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Commercial Biopharma in Wisconsin: What Next?

The University of Wisconsin – Madison, is one of the country’s leading centers of public biopharmaceutical research, and the campus has spawned dozens of spinout companies based on University research. For this, the citizens of Wisconsin should be grateful; and, even more so, hopeful. Grateful because a foundation capable of supporting future growth is in place; hopeful because given the right conditions that growth could, over the next five years, support the emergence of the Madison area as one of the nation’s top five centers of commercial life sciences investment, and indirectly the emergence of Wisconsin as an important mid-continent oasis for venture capital investors that today think of the state as flyover country.

The major progress to date is reflected in the dozens of Madison area life sciences companies, including biopharma companies, with important ties to UW-Madison research. While not large by national standards (UC-San Diego – good school, but hardly a match for Madison – has spawned a couple of hundred life sciences companies) it is a big enough number to establish that the University is technically capable of, and, as important, culturally willing to enable, the kind of private/public collaborations that are critical to realizing the “real world” potential of the University’s basic research.

So, the question is no longer can Wisconsin play in the biopharma major leagues, but can it compete for championships. Can Wisconsin, instead of being known for a handful of companies worthy of acquisition by larger, better funded national firms with roots outside the state, become a major center of large, well-funded companies acquiring promising competitors and moving their operations to Wisconsin. The answer is, in my opinion, yes – if we can take two big steps. The ultimate step is becoming tightly integrated into the major venture capital markets, particularly on the two coasts. The penultimate step is moving our biopharma university spinouts from founder/scientist-managed to professionally managed earlier in their development.

We need stronger ties to the major venture centers, particularly on the coasts, because that is where the majority of biopharma venture and other risk capital money is, in terms of quality as well as quantity. That is critical because compared to just about every other tech-driven sector, what sets biopharma company-building apart is the vastly more time and money it takes to build a profitable business. You simply can’t get a major biopharma company off the ground with a succession of six and low seven figure investments and SBIR grants. At best you will get to the table too late with too little – and create something for larger, better funded firms to snap up. Unfortunately, multiple high seven and eight figure risk capital investments are simply beyond the capacity of Wisconsin’s limited venture capital base; even more so if you limit the field to firms with nationally recognized life sciences bona fides.

So, how do we get the major biopharma venture capitalists on the two coasts to Madison on a regular basis? Not now and then, but as a regular stop where they make regular investments?

Having spoken with some; having worked on the west coast for life sciences companies and their investors; and having seen money center biopharma investors warm to the Research Triangle life sciences market over the period from roughly 1995 to 2005, I think the answer is professional management. Biopharma and other life science spinouts from places like UC San Diego – at least those that in fact receive substantial capital from the most highly-regarded life sciences venture investors – tend to share one key characteristic besides compelling science: experienced professional management. I believe that if our most compelling young biopharma and other capital and time intensive life sciences companies could match management resumes with their comparable counterparts on the coasts, our companies would, in short order, find themselves with comparable balance sheets as well.

Why is professional management so important in the biopharma space? Several reasons. Foremost among them is that building a major biopharma business not only takes more capital and time then building, for example, a software company, it is just plain more complex. The science is more complex, the regulatory environment is more complex, the market is more complex, and the business/financial models are more complex. The bottom line is that venture investors, who in almost every case put the quality of the management team ahead of other factors on their investment checklists, do so even more regularly when they evaluate biopharma and other complex capital and time intense life sciences investment proposals.

Why don’t our management teams match up well with west coast management teams? Two factors jump out. First, our founders (mostly university professors) have less experience (indirect as well as direct) than their counterparts on the coasts with the company building process. These are incredibly bright folks with incredible amounts of energy and, no offense intended, they all too often underestimate the time, energy and skill it takes to build a world class biopharma company. As a result, they are often reluctant to transfer management of their companies to “the suits” nearly as early in the process as they should. We have to change that mentality if we want to generate sustained serious investments from serious life sciences venture capital investors.

Another reason we don’t have a deep pool of experienced company builders managing our biopharma spinouts is that it is hard to attract them here. No, I am not talking about the climate, though I am sure weather is not a net plus for us. Rather, I am talking about the career risks an experienced biopharma professional takes when they move to what is, for now, a minor league city in terms of “big time” (read “big money”) emerging biopharma companies. The kind of manager we are talking about wants to know that if the deal they are working on now doesn’t work out – or even if/when it does – they won’t have to relocate (again) to find their next opportunity.

To some extent there is not a lot we can do, locally, to change the metrics of the “what will I do next problem.” But there are a few things that would help. One is changing the dominant “I can do this myself” culture common among the area’s founders. Another is making sure that the great science we have here in Madison is more visible in the business community on the coasts. I very much doubt, for example, that the typical life sciences manager on the west coast realizes that UW-Madison is a top-3 recipient of NIH funding.

UW-Madison, and the region, has made enormous progress over the last dozen years in demonstrating both the ability and willingness to work with the private sector to commercialize the University’s extraordinary research. If we can take the next big step – recognizing the need for and successfully competing for experienced professional biopharma managers – we will, I think, rapidly find ourselves among the nation’s leading centers of biopharma venture capital investment. And, once the venture people are here, they will – probably to their surprise – find that we have lots of other great technologies ripe for venture investment as well, all around the state.

©2020 MICHAEL BEST & FRIEDRICH LLPNational Law Review, Volume I, Number 222



About this Author

Paul Jones, Michael Best, technology lawyer, life sciences attorney,
Of Counsel

Paul draws on his extensive business experience as a successful serial venture capital-backed entrepreneur, investor, and angel investor to represent emerging technology and life sciences companies, and venture capital firms in financing and other strategic transactions and general corporate matters. His focus includes:

  • Venture capital financing

  • Startup business and financial planning

  • Strategic business development planning and execution

  • ...