“ The U.S. life sciences market has often been seen more as a po-tential graveyard than a poten-tial goldmine. But here at TCG, we have proven with six firms we have helped that European companies can successfully navigate the medtech maze and be successful in the U.S. market.”

— Dennis Burns Partner

TCG Group LLC

Building on the Carolinas’

reputation as a hub of

international business . . .

life sciences companies are

finding creative ways to

overcome lingering industry

challenges and to ensure

their continued success in

an increasingly competitive

global marketplace.

GLOBAL CAROLINA PROFILETHE LIFE SCIENCES INDUSTRY IN THE CAROLINAS: THINKING BEYOND BORDERS

Amidst lingering anxiety and widespread uncertainties about recent healthcare legislation, newly implemented taxes, and limited access to venture capital, life sciences startups and established companies alike continue to face major challenges. Recognized industry clusters such as Research Triangle Park (RTP), as well as up-and-coming areas like the Greenville, Charleston, and Charlotte regions, continue to provide fertile ground for medtech, biotech, and pharmaceuticals companies to open and operate. However, with the recent emergence of Brazil, Russia, India, and China as major industry players, life sciences companies in the Carolinas find themselves facing not only the aforementioned challenges, but having to compete on a global stage.

But not all the news is negative. The life sciences industry has managed to sustain growth even during the recent major economic downturn. Moreover, a number of new industry initiatives are helping to ensure that local life sciences companies can continue to innovate, get their products to market, and secure much-needed capital. These initiatives, the result of a new spirit of collaboration among economic development organizations, government agencies, and universities, are helping to form a new foundation of support on which companies can build. Working within this framework, and building on the Carolinas reputation as a hub of international business, a number of local life sciences companies are finding creative ways to overcome lingering industry challenges and to ensure their continued success in an increasingly competitive global marketplace. The convergence of these various forces is helping to reshape the life sciences industry in the Carolinas and has industry insiders thinking beyond both figurative and literal borders.

BIO – A MUCH-NEEDED “BIG TENT”

On an organizational level, this reshaping can be clearly seen in the newly formed SCBIO organization. North Carolina has long operated its life sciences industry successfully under the NCBIO umbrella – evidenced in RTP’s recent top 10 ranking for life sciences clusters nationally. South Carolina, on the other hand, functioned until recently under separate medtech, biotech, pharma, and various other industry organizations. This all began to change – and change quickly – when a group of industry experts, led by Michael Bolick, set out to bring the state’s life sciences companies together under a “big tent” organization. In 2010, Bolick rebranded the Palmetto Biotechnology Organization (the local branch of the national BIO organization based in Washington, DC) to SCBIO as a first step in taking the life sciences industry in the Palmetto State to the next level.

Bolick, who spearheaded the initiative, assembled a veritable army of company executives, economic developers, and community leaders to aid him in his effort. As founder of Greenville, SC-based Selah Technologies and current President of Lab21, Bolick first reached out to his numerous industry contacts. Armed with cross-industry support, as well as knowledge gleaned from the most recent Battelle reports, he then approached Hildy Teegan, Doug Woodward, and others at USC’s Moore School of Business for help in identifying the state’s life sciences clusters. “When we received the results of Dr. Woodward’s study, we were startled to find that the companies are evenly distributed throughout the state,” Bolick said. “This was great news, as it enabled us to demonstrate to the South Carolina Department of Commerce and the regional economic development entities that a life sciences big tent organization was something that we could all rally around.” Bolick next contacted Bill Mahoney at the South Carolina Research Authority (SCRA). SCRA had operated an unrelated entity known as SCBIO for some time, but was willing to part with the name. “In a gracious and timely manner, SCRA agreed to transfer the name SCBIO to our group so we would be named in a manner consistent with the other state BIO affiliates,” said Bolick.

“The SCBIO-SCMedTech confer-ence has shown that the life sci-ences industry is thriving here [in the Carolinas] and that you can no longer be considered fly-over state[s].“

— Pete Pellerito Vice President

National BIO Organization

In 2010, Bolick

rebranded the Palmetto

Biotechnology

Organization to SCBIO,

as a first step in taking

the life sciences industry

in South Carolina to the

next level.

“ Now when a landing party calls [the South Carolina] Department of Commerce looking for the in-dustry folks at SCBIO, they’ll find we are open for business.”

