Madison, Wisconsin: The Midwest's Low-Key Hotspot

HOOKED ON MADISON

Four years ago, Keck's postdoc in molecular and cell biology at the University of California-Berkeley was winding down, and he began looking for a faculty position at a major research university. Keck ended up choosing UW-Madison based on the strength of its science and the quality of its community. "We were looking for a nice-sized city where it would be great to raise kids," Keck says.

Now he's hooked on Madison. "I'm getting great students, and scientifically I'm not limited by anything but myself," Keck says. "The public schools are among the best in the country and compared to California, the housing prices are a dream-come-true." Still, Madison isn't paradise. "It's nice having seasons, unlike Berkeley," Keck says, "but there are times when I wish it were warmer."

Okay, so what if the temperature drops to 5°F in January and shoveling snow becomes the city's unofficial winter exercise? There's also ice skating, sledding, and cross-country skiing. And indoors there's plenty of warm entertainment and cultural activities: from the performing arts at the city's new $200-million Overture Center, to night clubs and restaurants along State Street, the mile-long thoroughfare linking the university campus with the State Capitol square on the isthmus separating lakes Mendota and Monona.

"The biggest downside is that there are no palm trees in Madison," says Tom Still, president of the Wisconsin Technology Council (WTC), a nonprofit institute that the state government established in 2001 to advise officials on science and technology issues. "Some people are not partial to winter. But spring and autumn here are superb."

THE UNIVERSITY RESEARCH ENGINE

As in many other biotech hotspots, the engine that generates growth in Madison's life sciences is its university. Founded in 1848, UW-Madison is one of the nation's largest universities, with nearly 41,600 graduate and undergraduate students. Receiving more than $600 million in combined federal and private research funding, UW-Madison consistently ranks among the top three public universities in total research spending.

Madison's 900-acre campus is on the shores of Lake Mendota. "Having everything on one campus contributes to cross-disciplinary work," says Carl Gulbrandsen, managing director of the Wisconsin Alumni Research Foundation (WARF), the university's venerable technology transfer and patenting office. "It's very easy to work across departments and across disciplines."

The School of Medicine has 550 medical students, more than 700 graduate students, and nearly 1,200 full-time faculty members. Particular research strengths are in oncology, cardiovascular and respiratory sciences, neuroscience, and aging. Regenerative medicine is fast becoming a particular focus across campus since developmental biologist James Thomson first isolated human embryonic stem cells (hESC) there in 1998. (See related story p. 49.)

UNABASHEDLY ENTREPRENEURIAL

UW-Madison may be the only major US research university that allows its researchers, faculty, as well as students, to retain ownership of discoveries (unless federal funds are involved). "It's important in faculty recruitment," says Gulbrandsen. "It gives the faculty more control and makes them happier."

If the university is the research engine, then WARF is the transmission that translates discoveries into products. The nation's first university tech transfer office, WARF was established in 1925 at the prompting of UW-Madison biochemistry professor Harry Steenbock to commercialize his vitamin D irradiation technology. Rather than accepting $1 million from the Quaker Oats Company for exclusive rights to his technology, Steenbock allowed WARF to license his patent widely, generating even more funds for university research.

Over the past 80 years, WARF has amassed more than $1 billion in licensing revenues and returned $750 million to university research, including $46.6 million last year alone. Today, WARF has thousands of patents in its portfolio and more than 3,600 technologies ready for licensing. Recognized as a model tech transfer office, WARF last year was awarded the Presidential National Medal of Technology for innovation.

But licensing is only the beginning. UW-Madison actively encourages faculty to start up companies from their discoveries. The university's Office of Corporate Relations sponsors an entrepreneur's center that offers CEO mentoring programs, assistance in writing business plans, and finding capital. WARF even has a small $10 million venture capital fund for occasional investments in promising companies. WARF currently has equity positions in 34 university-related startups and evaluates proposals for 12 to 15 more each year, Gulbrandsen says.

SPINNING OFF DISCOVERIES

Many of these companies, such as Third Wave Technologies, Deltanoid Pharmaceuticals, Neoclone Biotechnology International, NimbleGen Systems, and Quintessence Biosciences, are emerging as leaders in Madison's biotech community. Mike Sussman, head of UW-Madison's Biotechnology Center, was one of three scientific cofounders behind NimbleGen Systems, a company that manufactures customized, high-density microarrays for genotyping and toxicity screening based on technologies developed at UW-Madison. "We just made a better light bulb," Sussman says.

