Russ Smestad

Russ Smestad is president of Stratatech Corp.

JUDY NEWMAN — State Journal

Russ Smestad isn't a scientist, but he has been a key player in the growth of several of the Madison area's scientific companies, and he has watched the biotechnology industry here grow up.

Smestad is president of Stratatech Corp., a Madison company that recently announced promising results in trials of StrataGraft, the human skin substitute it has developed to treat burn patients.

In his free time, Smestad maintains Biotech Profiles, the website he set up to track the area's biotech companies. He also is on the boards of directors for Mirus Bio and FluGen.

Smestad knows his subject matter; he got his start in the field with a job at Cetus Madison, one of the early biotechs here, and then moved on to executive roles at PowderJect Vaccines and Mirus Bio before joining Stratatech in 2010.

A native of Neenah, Smestad, 59, has a bachelor's degree in business from UW-Madison.

Q: How did you get involved in the biotech industry?

A: Cetus Corp. was one of the premier, initial biotechnology companies, established in Berkeley, Calif., in 1971. It was also one of the first to go public, raising more than $100 million in 1981, and it wanted to form subsidiaries targeted at different business areas.

UW-Madison bacteriology professor Winston Brill was on Cetus' scientific advisory board and he was asked to lead a subsidiary in Madison. It was called Cetus Madison Corp. and it was based on genetic engineering of plants. Later, the company was purchased by W.R. Grace & Co., a global chemicals firm. The name was changed to Agracetus and the company developed a way to deliver genes into skin, a needle-free way to administer vaccines. That was spun off to merge with a British company and became PowderJect Vaccines.

When I joined Cetus Madison in 1982 as controller, the biotech industry was really being formed. It was not like one could hire people already with a track record in this space. I, essentially, grew up with the biotech industry, simply by luck. My career path would be difficult to replicate today.

Q: How many biotechs are operating in the Madison area now?

A: There are 159 active in the greater Madison area.

Q: How has the market changed in the past few years?

A: There have been a lot of acquisitions of what I call mid-tier companies. The large companies are prospering; the small companies are stable; but our mid-tier is getting smaller.

When a company is purchased, either the acquirer has access to resources that can help it grow faster or the acquisition is absorbed into the new parent company and can be lost. That's what happened to PowderJect. When its parent was purchased in 2004 by Chiron, the world's fifth-largest vaccine company, the Madison labs closed, ending 88 jobs. The rest of Agracetus, though, had been bought by Monsanto and still works on plant genetics in Middleton.

Q: Stratatech recently released results from its first human clinical trials that showed seven burn patients who received a single treatment of StrataGraft skin tissue had their wounds fully closed within three months. How significant is this?

A: It's very significant. The results we're seeing are truly remarkable. They exceed our expectations. We were hoping to see some partial success but the fact that this is working consistently and in every patient is just excellent.

We're developing a universal skin substitute, made of human cells, that mimics a patient's own skin. Right now, surgeons have to transplant skin from a healthy part of a burn victim's body. Think of that — one is creating a wound to heal a wound. Many burn victims will tell you the donor site is more painful than the trauma site, and it's disfiguring. It never heals up quite the same.

In our trials, we use two test sites, one with StrataGraft and one with a patient's own transplanted skin and compare results. Our product is healing a wound comparably to or better than an autograft. In DNA analysis, after three months, in our tests so far, we cannot detect any treatment cells. That means the StrataGraft tissue is gradually replaced by the patient's own cells. That's a very good, long-term safety consideration.

StrataGraft could become the standard of care where instead of doing a skin transplant, a surgeon could put an off-the-shelf product on the wound and heal it directly.

Q: What is the next step in the testing process?

A: The first study now has 10 patients with burns of about 5 inches by 6 inches. Our second group will involve a larger burn area. We have six clinical sites, including UW-Madison, and hope to enroll 20 patients by the end of summer.

Q: Stratatech also has several other products in the works. What is their status?

A: We are developing genetically enhanced skin tissues with anti-infection properties. ExpressGraft is anti-microbial and is on track to start clinical trials in early 2013. Another version would promote the growth of new blood vessels. The goal of those products is to heal wounds such as diabetic ulcers.

Q: There are other types of skin substitutes on the market. How are Stratatech's different?

A: The products have different cellular composition and they are being sold only for non-healing ulcers. There is no product like ours. If we are successful, we would be first. But we are thankful to them for being pioneers in the industry, for solving many problems in making skin substitutes commercially viable, such as physician practices, pricing, manufacturing and government reimbursement.

Q: It has taken a long time for Stratatech to reach this point. The company was formed in 2000 based on a discovery in the UW-Madison lab of Lynn Allen-Hoffmann, now Stratatech's chief executive and chief scientific officer. That was a dozen years ago. And funds for biotech companies have been tight.

A: It is tough for any early-stage biotech company. When I joined Stratatech, funding was a challenge as it has been for everybody. Fortunately, angel investors have supported the company and it has received a terrific amount of grants. In the last two years, Stratatech has received $15.7 million in multi-year grants. We are drawing against those and reaching out to potential corporate partners to continue our efforts.

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