— Michael Bolick President

Lab21

In 2010, the year of SCBIO’s re-emergence, the state’s medical device industry organization (SCMedTech) was hosting its 6th annual conference that had been growing steadily in prominence and attendance since it began in 2005. An effort that began in the Upstate, it had evolved into a statewide entity with leadership from medical device industry executives in the Charleston, Columbia, and Greenville-Spartanburg areas. Bolick knew that the medical device and technology sector represented one of the most important additions to be included under the “big tent.” Matt Gevaert, president of SCMedtech, explained the challenge of incorporating medtech into SCBIO: “We faced the question of how we can take this existing and successful effort, retain its focus, history, and industry relationships formed over many years, and place it in the context of the organizational efforts aimed at the broader life sciences level.” The seven-member SCMedTech industry council (which included Gevaert), worked with Bolick, newly appointed SCBIO Executive Director Wayne Roper, and the SCBIO board to craft an affiliation agreement between the two groups relying on the structure of sector “industry councils” within SCBIO: one for medical devices and technologies, another for pharma, another for agriculture-based biotechnology, etc. As a result, SCMedTech became affiliated as the medical device industry council for SCBIO.

The two organizations then agreed to co-host the annual meeting that SCMedTech had been planning as its seventh annual. The inaugural SCBIO-SCMedTech conference, “Creating Wow!” was held in Charleston this past November – and was an enormous success. National BIO organization Vice President Pete Pellerito summed up the conference – and South Carolina’s new role as an emerging life sciences hub – thusly: “The SCBIO conference has shown that the life sciences industry is thriving here and that you can no longer be considered a flyover state between RTP and Atlanta. South Carolina is becoming a major industry player in its own right.” And though the true impact of the organization on the life sciences industry in South Carolina is yet to be seen, its establishment is a major step in the right direction. “Now,” Bolick explains, “when a landing party calls our Department of Commerce looking for the industry folks at SCBIO, they’ll find that we are open for business.”

SCBIO agreed to co-host

the annual meeting that

SCMedTech had been

planning as its seventh

annual. The inaugural

SCBIO-SCMedTech

conference “Creating

Wow!” was held in

Charleston this past

November [2011] –

and was an enormous

success.

“Having so many of our vendors right here, plus their excellent competencies designed for medi-cal devices to back us up, has saved KIYATEC enormous expense during these difficult times.”

— Matt Gevaert CEO

KIYATEC

COOPERATION, COLLABORATION, AND SHARED EXPENSE – THE CASE OF KIYATEC

While both Carolinas are now on the map as centers of the life sciences, the industry faces tough decisions as it continues to build momentum and grow. Pellerito spoke of the need to exercise caution while encouraging growth. “The Carolinas should not aim to become the next Boston or Bay Area [of California]. The key will be to limit your focus to those areas where you already excel.” Product development and manufacturing scale-up are two such areas of excellence that are on full display in the Upstate region of South Carolina. Building on existing strengths, life sciences startups and established companies in the Upstate are well-served by sophisticated hospital groups, university research facilities, and economic development organizations. With these various groups showing an increased willingness to work together, they are providing life sciences companies with the support they need to endure the increasingly tough climate.

One company that took full advantage of the local resources available to it is Pendleton, SC-based KIYATEC. Co-founded in 2005 by David Orr and Canadian-born Gevaert, KIYATEC’s mission is to commercialize the novel 3D cell culture technology that Orr (along with Endowed Chair Karen Burg) invented in the labs of the Department of Bioengineering at Clemson University. KIYATEC began its operations out of a university incubator and quickly became the biggest external customer with respect to hourly use of a specialized microscope located on campus. But the partnership with Clemson was just the beginning for KIYATEC. When sourcing the components and processes for its initial product, the company leveraged the manufacturing strength of northwest South Carolina – particularly with respect to medical devices – and found five of the six vendors it needed locally. “While we were still in the earliest phases of product development,” explains Gevaert, “operating in Upstate South Carolina meant we immediately had all but one of our vendors within a 60-mile radius. Having nearly our entire supply chain that close put us at an enormous advantage right from the beginning.” Later in 2011, when the Greenville Hospital System’s Institute for Translational Oncology Research (ITOR) opened its 20,000-square foot innovation zone for advanced cancer research, KIYATEC quickly moved to become the facility’s first corporate tenant.

