Twenty years after selling Mount Kisco high-voltage electronics manufacturer Universal Voltronics Corp. to a $10-billion-a-year maker of scientific instruments, Barry Ressler has two other startups he”™d like to grow.
Ressler is chairman, president and CEO of Triton Thalassic Technologies Inc., manufacturer of a patented sterilization platform technology he co-invented that uses ultraviolet light rather than heat to treat packaged pharmaceutical products. The company”™s internal R&D program is using the same technology to develop new food and beverage products as well as to safely treat stored blood products such as platelets and fresh frozen plasma.
Ressler is also chairman of E-P Therapeutics Inc., whose cancer drugs are designed to eliminate the need for chemotherapy or radiation. He founded both businesses with different partners, and says he would consider relocating the Ridgefield, Conn., businesses to Westchester, but the county”™s high taxes and business costs make such a move impractical.
“When I was in Mount Kisco, I had a very tough time hiring people who couldn”™t afford to live in Chappaqua or the Bedford area. But I had a manufacturing operation, and I found that the Westchester area I was in was not really very helpful to hire production employees,” Ressler said, forcing him to create a shuttle for employees stretching from southern Westchester north to Carmel.
“Now in the biotech area, I see a better opportunity in the Westchester County area, particularly because of downsizing of companies and because of the education level of people. But there have to be some incentives to help us make that transition,” he added.
Foreign locations, subsidiaries
Ressler discussed his companies”™ situations during the Jan. 21 “Biotech Capital Breakfast,” held by the Westchester/Hudson Valley division of the Association for Corporate Growth (ACG) New York, with sponsors that included the Westchester County Association.
During the breakfast, at Tappan Hill Mansion in Tarrytown, and in an interview, Ressler said he”™d like New York to emulate states like Maryland and New Jersey in setting aside grant money and facilities for biotech startups.
However, New York must plug a $9 billion deficit in next year”™s budget, and Gov. Andrew Cuomo has pledged to curb spending. New Jersey Gov. Chris Christie, who faces a $10.5 billion shortfall, last year persuaded lawmakers to halve funding for the Technology Business Tax Certificate Transfer Program from $60 million to $30 million.
Biotech startups are also increasingly being wooed by nations in South America, Eastern Europe and Asia ”“ especially China ”“ about carrying out clinical trials outside the U.S., said one panelist, John Pennett, a CPA and audit partner who directs EisnerAmper”™s life sciences practice.
“We”™re seeing people on the ground in foreign locations. We”™re seeing early-stage companies setting up a subsidiary in Brazil and Argentina and Romania, places like that, to house one or two (chief medical officer) and (chief science officer)-type folks, who are helping to manage the clinical trial operations,” Pennett said. “It”™s a way for companies to get work done pretty quickly and pretty efficiently.”
Pursing private partners has its challenges. Investors, he said, increasingly want commitments to join full-time the companies in which they are investing: “One of the common things that keeps coming up earlier and earlier in the conversation is, ”˜What is the market for this product? And what is the reimbursement strategy?”™ ”
Pennett said companies using government grants to fund research must obey strict reporting requirements and other rules designed to track how the cash is spent: “We”™ve seen an uptick in government audits of companies receiving government grants. All entities that spend $500,000 or more a year in federal grants must undergo audits ”¦It”™s a good thing for us, but it”™s kind of a pain for the companies.”
Prospects are improving
Joel Papernik, a member in the corporate practice of the law firm Mintz Levin, said traditional venture capital has been harder to obtain for startups in the three years since the economy has skidded into recession, since firms themselves have been unable to raise funds for the purpose.
But as the economy has improved in recent months, so too have the prospects for VC funding of biotechs, judging from the results of one national tracker of venture activity. According to the quarterly MoneyTree Report, VC investors completed 460 deals totaling nearly $3.7 billion in 2010, up from 426 deals worth a total almost $3.6 billion in 2009.
That”™s encouraging for Ressler”™s E-P Therapeutics, which is now pursuing series A venture capital. E-P has been funded by its founders and directors, as well as through grants from the National Science Foundation and National Institutes of Health, and collaborating universities, all raising a combined $3 million.
Papernik said options for startups have traditionally involved mergers and acquisitions by pharmaceutical giants, though some “big pharma” companies are helping startups through collaborative development programs, such as the incubator that Pfizer operates in La Jolla, Calif.
Profit margin relief
Matthew Wotiz, the third panelist and a senior associate with the global private equity fund Paul Capital, said his firm has completed 40 investments totaling $1.1 billion in biotech, pharma and medical device startups. One of those investments occurred in Westchester ”“ $25 million in financing for Hawthorne-based Acorda Therapeutics Inc. in 2006.
The firm invests in revenues associated with life-sciences products ”“ both “passive” royalty streams collected by academic institutions, companies or individuals that have invented technologies and other forms of intellectual property; as well as revenues actively generated by companies from sales of products or business collaborations.
Wotiz said big and medium-sized biotechs and pharma companies are so intent on removing spending on drug development off their profit-and-loss statements that they will cede rights to some of the revenues the drugs are expected to generate.
“It”™s not so much a need for cash as it is a need for (profit) margin relief, and we”™re seeing a lot of that these days. So we”™re evolving our model to try to take on more clinical risk,” Wotiz said.