Hector DeLuca, chair of the university's biochemistry department, is also one of the city's serial entrepreneurs. DeLuca has some 250 patents with WARF and has been involved in starting and running four Madison biotechs, including publicly held Bone Care International, which was acquired in May by Genzyme for $600 million. In 2001 DeLuca and a colleague established Deltanoid to develop vitamin D analogs for osteoporosis, renal osteodystrophy, and psoriasis. "Madison is ripe for development," DeLuca says. What's lacking, he and many others say, is venture capital. "But that will come as young companies start showing what they have. That will start attracting investment capital."

Many of these startup companies operate in the University Research Park (URP), a 255-acre facility three miles west of the campus and currently home to 107 companies employing nearly 4,000 people. The park also has a 113,000 square foot incubator facility, the MGE Innovation Center, that houses 35 newly hatched companies. "This is the signature entree for the park," says URP director Mark Bugher. "When a company inks a deal with WARF, this is where they come to begin growing."

Plans are underway next year to double the capacity with University Research Park II, a 260-acre facility on Madison's far west side. The new facility will have room for 53 sites, including at least one more incubator, allowing another 200 or so companies to put down roots.

WANTED: BIG PHARMA AND BIG BIO

But all this university activity doesn't solve a different, long-standing need in Madison. For unlike most other life science locales, Madison doesn't have a major pharmaceutical or large biotech company to help anchor the research enterprise by creating a critical mass of jobs and attracting outside attention and investment. "It sure would be nice to have a Big Pharma or a big, fat biotech success story here," says Deven McGlenn, CEO of NeoClone Biotechnology, a WARF spinoff that produces monoclonal antibodies.

One of the larger life science companies in Madison is Covance Laboratories, a Princeton, NJ-based drug development and contract research organization. Most of the company's 1,200 employees have science backgrounds, says Susan LaBelle, vice president for global marketing. Covance plans to hire "hundreds" of scientists as the company expands its facilities in Madison, she adds. "As a recruitment source, UW is a very important resource for us."

Promega, a major producer of reagents, employs about 500 scientists and professionals in the city. "It's very easy for us to hire senior executives from people who lived in the community or worked at the university," says Bill Linton, Promega chair and CEO. "It's not hard to convince them of the area."

Companies such as Covance and Promega are beneficial for Madison's smaller pharmaceutical and therapeutics companies, since the larger companies can outsource drug discovery, development, and clinical trials. UW-Madison's chemistry department has a small, FDA-approved bio-manufacturing facility, and the pharmacy school can do metabolic studies and formulation work for industry under contract.

ALSO WANTED: BIG BUCKS

While Dane County ranks in the top 100 counties nationwide for venture capital funding, Madison has only a handful of VC firms willing to invest in local startups. It may be that the major VCs, located on either coast, don't like the hassle of changing planes in Chicago to get to Madison. The truth is that Madison's venture capital shortage is endemic to the entire Midwest region, which received $198 million, or less than 4% of total US venture investments in the fourth quarter of 2004.¹

"We have all the ingredients needed to succeed in the 'new economy,"' says Jim Leonhart, executive vice president of the Wisconsin Biotechnology and Medical Device Association. "We have technology, an abundance of talent, and diversity reflecting the world. We only lack more attention from the moneyed people, and we are working hard to attract them now."

To do so, the state is trying to foster VC growth by providing additional public venture funds, and industry groups are helping entrepreneurs network with individual "angel" investors. But some believe the answer lies in the private sector. "If we had a critical mass of good companies, a lot of us believe the VCs would come here," says Joe Kremer, director of the Wisconsin Angel Network.

ENVIABLE QUALITY OF LIFE

Cold winters aside, Madison's quality of life is the envy of other biotech locales. While science salaries are slightly lower in the Midwest, the difference is more than made up through an affordable cost of living that is about on par with the US national average.

The average commuting time of 17 minutes is also on par with the national average. The city's public transportation – is highly regarded and environmentally conscious Madison boasts 96 miles of bikeways. The city also has four lakes offering boating, water sports, and 13 public beaches.

With about 60,000 students, faculty, and staff, UW-Madison's population represents nearly 30% of the city's 210,000 people, making Madison a true university town. "We have a large population that never ages," says Promega's Linton. Some say Madison's reputation for being politically to the left of Ralph Nader is overblown. "Conservative and progressive politics are competitive, but it's a healthy debate," says WTC's Still. "There's no question there are deep passions, but the political tradition has been a strength to the city."

Politics aside, when it comes to academia and industry, Madison is all business. The city is destined for a significantly larger place at the biotech and life science table, Linton believes. "It's not a question of if Madison can become a major player," he says. "The question is, just how big will Madison become?"