June 2004 BioNext? By W. Matt Meyer
Memphis’ burgeoning biotech sector got a boost earlier this year when pharmaceutical company GTx raised more than $86 million in an initial public offering.
The progress of GTx is helping Memphis believe it can become a thriving center for biotech companies and investment.
“They are the poster child for (biotech efforts) in Memphis,” says Steven Bares, president and executive director of the Memphis Biotech Foundation.
GTx began in 1997 after AutoZone founder J.R. “Pitt” Hyde made a $1.4 million investment in the company headed by Mitchell Steiner, the urologist who treated Hyde for prostate cancer. Before founding GTx, Steiner specialized in urology and urologic oncology at the University of Tennessee Medical School in Memphis, where he is still professor and chairman of the department of urology.
Steiner is positioning GTx as the “men’s health biotech company.” On Feb. 3, the stock began trading on NASDAQ under the symbol GTXI. It has several drugs in the pipeline, including some aimed at ending prostate cancer and improving muscle and bone mass in chemotherapy patients. Its first drug is set for market in 2006.
The company grew out of the medical research and academic environment in Memphis. Steiner wants the company to provide a way for that research to get funded with venture capital and eventually go to market—and to keep it all in Memphis.
“Our idea was that if we had five drugs we could take to market, all the up-front money—about $2.5 to $5 billion—could be spent here in Memphis and in Tennessee,” Steiner says. “It’s a no-brainer that you would want to hold on to it.”
GTx’s path to public company status knocked down barriers for future biotech companies. For example, state laws were changed to allow universities to enter moneymaking agreements with researchers over patents. Also, in 2001, Hyde and others started a venture capital group called MB Venture Partners—dedicated to funding biotech companies—and formed the Memphis Biotech Foundation.
Steiner says these and other developments in Memphis—the availability of more small business incubators for biotech startups and more biotech patent attorneys—will make it easier for others.
“Is the success of GTx replicable? Yes, now more than ever,” Steiner says. “There are all the right groups in place.”
In addition, Gov. Phil Bredesen has included $10 million of state money for Memphis’ pursuit of a planned $400 million bio-tech research park.
With all this momentum, biotech is hoped to be “the next FedEx” for Memphis, Bares says.
“This is a big deal for the community. It needs another industry,” Bares says. “Wages in warehouse work are not going up, and you can’t live on $10 an hour.”
Memphis already has a good start in the field, as biotech companies in the area employ 37,000 people in 310 companies, or one of every 16 workers. That concentration is 32% higher than the national average.
Future biotech jobs likely will pay better than your typical logistics or warehouse worker, Bares says. “Biotech jobs” could include anything from a machinist who works with titanium for the latest orthopedic device or a laboratory technician in a highly regulated drug manufacturing facility.
“These will be skilled jobs,” Bares says. “This won’t be like working in a warehouse with no skills. This is a good industry.”
And it’s also growing fast. In 2003 biotech-related industrial investment in Memphis was more than $200 million—more than 50% of all industrial development for the year.
Battelle, a nationally known technology consultant, has studied Memphis’ biotech assets twice, once in late 2002 and earlier this year. Memphis can succeed as a biotech player if it focuses on its niche strengths, says Mitch Horowitz, Battelle’s director of strategy.
The niches identified by the report include orthopedic care (Memphis is home to several medical device makers and world-class clinics), logistics (the FedEx hub allows sensitive medical equipment a better chance for next day delivery) and hospital care (a high con- centration of hospital and academic employees means more innovation).
Becoming a biotech center will be a marathon, not a sprint, Horowitz says. Memphis’ biotech output or investment is nowhere near other cities and the competition is fierce. More than 40 states and hundreds of regions have already begun serious biotech marketing plans.
“Can everyone succeed? No,” Horo- witz says. “But it’s a major market. It will be as big as information technology was in the ’80s and ’90s. You have to find your slice of the market.”
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