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Mark Bugher: Research Park Expansion Helping Create 'Critical Mass' of Midwest Biotech
7/22/2003

Nearly two decades ago, the University Research Park started in Madison as a way to help faculty start-up companies grow.

This unique economic development enterprise has bloomed in recent years -- so much so that the park is preparing to expand on Madison's far west side.

While serving as an incubation location for new companies, the Research Park's director has a broader goal -- educating the folks on the east and west coasts that there's a third, thriving coast populated by innovative biotech companies

``I think the goal is to create a Midwest critical mass of biotechnology companies. That's what a lot of us, through the Tech Council and Biotechnology Association, are working towards,'' says UW Research Park Director Mark Bugher, a former official in the Thompson administration who heads the Wisconsin Technology Council.

``I do think there is an opportunity to focus on the Midwest, and many of us are working on a Midwestern strategy to draw attention to what's going on in the Midwest so that we get people off of this kick that the whole biotech world is only on the coasts. We have a lot to offer here in the Midwest.''

WisBusiness President Jeff Mayers interviewed Bugher on July 9.

Mayers: What is the status of the University of Wisconsin Research Park right now?

Bugher: The current University Research Park is getting very close to full absorption. The park currently houses 107 companies. Those companies employ 4,000 people, and our annual payroll at the park is currently $240 million per year, for an average annual salary of around 60,000 dollars per employee - which is truly, sort of, a model economic development structure (for) many people in state government and public policy .

Mayers: All within the city of Madison?

Bugher: All within the city of Madison, with no city subsidy, city help, etcetera, etcetera, etcetera. We have about 23 acres left in the total site that will support four buildings, and then we'll be completely filled. We have very little space left in our incubator. We have probably one office space.

Mayers: Is that where your headquarters are?

Bugher: Yeah. The incubation facility is where we put the start-up companies. We have 35 companies in the incubation facility right now. All of our wet labs are filled. It's a very busy place, and we're continuing to try and be helpful to new start-up companies that are coming out of the University. We have some modest vacant space over on the east side, or the older part of the park, that we're working hard -- and quickly -- to fill.

Mayers: It seems to me that the growth has been dramatic in recent years versus other years. Is that what happened?

Bugher: Well, it picked up exponentially in the last couple of years. I think we had our best year ever in the first half of '02, put about 200,000 square feet online in the first six months of the year. So, '01 and '02, were pretty rapidly growing timelines out there.

Mayers: How do you explain that?

Bugher: I think it was a combination of aggressive marketing (and market conditions). We put together several deals at once. We worked hard to build a new wing on our incubation facility, which attracted more in the way of start-up companies out there. And ... I think that the real-estate development business, in this particular area, is just like any other: there's peaks and valleys that occur, and you have a flurry of development and then it calms down for awhile, and then you pick it up again, based on demand. ... We're in the precursor (stage), I think again, for another rapid acceleration of development that will occur in the next 24 months.

Mayers: Really? Why? The economy doesn't look too good.

Bugher: Our leasing business is outstanding; we're busting at the seams. So, we're going to have to look at, at some point, expanding our incubation opportunities in the park.We have several deals that we're working on, which will break loose soon. What we do is we work on these projects for months and months, and then all of a sudden they come together and start working; and, the developer, the tenant, gives the go-ahead, and away it goes with the project. And so, we anticipate that some of those will break loose here very quickly.

And, the economy is, frankly, starting to pick up. And so, a lot of these companies that were holding back the last 12 months or so, are now starting to feel a little bit better about what they see in the economy and are making decision about expansion opportunities.

Mayers: In a way, you have your own economic indicator out there. It's a different slice of the business world, but it's an indicator nonetheless, right?

Bugher: It is an indicator, and I think that when you look at how these people feel about things like the pharmaceutical industry, the biotechnology industry . how spending is going in those particular areas of the economy and they start making decisions about expansions, that generally is a very positive sign as to which way the economy is going. And, I think it reflects, sort of, public attitude about ... their view of the economy. I think consumer confidence is a very important aspect in the economy: it affects the stock market, it affects spending decisions by people, and certainly is one of the things that we see fairly directly.

Mayers: How long has the UW-Research Park been in existence?

