Ten years ago, Paragon Bioservices moved into the University of Maryland BioPark with just 30 employees and a change of direction to focus on manufacturing gene therapies.
Monday the firm announced that it had agreed to be acquired by Catalent Biologics in a more than $1.2 billion deal expected to be completed this quarter. It has about 380 employees and more than 70 customers, numbers expected to grow under Catalent.
While the acquisition has been good news for Paragon, it has also been a shot in the arm for Maryland’s startup community and for the state’s growing biotech industry in particular.
“I think it’s a testament to the kind of value we are creating and helping to generate here. It’s always nice when there’s that validation from the marketplace,” Thomas Sadowski, vice chancellor for economic development at the University System of Maryland, said. “Transactions like this help demonstrate that that confidence spreads well beyond Maryland and to the global marketplace.”
Exits like Paragon’s can bring validation to what wide-ranging bodies like the state or the university system are doing to spur startup activity in Maryland.
It helps bring more capital, necessary for any startup, into the region and it keeps capital already in Maryland here. Paragon had that mix of both, with investments from the local Camden Partners and from NewSpring Capital, a Philadelphia-area fund.
“It’s good to have local sources that are engaged, and it’s also good to look at outside funding,” said James L. Hughes, president of the University of Maryland Baltimore Health Sciences Research Park Corporation, the BioPark’s governing body. Hughes is also vice president and chief enterprise & economic development officer at the University of Maryland Baltimore.
Paragon’s success gives other local entrepreneurs more examples of people who managed to build businesses to successful exits, whether that is an acquisition or a public offering.
“I started with the program about 5 years ago,” said Arti Santhanam, director of the Maryland Innovation Initiative, a fund in TEDCO, the Maryland Technology Development Corporation. “I remember that there weren’t many positive stories to lean back on. You felt a little isolated as an entrepreneur. Now you will find a life sciences entrepreneur in a coffee shop.”
Marco Chacon and Pete Buzy, Paragon’s chairman and CEO, respectively, already have a reputation for spending their time helping some younger entrepreneurs.
“Paragon has been great at mentoring other companies, and Harpoon certainly has been,” Hughes said. “You start building this network of CEOs who can help advise and be role models.”
Harpoon Medical, a medical device company, was acquired by Edwards LifeSciences late 2017.
Having a number of experienced startup leaders and successful exits helps bring more capital to the area, Santhanam said.
“They are looking for a good density of technologies and startups and startup entrepreneurs for them to make that commitment to move into the region and put some deals there and follow-on dollars,” she said. “That density comes from big exits.”
With the Paragon exit, Maryland economic development officials will have something else to talk about at J.P. Morgan’s annual health care conference.
The Paragon acquisition also carries specific validation for Maryland’s biotech industry. Paragon, and other growing manufacturers like RoosterBio in Frederick, are a significant piece of infrastructure for the big drugmakers. That can be especially true for Paragon, which has a head start on the gene therapy market that is expected to reach $25 billion.
“I think traditionally in the state we focus on the companies that are developing their own priority drug,” Hughes said. “(Paragon) shows the success of the business model of somebody like Paragon or Emergent (BioSolutions).”
It also helps some of the local startups that are developing new drug therapies. They have easier access to these manufacturers in their own backyard.
Because of Paragon’s position in the field, a lot of the big players in the drug industry had to come to Baltimore and the BioPark and were introduced to the rest of the innovation ecosystem.
“These are true biotechs that are creating tools for the pharma industry,” Santhanam said. “Having that infrastructure is crucial for our startups that are in the therapeutic state.”