SUPER POWER WHILE OTHER BUSINESSES LANGUISH IN ECONOMIC DOLDRUMS, BIOTECH FIRMS OFFER ONE BRIGHT, SHINING LIGHT FOR INVESTORS, POTENTIAL WORKERS.

Byline: Barbara Correa Staff Writer

As investment in Southern California's online and information-technology industries continues to languish, biotechnology is emerging as a silver lining for future business development and job growth in the region.

From the 101 Corridor to Biotech Beach, an area that stretches from Ventura to San Diego counties, universities, city development departments and incubators - communities of entrepreneurs, academics and investors collaborating to develop new ventures - are looking for ways to grow the sector.

``You had a lot of venture capital that went into tech and software, and they weren't viable business plans. But they've had more success in the biomedical sector,'' said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp.

``People feel there's a lot of growth potential there because the population is living longer and experiencing more medical problems. And in Southern California, you have the medical schools and the research hospitals.''

Venture capital investment in information technology in Southern California plummeted from $5.6 billion in 2000 to $690 million last year, according to VentureWire, a venture capital research firm. But investment in biotechnology (generally drug development and manufacturing and medical devices) in the area rose from $653 million to $860 million in the same period.

And while the San Diego area has historically been seen as the region's hub for biotech activity, its neighbors to the north are offering increasing competition.

In the past year alone, Thousand Oaks-based Amgen acquired Immunex for $16 billion in the largest sector deal ever. Santa Monica biotech company Ceres signed a $137 million deal with Monsanto Co. to provide it with genomics technologies for agricultural crops. Agensys, a cancer drug developer also in Santa Monica, raised almost $43 million in new financing, the largest venture deal in the area.

BioMedix, a Diamond Bar company making test strips for food pathogens like E. coli, plans to relocate any day to California State Polytechnic University, Pomona's new Innovation Village, a technology incubation center on campus. The American Red Cross plans to open a blood processing center there in May, said Julie Holland, director of the NASA Commercialization Center, another incubator that's been on campus three years.

Last fall, California State University, Channel Islands, opened its Camarillo campus, dedicated to supplying local businesses - including Amgen and Baxter - with graduates and applied research.

In the past few years, Medtronic MiniMed - a supplier of insulin pumps - has established its headquarters on the campus of California State University, Northridge, Santa Clarita has emerged as a biotech cluster at the Valencia Gateway development and Claremont McKenna College opened the first program, with the Keck Graduate Institute, specifically designed to train students to manage biomedical industries. Cal Poly Pomona opened a 120,000-square-foot lab devoted to biotech research two years ago.

Also, the University of California, Los Angeles, office of intellectual property administration brought in a new director to push greater technology transfer to bring local start-up technologies to market.

High hurdles

All this activity has put the biotech sector at the top of economic development planning lists across the region.

For all the optimism however, growth faces specific challenges on top of a generally weak economic climate.

Data showing biotech as one of the most attractive sectors to investors has to be considered against the backdrop of the general collapse of venture capital activity since 2000.

``The mood is cautious,'' said Dr. Gary Lazar, managing director of California Technology Ventures, a Pasadena group that provides early stage and seed money to biotech concerns in Southern California. ``Relative to technology spending, biotech has had more activity but the bottom line is that all types of venture investing has been stymied because there are no exit strategies and no public offerings. Deals are getting done, but only the best technologies are getting financing.''

Those include Insert Therapeutics, a California Institute of Technology ``nanotechnology'' spinoff that created a delivery system for small-molecule drugs.

California Technology Ventures is also looking at the medical device area and at companies with novel molecules for cancer, diabetes, cardiovascular and neurodegeneratice diseases.

Other areas of interest to the venture community that don't fall under the traditional biotech category but are still related are homeland defense sensing technologies, said Gary Clark, executive director of Venture Coast Biotechnology Institute, a nonprofit business development organization covering Santa Barbara through Pasadena, and a member of the Tech Coast Angels, a group of several hundred investors in Southern California.

``One company has a new metal that can be sprayed on an airplane wing and can detect the presence of elements like ice and can automatically melt it,'' he said.

Technology to market

Transferring such technologies from the research lab to market isn't as straightforward in biotech as it is in other industries.

With a computer software product, for example, once it's developed the challenge is basically just marketing and selling it, whereas with a new drug, technology or medical device, it takes years of study and testing before it gets anywhere near the marketing phase, said Peter Hartz, a partner at FortuneLab, a venture capital firm in Canoga Park.

All that research and study time means biotech startups require a lot of capital before they can actually put a product out or be acquired, said Clark.

Another hurdle for biotech development in Los Angeles and Ventura counties is that the companies are so decentralized geographically, with clusters at universities and research hospitals as far-flung as City of Hope medical center in Duarte, Harbor-UCLA Research Institute in Torrance and Huntington Medical Research Institute in Pasadena.

``We don't have a Torrey Pines Road (in San Diego) where there is so much concentration,'' said Gary Lazar. ``Geographic issues are very difficult to overcome.''

Still, the outlook for drug and medical device manufacturing in the region is so bullish that most of the industry is concerned about a shortage of qualified workers as new drugs currently in the approval process are given the green light by the Federal Drug Administration.

``That skill set is tricky to find,'' said James Harber, director of the Central Coast Biotechnology Center at Ventura College. ``It's not like computer chips, where if it's off, you can throw the thing away. We're talking about injectable products.''

Los Angeles County biotech already employs thousands more workers than San Diego and Orange counties and is expected to add more than 6,000 jobs in the next four years, the California Employment Development Department reports.

Several colleges are making an effort to train students to take those jobs by exposing them to real-world experience in the field.

CSUN students are interning at Medtronic. The Business and Technology Partnership, affiliated with CSUCI, is promoting student internships at local biotech and tech companies, and Moorpark College biotechnology students are using CSUCI's labs. Ventura College in Ventura and College of the Canyons in Santa Clarita help place students at Amgen, Baxter and BioSource.

``People wonder, can my kids work at Amgen or Baxter?'' said Harber. ``Yes, they can.'' And they don't necessarily need to have a doctorate or even a degree in biology to do it. ``For every Ph.D. in a biotech lab,'' he said, ``you need a pyramid of technicians to support that person.''

CAPTION(S):

drawing, 2 charts

Drawing:

(color) no caption (Biotech man)

Jorge Irribarren/Staff Artist

Chart:

(1) BIOTECH BUCKS

SOURCE: VentureWire

(2) BIOTECH JOBS

SOURCE: Employment Development Dept.

Staff Graphic