Bugher: The park is about 18 years old. It stated as the original ag research farms out on the west side of Madison. And. I think the first series of buildings began out there in 86, the mid-80s, and has been growing somewhat slowly ever since. But in the last few years of course, it's grown very rapidly.

Mayers: What makes it different from any other business park or government sanctioned business development?

Bugher: I think we try to be much more selective with regard to our niche. And, our niche is faculty start-up companies -- ... technology that's spun out of the University with patents that are secured by the University. We aren't necessarily interested in competing directly with the major developers here in this community. ...

Mayers: But you do in some way?

Bugher: Well, we do in some way . Because were it not for us, they may go somewhere like that. But I think that if ...it were not for us you could say that some of these companies wouldn't exist, because of the uniqueness of the product that we offer. Most developers would not take the risk and build the speculative wet lab space that we have built out in the research park and made it available for start-up companies. They just wouldn't do it. It's too high risk.

Mayers: Can you give me an example of a company that might not exist?

Bugher: Strata-Tech. In fact, she's been quoted as saying that it'd be unlikely that she'd be in business if she had not had the opportunity to be in the research park. And so, that's one that may not have existed. And, I think that these people would have a very hard time finding this unique style of space -- lab space with tile floors, with fume hoods, and with certain clinical requirements.

Mayers: Of course, you are building them with somebody's specs, aren't you? I mean, you folks aren't building the building and saying come in here?

Bugher: No. We built the speculative wet lab space, which nobody else does.

Mayers: OK, how much of that do you do?

Bugher: We've done a lot of that. I mean, the incubator itself is 113,000 square feet. Now, not all of that is wet lab space; half of it is probably wet lab space. And so, what we've done in those spaces is we've actually built the wet labs. We put the plumbing in, we put the fume hoods in, we've done all the things that you take a roll of the dice on. ... And then, they've come.

Mayers: No other developer is going to do that?

Bugher: Nobody's going to do that. It's too high risk; it's too expensive. We also have very short leases. We have 12-month leases for our tenants. Nobody's going to spend the kind of money that it takes to build a wet lab and then command a 12-month lease. They're going to want five-year leases or 10-year leases. Our leases are considerate of the needs and wishes of the faculty start-up companies. We know that they don't want long-term leases.

Mayers: Do you have a lot of turnover?

Bugher: We try and keep the turnover down. We try and keep them within the confines of the park, per se. . So, you graduate outside of the walls of the incubation facility in the context of the park. That's really our goal is when we have a company that's growing out of the incubator we want to move them to a building that's self contained in the park. That's really our ultimate goal. And so, you don't see a lot of moving around because we try to keep them within the confines of the park. Now, we do lose some to other parks, and that's good, too. I mean that's not a problem for us, because part of our goal here is to be helpful and get them to a point where they can be self sustaining. ...

Mayers: Because you're non-profit?

Bugher: We're non-profit. We're there to serve the needs and the wishes of the University -- and the commercialization process that comes out of the University technology. And, that's what separates us from a traditional real-estate developer.

Mayers: Is there anything else like this in Wisconsin?

Bugher: I don't think there's anything else like this in the state. There's very few that are really pure research parks in the country. ...

Mayers: What about in the Midwest?

Bugher: My guess is that there's very few -- that I can recall

Mayers: So your market area is really national in scope? Even international?

Bugher: I think we like to think of ourselves as really, first and foremost, of being a service to the faculty at UW-Madison. Now, if somebody wants to come into the park and they will create a relationship with UW-Madison with their start-up company, that would be of high interest to us. We have talked a lot to the French . The French government and other governments -- including Norway and Germany, Korea and others -- about international technology transfer. ...We would be able to identify a company -- from Korea, from France, from Norway, from Germany -- bring them into Madison, for instance, incubate them in the research park, let them link up with faculty members on campus to help them with their technology, and hopefully allow them to grow and flourish. And then, they'd move back to their home countries at some time. So that's a concept that we would like to pursue. Our market, though, is pretty much reserved for the faculty at UW-Madison at this point in time.

Mayers: Why wouldn't every campus in the system have a technology transfer program?

