IPO highlights region's big slice of life sciences

Organ-replacement developer Tengion Inc.'s initial public offering last week is more evidence the Philadelphia region has a leading position in developing cutting-edge drugs and therapies, a top industry official said Tuesday.

"We have now moved up to slightly behind Boston but certainly ahead of San Francisco and San Diego," Mickey Flynn, president of the Pennsylvania Biotechnology Association in Malvern, said in assessing the industry.

A national composite index of metropolitan regions by the Milken Institute in 2009 placed Philadelphia No. 2 in life sciences behind Boston.

The other metro areas in the top 10, in descending order, were San Francisco, New York, Raleigh-Durham, N.C., Los Angeles, Chicago, San Diego, Minneapolis, and Washington, D.C.

For many years, the Philadelphia region has been the heart of the East Coast pharmaceutical corridor, with traditional drug giants Merck & Co. Inc., GlaxoSmithKline, Johnson & Johnson, Wyeth (now owned by Pfizer Inc.), and AstraZeneca employing thousands of executives, researchers, and marketing managers here.

The concentration in traditional pharmaceuticals - with its focus on blockbuster drugs and big labs - was thought to retard growth in next-generation biotech drugs at smaller firms.

That has changed with university research, state efforts to invest tobacco-settlement funds into biotechnology, and special tax-favored zones for small companies, experts say.

Small drug companies also are looking to commercialize advances that traditional pharmaceutical giants don't consider appealing, Flynn said.

Auxilium Pharmaceuticals Inc. of Malvern and Morphotek Inc. of Exton are examples of the innovation taking place, he said.

Philip Sass, executive vice president and chief operating officer at Morphotek, said Tuesday the company recently announced it would construct a biologics pilot plant for $80 million that would employ 100. The plant, in Exton, should be completed by August 2011.

Morphotek has a number of antibodies in clinical studies for combating cancer, Sass said. The company is 10 years old and uses technology from Johns Hopkins University. "We've had tremendous success in recruiting here," Sass said, noting that the company has expanded in the last three years to 170 employees from 50.

Tengion, which went public last Friday at $5 a share, closed Tuesday at $5.02 a share. The East Norriton company said in its IPO prospectus that it focuses on discovering, developing, and commercializing replacement bladders and other organs and tissues, using a patient's own cells.

The company could not comment Tuesday because it is in a silent period, routinely imposed by regulators after a stock sale. Steven Nichtberger, a former senior manager with Merck, is Tengion's president and chief executive officer.

Timothy Bertram, a former senior scientific executive at Pfizer Inc., is Tengion's senior vice president of science and technology.

According to regulatory filings, Oak Investment Partners XI, Johnson & Johnson, Brookside Capital Partners Fund L.P., and Quaker BioVentures have invested in Tengion.

Flynn said he was traveling to Washington on Tuesday with about a dozen officials from Pennsylvania biotech companies for an annual meeting with congressional representatives and staffers.

The health-care bill that became law last month will be one topic, he said. A concern is a new tax on medical device manufacturers, which will hurt smaller device manufacturers, Flynn said.