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Wednesday, May 19, 2004 - Page updated at 12:00 A.M.
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South Lake Union incubator kicks off first two ventures

By Luke Timmerman
Seattle Times business reporter

TOM REESE / THE SEATTLE TIMES
From left Craig Smith, Ray Goodwin (of VLST), Carl Weissman (of Accelerator), Greg Mahairas (of VieVax) and Steven Wiley (VLST). Accelerator is backing the two biotech startups.
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The Accelerator, an incubator at South Lake Union directed by biotech legend Leroy Hood, some prominent venture capitalists and a real-estate developer, has placed its first bets on two startups after a year of sorting through more than 120 business plans.

One of the new companies is VLST, a drug development startup that reunites the duo who did early creative work on Immunex's blockbuster drug Enbrel — Craig Smith and Ray Goodwin — with a longtime partner there on cancer drug discovery, Steven Wiley.

The other startup is VieVax, a vaccine company spearheaded by Greg Mahairas, an immunologist who made his name running a 200-person rice genome sequencing project for Hood at the University of Washington.

Both companies are secretive about their plans — VLST won't even say what its acronym stands for — largely because their intellectual property isn't entirely locked down yet, they don't have solid proof their ideas work, and they don't want to let competitors know precisely what they're up to.

Accelerator's combined investment in the two companies is $5.6 million, which should give each up to two years to show in lab tests and animal studies that its ideas have practical use.

Accelerator

What it is: A biotech startup incubator

Where: South Lake Union, 1616 Eastlake Ave.

Founded: May 2003

Who's involved: Three of the largest health-care venture capital firms in the world — MPM Capital, Arch Venture Partners, Versant Ventures — and a biotech real-estate developer, Alexandria Real Estate Equities. The Institute for Systems Biology, the nonprofit research center in Seattle led by biotech pioneer Leroy Hood, offers companies access to its labs and its faculty in exchange for ownership stakes in the companies.

Plan: To bankroll six biotech startups over its first three years. If the startups show tangible results in animal tests within two years, they would be on track for more substantial financing from the investor group to continue development.

The money: $15 million was carved out for Accelerator a year ago. $5.6 million has been invested in first two companies.

VLST

Who: Craig Smith, Steven Wiley and Ray Goodwin, scientific co-founders.

What it does: Smith says the plan is to improve identification and validation of specific targets on cells, which can be used to make drug development more precise, cheaper and faster.

VieVax

Who: Greg Mahairas, chief technology officer

What it does: Developing technology for genetic-based vaccines that could be used in multiple infectious diseases.

Source: Accelerator

Hood said he and other leaders of the Accelerator made those decisions after vetting more than 120 business plans.

The Accelerator plans to invest the rest of its initial $10 million pool in four more startups over the next two years, and if those ventures have some success — defined as one or two strong emerging companies out of six — the incubator could keep it going.

Few scientists have ever created something as successful as Enbrel more than once in a lifetime, but Hood, a co-founder of Amgen, Applied Biosystems and Rosetta Inpharmatics, said he thinks the scientists at Accelerator's first two ventures have the track records to do it.

"What really matters in this business is what you've done, more than what you say. There are a lot of great talkers, but not as many great doers," Hood said.

All the parties say they have plenty to gain.

As Accelerator creates new companies, Hood's Institute for Systems Biology will offer up its existing lab equipment and faculty brains in exchange for ownership stakes in the companies, which could someday fatten the endowment at his nonprofit research institute.

The venture investors, MPM Capital, Arch Venture Partners and Versant Ventures, get an inside track at investing in companies that carry Hood's stamp of approval. Arch managing director Robert Nelsen said it also offers the chance to buy into companies with potential "at the lowest possible price."

Alexandria Real Estate Equities, the developer of lab space for the startups, also gets an ownership stake and an inside track with companies that could become large tenants in Seattle, one of its targeted growth markets.

The scientific entrepreneurs get money for their ideas, but without the powerful title of chief executive. They can let a skeleton business crew at Accelerator handle administration, while they focus on the science and hitting the investors' goals. If the ideas pan out, the investor group has enough money to carry them all the way to an initial public offering.

Smith said his company isn't licensing technology from his former employer, Amgen. He left the giant biotech to push the frontiers of science, which couldn't be done in a large drug company, he said.

The plan he has drawn up with Wiley involves making the identification and validation of cell structures more precise, which could make aiming new molecules at them a faster and cheaper job. The goal is to develop two new molecules in two years, to have one in human testing within three or four years, and to concentrate on cancer and autoimmune diseases, he said.

"This could be as big as radiation or chemotherapy," Smith said.

Mahairas said his company aims to produce a genetic-based technology that could be applied to quickly develop safe vaccines for dozens of infectious diseases, like smallpox or flu, although he wouldn't say which programs he's focusing on.

Christopher Henney, a co-founder of Immunex, said time will tell if the companies are onto something, but he said the investors, Hood and the former Immunex scientists are all "first-rate people."

"The idea is to put a little flame under the research fire, translate ideas into practice, and if they come off, then they'll have something to talk about," Henney said.

Luke Timmerman: 206-515-5644 or ltimmerman@seattletimes.com

Copyright © 2004 The Seattle Times Company

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