Betting on biotech

Primed for growth, Minnesota's biotech sector is brewing plenty of interesting ventures — and the stakes are high

The process of launching a biotech company and developing it into a profitable enterprise could be considered a form of high-stakes gambling. Even a venture based on groundbreaking technology, its value proven in a laboratory setting, can't be considered a sure thing given the large amounts of capital needed to traverse the path from discovery to market.

"High stakes" also implies the potential for big winnings, and that's how public and industry leaders see Minnesota's biotech future. They cite an array of public and private assets in the areas of molecular and cellular biology, health sciences, agriculture, and bio-materials, adding up to an industry primed for explosive growth.

Cargill affirmed that potential several years ago when it formed the Minnetonka-based spin-off NatureWorks to develop and manufacture a line of bio-plastics based on natural plant sugars. NatureWorks has led to the formation of about a dozen smaller companies, says Dale Wahlstrom, president and CEO of the BioBusiness Alliance of Minnesota and LifeScience Alley.

"The ability to control outcomes in biotech is improving dramatically on a daily basis," says Wahlstrom. "Eventually the ability to control biological processes will be as common as our ability to control electronic circuitry is today."

Raising capital is a challenge for most startups, and that is especially true for biotech companies, says Rick Brimacomb, a longtime investor and advisor to early-stage companies and founder of Minneapolis-based Brimacomb and Associates. In the Twin Cities, sources of capital "have historically been more med-tech-oriented. More often than not, companies in the biotech category need a lot of money and long lead times to profitability. That makes it difficult for local money to find those deals. And bringing in money from the coasts is not easy."

But Brimacomb also cites positive developments that bode well for Minnesota's biotech sector, such as the angel investor tax credit created by the state legislature. Although venture capital firms have become less willing to invest in early-stage ventures, angel investors are becoming more organized and stepping up to fill the early-stage vacuum, Brimacomb notes.

The state's abundant resources in health care, agriculture, and technology, along with a welleducated workforce, represent "the ingredients we need to succeed in complicated market categories like biotech," he says.

Several years ago, the BioBusiness Alliance launched a community initiative to connect startups with angel investors called the Minnesota Angel Network (MNAN). It provides an educational program for entrepreneurial companies seeking to raise investment capital and an online connection for accredited investors interested in investing in MNAN-certified companies.

Below, a sampling of innovative biotech ventures in Minnesota.

Miromatrix Medical

In 2008, Dr. Doris Taylor, Dr. Harold Ott, and their team at the University of Minnesota's Center for Cardiovascular Repair made international news with a novel decellularization process. They had removed the heart from a recently euthanized animal, decellularized or removed the cells from it, and then injected it with a mixture of heart cells from a donor rat. After eight days in a bioreactor, the heart began to beat again.

Eden Prairie–based Miromatrix Medical Inc. licensed the technology from the university and is developing organs and organ-derived products for human use. The regenerative medicine company expects its first product, a biological mesh made from porcine organ tissue, to be on the market during the second calendar quarter of 2014, says president and CEO Robert Cohen. With it, the company is targeting a rapidly growing $2 billion market for abdominal wall/hernia repair, breast reconstruction, and other soft tissue applications.

Last year, the company completed a $6 million Series A financing round. The firm has allowed and issued patents in China, Russia, Australia, Israel, Europe, and the United States, and has "many" more patents pending, according to Cohen.

Cohen says the company's potential markets are vast. "We have an opportunity to eliminate the organ waiting lists and to tackle enormous medical conditions such as diabetes, end-stage liver failure, and kidney disease otherwise requiring dialysis."

Miromatrix occupies an approximately 1,000-square-foot laboratory and is building out a separate 8,000-square-foot manufacturing building where it will make the mesh. "Many other products will follow," says Cohen.