Bugher: I think that many campuses lack the ingredients to have an effective technology transfer program. They don't have a WARF, which is an incredible and extraordinary asset for this campus. WARF is one of the things that makes a research park click. And, a research park is there because of WARF. ...Many of WARF's patent holders are successful is because of the research park. So, there's a sort of symbiotic relationship there, between the two. Most campuses in this country don't have a WARF, I mean it's a very unique entity. It's unique in all the world.

Mayers: Couldn't Eau Claire run something through WARF? I can think of Eau Claire as being a place where a mini-research park would actually work.

Bugher: Stout has a little mini-research park -- a little technology park there that works out of technology that's been created through Phillips Plastics with some other companies that they've started there. And, that works in their small niche there, but most of these campuses in the UW System just don't have the research budget that UW-Madison has. ... UW-Madison ranks second in the nation in terms of research spending and in monies that we get from the federal government to promote research. So it's pretty hard for Stout, and Stevens Point, and Eau Claire, and some of those to keep up with that. But there are emerging issues in technologies that are coming out of these comprehensive campuses that we need to pay attention to. Particularly working with the faculty. WARF has started recently an enterprise called WISYS, and that's the comprehensive campus version of WARF. So their job is to go out and to extract technologies from the comprehensive campuses in hopes of creating a critical mass of potential small companies that could be started at some of those campuses. The other place is Marshfield Clinic; they're doing a significant amount of federally sponsored research.

Mayers: But Marshfield Clinic has no ties to you folks?

Bugher: No ties to us. Although there is a medical school tie, a significant medical school tie. Many of the medical school residents ... do their residencies at Marshfield Clinic. ...

Mayers: It doesn't hurt to have that going on with what you have going on. You don't view them as competition -- this is sort what makes Wisconsin a better place to relocate.

Bugher: ...Absolutely. I think the goal is to create a Midwest critical mass of biotechnology companies. That's what a lot of us, through the Tech Council and Biotechnology Association, are working towards. And so, this place is pretty unique, and this enterprise is pretty unique in all the world.

Mayers: You hinted at some new things -- I suppose you can't announce any of them?

Bugher: In terms of projects in the current park, we can't. But we're working on the new park, which is going to be on the far west side of Madison. It's two miles west of the current park, located at the corner of Junction Road, Mineral Point, and Valley View Road, behind Menard's, across the road form the Holy Name Seminary grounds. That will be a 260-acre park, which is (a) similar size to the current park.

Mayers: Are you 100 percent certain that it's going to be built?

Bugher: The City Council has to approve the plan for it, and the land has been acquired by the University Board of Regents, and we're holding the land. So, it would be difficult to imagine that it won't happen. It just takes a lot of time to go through the planning process, and so one has to be patient to with this kind of exercise, to say the least.

Mayers: If all things go according to plan, when would the first building be up?

Bugher: Probably early '05. We'd probably do infrastructure in '04, late '04. Gutter, sewer, and water, that kind of thing. We could conceivably be out there in '05 with a building started. That would provide us with the initial 40 sites and take us 20 years or so to develop that out in a slow methodical way. ...I think the market clearly, based on discussions with our partners based on campus like WARF, will clearly be there because I think what they're seeing is a substantial, significant increase in interest in the whole technology transfer area among faculty. And so, clearly I think the market will be there to sustain this kind of development.

Mayers: Someone once told me that the reason this is happening is because WARF decided to open it up a little bit so that the developer of the technology could get more money without having so many strings attached. Is that correct?

Bugher: Back in the late '90s, the WARF trustees made some decisions concerning taking equity and start-up companies, making money available to start up companies, being more aggressive with their promotion of their patents and that kind of thing, being more market orientated. I think that helped a lot. ...(It had) been known as a kind of a secretive organization up until that. But I think that recently in the past five to 10 years it's opened up .... It's generated much more in the way of interest by agreeing to invest, and provide funds to companies to help them with their patenting and licensing.

Mayers: If I were a professor, would I get to have more of a stake in my invention?

Bugher: There is a standard negotiation package that they go through in terms of what the professor gets out of it. The patents are owned by the state. The faculty member does not own the patents. So, if a faculty member discovers a cure for cancer using federal research dollars, those discoveries are owned by the taxpayers of the state of Wisconsin, and WARF is responsible for protecting that patent. What they do then is license it back to the faculty member, and then provide the faculty members with a slice of royalties that come out of products that are made from that technology. ...

