Bio-science incubator falters

Front door of University Enterprise Laboratories
This former Target warehouse was turned into a biomedical incubator, but it hasn't panned out for the University of Minnesota, city of St. Paul or other partners. It's in financial trouble now.
MPR Photo/Tim Nelson

Four years ago, University Enterprise Laboratories had great promise. Once a giant Target Corporation warehouse, it was going to be the intersection where world-class biomedical research from the nearby University of Minnesota met venture capitalists ready to help bring the ideas to market.

Backers were hoping to launch the next Medtronic or 3M.

But for a variety of reasons, the research and the money haven't come together.

Now, the operation has laid off its program staff and shelved its mission, according to a memo obtained by Minnesota Public Radio.

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University Enterprise Labs was intended to have on-site experts to bring the money and ideas together to do business. Even to eat barbeque on the lawn.

"On the functional side, the thing is just a thriving success," said Bob Elde, dean of the University of Minnesota's College of Biological Sciences. "We're not worried. We're just having to do some belt tightening."

Elde and other directors are hoping to renegotiate their financing with Wells Fargo and have asked a real-estate management company to take care of the place.

Sign for University Enterprise Laboratories
This sign marks the entrance to the University Enterprise Laboratories troubled bio-science incubator.
MPR Photo/Tim Nelson

It didn't start out that way.

Six years ago, a University of Minnesota researcher, Catherine Verfaillie, was heading the first stem cell institute in the country.

Her research yielded what looked like a breakthrough. It said adult stem cells might someday substitute for embryonic stem cells to generate new tissue. Genetics and materials science looked promising, too.

Off campus, business and community leaders hoped that biomedical research like Varfaillie's could help put Minnesota on the biomedical map and boost the economy.

Led by Elde and St. Paul mayor Randy Kelly, they refitted the empty warehouse on Highway 280 with lab and office space. It was supposed to be a home for private spin-offs of other university breakthroughs.

The project cost $24 million back in 2004. Corporate money from 3M, Allina and Xcel Energy helped pay for it.

Founders formed a non-profit with the U to run it and hired a start-up expert to help guide the fledgling tenants and hook them up with investors.

But shortly after UEL opened its doors, California voters approved $3 billion in state funding for stem cell research there. Massachusetts and Wisconsin also made big bets on the biomedical sector.

Even in Minnesota, attention was moving elsewhere. The University's Academic Health Center convinced the state to invest about a quarter of a billion dollars into biomedical facilities on campus. Four new buildings are slated for the East Bank in Minneapolis.

Back in St. Paul, it's proven harder than anyone thought to fill a warehouse of 21 wet labs with biomedical startups. There are some. But the hardware and lab space at UEL were expensive for shoestring scientific companies.

The tenant list instead came to include companies like Minnesota Wire and Cable and the Minnesota Lions Eye Bank. Consultants, a law firm and University administrative offices also fill some of the space. It's hard to figure out the mission by reading the building's tenant directory.

Founders, like Elde, hope they can still make UEL more than just regular real estate.

"UEL is a startup," he said. "We're proud host startup companies, but we're a startup as a not-for-profit. This is not surprising or unprecedented, and I'm really personally and professionally really sad that we had to come to this moment."

It's going to take more money to restart the startup.

But its hard to say where that money might come from. The state already put a quarter million dollars into UEL in 2006 and the city of St. Paul is already guaranteeing nearly half the project's $14 million in financing.