Mayo Clinic makes city's biobusiness center different (video)

Biobusiness is lucrative business, and everybody, it seems, wants a piece of it.

Forty-eight states and 18 countries were represented at one recent international conference that acts as a fishing pond to attract startup bioscience companies, said Rochester Mayor Ardell Brede.

But where Rochester lacks the climate, the cachet of the East or West coasts — or simply the cash — to cinch the deal with many of those companies, it does have something none of the others do.

Mayo Clinic down the hall.

Close proximity to Mayo's physicians and scientists makes the Minnesota Biobusiness Center a valuable trump card in Rochester's hand, Brede said.

"The fact that we've got a facility right downtown," he said. "It's connected by skyway to Mayo. It's got UMR (the University of Minnesota–Rochester). It's got IBM. It's got Hormel Institute. That's a pretty powerful hand we have." That fact is what led the city to break ground for the Biobusiness Center four years ago.

"This was an opportunity," said Assistant City Administrator Gary Neumann. "Not many cities have the Mayo Clinic, have a group that's actively trying to market the patents coming out of Mayo."

It's not a slam dunk, though — either landing the new companies or having them be successful once they're here. Startups are risky ventures, and for every Mill Creek Life Sciences or Regen Theranostics that's opened shop in an atmosphere of hope, there is one that's either never gotten off the launch pad (iMortal) or had to ratchet back its operations (Kardia Life Sciences).

That's typical happenstance in the biobusiness world, where, if you're lucky, for every success story there probably will be two failures, said Steve VanNurden, chairman of Mayo Clinic Ventures, which licenses Mayo Clinic ideas to outside companies.

"I equate it to a baseball average," VanNurden said. "If you hit .333, you're in the Hall of Fame."

The city went into the BioBusiness Center "with our eyes open, that some are not going to make it," Neumann said. But where a private developer might have felt pressure to lease space to other kinds of companies to make ends meet, the city has largely been able to stick to its original purpose of making its building a bioscience hub.

Having Mayo as an anchor tenant helps, obviously. The clinic fills five of the eight floors with members of a variety of departments, including Mayo Clinic Ventures and Mayo Clinic Global Business Solutions.

"We wouldn't have a building if it wasn't for Mayo signing a lease," said Gary Smith, president of RAEDI, a nonprofit economic development agency in Rochester.

And the smaller companies there could probably not have a better godfather. Mayo Clinic Ventures has licensed Mayo ideas to 45 or 46 startup companies since its formation about a decade ago, VanNurden said.

"In the past, we had discussions about where those companies would be," he said. "We never had the ability to say, 'Let's locate them where we are.'"

Now, at least two of the BioBusiness Center's three bioscience tenants have ties to Mayo Clinic. Mill Creek Life Sciences has advisers on the Mayo Clinic staff, and ReGen Theranostics, a startup with two employees, licensed Mayo Clinic technology to manufacture stem-cell technology, derived from patients, for medical research companies.

The Biobusiness Center was "absolutely perfect for what we were looking for, and the city was incredible to work with," said ReGen president and co-founder Matt Nelson.

"It's conversations on a daily basis because we have daily contact with Mayo," Nelson said.

Nelson foresees a near-term expansion of the operation.

"We are one year into production," he said, "so we hope to double or triple our production in the next year."

The support and collaboration between Mayo Ventures, RAEDI, and the city government makes a nice atmosphere for a startup company to sink roots here, VanNurden said.

But money helps, too. The groups work together to help connect companies with grants, low- or no-interest loans and investors. More help might be on the way, as RAEDI seeks, in the city's 2012 proposed sales tax extension, $5 million to establish a loan fund to help startup businesses, including bioscience companies.

The city tries to do its part, offering new companies financial assistance to "fit-up," or tailor the blank office spaces to fit their needs. In addition, the building was designed to be as energy-efficient as possible, to hold down utilities bills, Neumann said.

The city charges rents of $16 to $20 per square foot — rates that are competitive with prevailing commercial rents elsewhere in the city, said Mac Hamilton, president of Hamilton Real Estate, a commercial real estate firm.

With the Biobusiness Center, the city "accomplished something here that I think a lot of private developers would have had trouble taking on," Hamilton said. "It is an attractive addition to our community."

If there's a knock on the building, it's that the mechanical room is over-sized, and that leads to tenants paying rent for slightly more shared space than is usual, Hamilton said.

"From a tenant's standpoint, nobody is happy paying extra," Hamilton said. But the premium location might offset those concerns. None of the tenants contacted for this story complained about rent.

Judy Mundy, of Mill Creek Life Sciences, identified only two concerns — that the building doesn't include a freight-sized elevator, which meant a piece of refrigeration equipment couldn't be brought into her second-floor offices, and that the building lacks a centralized power-backup system to keep Mill Creek's deep freezers, set to minus-80 celsius, running in the event of a power outage.

But not many companies have those kinds of needs, said city Development Director Doug Knott, who said one of the building's three elevators is up-sized and proved capable of hauling everything else, including construction equipment, to the upper floors. The building has backup generators to keep its core systems running, but few tenants need more than that, and those that do can supply their own, Knott said.

What the city learned, from visiting other biobusiness office buildings before designing its own, Knott said, was to keep its design general and let businesses tailor to space to their needs.

"They (other builders) put a lot of money into technology that either wasn't used or wasn't suited to the tenants," Knott said. Mill Creek, for example, installed its own "clean rooms" for product manufacturing.

"They're able to construct what they need in the space that we have," he said.

Other future considerations went into the building's design. It has the potential to be linked via subway tunnels to Mayo Clinic's Stabile or Guggenheim buildings, and the foundation is capable of carrying another six floors, Neumann said.

More likely than adding floors, however, is the potential of developing another Biobusiness Center on another site, Neumann and Knott said. But that's still just a bubble of a thought in a test tube, they said.