Mayers: Is this (expanded park) all within the City of Madison?

Bugher: ... It was annexed into the City of Madison as part of an annex sanction negotiated settlement with the Town of Middleton last summer. We wanted the services that the City of Madison could provide; we never asked the City of Madison for any subsidies or any help in this effort. All we wanted from them was approvals of our unique lab use configurations, and they have been thus far helpful -- although, they want us to do some things in the new part that are currently not in the existing part.

Mayers: So is this the new administration (of Mayor Dave Cieslewicz) that wants this done?

Bugher: I think it's just an evolving pattern of change in land use, planning attitudes that we're seeing not only in Madison, but across the country.

Mayers: So what is the administration looking for?

Bugher: More density, less green space -- if you can believe it -- in Madison. When I tell people that the city of Madison wants less green space, people find that very hard to believe. ...They like the concept of new urbanism, which means, you bike to work, and walk to your shops.

Mayers: Are there going to be places to live at the new UW-Research Park?

Bugher: There will be places very close to it. That's part of the neighborhood planning process that we're going through right now. The plan will be presented to the planning committee -- the plan commission -- probably in early August and will reflect this notion of a job-creation place in the research park, and then a residential place next to it.

Mayers: What do think of that?

Bugher: I think there's some merit in trying to do some kind of mixed use. I think that one of the things that we're trying to impress upon the city is that our level of client, or our customer, is a start-up company and that we can't build high-density, 10-story research buildings in a new research park with underground parking. What works for us is smaller -- 35,000 to 50,000-square foot buildings with surface parking, and a relatively inexpensive on a per-square-foot basis, because the rent has to be relatively inexpensive on a square-foot basis to support these start-up companies. And, that's an issue we've had a hard time breaking through with some of the staff at the city, and some of the members of the plan commission historically. They would like to see mini configurations of downtown Madison out there, and I don't think that's possible. I also think there's an attitude of trying to get people out of cars. This is an admirable goal, but I don't think that the public in this city -- or country -- are ready for ditching their cars, and walking to work and biking to work and that kind of thing.

Mayers: How has Mayor Cieslewicz been?

Bugher: He's good. He's a friend, and I respect him a lot for his perspectives on land use. He thinks the current park is not dense enough. ... I think the people in Madison forget that the current park was developed the way that it was after a significant amount of work with the local neighborhoods.

Mayers: People then were used to the green spaces, so this was less of a shock to them.

Bugher: That's right. They wanted less density; they wanted green areas. The other thing that they wanted, and in some ways we were way ahead of our time on this, is they wanted water run off from surface parking to go into natural attenuation with green spaces, as opposed to running into storm sewer systems.

Mayers: You have a lot of wetland catchment areas out there .

Bugher: That's right, and that was way ahead of its time. ... People criticize us for having too much green space, but that green space is actually functional. ...

I think that the mayor is willing to be supportive. Any local politician who didn't support an enterprise that's delivering 4,000 jobs, many of those people living and working in the city of Madison with $240 million annual payroll, would be crazy, I would think. It's sort of like the discussion they had in the mayor's race around Epic Software leaving the city of Madison. That's the kind of jobs that you want to keep in the city. ...These are highly educated young people that are coming out of our educational institutions -- private colleges, public colleges, tech schools -- and these are the kinds of people that you want to keep in an economy. So, I think, most local politicians would be crazy not to keep that, and we're working closely with them to design this facility in a way that can be a unique cutting edge research park, and yet accommodate some of the interests of the urban planners in terms of its design.

Mayers: As the Chairman of the Tech Council, where do you think Wisconsin should go? Where can Wisconsin go in terms of its economic future?

Bugher: We ought to get together with our colleagues in the Midwest and have people acknowledge the Midwest as an emerging growing economy for high-tech, science-based businesses. Anywhere that you find a large major research institution like UW-Madison, you're going to have substantial economic presence that is going to occur out of that. We ought to take advantage of that, highlight that, emphasize that, and collaborate with our colleagues in Minnesota, Iowa, Illinois, Michigan, to impress upon folks on the coasts of the kind of unique technology that's going on here. I think that once they get here and they look around, they'll say: "Wow, there's some pretty neat stuff going on here." That's when you've got their interest. But if they don't get here, it's pretty hard to get them into that kind of mode.