As KIYATEC grew, it found

continuous support

from ITOR, Clemson, and

local agencies such as

the Upstate SC Alliance

in the form of lab space,

R & D capabilities,

and promotion and

marketing. It also

received a much-needed

investment from SC

Launch.

“Just as we had achieved a degree of success in the United States, we were approached by [Italian medtech company] Spes Medica, who were looking for a U.S.-based company to distribute their products. We took the job on, and it ended up resulting in more ben-efits than we could have possibly anticipated.”

— Shawn Regan CEO

Rhythmlink International

“To be located in a place featuring both a hospital setting with entrepreneurial physicians and local manufacturing strengths in medical devices is a rare, nearly unique, advantage for our company and others like us,” said Gevaert.

As KIYATEC grew, it found continuous support from ITOR, Clemson, and local agencies such as the Upstate SC Alliance in the form of lab space, R & D capabilities, and promotion and marketing. They also received a much-needed investment from SC Launch. “SC Launch has played a crucially important role in our growth and maturation,” Gevaert says. “They brought connectivity and experience – in addition to investment dollars – to our efforts at KIYATEC, all of which helped our ability to attract additional investment and ensure success.” This success has helped KIYATEC make great strides. The company recently announced three separate co-development relationships with leading materials manufacturing companies. These relationships have led to four new products being launched simultaneously. “The logistical feat of coordinating co-development and co-launch with this many companies, not to mention the new products’ distribution through leading supplier Sigma-Aldrich, is a badge of honor for KIYATEC and an indicator of the value that our industry peer companies place on our 3DKUBE technology platform,” Gevaert said. “Having so many of our vendors right here, plus their excellent competencies designed for medical devices to back us up, has saved KIYATEC enormous expense during these difficult times. It’s unlikely that our level of success would have been possible without the cooperation and support of the local life sciences cluster here in the Upstate.”

NEGOTIATING THE NEW NORM – RHYTHMLINK INTERNATIONAL

While a solid local support system is growing, the “new norm” in the life sciences industry means that certain challenges, such as navigating the historically time-consuming and complex process of obtaining FDA approval, remain daunting. And while it is still unclear the extent to which new regulatory guidelines will affect the cost of doing business in the coming years, there is no doubt that new guidelines are coming – and possibly sooner rather than later. Companies will therefore need to have that much more capital available in order to remain up and running while awaiting approval. As former chief scientist and assistant commissioner of the FDA

Rhythmlink has since

firmly established itself

as a major force in the

neurodiagnostic devices

market – having been

named one of the top 20

of South Carolina’s fastest

growing companies in

each of the past three

years.

“In these austere economic times, the FDA simply doesn’t have the necessary personnel to keep up with the applications for product approval.”

— Dr. Frank Torti Former Assistant Commisioner

FDA

Dr. Frank Torti said at the recent SCBIO conference, “In these austere economic times, the FDA simply doesn’t have the necessary personnel to keep up with the applications for product approval.” How individual firms respond to these challenges, then, will determine which ones manage to compete on a global stage and which ones fall by the wayside. And while some companies are now choosing to forego FDA approval altogether and working instead to obtain compliance overseas, where approval processes are often quicker and easier, Columbia, SC-based Rhythmlink International took a novel, yet practical approach to obtaining FDA approval for its products first – and as a result gained access to the potentially very lucrative foreign markets.

As its name indicates, Rhythmlink International had from its inception an international focus. However, the company’s leadership was wise enough to realize that, despite the need to compete on a global stage, they initially had the best competitive advantage for their products in the U.S. market. So while they always kept a close eye on the global markets, Rhythmlink first focused on obtaining FDA approval and growing the company domestically. Though this approach required much bootstrapping during the early stages, it quickly proved to be the correct one, and Rhythmlink has since firmly established itself as a major force in the neurodiagnostic devices market – having been one of the top 20 of South Carolina’s fastest growing companies in each of the past three years. Based on its success at home, Rhythmlink garnered the attention of a number of European companies looking to gain a foothold in the world’s largest market. In the process of establishing itself as a thought leader at home, Rhythmlink realized a number of unanticipated business benefits. “Actually we never set out looking to partner with any one company – or any company for that matter,” explains Rhythmlink CEO, Shawn Regan. “But just as we had achieved a degree of success in the United States, we were approached by [Italian medtech company] Spes Medica, who were looking for a U.S.-based company to distribute their products. We took the job on, and it ended up resulting in more benefits than we could have possibly anticipated.”

