Why the Midwest Is Becoming America’s Most Surprising Biotech Hub
WHY YOU SHOULD CARE
Because it’s a modern day gold rush in the Midwest.
At the VentureOhio awards in September, serial entrepreneur Mike Hooven delivered a keynote speech. The 61-year-old wondered aloud: How many of the 500 people gathered in this Hilton ballroom were providing funding back in the ’90s, when he was starting his first medical device company? “Maybe five hands came up,” he says, chuckling.
But now that the biotech scene has started to prove itself, people can’t help raising their hands — and those hands are often clutching fistfuls of cash. According to the 2017 BioEnterprise midyear report:
Cincinnati has had 90 percent growth in biotech startup investment since 2012, including more than $54 million in the first half of 2017 — more than any other city in the Midwest.
Boston and the Research Triangle in North Carolina are better-known bio hubs, sure. Still, a series of wins are building momentum in the Queen City of Ohio. Last year, Cincinnati broke into the top 20 metro markets for overall startup activity, jumping seven spots to No. 18 — and emerging as the leading startup market in Ohio, according to the 2017 Kauffman Index.
What’s got Cincy revving? Established institutions that use medical science, from businesses like Proctor & Gamble and Johnson & Johnson to Cincinnati Children’s Hospital Medical Center — a top-three hospital for kids — have seen homegrown talents emerge to create new companies. That’s how Assurex Health, which provides a genetic-testing technology developed at CCH with the help of Mayo Clinic, spun off and ended up being bought in 2016 by Myriad Genetics for a cool $225 million. Aerpio Pharmaceuticals topped the biotech investment leaders board at $41.8 million last year. And Enable Injections, which began in 2010 and has raised $32 million to date, according to Crunchbase, promises to revolutionize the way patients can self-administer everything from blood disorder medications to cancer drugs. That has local observers thinking it could soon be the city’s latest billion-dollar company.
The startup pipeline has been strong, in part thanks to a strategy centered around seed investment from venture groups like CincyTech, which began in 2005 and now manages a $30 million fund. Government help has played a role too, in the form of Third Frontier, a decade-old state bond program that has doled out investments sometimes surpassing $100,000 to promising startups. While life-science investing is often seen as a risky bet, given that most drugs never pass regulations and reach the market, investors here are playing the long game. “It’s about having the patient capital — the deep pockets locally to move these along, and then bring in big coastal firms,” says John Rice, CincyTech’s director of life sciences.
The challenges are similar to most startup scenes: concerns over future funding and founders. “We need to continue having companies scale and exit,” says Mike Venerable, CEO of CincyTech. “You can find a great idea. But can you find the money and talent to nurture it through?” The difficulty multiplies in a place like Cincy, which doesn’t yet have that sexy appeal of a Silicon Valley — nor the hundreds of jobs that a techie could turn to if they lose their current gig. Without as much opportunity, workers are less sticky … and more likely to go where the grass is greener at the first sign of trouble.
It’s also hard to tell what Cincinnati stands for, which points to a larger difficulty in promoting itself, Hooven says. “It’s just not the way people in Cincinnati are. You won’t ever hear Cincinnati say: ‘We’re No. 1.’” Maybe they don’t have to worry about bragging, though. If the investments keep rolling in, Cincy can let the scoreboard do the talking.