Bioscience

Arizona bioscience businesses weave an international web

March 3, 2006

By Flinn Foundation

When it comes to doing business in the biosciences, the world is a very small place.

Consider this, AmpliMed, a Tucson-based drug development company, will manufacture its drugs in partnership with a Dutch company that is actually owned by an Israeli company.

Machine Solutions Inc. (MSI), a start-up based in Flagstaff, Arizona, has sold its products to customers on six continents. Dan Kasprzyk, co-founder of MSI, said 50 percent of his sales are to international customers.

Much of Arizona’s Bioscience Roadmap focuses on what Arizona needs to do to build a biosciences economy to compete with leading states and nations in niche areas such as cancer therapeutics, bioengineering, and neuroscience.

But those involved in the bioscience business say that when Arizona is successful, it will not just be competing with other states. Instead, a successful bioscience economy will take its place on the international stage and stand beside other countries such as Japan, China, Israel, and the United Kingdom.

“Thanks to globalization, the market is expanding beyond our borders,” said Micah Miranda, biosciences manager for the Arizona Department of Commerce. “We have to be in Asia. We have to be in Europe.”

Miranda would know. He was hired last year to serve the state’s bioscience business sector. His first day on the job was at the international BIO convention in Philadelphia. While Miranda first thought much of his work would focus on California, he now sees the future of bioscience differently.

“If we want to be a leader in the biosciences, we have to look internationally,” he said just a few hours after returning from an international medical device manufacturing convention in Anaheim.

For Miranda and other business executives and government officials, looking internationally means developing strategic international relationships that tap into the global market.

“For private businesses, globalization promises wealth by providing access to new business partnerships, markets, foreign capital resources, and more,” said Joe Snell, chief executive officer of Tucson Regional Economic Opportunities.

The question is how these relationships develop and what do they entail. The surprising answer is that in the biosciences relationships are not just centered on exports; they take place on many different levels.

For this month’s Meet the Player series, we are featuring four companies that have successfully tapped into a web of international contacts that includes venture capitalists, pharmaceutical company executives, medical device manufacturers, and many others.

If Arizona business executives and policy officials who are developing these international ties have their way, soon Arizona, a relatively obscure state on the international stage, will no longer be hidden. Each company’s expanding web of international relationships will clue the world in to the Grand Canyon State.

“People around the world will know that something is going on in Arizona,” Miranda said.

AmpliMed: This product has been brought to you by Germany, Sweden, Japan, Holland, Israel, and the U.S.

For some, the phrase “international business” implies nothing more than an exchange of goods across national borders.

In the biosciences, it is not that simple.

“There are all sorts of levels on which international links take place, far more than just selling products,” said Robert Ashley, CEO of AmpliMed. “We really do have a global economy.”

In the case of AmpliMed, “international business” encompasses a wide variety of international ties, beginning with a German drug development company in the 1970s.

That is who first developed the compound which has become AmpliMed’s leading product. After the German company was acquired by Roche, a Swiss-based healthcare and pharmaceutical company, the development of the drug was abandoned. Then it caught the eye of AmpliMed founders.

The compound was rediscovered by University of Arizona researchers and renamed Amplimexon. Phase I trials for Amplimexon began in 2003, and the drug has shown promise for treating various types of cancers, including metastatic melanoma, pancreas cancer and multiple myeloma.

AmpliMed has already obtained orphan drug designations in Europe for the drug, which will give Amplimed ten years of marketing exclusivity for the treatment of pancreas and ovarian cancer.

And the international ties do not end there.

One of the raw materials for Amplimexon is being manufactured in Sweden, specifically in a facility that used to be the site of Alfred Nobel’s explosives factory. Cambrex, an international chemical company, is manufacturing the product.

Then the raw material is shipped to the Netherlands, where it is mixed with other ingredients and freeze dried to produce the final product. The Dutch company Amplimed is collaborating with is actually a subsidiary of a major Israeli pharmaceutical company called Teva.

“There’s a potential for a global partnership with that relationship, too” Ashley said.

Amplimed executives have already met with officials from Teva to discuss the company’s interest in marketing oncology drugs in Europe, a market the Israelis could jump into with Amplimexon.

Last year Ashley began a significant campaign to raise awareness of AmpliMed among investors in order to raise capital to develop AmpliMed’s cancer drugs. In addition to the United States he is targeting investors in Japan and the United Kingdom where the venture capital structure is similar to that in the U.S.