In its mission to develop vaccines used to prevent and treat bacterial diseases, St. Paul–based Syntiron has licensed a vaccine to Sanofi Pasteur, the vaccine division of the Paris-based pharmaceuticals giant Sanofi Aventis. Syntiron's developmentand- licensing agreement with Sanofi could end up being worth as much as $149 million, according to officials at the startup. It was founded in 2004 as an R&D company developing human vaccines based on ironregulated bacterial proteins.

Syntiron is a spin-off of Epitopix, which has been developing vaccines for poultry since the 1990s. Syntiron is using Epitopix technology to develop human vaccines. Epitopix, meanwhile, is a spin-off of Willmar Poultry Company, which operates one of the world's largest turkey hatchery operations.

"The concept that animals can produce materials that can be used for human vaccines is old," says Lisa Herron-Olson, Syntiron's chief operating officer. "But historically there has not been as much interplay between animal and human researchers as you might expect. Our company is unique in that way."

Syntiron has developed a pipeline of pre-clinical, human vaccines, with the goal of beginning human clinical trials within three years, according to Herron- Olson. "The fact that we have a vaccine platform that can be used for multiple types of bacteria is huge."

Syntiron's affiliation with an established, revenueproducing company (Willmar Poultry) has been a major asset, helping the smaller company obtain more than $10 million in contracts and grants from U.S. government agencies, Herron-Olson says.

Ever Cat Fuels

Isanti-based Ever Cat Fuels has a faster, more efficient way to make biofuels that consumes no water, uses no harsh chemicals, and produces no hazardous waste products. Called the Mcgyan process (named after inventors Clayton McNeff, Arlin Gyberg, and Ben Yan), it converts non-food fats and oils containing free fatty acid - cooking oil , for instance - into biodiesel. Sister firm SarTec Corp. developed the process in 2006.

Ever Cat Fuels has been marketing its biodiesel to "some of the larger feedlots, construction companies, and cattle companies in the Midwest, especially Nebraska and Kansas," says company spokesman Dave Wendorf. He sees a growing demand for biodiesel among fuel blenders complying with federal and state mandates for alternative fuels use. And he sees a "huge" market for biodiesel for non-transportation industrial uses, such as mining and irrigation systems.

The company is completing a private placement to raise an undisclosed amount of fresh capital, says Wendorf. It also received a $400,000 grant from the Minnesota Department of Agriculture to design a smaller 6-gallon-per-hour mobile unit for use by farms and other small businesses. Field tests will begin later this year.

The company has also begun to explore expanding its production facility. "We're on a roll," says Wendorf.

Gel-Del Technologies

Based in the University of Minnesota's University Enterprise Laboratories, Gel-Del Technologies makes biomaterial products that mimic the body's tissue. The company uses revolutionary and patented protein-based fabrication techniques developed by biochemist Dr. David Masters and is in the forefront of the burgeoning science known as regenerative medicine.

Compared to the plastic and metal used as implant materials, the company's bio-materials have enhanced "bio-compatibility," Masters says, which can reduce or eliminate post-surgical complications such as inflammation, foreign-body response, and the formation of blood clots.

Gel-Del combines complex carbohydrates and proteins to create and "supply the body with the material it uses to regenerate itself," says Masters, a former Harvard and Mayo Clinic researcher. The company has designed and produced products in the laboratory, such as cosmetic tissue fillers and blood vessel grafts, and implanted oral and particle drug delivery systems that it says are a major improvement over existing FDA-approved products. It has injected and/or implanted its proprietary biomaterial as cosmetic, orthopedic, urologic, and cardiovascular products into research animals, with very promising results, Masters says.

With more products in the pipeline - including coatings for cardiovascular stents - the company has developed "a full portfolio of U.S. and international patents" and expects to establish its first licensing agreement by year's end, according to chief operating officer Randy Meyer.


Minnesota's combination of agricultural, corporate, and scientific resources has made bio-plastics one its most promising new industries. And within the bio-plastics category, the state's most promising startup may be Plymouth-based BioAmber.