Based on its success

at home, Rhythmlink

garnered the attention

of a number of European

companies looking to

gain a foothold in the

world’s largest market.

“There are more than 1,100 medtech companies in Germa-ny, where we concentrate our efforts, with 90 percent of them still lacking a presence in the United States.”

— Dennis Burns Partner

TCG Group

Through this partnership, Rhythmlink and Spes Medica have maintained a steady exchange of ideas, resulting in a better understanding of each others’ core competencies, enhancements in product innovations, and even the sharing of patented technologies – as well as success in each other’s respective home markets. “We always knew there was a market for Rhythmlink’s products internationally, but we didn’t necessarily know how to get there,” Regan says. “It turned out that having a connection with a partner from abroad went a long way to helping us understand what we needed to do to enter the 20-plus-country European market successfully.” And so although obtaining CE compliance for its products took time and was preceded by FDA compliance, Rhythmlink was well-prepared for entering the European market as a result of its experience in the U.S. markets and it ongoing relationship with Spes Medica. “Now we’re seeing great success in these markets, too. In the process, we are realizing our goal of being a truly international company,” Regan concludes.

GLOBAL PIPELINES AND THE MEDTECH MAZE – TCG GROUP

“Global pipelines” – defined simply as one company maintaining a close working relationship with another company from overseas – are becoming an increasingly popular concept in business circles. A recent study from Europe’s Centre for Economic Policy Research found that companies that maintain global pipelines are up to four times more likely to produce major innovations than those that interact solely within local business clusters. Examples of this can be seen right here in the Carolinas. While many medtech firms located around NC’s RTP continue to look locally to overcome their challenges, others such as TCG Group are actively cultivating global pipelines to generate business opportunities.

TCG’s core competencies are in helping European life sciences companies set up and succeed here in the Carolinas. “There are more than 1,100 medtech companies in Germany, where we concentrate our efforts, with 90 percent of them still lacking a presence in the United States” says TGC Partner Dennis Burns. A former executive at Johnson & Johnson, Burns (along with his five partners, including one on the ground in Heidelberg) possesses a wealth of industry experience – and sees enormous potential for the Carolinas in tapping into

While many medtech

firms located around

NC’s RTP continue to

look locally to overcome

their challenges, others

such as TCG Group are

actively cultivating global

pipelines to generate

business opportunities.

“In May 2009, at Ed [Snape]’s insistence, I met with Graham and Berwyn Clarke, Lab21’s Founder and CSO. And as we talked, I realized that Selah’s molecular imaging agent might be a perfect fit in a fast-growing molecular diagnostics company.”

— Michael Bolick President

Lab21

the European market. And although these companies are not the types of ‘buffalo’ in terms of FDI (foreign direct investment) that economic development agencies have traditionally been hunting, they are fast-growth companies who can leverage CE approval and EU sales for their products into 510k clearances that open up the North American markets. “The U.S. life sciences market has often been seen more as a potential graveyard than a potential goldmine, primarily because of its enormous complexity and the FDA,” Burns explains. “But here at TCG, we have proven with six firms we have helped that European companies can successfully navigate the U.S. medtech maze and be successful in the U.S. market.”

One recent TCG success story is Durham, NC-based ROTEM. ROTEM is the U.S. subsidiary of Tem International GmbH, the developer and manufacturer of the ROTEM® hemostasis analyzer for monitoring surgical bleeding in the OR. The ROTEM® analyzer has been used in more than 50 countries since 2003, but only recently, with the help of TCG, received FDA clearance. “Whereas many companies receive CE approval for their products in Europe and then skip the FDA and the U.S. market, ROTEM was, with help from TCG, able define the enormous potential of their product and to obtain FDA approval quickly,” Burns explains. “Now, with the FDA clearance, we can offer the ROTEM® technology to top U.S. hospitals and research centers. Plus we provide thorough training and support from our convenient and advantageous location near Research Triangle Park, where you are within a two-hour flight of two-thirds of the United States.” As anticipated, TCG and ROTEM are riding that wave of success and have quickly created high-paying, knowledge-based jobs for the local economy. “We’ve hired seven new salespeople and eight new staff, and we’re in talks with most of the top 50 hospital groups about getting ROTEM’s products into their facilities. It’s truly a win-win for all involved,” Burns concludes.