This past year Amplimed went to BIO JAPAN 2005 with the Department of Commerce to meet with potential investors. In turn these investors could help put AmpliMed in contact with Japanese pharmaceutical companies who could develop and market Amplimexon for cancers common in Japan, such as stomach and throat cancer.

“You have to keep an eye out for (international partnerships),” Ashley said. “They often don’t arrive through the routes you expect them to arrive.”

InNexus: watching out for its next international move

Last September InNexus Biotechnology made the front pages of Phoenix-area newspapers after the Canada-based company announced plans to open its US headquarters in Scottsdale.

It was all part of a strategic plan, part of the company’s next phase of evolution, said Jeff Morhet, chief operations officer for InNexus.

InNexus specializes in unique technology that uses biotechnological engineering to enhance the antibodies that fight infection and disease. InNexus’s two primary platforms are referred to as SuperAntibodiesTM and TransMAbsTM.

“The technology is a very broad- based opportunity for us to penetrate different markets,” Morhet said.

But before penetrating the US markets, InNexus executives have had to strategically develop the company, and they have done so by going global in an untraditional way.

InNexus was founded just five years ago in Seattle by Dr. Charles Morgan, a leading authority and pioneer in monoclonal antibody development. Just two years later Morgan took the company public through a reverse takeover of a Canadian company. InNexus had been researching potential options in Canada, hoping to find ones that were smaller and public.

“We found another company that was developing technology and being publicly traded,” Morhet said. “So we actually bought it.”

InNexus moved out of Seattle and settled into its new international headquarters in British Columbia, Canada.

In the past few years, a number of biotech companies such as InNexus have moved abroad for strategic reasons. Many of the major medical device manufacturers have set up shop in Ireland to capitalize on the country’s technical expertise and business incentives. Terry Winters, a venture capitalist, offers an example closer to home.

Winters sits on the board of a company called Epitan. Originally Epitan was spun off melanoma research at UA. When it failed to get funding in Arizona, a friend of Winters took the company to Australia.

But the US is the dream market, particularly for drug development companies. According to IMS, a consulting firm for the pharmaceutical and healthcare industries, in 2001 the US accounted for 50 percent of global pharma sales.

For that reason, most companies, such as InNexus, eventually look to return to the US to put their products through the trials required by the Food and Drug Administration. And the question Arizona officials ask themselves is how they can recruit international firms to base their US headquarters in the state.

To get those companies to open their US headquarters in Arizona requires carefully developed relationships between the state and the company, Miranda said.

“International companies can go anywhere,” he said. “You need to develop relationships with them to gain their trust.”

The importance of relationships is illustrated by InNexus’s decision to move to Arizona, for it was Morhet’s connection to the state that put the Phoenix area on InNexus’s radar screen.

“If you look at it from the outside, you don’t see Arizona as a biotechnology hub yet,” he said. “You don’t see it as a town with enough resources to support a biotechnology piece.”

Prior to joining InNexus in 2003, Morhet had been doing cancer drug development work in Scottsdale for nine years. He knew exactly what resources the state had to offer with its research institutions and hospitals.

“I had a unique opportunity to see all this and go back to InNexus and say, ‘Let’s consider this,'” he said.

When Morhet secured a collaborative partnership with Mayo to develop InNexus’s technology, the company chose the Valley for its US headquarters.

Now InNexus is mapping out its next strategic moves. On the horizon: partnerships with European firms.

MSI and GenoSensor: Ringing up international sales

Thanks to technology and air travel, it has become seamless to do international business anywhere, be it in Flagstaff or in Phoenix. As a result, the global nature of the bioscience sales business is occurring on a scale that surprises even those involved, catching them off guard.

As Kasprzyk put it, entering the world of international business provided him with a “real crash course” when his international sales skyrocketed in the company’s first years. But the founders learned quickly how to keep up with the international requests they were receiving for their products.

“We ended up hiring a director of global sales and marketing who had years of experience in international business,” Kasprzyk said.

It turned out to be a valuable investment for the company, which would soon become a leading process and testing equipment supplier for medical device manufacturing companies.

Just seven years after being founded, 50 percent of MSI’s sales come from international customers. And they are gearing up for the near future in which Kasprzyk predicts their international sales will reach 75 percent of their total business.

With China’s rising status as an economic power, more and more of MSI’s sales will be directed eastward, Kasprzyk said.

