Health Care and Economy and Life Science & Biotech and Technology

Incubator lures biotech upstart: Fish vaccine biz hoping to land on canal

April 4, 2005

Hatching new businesses is getting to be routine for Indiana University. So it was easy for Richard Wagner to contemplate moving his biotech startup from Columbus, Ohio, into IU's 2-year-old business incubator on the Central Canal.

"It's an excellent facility. Every time I go up, I'm more and more impressed with it," Wagner said. "They put a lot of thought into designing it to meet the needs of life science and biotechnology research."

Wagner, who holds a doctorate in plant biology from the University of Illinois, calls his tiny, young firm Phycotransgenics. He's currently in negotiations to move the 4-year-old company and its four employees into IU's Emerging Technologies Center.

Phycotransgenics is attempting to use algae to deliver immunizations to animal populations, such as fish or shrimp. The current method of vaccinating them in fisheries is cumbersome and expensive, involving removal from water for individual hand injections. It leaves fish traumatized with ugly and unappetizing scars.

Wagner hopes to develop modified algae to bear vaccines. When it's released into the water, fish will receive their immunizations by eating the algae. The cost would be a fraction of the 15 cents to 25 cents per fish under current immunization techniques. And those savings don't consider the industry's annual losses to disease, Wagner said. The $15 billion worldwide shrimp market alone loses $1 billion annually to infections.

Like most entrepreneurs, Wagner has big plans for his startup. He hopes assistance from IU's Research and Technology Corp. will help Phycotransgenics move beyond its current clinical trials to create viable products and profits.

"My plan is to move the whole operation into Indiana. I think the opportunities here are much better at this point," he said. "There just seems to be a climate of pushing entrepreneurship."

In the IU incubator, Wagner said, he'll be able to avoid many expensive fixed costs, such as sterilization equipment, which runs about $60,000, or a centrifuge, which costs about $80,000. Location there will allow him to concentrate his spending on the applied side of his research and development.

Wagner cited the BioCrossroads initiative, as well as Indiana's 21st Century Research and Technology Fund, as motives for his impending move. Last August, he was co-recipient of a 21st Century Fund grant worth $1.8 million aimed at developing the business applications of algae.

"The commitment is there. They really want to see this develop," he said. "It's exciting to be part of that."

Phycotransgenics will join 22 other small companies in the IUETC, which has space for only 23 to 25. Six were originally formed outside state lines, but later were attracted here by the facility's quality. Several IUETC clients have been purchased by larger firms. But so far, none have folded.

"The IUETC is over 85 percent full, and we continue to get quality applications for outstanding startup companies every month," said IUETC President and CEO Mark Long. "It's filling up fast."

But bringing new companies in is only half the new-business-incubation equation, Long said. The other half is moving them out. Several tenant firms will "graduate" from the incubator this year, he said. One of them is the health care management company The Haelan Group, which is currently looking for new offices downtown.

Haelan CEO Julie Meek said her fastgrowing company has gone from four to 9 employees and added 19 clients since last fall, creating a "six-fold" increase in revenue. She declined to reveal the specific sum. When Haelan's affiliate health care "coaches" are included, Meek said, her staff now approaches 25.

"It's crazy around here. But that's good," she said.

Haelan uses predictive modeling and heath surveys to help businesses learn which employees are likeliest to make up 70 percent to 80 percent of their health care expenses.

The IUETC helped Haelan raise capital through IU's Pervasive Technology Fund, Meek said. Long serves as chairman of the company's board of directors. Whenever her firm needed help, she said, Long found a way to provide it, whether through the free services of IU MBA students or from a cadre of Indianapolis professionals. Operating out of the incubator, Meek said she made the connections that led to 50 percent of her current clients.

"Just being in this building puts you in contact with people who network you to expert legal and accounting advice," she said. "We didn't have any Indianapolisbased customers until we were in this building."

David Doyle, who manages the private local business incubator Inception LLC for technology entrepreneur David Becker, is a member of IUETC's advisory committee. The key to Long's success, Doyle said, has been his efforts to build a support network of friends in the local business community. Those friends help Long identify promising startups, then aid in their mentoring.

Just as important is Long's focus on the bottom line, Doyle said, and his willingness to reject potential occupants whose business plans are weak.

"We really focus on the end game, which is, 'Are they going to be able to deliver a product or service the marketplace is going to accept?'" he said. "Any entrepreneur, whether inside or outside a university, they have to find a way to understand the process."

Long agreed. Carefully adhering to high standards is how, in just two short years, he increased the IU Research and Technology Corp.'s revenue from $2 million to $10 million annually. It's how he'll keep attracting promising new firms-and graduating them a few years later.

"We are highly selective regarding businesses that are accepted into the IUETC," Long said. "But our selectivity is based on choosing those businesses we can best assist, and those companies that have the best potential for growing the Indiana economy."
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