Mayers: How big of a factor is transportation in holding the Midwest back?

Bugher: I think it's a major factor that hurts the Midwest. I think air traffic, air travel, is a major issue. We heard it a couple of days ago (from) people in the Chippewa Valley who have major computer companies up there who have a hard time meeting their customers and attracting their customers from the coasts and elsewhere in the country when they have to fly to Minneapolis or catch a plane to somewhere else ... or take a bus or that kind of thing. It gets to be very, very difficult. We had a story at the tech conference of a CEO of a company here in Madison who was expecting to receive ...some major corporate players from California, and they turned around in Chicago because their plane was cancelled to come to Madison. They weren't going to ride a bus. So we have a problem with air travel.

...We (recently) had a tech transfer session at Oslo Norway, and it was sponsored by the University Alumni Association. At that particular place, we had an opportunity to observe the Norwegian transportation system, which is extraordinary for a country that has (fewer) people than the state of Wisconsin. The city of Oslo has subways -- extraordinary, wonderful, beautiful, efficient subways; they have trolley cars -- electric, wonderful, efficient trolley cars; they have most beautiful diesel busses -- quiet smokeless, comfortable busses. .... We took a bullet train from Oslo to the western coast for a very small fee. It was comfortable. It didn't sway back-and-forth and clickity-clack. You're sitting leather chairs with picture windows, being served and the trains were full; it was inexpensive, they were going 80 mph.

That's the transportation system we will never have in this country unless we get off the hang-up with cars that we have. Over in Europe, in place like Norway, they have gasoline prices that are double what we have in this country, and they are the third largest exporter of oil in the world. And yet, they have gasoline prices that are double what ours are. So, there is a lot of things that we could be doing in this area -- in the Midwest and in this country -- to improve our economic development and activities. One of them is transportation and the other is energy

Mayers: It seems we've made progress on the energy front. I don't know, you tell me.

Bugher: I don't know. It's maybe one step forward, five steps back. ...

This new plant in Madison. We expended extraordinary resources to locate ... (what) was basically a no-brainer -- the co-generation facility, a 170-megawatt facility. ... I suppose you could say it was an appropriate process, but it cost the company, it cost the ratepayers, it cost the shareholders a lot in terms of time and energy and some of the things they had to do, including subsidizing diesel fuel that goes into our busses here in the city of Madison. ...We (also) have the problems with access and power in the state of Wisconsin. We haven't done much to solve that; we have a problem with capacity, if production. ...

We haven't licked the problem. There's still a fair of amount of 'not in my backyard' kind of attitude that goes on here. I think that they're having major struggles with that Arrowhead-Weston line. Maybe there's a better way to do it. We've got the Oak Creek controversy. I mean, we should be building nuclear plants here in this state; it takes you 10 to 15 years to build those. We should be working for ways to repeal the limitations on the construction of nuclear plants and get going on those things immediately, or we're going to be sort of in the dark ages up here. ...

Mayers: Back to the research park, it's trying to show the way here in terms of economic development.

Bugher: That's right. Here's the template that you can look towards, and other campuses and other communities can do this. But, I do think there is an opportunity to focus on the Midwest, and many of us are working on a Midwestern strategy to draw attention to what's going on in the Midwest so that we get people off of this kick that the whole biotech world is only on the coasts. We have a lot to offer here in the Midwest. We have a fantastic education system for families. We have low crime. Quality of life is great. Housing is inexpensive, comparatively.

And when you try to talk to venture capitalists ...about those kinds of things, sometimes you have to get them here in order to prove and demonstrate that you have these kinds of qualities. We're getting a new venture company that's coming to Madison as result of the SWIB initiative: Fraser's Life Sciences fund. That's a fantastic, very important step for this state and this community to get them here. Because they're into all kinds of potential over . on the West Coast. And, hopefully, we'll attract a lot of attention with their presence here. So, we're hoping that that will be the case.

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