MSI is not only selling its products to companies all over China but also to bioscience heavyweights in Europe such as Germany and Ireland. One of the company’s first sales was to a small company in Turkey and since then its business in the Middle East has expanded and been very successful, particularly in Israel.

In addition, MSI has a number of customers in countries with emerging economies such as Poland and Romania, Kasprzyk said.

To cope with the challenges of selling automated process technology to customers involved with emerging products in the area of catheters and stents, Kasprzyk has recently hired six people who will represent MSI abroad. Through strategic partnerships with 2 Spring in The Netherlands and Daiichi in Japan, MSI now has coverage in 25 European countries and complete coverage within Japan.

“As we grow as a company, our customer base is going to grow in various parts of the world,” Kasprzyk said. “A lot of that is going to happen as we take advantage of the people in these countries who are trained to sell our technology.”

While MSI has been doing international business from Flagstaff for a few years now, GenoSensor Corporation is only in its second year of sales. A look at its start-up sales figures shows startling evidence of how big a role international partnerships can play in a company’s early success.

Last year the microRNA chip manufacturer doubled its sales numbers from the previous year, and is expecting sales to double again this year. Nearly half of all its sales came from outside the United States.

About 50 percent of GenoSensor’s customers are from the United States, 40 percent are from Europe, and 10 percent are from Asia and South America, said James Xia, president and founder of GenoSensor.

Xia’s first and biggest international customer is the German Cancer Research Center. He is helping them identify biomarkers for diagnostic and therapeutic purposes.

Other international customers include: University of Rome in Italy, Tokyo University in Japan, the Japan National Institute of Health, and University of Oxford.

When asked how he found his customers, Xia said many came through conference shows and the web. If you do a web search for microRNA chips, GenoSensor will be the first website listed.

“A lot of my customers, I have never seen them, never met them,” Xia said. “The France, the Netherlands, Canada. I even have a customer from Mexico and Turkey.”

Arizona where?

As strange as it may feel for Xia to have customers dotting the globe, he knows other companies might think it is just as bizarre to be doing business with Arizona, a state whose bioscience reputation stands in the shadows of its neighbor to the west – California.

So he embraces the opportunity to put the state on the international stage.

Last year when Xia traveled with Commerce to Bio Japan, he had the opportunity to speak about his product to a Japanese audience.

“I was talking at Japan 2005, and there were four speakers in front of me who were all from San Diego,” he said. “When it was my turn, I jumped on stage, and said ‘I am different from all the other speakers, I am from sunny city, Phoenix, Arizona.’ Then I started talking about my story, and I think I stood out.”

Miranda pointed to this kind of exposure at Bio Japan as an example of how Arizona can be successful in becoming a world leader in the biosciences.

“At Bio Japan we were able to meet with large pharmaceutical companies and explain to them what is going on in Arizona and why they need to be here,” he said.

Like MSI, Commerce has four international representatives whose job it is to help Arizona businesses seek out international ties. The four reps based in Mexico, Japan, Taiwan, and Wales are invaluable, Miranda said.

“They are in place and ready for businesses to use them,” he said. “They have market penetration and are willing to help.”

Commerce is not the only government entity trying to help businesses take a place on the global stage.

The City of Phoenix, led by Councilman Greg Stanton, Rabbi Robert Kravitz, and Mayor Phil Gordon, developed a sister city relationship with Ramat-Gan, Israel.

As a bioscience hub in the Middle East, Israel offers a number of opportunities for exchanges, Kravitz said, and he hopes to take businesses on a trade mission there soon.

The three regional development organizations are planning to lay out their own vision on how to help businesses successfully integrate into the international economy.

“The international nature of the biosciences is giving us the impetus to know and learn more about complex research and technology than we might have in the recent past in order to create better opportunities for emerging companies,” said Jeanine Jerkovic, vice president for international programs for the Greater Phoenix Economic Council.

In the end, everyone’s effort will be needed.

As Stanton said, “Arizona’s institutions are in their infancy. We have to market ourselves. We have to let the rest of the country and the world know what we are doing.”


For more information:

Arizona Department of Commerce, http://www.commerce.state.az.us/Export/default.asp

AmpliMed, http://www.amplimed.com

InNexus, http://www.InNexusbiotech.com/

Machine Solutions, Inc., http://www.machinesolutions.org/

GenoSensor Corporation, http://www.genosensorcorp.com/

“On the Market (featuring GenoSensor’s technology),” Nature, http://www.nature.com/nm/journal/v6/n8/full/nm0800_937.html