Early investment in life science startups is Wayne Roper and SCBIO’s prescription for a $2.5 billion payoff
Keep these three numbers in mind, because each has a crucial role in the state’s next big economic story: five years, $15 million, $50 billion.
Let’s start with the $50 billion. The state’s economy could increase by more than $50 billion — $2.5 billion in Greenville County alone — if one thing were to happen: the average per capita income rises to the national average of $46,049. Statewide, per capita income is now $38,302. Greenville’s average per capita income is close to $41,000.
That $50 billion number is the most important one to keep on the radar, says Wayne Roper, president of the S.C. Biotechnology Industry Organization (SCBIO), a Greenville-based nonprofit trade organization that promotes the life science industry statewide. One of the best ways to attract those high-paying salaries, he says, is to encourage more biotech and life science startups.
And here’s where the $15 million comes in. Life science industry startups — like all innovation-based startups — need seed money. SCBIO is asking for the state’s S.C. Launch program funding to increase from $6 million to $15 million annually. The money supports new companies developed from South Carolina technology.
The trouble is, this push didn’t get going until 2006. “We have catching up to do,” Roper says. “Nearly every state in the Southeast has been at it longer and has put more capital and initiative into growing innovation companies, and particularly life sciences.” For example, the Georgia Research Alliance has an $18 million-plus budget, while Florida had a $1.5 billion life science initiative under former Gov. Jeb Bush (1999-2007). North Carolina gave $20 million a year to life science funding until cuts last year.
Finally, five years. This is when the region may start seeing results.
It took Charleston’s Digital Corridor initiative five years to begin paying off with high-value jobs. The Charleston area’s per capita income has risen now to above the national average and well above the state’s 80 percent of national per capita income, Roper says. Meanwhile, an 8 percent jump in technical jobs in 2015 resulted in $309 million added to the South Carolina economy.
“These jobs pay double the typical office job and provide opportunities for our brightest graduates,” he says. “We need to create wealth here.”
New areas of growth
SCBIO’s chief aim is to bring industry partnerships to the Upstate’s life science assets and to nurture an innovation ecosystem that creates those high-salary jobs, Roper says. The goal is to think bigger than branch manufacturing plant announcements and much bigger than service sector growth.
“Manufacturing is the traditional wheelhouse of the Department of Commerce,” Roper says. “SCBIO’s focus is moving up the value chain to high innovation and innovation-based jobs in research and development, where angel investors, venture investors and equity capital investments are made.”
Life science industrial growth already is showing up locally and across the state in recent investment headlines, including the $4.6 million invested in Valeant’s Spartanburg distribution facility, the $20 million in Greenville’s Bausch & Lomb plant and $20 million in Haemonetics’ Union County plant.
In Lexington County, Nephron Pharmaceutical began production this year at its $313 million plant and headquarters, and in Richland, the Ritedose Corporation is in the middle of a $110 million expansion of its plant.
The more South Carolina promotes innovation businesses, the more the life science and biotech industry will grow, and the more it grows, the higher the area’s per capita income will climb.
Plugging the brain drain
The problem isn’t a lack of extremely intelligent and talented people in the life science and biotech fields — Clemson University, the Medical University of South Carolina (MUSC) and the University of South Carolina (USC) produce many such graduates. It’s just that most of them don’t stay in South Carolina. About two out of three advanced engineer and life science graduates leave the state, Roper explains — and some only leave because they have to.
“An increasing number of entrepreneurs do not want to leave South Carolina,” Roper says. “They love the state.”
The problem is that these graduates have specialized training and there are not enough local jobs for them. More would stay in the Palmetto State if they received the same kind of job offers they field from companies across the nation.
“For folks going through Clemson, you hear it expressed over and over, ‘Boy, I wish I could stay here and work,’” says Tom Strange, past chair of S.C. Launch, SCBIO board member and the founder of a successful startup, Maven Capacitors, which was sold to medical device company St. Jude Medical of St. Paul, Minn. Strange is now head of research and development for St. Jude Medical, which employs around 500 people in Pickens County and has a $12 million, 60,000-square-foot expansion underway.
To develop a technology and life science hub like the ones in North Carolina’s Research Triangle area, Atlanta, Boston and elsewhere, state and local leaders need the foresight to attract and assist startups and keep the companies here once they prove successful, Strange says.
Strange started Maven Capacitors, which designed capacitors for use in the human body, in Pickens two decades ago. After his company grew and was sold, he worked to keep the operations in South Carolina.
“I convinced the management that we had the technical innovation in South Carolina, and we were very successful at hiring well-trained people out of the local universities,” he says.
Startups get a leg up
Other key components to growing the life science industry are federal grants, state small-business grants and seed money from nonprofit groups. SCBIO, for instance, provides seed grants, support services and other assistance to promising biotech entrepreneurs. “SCBIO is at the door of all three research universities, trying to encourage the commercialization of the most promising concepts,” Roper says.
An example is Jinxiang Zhou, who was the top chemical engineering student at Tongji University in Shanghai, China. He received a Ph.D. from Clemson University and now is co-founder of Greenville-based Purilogics.
Zhou collaborated with his Clemson professor and mentor, Scott Husson, to start a company to improve the current purification process for biologic drugs under development. Their process could help the biopharmaceutical industry get lifesaving cancer drugs and other biologics to market faster.
Purilogics recently received a $150,000 grant from the National Institutes of Health (NIH), helping to fund the small startup’s first full-time staff. The company’s first help in getting started came from a $50,000 National Science Foundation grant, a $30,000 Clemson University Research Foundation (CURF) grant and hands-on marketing, business planning, intellectual property and negotiation mentoring and assistance from SCBIO experts.
SCBIO’s help was invaluable, Zhou says. “We had no idea about what a license registration looks like, and the license is the key to enable us to produce output legally.”
Located in the Institute for Translational Oncology Research (ITOR) at the Greenville Health System, Purilogics is currently testing its patent technology. “We are currently collaborating with two pharmaceutical companies,” Zhou says, adding that the company could have its first customer by the end of 2017.
With a matching grant from the S.C. Department of Commerce Office of Innovation, SCBIO QuickStart provides expert assistance to new life science companies, including Purilogics.
“With QuickStart we provide mentoring and professional services to an early-stage company for one year,” Roper says. “We provide up to $10,000 in professional services, including legal, prototyping, marketing, website and business plan developing.”
Touched by angels
Angel investors are crucial to nurturing life science startups, Strange says, and the Upstate Carolina Angel Network, launched in 2008, can help.
Roper calls the boom in active angel investors — high-net-worth investors who put their own money into startups — “the great untold story of the last three years.”
Angel investor networks might put $200,000 toward a new company, providing critical funding to help companies get off the ground. The number of South Carolina investors who are helping local companies has increased from about 40 in 2013 to more than 240 today, and the increase is due to the state’s passage of a 35 percent tax credit for angel investors, Roper says.
The Upstate Carolinas Angel Network and Matt Dunbar, its managing director, helped expand the number of groups and developed networks of funds since the act was passed, Roper says. UCAN has now formed VentureSouth that encompasses some of North Carolina.
Fifteen years ago, life science entrepreneurs would move to Boston or Minnesota to start their companies because that’s where they found the venture capitalists and the money to make it happen, Strange says. That’s no longer true, and state governments and local angel investors are helping to fill in the gap left by venture capitalists who have moved on to later-stage deals, he explains.
“Our big challenge in South Carolina is how to keep the successful startup here once it gets to that point where it’s middle-sized,” Strange says. “We have in the Greenville area this crop of people who are wealthy and looking for the right kind of investment.”
