Despite assets, valley cluster slow to develop.

Politicians are fond of saying that biotechnology is the city's economic savior. It's nice to imagine, especially as San Francisco and San Diego have blossomed into successful biotech communities. Los Angeles alone is one of the largest economies in the world, so economists are left to wonder why the city shouldn't be able to duplicate its neighbors' success.

Despite having world-class research centers like USC and UCLA and the growing Cal State Channel Islands as well as the largest biotechnology company in the world, Amgen, just around the comer, the Valley has not been able to raise a promising crop of biotech startup companies, although there are a handful doing promising work.

Manish Singh, a director with California Technology Ventures in Pasadena, says there is simply not enough money to fund local biotechnology companies.

"There are no big biotech funds in the Los Angeles area and there are probably three venture funds that do any life science investments," Singh said. "If you look at their portfolios, there are very few biotechnology companies in Los Angeles that they have funded."

In the spring issue of SoCalBio Synergies, published by the Southern California Biomedical Council, Singh and his co-authors wrote that most venture capital firms tend to invest in their own regions. When they explore other parts of the country, they usually end up investing in regions that are considered safe bets, a designation that Los Angeles has yet to achieve.

If Los Angeles does manage to get a little bit of recognition, Singh said, there are a number of investment opportunities in the Valley and elsewhere.

"We have a large number of experienced students, we have people who have worked at Amgen, Baxter, MiniMed. We have a lot of those experienced entrepreneurs who know this business," Singh said.

One way to jumpstart local biotech activity would be for the city or state to require public employee pension funds to invest a certain percentage of their funds into local life science firms, an idea first proposed during Los Angeles' Life Sciences Industry roundtable in 1999. Some states have enacted such measures.

A key component in growing the area's life sciences businesses may be the oft-discussed USC Biomedical Research Park. Mayor Antonio Villaraigosa has voiced his support for the project - it would be located in the city council district he formerly represented--and County Supervisor Gloria Molina has stated along with USC President Steven Sample her intent to guide the park into existence. University leaders and politicians are betting that if the center can be filled with startup companies working close by each other and the city's research institutions, they may in turn attract more venture capital firms.

Drawing interest

Interest from local venture capitalists might generate more interest from other firms across the country, Singh said.

"We are funding a company out of Cal Tech. If we put in $3 or $5 million, we might be able to attract $40 million or $50 million from outside investors," Singh said. "They'll come in because they see that smart money is coming in from local investors."

Cal State Channel Islands is pushing biotech research itself. This fall, the first class in the school's Master of Science Degree in Biotechnology and Bioinformatics will hit the classroom. Throughout the program, business and science students will learn the drug development process. Staff from Amgen will be on hand to teach some of the classes.

The school is also a center for Alzheimer's research as of this year. Last year, former Amgen medicinal chemist Gil Rishton set up the Alzheimer's Initiative on the campus to study new drug components which could potentially lead to a cure for the disease.

Rishton said that research at the Institute has proceeded to the point where he's getting ready to file patent applications.

Junfu Zhang, author of a report published recently by the Public Policy Institute of California titled "The Dynamics of California's Biotechnology Industry," said that attempting to grow a cluster is usually a more successful strategy than recruiting out-of-state firms.

"It seems that people are always talking about attracting biotech business, they talk about reasons why we can't attract companies or why firms won't come to our region," Zhang said. "From our study, the impression I got is that regions don't attract biotech businesses. You see San Francisco and San Diego; they are big biotech centers but if you look at them carefully, they don't attract biotech businesses from anywhere in the country, they created biotech companies."

Luring companies

Economic policies like tax breaks may not serve to lure biotech businesses, but if a project like the USC research center managed to increase lab space and build on manufacturing capabilities, it could go a long way toward nurturing the city's talent.

Zhang said that Los Angeles' existing crop of research universities, educated and experienced scientists and the presence of the world's largest biotech company do provide many of the ingredients necessary to building a thriving biotech culture.

Edmond Buccellato, chief executive officer of Advanced Biotherapy a small biotech company in Woodland Hills attempting to use antibodies to treat a wide variety of diseases, said that many investors are simply too unfamiliar with biotechnology to risk their money.

"One reason is the number of failures. There have been a number of product failures in clinical trials," Buccellato said.

The potential for failure combined with a multi-year development schedule and the cost of developing a drug, which can reach close to $1 billion, are three factors that make it difficult for small companies outside of nationally recognized clusters to get attention, Buccellato said.

For companies like Advanced Biotherapy, the solution is often to license their products and research to a larger company with the resources to bring a product to market. Buccellato said Advanced Biotherapy is working on a licensing agreement right now. In exchange for research, companies receive an up-front fee along with additional payments made upon the completion of predetermined milestones like specific sales figures.

Despite the fact that Los Angeles has been slower to create a thriving biotechnology industry, Singh says it is much too early to start declaring the region a failure.

"I think this is the beginning of the biotech revolution, a lot of what we discovered in the late 90s and the early 2000s, none of that stuff has been commercialized," said Singh. "A lot of the commercialized technologies are 15, 20 or 25 years old."

JONATHAN D. COLBURN Staff Reporter