For investors, biotech is both a great opportunity and huge risk, especially in the case of drug discovery.
If a product goes to market, a company and its investors can make back their investment and much more. But the big risk comes in funding research and testing a technology that isn't ultimately commercialized.
More than one company has made the mistake of putting all its proverbial eggs in one basket. Even a good product can get caught up in the approval process and bankrupt its investors.
Gil Van Bokkelen knows this. That's why Athersys, Cleveland's most talked about biotechnology company, has taken a different approach.
"There are biotechnology companies out there that want to be more fully integrated," Van Bokkelen says. "These biotechnology companies have recognized -- because it is a very capital intensive process -- that one strategy to help them achieve that goal is not just to raise money in the equity market but to license technology and create alliances with other biotech or mainstream pharmaceutical companies."
Van Bokkelen refers to the relationships the seven-year-old company has formed with Pfizer, Bristol-Myers Squibb and Medarex as strategic equity investments.
"It's called comparative advantage," he says. "Two parties strike up a relationship, and they each do what they do best and then share the proceeds ... it is a way to maximize the benefit."
Athersys provides the drug targets, which are a result of proprietary technology, and other companies take the technology from there, paying fees along the way of the drug's development cycle. Athersys benefits monetarily without making the capital investment in the development process.
Sounds simple enough -- the new biotech company making licensing fees off its technology -- but the first step, says Van Bokkelen, is getting in the door.
"The reality was we weren't doing deals with the big pharmaceuticals when we were in the incubator," says Van Bokkelen.
It wasn't until Athersys moved into its world-class facility that it got its foot in the door, and even then, it took on all the risk.
"The way that we managed to convince them was to work on a focused set of objections, says Van Bokkelen. "Then we bombarded them with scientific data and even said that in the initial stages we would assume all the risk."
Van Bokkelen has big plans for Athersys, and says licensing technology is going to become less relevant to the company's focus."It is a reflection of our strategy and capability. The company was never going to be about one product and one technology -- it is about a broad base," says Van Bokkelen. How to reach:Athersys Inc. (216)431-9900 or www.athersys.com