As a smaller life-science hub, Seattle has had at least as difficult a time attracting research talent as venture capital in a mixed year of successes and stumbles

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Cash and talent are two ingredients biotechnology companies need to survive.

Ikaria, one of the few biotechs locally to raise startup capital in 2005, got the first ingredient last spring but found the second more difficult to attract to Seattle.

Chief Executive Dr. Flemming Ornskov, himself drafted from the ranks of big pharma, said some scientists the company recruited had to be convinced that Seattle offers the same career opportunities as larger biotech hubs.

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“What I hear from people we try to attract to the area is, ‘There’s not a lot of other companies up there. There’s not a whole environment of small companies,’ ” Ornskov said.

Seattle saw a handful of new biotech starts this year, but at the same time some established public firms stumbled and others disappeared.

Overall, the region did not make much progress toward achieving what biotech veteran Doug Williams calls “critical mass” — in fact, the area’s publicly traded biotech companies as a group shed about 160 jobs.

City and state officials cite job creation as one justification for encouraging biotech development in the South Lake Union neighborhood and dedicating $350 million in public funds over the next decade to bolster life-sciences research.

It will take more startups, as well as maturing companies with strong development pipelines, to reach the point where recruiters “don’t have to convince people that Seattle is the right place to come, from a career-development perspective,” said Williams, chief scientific officer at ZymoGenetics, which added 65 new positions this year.

“Part of the reason people go easily to San Diego, the Bay Area or Boston,” he said, “is they know that they can take the risk, if you will, of going to work in an inherently risky industry because there’s so many other job opportunities locally.”

One of the success stories of the year was Ikaria. Venture capitalists pledged at least $10 million to back technology from the Fred Hutchinson Cancer Research Center that can cause temporary hibernation in mice. The company aims to develop a treatment that could give trauma patients a better chance of survival.

Ultimately, Ikaria has been able to bring in the right personnel, such as Thomas Deckwerth, who came from San Diego’s biotech industry to be director of biology.

The neuroscientist said Seattle’s status as one of the smaller biotech hubs was a drawback, but he was more focused on the opportunity to develop novel science at a young, well-funded company. “That definitely attracted me here,” Deckwerth said.

2005’s ups and downs

Here’s a rundown on the year’s noteworthy events in the local life-sciences industry:

Snoqualmie-based Light Sciences Oncology pulled in $67 million during the fall, the largest venture investment in any Washington company since 2001. Calypso Medical Technologies in Seattle got $44 million, the state’s second-largest venture bet. Alder BioPharmaceuticals of Bothell, Pathway Medical Technologies of Redmond, and Seattle companies Teranode and Tessera also collected funding.

Accelerator, a venture-funded biotech incubator on Eastlake Avenue in Seattle, hatched two startups: Homestead Clinical and Allozyne.

But nationally, venture capitalists this year put a greater share of their investment in biotech behind later-stage companies with products closer to the finish line.

“A lot of [venture investment] is going after less-risky things,” said Bob Nelsen, managing director of Arch Venture Partners, which bucked that trend by funding startups including Ikaria and the Accelerator companies.

Total venture-capital investment in biotechnology was down 25 percent nationally and 18 percent in Washington through the first three-quarters of 2005, compared with 2004, according to statistics from VentureOne.

But if local biotechs with good technology aren’t finding venture support, Nelsen said, it’s not because VCs don’t have the money.

“The biggest weakness of the region in biotech is a lack of experienced startup management talent,” he said. “It’s not funding.”

Biotech backers have their eyes on another source of capital: the Life Sciences Discovery Fund, created by the Legislature at the behest of Gov. Christine Gregoire to foster growth in the industry. The $350 million in state tobacco-settlement dollars, which won’t arrive until 2008, is slated to fund life-sciences research and can’t go directly to businesses. An effort is under way now to find additional funding sources and ways to begin distributing research grants sooner.

The industry hopes increased research funding at Washington universities will lead to more biotech company starts. Toward that end, lawmakers revised ethics rules to smooth the transfer of technology to the private sector. It’s up to each university to draft its own tech-transfer policy.

The University of Washington strengthened its ties to Seattle’s growing biotech neighborhood when it announced plans to build two additional buildings in South Lake Union. Another developer group said it’s building 93,000 square feet of biotech lab space on spec.

Researchers at Seattle Biomedical Research Institute (SBRI), which moved into a new South Lake Union building in 2004 and now has 210 employees, received two Grand Challenges in Global Health grants worth $32.5 million from the Bill & Melinda Gates Foundation. SBRI, which focuses on malaria, tuberculosis and HIV, matched Harvard as the only other institution to land two. Another grant went to UW researchers collaborating with industry on a durable, portable diagnostics device.

Stock prices lag progress

The region’s public biotech companies had some successes in 2005, though you wouldn’t always know it by watching their stocks.

Icos’ joint venture with Eli Lilly reached profitability in the third quarter on sales of erectile-dysfunction drug Cialis.

ZymoGenetics launched its first late-stage clinical trial, testing whether rhThrombin is a safer way to stop surgical bleeding, with a goal of filing for regulatory approval by the end of 2006.

Dendreon cobbled together data that showed 33 percent of men treated with Provenge, its prostate-cancer therapy, were alive after three years, compared with 15 percent of men on placebo. It also plans to file for approval next year.

Sonus Pharmaceuticals inked a partnership with German pharmaceutical giant Schering AG worth up to $168 million. It will support development of Tocosol Paclitaxel, which entered a late-stage trial in the fall.

Amgen, the world’s largest biotech company, based in Thousand Oaks, Calif., added 86 jobs in Washington this year and still has more than 50 local openings.

Other companies stumbled:

Corixa let go its non-Hodgkin’s lymphoma drug, Bexxar, late last year after it missed sales targets. That led to layoffs and finally a $300 million acquisition by partner GSK, spelling the end of what had been a stalwart Seattle biotech.

After a clinical trial showed Xyotax provided no survival benefit beyond existing therapies for patients with lung cancer, Cell Therapeutics launched another trial in women, who have responded better to the drug in previous studies.

Targeted Genetics abandoned 15 years of research on a gene-therapy treatment for cystic fibrosis.

Xcyte, the only local biotech to go public since 2002, halted development of its cancer vaccine and, earlier this month, announced a reverse acquisition deal that will see it absorbed into Scottish biotech Cyclacel.

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com