Biotech struggles in market - another firm bites the dust (16/1/2006)

EXCERPTS: Biotechnology boosters predicted that it would revolutionize crop production. Voytas created a company, Phytodyne Inc., and state and federal government and private investors poured millions of dollars into the Ames-based biotech startup.

State officials touted Phytodyne as a poster child for the burgeoning biotech economy. Early in 2004, Iowa Gov. Tom Vilsack announced a three-year, $5 million financial assistance package for Phytodyne, saying the company had the potential to revolutionize agriculture.

By late 2004, Phytodyne had been dissolved, its workers laid off, its laboratories disassembled and its investors left holding the bag.

People who had championed Phytodyne's potential were crestfallen. Those who once had spoken with pride of Phytodyne's promise now pause and look down when asked about the company.


A state official is quoted in this article saying biotech is booming. In fact, since its inception in 1976 the biotechnology industry has lost a combined $40 billion.

"This notion that you lure biotech to your community to save its economy is laughable," says Joseph Cortright, a U.S. economist who co-wrote a report on the subject. "This is a bad-idea virus that has swept through governors, mayors and economic development officials."

Biotech struggles in market despite its promise in lab
Ames firm's collapse reflects troubles of an industry Iowa counts on for jobs
Des Moines Register, January 15, 2006

Ames, Ia. - Dan Voytas' company has died, but his dream endures.

The Iowa State University professor wanted to market a faster, more precise way to genetically engineer crops - the holy grail of the $30 billion crop seed industry. Biotechnology boosters predicted that it would revolutionize crop production. Voytas created a company, Phytodyne Inc., and state and federal government and private investors poured millions of dollars into the Ames-based biotech startup.

But Phytodyne failed to get access to a key piece of patented technology owned by a California company. Financing fell through, Phytodyne folded, and Voytas returned full time to academia, taking three fellow researchers with him, including David Wright, co-founder of the company.

Phytodyne's story is a cautionary tale for those seeking to build businesses and create jobs based on biotechnology, an industry that Iowa and other states are trying to tap. And it shows how hard it is to turn a university researcher's biotech discovery into a commercially viable product.

Locked out of the marketplace, Voytas, 43, has joined with colleagues at Harvard University Medical School and other institutions to make the genetic engineering process developed at Phytodyne available to academic researchers around the world for a nominal fee.

"Scientifically, we met our objective and exceeded our expectations," Voytas said. "We and, unfortunately, our investors are not going to recoup their investment, but people will benefit nonetheless."

Meanwhile, the California company with the patent, Sangamo BioSciences Inc., has sold exclusive rights to use of its technology in plants and plant cell cultures for agricultural and industrial purposes to Dow AgroSciences in a $50 million deal announced in October.

Those disparate approaches represent two sides in a philosophical, legal and economic tug-of-war that has emerged in the decade since agricultural biotech products first hit the market. On one side are those who believe that scientific and technological discoveries belong in the public domain so that researchers at universities and not-for-profit organizations can make advances for the common good. On the other side are those who believe in the right to restrict access to new technology to the highest bidders.

Riches from research

The promise of combining Iowa's agricultural prowess with emerging biotech-based research at state universities has tantalized state leaders. Biotechnology could help turn Iowa's 23 million acres of cheap corn and soybeans - now used primarily for livestock feed - into a gold mine of food, fiber, fuel and pharmaceuticals, supporters say.

The possible risks and rewards are huge. The Battelle Memorial Institute, a Columbus, Ohio-based consultant, has recommended that Iowa spend $300 million over 10 years, mostly on the state's three public universities, to try to attract and retain premier scientists, develop research facilities, and turn ideas into new products and companies. Battelle predicts the investment would attract or create 130 new bioscience businesses and 5,100 high-paying biotech jobs, while indirectly creating another 10,950 jobs.

But nine out of 10 biotech startups fail. Voytas and Wright knew that going into their venture. So did investors and state economic development officials.

They believed the company could be the exception. The research team consisted of top-flight scientists, including Voytas, a molecular geneticist who had earned a bachelor's degree in biology from Harvard and a doctorate in genetics from its medical school.

Phytodyne sought to develop plant engineering tools with global appeal and potentially enormous payoffs. And the company was located in the heart of the world's most productive grain-growing region, with lower operating costs than those found in such high-tech hubs as Boston or San Diego.

Phytodyne also had this in its favor: proximity to a major land-grant institution whose Plant Sciences Institute had a mission closely linked to Phytodyne's - discovering new and better ways to increase the productivity and uses of plants.

Initially, Voytas and Wright estimated that their method would shave two years off the time it takes to develop and commercialize new crop seeds - a process that typically takes six to eight years, with research and regulatory compliance costs averaging $50 million per product. Eventually, they developed an even better approach that enabled them not only to add genes to plants, but to change the DNA code of a plant.

State's high hopes

State official

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