RE-CYCLING THE DEVEOPMENT CYCLE – SELAH AND LAB21

A handful of especially savvy companies are already managing to combine global pipelines with local initiatives to realize immense business benefits. Michael Bolick’s former company, Selah Technologies, is one example of how utilizing both of these approaches can help fund growth and drive

Selah Technologies, is one

example of how utilizing

both [local initiatives and

global pipelines] can help

fund growth and drive

innovation in previously

unimagined ways.

“While the senior leadership at Lab21 always planned to posi-tion the company to thrive in the U.S. market, the relationship that we built between Selah and Lab21 shows just how huge of an impact global pipelines can have.”

— Michael Bolick President

Lab21

innovation in previously unimagined ways. In the area of product development, the global pipelines study shows that companies that added just one new international relationship improved their chances of successfully introducing new ideas by 26 percent. When Selah Technologies was searching for a partner for its molecular imaging technology, Bolick established a connection to UK-based Lab21. In Lab21, he found the molecular diagnostics partner he was looking for. In the process, Selah found a way to use this global pipeline to “break out” of the traditional life sciences development cycle – where startups depend heavily on outside sources of venture capital – and succeed beyond anyone’s expectations.

“In late 2008” Bolick explains, “Selah had developed a working prototype of its revolutionary Selah Dots® technology, which enables molecular imaging of cancer.” Little did Bolick know, however, of the unprecedented economic storm that was about to hit. “We had applied, and were selected, to present at the Life Sciences Venture Capital Summit in the financial district in New York City,” says Bolick, “just in time for the Dow to fall from 14,000 to 6,300 points!” Seeing his chances of securing venture capital in New York as slim, Bolick returned to Greenville and began updating Selah’s investors and evaluating possible paths forward. Around that same time, Ed Snape, founder and partner at Nexus Medical Partners, contacted Bolick and mentioned that Graham Mullis, CEO of Lab21, was searching broadly for a home for his U.S. headquarters. “Ed saw a wide-open field of opportunity in South Carolina and suggested that I speak to Graham to describe the playing field for life sciences companies in South Carolina,” Bolick says. “In May 2009, at Ed’s insistence, I met with Graham and Berwyn Clarke, Lab21’s Founder and CSO. And as we talked, I realized that Selah’s molecular imaging agent might be a perfect fit in a fast-growing molecular diagnostics company.”

There was, in fact, a good fit. Bolick explains: “I knew that if we could take the innovative capacity of Lab21 from the other side of the ocean, which is constrained somewhat because of government-controlled healthcare, and unleash that capability set – that proven set of best practices around molecular medicine and personalized healthcare – in a U.S. market that is still globally competitive . . . I knew it could be huge.” But even Bolick underestimated the impact this global pipeline would eventually have.

When Selah Technologies

was searching for a

partner for its molecular

imaging technology,

Bolick established a

connection to UK-based

Lab21. In Lab21, he found

the molecular diagnostics

partner he was looking

for.

As the two companies continued to explore these connections through cross-fertilization of ideas between South Carolina and the UK, the clearer it became to Bolick that there was a home for Lab21 in South Carolina. With the help of local government, economic development, and university leaders, Bolick and Selah managed to recruit Lab21 to the Palmetto State. In 2009, Lab21 officially acquired Selah, and located in the NEXT Technology Center in Greenville. “What started as a 30-minute discussion turned into a major economic development win for the Upstate,” Bolick says. “And while the senior leadership at Lab21 always planned to position the company to thrive in the U.S. market, the relationship that we built between Selah and Lab21 shows just how huge of an impact global pipelines can have.”

ACTING LOCALLY, SUCCEEDING GLOBALLY

Though myriad challenges will likely continue to plague the industry for the foreseeable future, life sciences companies from the Carolinas are proving that they can not only survive and grow, but can compete on a global stage. Through working with local agencies such as NC- and SCBIO, and by establishing and maintaining global pipelines, companies are attracting funding, driving innovation, and cultivating valuable partnerships – helping in both the short and long term to create high-paying jobs for our states. The wealth of resources that exists right here in our own back yard – from new industry organizations to world-class universities to creative, globally-focused companies – is helping the life sciences industry lead the way toward the type of fast growth that experts agree will be key to the Carolinas’ continued success in the increasingly competitive global economy.

Though myriad

challenges will likely

continue to plague

the industry for the

foreseeable future, life

sciences companies from

the Carolinas are proving

that they can not only

survive and grow, but

can compete on a global

stage.