A week after anthrax-laced envelopes arrived at the Washington, D.C., offices of two U.S. senators in October 2001, bioscience startup U.S. Genomics Inc. received a call from the Pentagon. Seems the federal government was interested to know whether the company's single molecule analyzer technology could be the basis for a machine to test air samples taken from various spots around the country. U.S. Genomics has since received a series of federal grants to explore the possibility.

Before that surprise call from the Pentagon, the company's technology, which enables researchers to identify many different individual molecules based on their genetic material, was used almost exclusively by life-sciences researchers in universities and pharmaceutical and biotech companies. Suddenly, the Woburn, Mass.-based company had an entirely new market opportunity.

U.S. Genomics has competition in the defense biosensors market from companies such as Innovative Biosensors Inc., Biacore International AB and Oxford Biosensors Ltd., but it is one of the few bioscience companies attempting to cross over from life sciences to defense. "They're a bit of an outlier in trying to do this," says Benjamin Doeckel, a principal with intellectual property consulting firm CRA International, which is advising U.S. Genomics.

While the revenue opportunities in defense are huge, working with the defense industry presents an entirely different set of challenges than working with universities and pharmaceutical companies. For one, there are no established homeland security companies with the resources necessary to nurture young bioscience companies with promising defense technologies, says Tim Jones, managing principal with TBJ Investments LLC. Creating technology often takes more time and money than government grant opportunities allow, he says, meaning bioscience companies must subsidize any homeland security efforts with other lines of business.

"I believe ultimately this space will evolve along with security concerns in the U.S. and around the world," says Jones, who has worked in the venture industry and now invests in several tech transfer opportunities. "The market demand is there, but right now the apparatus for transferring technology still fits in the defense industries rather than in a separate and distinct area" -- such as homeland security.

In the meantime, the learning curve has been steep for U.S. Genomics, which has had to adapt its academic and pharma licensing strategy to fit the demands of defense. As a small company, U.S. Genomics lacks the resources to take on the government market, which can include local and federal governments in the U.S. and elsewhere, without help from one of the large defense-oriented companies, says Jenny Rooke, vice president of corporate development. As a result, Rooke has a list of 13 companies -- including Northrop Grumman Corp., Lockheed Martin Corp. and General Dynamics Corp. -- that might be interested in licensing the technology and focusing on the government market.

"In pharma it's very common for a small early-stage biotech company to partner with a large pharmaceutical when ... there is still plenty of risk left in the development process," Rooke says. "That's definitely not the case in defense, where large integrators tend to pluck things off the shelf or just repurpose them for another application. There's not a lot of tech risk there."

Defense contractors use a standard called the technology readiness level to gauge how far along a technology is, Rooke says. Right now, U.S. Genomics' tech is about a three or a four and defense contractors typically look for tech that's at a six or a seven. Rooke is also learning that when it comes to doing a deal with a defense contractor, the up-front licensing fees that are normal in life-sciences deals are absent.

"There's a sense that they're getting involved early when there's still a lot of risk, and we have to make sure the deal structure takes that [risk] into account," Rooke says.

While U.S. Genomics has yet to land a partner, Rooke is confident that the company has a future in defense. If that happens, it's a good bet other bioscience companies will follow its lead. - Stacey Higginbotham

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