Bio-Tech Invasion

Montana industry once meant miner’s helmets and cowboy hats, but a growing number of Montana workers today are more likely to be found in lab coats or head-to-toe clean suits. The state’s biotech sector is growing quickly, attracting attention from national and international investors as well as the media.

According to an article on IndustrialInfo.com cited in the Montana BioScience Alliance’s October 2005 newsletter, Montana has become the site of “some of the world’s most advanced biotech research laboratories.” The work going on in Montana, it continues, features “multi-million dollar construction projects for labs seeking cures or deterrents for everything from Ebola to serin gas.”

A 2003 report prepared for the Montana Governor’s Office by the North Carolina-based Regional Technology Strategies, Inc. indicated that at that time, Montana’s biotech or “life sciences” cluster already had “more than 50 firms, as well as an important group of public or non-profit laboratories, research institutes and hospitals” active in the industry.

It’s a concentration that defies some serious conventional wisdom.

“Relative to the size of its economy, Montana has a substantive, relatively diverse, and growing life sciences cluster,” the report states, adding that the health of the sector is surprising because the presence of medical schools is usually seen as “a necessary condition for biotech cluster development.”

According to the report’s authors, Montana has succeeded in biotech “in spite of this handicap by developing its own distinctive infrastructure that includes several medical/bioscience research institutes, hospitals with research and clinical trials capacity, and a very strong life sciences and related-engineering presence and interest within its two major universities.”

And the lifestyle issue doesn’t hurt.

Guy Cook—the CEO of Belgrade-based Bacterin Inc., a company that develops and manufactures bioactive coatings for medical devices—says that Montana can compete with larger areas such as Boston and San Diego for highly qualified employees because it is “such a beautiful spot with such a high quality of life.”

“It’s not hard to recruit people once they get off the plane,” Cook says.

Bozeman, indeed, has been one of the Montana epicenters for bio-tech. The other big player, perhaps unsurprisingly, is Montana’s other university town, Missoula. In both cases, the universities and public-private partnerships have played key roles in the sector’s development.

THE BOZONE

Montana State University—once best known as an agriculture and engineering school—still has significant interest in both, but research now is just as likely to involve “mapping noxious weeds with remote sensing equipment, protecting cancer patients from radiation’s harmful effects, and developing a Mars Cargo Vehicle for deep space travel,” in the words of the MSU TechLink Center website.

In 2003, Bacterin Inc. spun off from MSU’s Center for Biofilm Engineering (CBE), which was founded in 1990 as part of the National Science Foundation Engineering Research Center at MSU. Bacterin, founded in 1997 by CEO Guy Cook, was the first “graduate” of TechRanch, an entrepreneurial incubator formed in part with money from MSU’s TechLink Center.

According to Molly Mason, Bacterin’s investor relations and marketing manager, the support and simple presence of the university has been “fundamental” in Bacterin’s growth.

“It means we have access to a lot of well-educated students and graduates for employment, and we also have partnerships in which we use their animal testing labs,” Mason explains. “There are also a lot of other alliances that can be made, and we receive a lot of support from alumni, and investors, as well as with networking. It’s been a significant benefit.”

The company has been lauded nationally and internationally, appearing as one of Fortune magazine’s “25 Breakout Companies” of 2005.

TechRanch (which was featured in a 2004 Distinctly Montana article) has also incubated several other area biotech firms since its founding in 2000, including LigoCyte, a Bozeman company that develops drugs and vaccines to treat inflammatory and infectious diseases; SensoPath Technologies, Inc., which is working on ways to detect and identify bioterror pathogens; and EnviroZyme, which uses microbes found in thermal pools in Yellowstone National Park to make a plant-based fish food that is high in nutrition but low on waste.

Other area biotech companies are also employing MSU research in for-profit ventures. The Belgrade-based company Phillips Environmental Products, for example, is using a cinnamon tree fungus patented by MSU Professor Gary Strobel in a product line used to kill both the smell and the harmful bacteria from human waste.

MISSOULA ASCENDANT

Four hours west in Missoula and Hamilton, start-ups—also anchored in part by the university and organizations that link high-tech companies—are making their own headlines. In September 2005, Rocky Mountain Biologicals, Inc. (RMBI) opened its new 7,000-square-foot manufacturing facility with the intention of doing worldwide business. Less than a year later, in July 2006, the company signed a multi-year, multi-million-dollar deal with Fisher Scientific, the world’s largest biopharmaceutical supply company.

RMBI—under the leadership of CEO Suresh Daniel, a UM graduate—manufactures, develops, and markets blood products for domestic and international pharmaceutical and biotech companies and research institutions. The company raised $2.7 million to start, including $1.5 million from a private stock offering to local investors. An additional $1.2 million came in part from a series of loans from a local nonprofit, the Missoula Area Economic Development Corp.

Daniel says that he thinks it’s great that a small Missoula company can be an important piece in a larger biotech puzzle, providing the blood products necessary to do important research.

“A company started right here in Missoula is providing a link in the chain of pharmaceutical manufacturing for new targeted therapies for cancer, rheumatoid arthritis, and cardiology, for example,” Daniel explains. “It can be done here.”

