Biotech services are a plus in Md.

Attraction: The pool of biotech service contractors in Maryland is a major reason why drug developers want to move here.

March 11, 2004|By William Patalon III | William Patalon III,SUN STAFF

When the Frederick unit of research-and-engineering giant SAIC landed a federal contract to create a malaria vaccine using DNA technology, it tapped a Baltimore company to play a key role in the project.

For SAIC, Cambrex Bio Science Baltimore Inc. represented a sound choice: The city-based company - among the best-known contract manufacturers serving the biotechnology sector - was able to make bulk batches of a prototype vaccine and had the in-house expertise to improve upon a previously designed production process.

Cambrex being close by was a bonus, said SAIC's point man on the program, Dr. William Bancroft. "The geographic proximity of Cambrex to our offices, and to our customer, has been a major asset," said Bancroft, an SAIC vice president.

FOR THE RECORD - An article in yesterday's Business section about biotechnology service companies misspelled the name of the chief executive of BIOCON Inc. of Rockville. He is Lawrence E. Cunnick. The Sun regrets the error.

As dozens of cities angle for a piece of the emerging bioscience arena, having a roster of researchers or even a blockbuster-drug company isn't enough. Long-term winners will have to have the supporting cast of contract-services companies like Cambrex behind them, experts say.

Contract-service organizations, or CSOs, offer a broad range of biotech assistance. They help arrange corporate financing and provide specialized research. They also can manufacture drugs and vaccines in small test batches and in large commercial quantities.

Some contract organizations help product-development companies organize and run their clinical-research trials.

The availability of CSOs is "a very significant priority" for drug-developing companies, said E. Rene Salas, head of the Life Sciences Practice for the McLean, Va., office of accounting-and-consulting giant Ernst & Young.

Almost 100 - nearly a third - of the 310 Maryland bioscience-related companies are service providers, according to MDBio Inc., a private, nonprofit organization that promotes the state's biotechnology industry.

MDBio President C. Robert Eaton estimates that the service companies account for 5,000 to 6,000 of Maryland's 17,000 biotechnology employees.

Unlike development-stage biotech companies that go years without profit or even revenue until a hoped-for product is approved, bio-service firms "can make a profit from Day 1," Eaton said. "They offer a service [by] finding out what is needed in the marketplace. They're not relying or waiting on some product approval. They do the work, and they get paid for it."

Maryland's biotech-service providers have helped nurture a sector in the state that is nicely diversified and increasingly well positioned to compete with its rivals in other parts of the country, industry experts say.

"I don't know of anywhere else in this country which has this critical mass of suppliers of specialized services," said Lawrence E. Kunnick, founder and chief executive of BIOCON Inc., a 25-year-old contract researcher in Rockville.

Many of Maryland's CSOs are becoming the service providers of choice, not just for biotechnology firms on the East Coast, but also for businesses overseas, said William W. Baker, an investment adviser and analyst who in February published a research report on contracting in the sector.

"To have this strength right here in Maryland is certainly very important - not only to the local [biotech-product] companies, but increasingly for the European companies" that are hiring Maryland's CSOs for across-the-board assistance, said Baker, who is president of GARP Research Corp., a Towson investment advisory and market-research firm. "Maryland is very fortunate to have this."

The availability of such services is crucial for emerging biotechnology companies, which typically are operating at a steep loss and are years away from having products on the market. And in today's tough, risk-averse investment climate, careful husbanding of their capital is crucial.

By relying on CSOs, "smaller companies ... don't need to be raising money to use [on] developing new production capacity," said Dennis Harp, a biotechnology-industry analyst for Deutsche Bank AG in New York.

That's where a company such as Cambrex comes in. The company, the Baltimore arm of Cambrex Corp. in East Rutherford, N.J., operates a recently expanded production facility on East Lombard Street that's partly owned by MDBio.

As a contract manufacturer, the local Cambrex provides a number of services for its clients. It works with companies that need specific quantities of a product, either for additional screening and testing, or for later-stage clinical trials. It also can produce commercial quantities of the active ingredients that form the basis of new drugs, said Aaron H. Heifetz, the local company's vice president and general manager.

The local Cambrex has 200 employees and makes about 50,000 liters of products each year. It has done business domestically and overseas, Heifetz said.

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