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Investment in Northeast Ohio Health Ventures Takes Off

Tuesday, January 22, 2008

Provided by The Plain Dealer
Written by Mary Vanac


Investment in new health care companies in Northeast Ohio nearly tripled last year, bringing more than $240 million to the region and providing some of the strongest evidence yet that bioscience is key to Cleveland's economic future.

Greater Cleveland has the potential to be one of the nation's top five centers for health care innovation, said Baiju Shah, president of BioEnterprise, the region's bioscience company developer.

Northeast Ohio already has taken a big step in that direction -- its health care companies have attracted an average of more than $100 million in investments during each of the last five years, said Shah, whose organization tracks health care investing in the Midwest.

"While we've got this great momentum that we've been building, we've got to capture the opportunities in front of us, like the Medical Mart . . . and we've got to keep investing," Shah said.

That momentum can be seen in the number of venture firms that have opened offices in Northeast Ohio -- more than two a year, on average -- and the growing number of companies that are moving here, in part, to benefit from those venture dollars.

"So if you look at this as the leading indicator of what our economy already looks like . . . I can see a clear future where biosciences is the dominant economic sector in the region," Shah said.

Nationwide, a record $9.5 billion was invested last year in biotechnology, medical device and health care service companies - collectively known as life sciences companies, according to the MoneyTree Report released Monday by PricewaterhouseCoopers, the National Venture Capital Association and Thomson Financial.

Biotech and medical device investments accounted for 31 percent of all venture capital investments nationwide - another record - making it the top area of investment in 2007, according to the MoneyTree Report.

The same was true in Northeast Ohio.

A report by JumpStart Inc., the region's venture developer, found that biopharmaceutical, medical device, and health care information technology and service companies accounted for nearly three quarters of the $318 million in venture investments made in the region.

Though Northeast Ohio has risen to the level of Minneapolis, which has long been the Midwest leader for health care venture capital, it probably will never overtake the likes of Boston or San Francisco, Shah said.

That said, health care companies in Greater Cleveland garnered a whopping $241.8 million last year, thanks in large part to a few big deals that may not be repeated this year, Shah said.

For instance, investors pumped $70 million into Athersys Inc., a Cleveland biopharmaceutical company. That represents Ohio's biggest health care investment last year.

In comparison, Northeast Ohio health care companies raised $87.9 million in 2006 and $171 million in 2005, according to BioEnterprise.

Even though health care investment in Cleveland trailed Minneapolis by more than $50 million last year, our region was slightly ahead for number of investments.

That's likely because local companies are in earlier stages of development than their counterparts in Minneapolis, Shah said.

Health care companies in the 11 Midwestern states and one region that BioEnterprise tracks attracted a record $1.2 billion from venture capital firms last year.

Among the states and region, Minnesota and Ohio tied for first place by attracting $296 million apiece last year.

A separate report by JumpStart also illustrated the importance of health care investment in Northeast Ohio. Biopharmaceutical companies in the region - which JumpStart defines slightly differently than BioEnterprise - received 53 percent of the venture capital, or $169 million, last year, according to the report.

Health care information technology and services received the next biggest percentage of regional venture capital at 12 percent, or $37 million. Next came medical devices, with 11 percent, or $35 million.

Shah believes that Ohio will overtake Minnesota as the perennial leader in Midwest health care venture capital. And that could be a harbinger of local economic recovery.

The National Venture Capital Association estimates that venture capital dollars create a greater economic impact than other types of investment dollars, Shah said.

That's because young, fast-growing companies that get venture capital create more jobs and more wealth than companies that get other types of financing.

For Northeast Ohio, that growth is still in the future. As young startup companies get established and grow, jobs could follow.

And while bioscience companies typically employ fewer people than auto plants or steel mills, the wages tend to be higher.

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