What biotech needs to grow.

• Author: PETERSON, ERIC
• Position: Statistical Data Included

DESPITE WORKFORCE, RESEARCH FACILITIES, PARKS, AN R&D TAX CREDIT AND OTHER PLUSES, COLORADO'S BIOTECH INDUSTRY IS FALTERING. WHY?

On paper, Colorado has the look at a 21st century international biotechnology hub: The states workforce is among the nation's best educated, and the University of Colorado and Colorado State University harbor world-class RNA research and veterinary science departments, respectively

Yet, despite such pluses as a biotech R&D tax credit and new biotech parks -- including one at Fitzsimons watched as a national model -- the industry has yet to fulfill its promise here. The missing pieces of the puzzle: cash and a local corporate role model.

"I think (Colorado biotech) is having trouble," said Jack Wheeler, president-elect of the Colorado Biotechnology Association, and president and CEO of Denver biotech startup Xtrana Inc. "A lot of the companies have left the state, or have been acquired by larger out-of-state companies." Recent acquisitions of Colorado biotech companies include Foster City Calif.-based Gilead Sciences Inc.'s 1999 $550 million buyout of NeXstar Pharmaceuticals Inc. and the 1998 merger of Deerfield, Ill.-based Baxter International Inc. and Somatogen Inc. Prior to the deals, NeXstar and Somatogen were headquartered in Boulder.

Consolidation has significantly changed the biotech landscape, locally and nationally Across the country there have been more than 100 biotech mergers and acquisitions in the past five years, a trend that peaked in 1999 with 60. In Colorado alone, eight companies were bought out, shut down or relocated in the same five-year period, leaving a significant talent base without employment.

So entrepreneurial instincts have reshaped the local industry: 59 biotech firms now call the state home, up from 38 in 1996. "What's happened is, since the larger ones have left, a group of small startups has arisen," said Wheeler.

Wheeler's Xtrana is among that group. Incorporated in 1998, the company is gunning to revolutionize the world of DNA analysis with cheaper, faster methods of testing for pathogens. However, financing remains the biggest need for startups like Xtrana. Cash, or the lack of it, is Xtrana's biggest obstacle, Wheeler said. To date, the company has closed on a modest $1.2 million in private offerings, in addition to $4.4 million in government grants and contracts.

In today's climate, venture capitalists look to Internet and IT companies first, leaving the players in other...