Brookwood Pharmaceuticals’ Funding Model

The biotech industry is steadily growing worldwide, but the challenge business start-ups face, even those with the most innovative ideas, is having the funding to see the idea through from soup to nuts. It’s a pricey menu of research and development costs long before a venture faces the financially draining phases of clinical testing. It’s rare to find the sort of merger that offers the best of both worlds, but by remaining in Birmingham after its buyout by SurModics, Brookwood Pharmaceuticals has created a model that could inspire other developing biotech businesses. According to Angela Wier, vice president of the Economic Development Partnership of Alabama, “From an economic development standpoint, there are three traditional legs: to recruit, retain and grow your own. Biotech is one of those sectors where you grow your own. Brookwood is a real example of that.” Originally part of Southern Research Institute (SRI), Brookwood Pharmaceuticals is a Cinderella story, and SRI is a fairy godmother of sorts that nurtured it through its early stages. After Brookwood Pharmaceuticals became a stand-alone business, SurModics saw the potential and paid $40 million in cash for the company, with the potential of an additional $22 million with the achievement of goals outlined in the agreement. “With Brookwood, the community had a tremendous opportunity to embrace a company spun out in Birmingham from Southern Research and attracted the interest of a company like SurModics,” Wier said. “It’s a tremendous opportunity to introduce someone like SurModics to the talent here in Birmingham. This is an example of taking the assets in your community and learning how to build on them until we can create the critical mass we need in that sector to be able to start companies here and keep them here through all the funding cycles and growth cycles.” Wier said the challenge for any biotech company is staying the course through the steady outlay of capital when income is delayed gratification. “The developmental timeline for biotech is longer than any other industry I can think of,” Weir said. “You spend a lot of money on the research and development before you ever have a revenue stream. Long tech times do require a huge investment — from research time to the point of approval where you can begin to develop a market.” Wier says Southern Research, with its 60-year history in the community, has been able to work on new drug compounds and actually get them all the way through the process—from animal tests and clinical trials and finally into the industry and to the patient. “With biotech, we’re continuing to build on a solid and steady base here in the community, and we’re fortunate to have that,” Wier said. “That gives us an edge. The front end of the industry is research and development, and you have to have a strong core or capacity for discovering drugs. We have a real foundation in this community that a lot of other places who want to become leaders do not have. They don’t have the baseline of research yet. We have that core strength, and if we’re smart, we’ll learn how to embrace it and build on it.” March 2008