The larger Bitterroot Valley area has been another hive of biotech activity, particularly because of the huge National Institutes of Health (NIH) Rocky Mountain Laboratories in Hamilton. The lab is one of the oldest federal research sites in the United States and is described by IndustrialInfo.com as “an integral part of the federal government’s quest to study the infectious microbes that cause disease in humans and animals.”

Moreover, British drug manufacturer GlaxoSmithKline last spring bought another Hamilton lab and manufacturing center, Corixa Corp., and a Missoula company, EndoBiologics International Inc., inked a major deal with a California company called VaxGen Inc. around the same time.

UPS AND DOWNS AND IDAHO

The track records of companies in Bozeman and Missoula belie some of the financial difficulties of doing high-tech bio-business in Montana. While all of the businesspeople interviewed were overwhelmingly positive about the economic direction of the state, most mentioned the difficulty of finding funding.

“There aren’t a lot of incentives to invest yet,” Daniel says, adding that he does believe the state is on the right track. Still, he says, the failure of a 2005 bill in the State Senate to reduce capital gains taxes for investors willing to take a chance on small-business start-ups was a blow.

“There have been venture capital hedge funds who have wanted to invest, but they need a push from the state government to make adjustments in the tax structure,” he explains. “As it stands now, Idaho’s (tax structure) is more favorable.”

Beyond taxes, Bacterin CEO Cook contends that venture capitalists often ignore Montana because of its laid-back lifestyle.

“They don’t believe you’re serious about business if you live work and play in Montana. Venture capitalists want to drive by and see how many cars are in the parking lot on a Friday afternoon,” Cook says.

Cook says he and his team have made a lot of trips to New York to seek funding, adding that now that Bacterin is more recognized, many of the investors want to come to Belgrade to see the operation.

“When we first started out, it was a problem to fly out of Montana because the seats were so expensive, but now, more of our clients want to fly out to see us, rather than our going to see them,” Cook explains. “They like to spend an extra day or two.”

All in all, Cook says, Montana’s biotech companies may have to work a little harder, but he believes they can compete with firms anywhere.

“Even small companies like ourselves can get national attention,” he asserts, “so long as you have a good company with a good story.” He also praises Montana’s Congressional delegation for its openness.

“One thing that is unique about Montana is that you can really get the ear of your delegation,” he says. “You’re not some anonymous company in Menlo Park.”

With the success of these companies, it looks as if the clean suits and lab coats are here to stay, if not supplanting Montana’s traditional resource industries than at least supplementing them considerably.

Luckily, the cowboy hat can still reign on the weekends.

Biotech Granddaddy in the Golden Triangle

One longstanding exception to the Bozeman-Missoula biotech corridor is the non-profit McLaughlin Research Institute (MRI) in Great Falls. Founded in 1954, the Institute focuses on improving human health through research on mice.

Dr. George Carlson is McLaughlin’s director and is also a research scientist for the Institute. He says that the biotech work underway at the Great Falls lab is just as important economically for Montana as that being done in Missoula and Bozeman’s for-profit startups.

“What I think some people, and particularly (Montana State) legislators, don’t seem to realize or understand is that they think a for-profit provides more economic development than a non-profit, and that’s not necessarily the case,” Carlson argues. “...(O)ur grants from the National Institutes of Health and other agencies and donations from foundations out of state as well as local support are what allow us to create good-paying jobs. That is happening largely because of money that’s coming from outside of Montana.”

“We are a non-profit that is already creating jobs,” he concludes.

As a September 2005 Billings Gazette article explains, quoting Carlson, “Fifteen years ago, the state of Montana gave McLaughlin $2 million to build a new facility, and since then, the lab has brought $35 million in research funds to Great Falls. That’s a payoff of $17 for every $1 invested by the state.”

The research done at McLaughlin all falls under the common theme of using the mouse as a model to explain and decipher human genetics, and there are four research groups. Carlson’s research focuses on Prion conditions such as Alzheimer’s Disease and Bovine Spongiform Encephalopathy, also known as Mad Cow Disease. Other researchers tackle auditory system development, while another group looks at myelination, an avenue that could eventually provide clues about multiple sclerosis (MS).

It’s work that is getting recognition far beyond Montana’s borders. Last fall, MRI and the University of Montana received a multi-million-dollar grant from the National Institutes of Health to study neurodegenerative diseases including MS and Parkinson’s. In April, an MRI conference organized by Dr. Pin-Xian Xu brought some of hearing research’s leading lights to Great Falls to discuss inner ear development and genetics and the future of auditory research in Montana. The Institute has also been designated a National Center for Research Resources (NRCC) Center for Biomedical Research Excellence (COBRE), in conjunction with the University of Montana.

In addition to its research role, MRI maintains an important educational mission as well, providing internships in cutting-edge research for high school and college students as well as research opportunities for school teachers.

According to Carlson, the main challenge to doing high-level research for a non-profit institute is the same one facing for-profit startups: capital. “Our biggest issue is the funding, because Montana is not a wealthy state. Many of the institutions similar to us have considerable endowments, and that just doesn’t happen here,” he laments.

On the other hand, Carlson says, MRI’s size and Montana’s “entrepreneurial” culture allows for considerable autonomy and less bureaucracy. “There are few impediments to doing research here,” he says.

~ Nicole Rosenleaf Ritter is a freelance writer and editor with deep Montana roots. After nearly a decade away, she returned to Montana in 2004 and now resides in Livingston with her family.