The five-year-old company has not yet reached profitability but is aiming at a huge potential market for its bio-succinic acid Bio-SATM, made from the fermented sugars of corn and other grain crops.

A less-expensive, low-carbon-footprint alternative to the succinic acid produced from petroleum, Bio-SATM is one of the few bio-based chemicals available on a commercial scale. The company is aiming at "a really broad market" estimated at more than $10 billion, according to executive VP Mike Hartmann.

Bio-succinic acid is a platform chemical that goes into a wide variety of products in industries including plastics, auto parts, PVC components, packaging, cosmetics, and more. "It can also be used as a building block for a number of derivative chemicals," Hartmann points out.

BioAmber plans to open its second manufacturing plant - and first in North America - in Sarnia, Ont., in the second half of 2014, Hartmann says. Sarnia is about 60 miles northeast of Detroit. The company considered about 100 possible sites in North America before narrowing the list to about 10 in the Dakotas, Iowa, Illinois, and Ontario. Sarnia was chosen on the basis of government support, logistics (accessibility to railroads, major highways, et cetera) and local infrastructure, Hartmann says.

BioAmber will develop the Sarnia plant in partnership with Japanese corporate giant Mitsui & Co.; the two companies also plan to build two additional plants, in Thailand and either the U.S. or Brazil.

The technological "platform" that led to BioAmber's formation was developed at a Cargill-affiliated predecessor firm that was working under a U.S. Department of Energy grant and researching the use of bacteria in producing alternative fuels. That effort eventually shifted to developing bio-based chemicals using yeast, which led to the creation of Bio-SATM and derivatives, Hartmann says.

BioAmber currently produces its bio-succinic acid in a large-scale demonstration facility using a 350,000-liter fermenter in Pomacle, France, one of the largest bio-based chemical manufacturing facilities in the world.

Today, petroleum-derived succinic acid is not being used in many potential applications because of its relatively high production costs and selling price. BioAmber says it can produce bio-succinic acid that is cost-competitive with succinic acid produced from oil priced as low as $35 per barrel, based on an assumed corn price of $6.50 per bushel.

Another BioAmber partner is NatureWorks, a collaborator in developing polymers for food-packing uses. To lower its production costs and develop more bio-chemicals, BioAmber has also forged agreements with several companies in Europe to develop other bio-succinic acid derivatives (and with companies in the U.S., Cargill and DuPont among them).

Hartmann declined to make any projections regarding profitability, but he says getting the Sarnia plant up and running will be a crucial step toward that goal.


Aspen Research

Back in the mid-'90s, Bayport-based window manufacturer Andersen Corp. was seeking a way to recycle waste material from its manufacturing processes. In 1997, it acquired Aspen Research, then an 11-year-old firm based in White Bear Lake. Aspen subsequently used its expertise to help Andersen develop Fibrex, a material that combines the strength and durability of wood with the maintenance ease of vinyl. Andersen uses the polymer-and-wood-based composite across its product lines, including the Renewal by Andersen line of replacement windows.

At its peak, Aspen was a $20 million company with 140 employees. In 2011, former investment banker Rick Burnton and partners Greg Patterson and Ken Zigrino bought Aspen from Andersen. Now based in a 106,000-square-foot manufacturing facility in Maple Grove, Aspen is developing its own patent-pending products. They include various bio-materials, resin products, and substitutes for petroleum-based materials.

Burnton says the company has become primed for growth by "leveraging the know-how we gained in developing sustainable composites for Andersen Windows."

The sustainable plastics Aspen creates are based on PLA resin developed by NatureWorks, the Cargill subsidiary. With the company generating about $4 million in annual revenue, Burnton says Aspen anticipates market growth of 65 to 70 percent for 2013-2014. "We're excited about where the market will be going in the next five to seven years," Burnton says, characterizing the market for the company's bio-based plastics as "unlimited."