Genetic Research is Becoming Big Business in Madison
By Kathleen Gallagher, Milwaukee Journal Sentinel
Jan. 16–Madison is giving new meaning to “gene pool,” as a small but growing number of companies in the molecular diagnostic field are springing up around the university and attracting the attention of venture capitalists.
Madison is home to a growing cluster of companies that provide molecular diagnostic tests or research tools. All five of these companies are based on discoveries patented by the Wisconsin Alumni Research Foundation: Third Wave Technologies Inc. spawned the genetic test and research tool making cluster when, in 1993, it was the first company ever to have WARF take a stake in it rather than license the related technology for a fee to an existing company. The genetic test maker went public in February 2001.
When EraGen Biosciences Inc. said last week it had raised an additional $12 million of venture capital, it marked a big step forward in the genetic test maker’s attempt to design and market products that aid early diagnosis of infectious diseases, cancer and bioterrorist agents.
It also underlined something a cadre of scientists and financiers in the state already knew: Madison is home to an emerging cluster of high-growth genetic test and research tool makers that aims to change the way we view disease, health care and even ourselves.
Armed with the four letters that comprise the genetic alphabet and a unique understanding of the twists and turns and chemical flags associated with DNA strands, companies such as EraGen, NimbleGen Systems Inc., OpGen Inc. and GenTel Biosciences Inc. are helping the world understand how cells function — and malfunction.
“The capabilities of these companies to totally change the way research and diagnosis is done is what makes them so valuable,” said Andrew Cohn, spokesman for the Wisconsin Alumni Research Foundation, or WARF, the University of Wisconsin-Madison’s patenting and licensing arm.
“We’re the discovery engine to find molecular markers for the world,” Emile Nuwaysir said of NimbleGen Systems, where he is vice president of business development.
NimbleGen and the other Madison companies aren’t the only ones involved in that quest, of course. On the map of biotech businesses, Madison is still a midget compared with giants in the San Francisco, San Diego and Boston areas.
But bolstered by powerful science coming out of UW-Madison, the fourth-biggest research institution in the nation, and an increasingly more entrepreneurial climate, the Madison area is beginning to look like it has the wherewithal to be a competitive force.
The emergence of Madison’s genetic test and research tool makers began in 1993 when the Wisconsin Alumni Research Foundation, instead of licensing a new UW-Madison discovery to an out-of-state company, allowed the researchers to use their patented technology to start one.
That company, Third Wave Technologies Inc., raised $82.5 million in a 2001 initial public offering and became an inspiration for what is now a growing cluster.
The reason the cluster could develop is because of UW’s research strength in biochemistry and molecular biology, as well as a revolutionary change at WARF that allowed entrepreneurs to get equity licenses. In other words, the university takes an ownership stake in a company instead of the traditional licensing fees and royalties for the use of the university’s intellectual property.
“There has been a group of prominent scientists who decided to start some companies, going back more than 10 years with Third Wave, and they’ve been successful doing it,” said Greg Lynch, a partner in the Madison law office of Michael Best & Friedrich and member of the firm’s Venture Best practice.
Those scientists aren’t finished yet, either. Two other companies in the molecular diagnostic and tool making business are in the process of forming, said Lynch, whose firm represents Third Wave and OpGen as well as investors in EraGen and NimbleGen.
The development of such a cluster is a good sign, said Dan Broderick, a managing director at Mason Wells, a Milwaukee venture capital firm that owns part of OpGen.
“In mid-America you are going to start seeing clusters of technology and areas of expertise forming, and molecular diagnostics could be such an area for Wisconsin,” Broderick said.
This cluster will likely create a lot of wealth in the next five years, which will produce more so-called serial entrepreneurs to go out and reinvest in new companies, said state Sen. Ted Kanavas (R-Brookfield).
Having a cluster also helps attract talent and encourages sharing of non-competitive information that helps everyone get better, said Tom Still, president of the Wisconsin Technology Council.
“These companies are all going after different diseases and different markets, but they’re bound together by their DNA pedigrees,” Still said.
GENETIC RESEARCH AT A GLANCE:
–EraGen Biosciences Inc. is developing genetic tests for early diagnosis of infectious diseases, cancer, several genetic disorders and bioterrorist agents. Its flagship test for cystic fibrosis will be marketed by Bayer Diagnostics.
–GenTel BioServices Inc. is a 5-year old company whose key product is a plate-like device called a biochip that reads blood to identify specific proteins involved in cancers and other diseases.
–NimbleGen Systems Inc. has grown to more than 80 employees since it was founded in 1999. The company makes gene chips for researchers that have been used to speed discovery of markers for diseases ranging from autism and tuberculosis to cancer.
–OpGen Inc. sells an “optical mapping” product to academic and commercial organizations around the world for genome comparison and other applications that help drug development efforts and infectious disease research.
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