their information technology experience in the life sciences/biosciences arena and formed Flax BioTech. Greg Flax said he spent a couple of years researching the market, learning the terminology and certification processes and understanding the industry from an IT perspective. He found few IT companies attempting to play in that space.

"The industry is demanding from a customer perspective and also from an IT perspective," said Rodney Born, executive sales account manager, who has a background in the life sciences industry and serves as a liaison between the IT staff and customer base.

The bioscience industry needs tend to be higher end and more complicated than basic office systems because they have to fulfill HIPAA regulations and security issues about how to store, track and access data, Born said.
 
Marketing and Clinical Trials
After spending a few years working at Lee's Summit-based Regulatory Clinical Consultants, Tim Wurst decided to combine that experience with his printing background to start Eriban Wurst, a pharmaceutical and health sciences marketing company. He recently expanded to offer clinical research support for dietary supplement companies. The Food and Drug Administration doesn't regulate these companies, but they still need to provide good research and backup information for products they market
.
"I'm not a full pharmaceutical contract research organization like Regulatory Clinical Consultants, but I can be a good general contractor and manage clinical trials for dietary supplement companies where regulatory demands are not so extreme," Wurst said.
 
Lab Equipment and Supplies
Hemco has focused on lab equipment such as furniture, fume hoods and ventilation systems for the biotech industry since 1958. In the 1980s when the biotech industry started emerging, Hemco started manufacturing enclosures and clean rooms.

Most of the company's business has come from the coasts, but the Midwest is starting to come around, said David Campbell, vice president of sales. Hemco just completed a project at KU's new multidisciplinary life sciences research facility on the west campus in Lawrence. The first floor is anchored by one of their largest clean rooms to date, Campbell said.

Human life science is a small part of a puzzle that also includes food products, agricultural and animal science, Campbell said.

"Of all the potential life science categories and opportunities, there is only a small percentage being touched on now," he said. "There is plenty room for everybody to go after life sciences, focusing on what makes sense for your area."

Ellen Jensen is the managing editor of Kansas City Small Business Monthly magazine.