CHICAGO - This city is pleased to host BIO. Signs hanging from lampposts lining the downtown streets tell passers-by, "We're glad you're here!" alongside the Biotechnology Industry Organization logo.

Of course they are - it's a nice injection of revenue. They're pleased other conventions are held here, too, but given that there are lots of places for industries to gather, a city has to offer an attractive package if it wants to play host.

Chicago has a nice one: The McCormick Place convention center is more than large enough to hold BIO's 19,000 attendees, and a few years ago, the city came up with a plan to help conventioneers get to and fro - it constructed a series of tunnels and back roads exclusively for convention buses. The route avoids the honk-and-grind of rush hour traffic and snakes by Soldier Field, runs parallel to railroad tracks and alongside loading docks to its final destination of McCormick Place.

Similarly, there are lots of places to start a biotech hub or build a manufacturing plant. It's an aggressive international game, which is why Hungary is doing all it can to sweeten its offer.

Hungary's Five-Year Plan

"You have to look at what a country can compete in," said Erno Duda, explaining why Hungary decided to focus on biotech at all, as opposed to any other industry. Hungarians have a solid history of research, he said, and are more entrepreneurial than parts of Western Europe. It already was the biotech leader among the 10 new additions to the European Union, making biotech "the easy choice," Duda said.

He's president of the Hungarian Biotechnology Association, as well as president and CEO of Solvo Biotechnology Inc., of Budapest. He detailed the country's five-year plan for biotech growth, initiated a year ago. By 2010, it would like to be viewed as an "up-and-coming" biotech presence, he said, and have between 100 and 200 biotech companies - it has 60 now.

The government is playing a large part. Hungary has a 16 percent corporate tax, which compares favorably to the nearly 40 percent in Western Europe, and if a company meets certain criteria of innovation, it can deduct up to 400 percent of its R&D costs.

Kamilla Szandrocha, head of investor relations at the Ministry of Economy and Transport for the Republic of Hungary, said that the government is doing even more, and doing it in a language every business understands - money.

If a company wants to build a manufacturing plant in Hungary, for example, the Hungarian government will subsidize 10 percent of building costs. It also will pay 25 percent of costs associated with training Hungarians for specialized jobs, or 50 percent if the job skills obtained are applicable elsewhere. If the person hired is somewhat disadvantaged in the work force, such as a single mother or someone returning to employment after some time, the government will fund an extra 10 percent.

Hungary's government also is building incubator houses and paying for biotech management training programs, flying in seasoned biotech execs from Europe and the U.S. to teach Hungarians how to start up and run a biotech firm.

"I think that's crucial," Duda said. "We also [received] a grant to re-patriate individuals" employed in the biotech industry abroad.

It's working. In the first year of the plan, Hungary already has raised its profile.

"You see deals being made," Duda said, and pointed to the acquisition of ComGenex Inc., of Budapest, by Albany Molecular Research Inc., of Albany, N.Y., which closed in early March. He warned of another purchase of a Hungarian firm in the works that soon will be made public.

Solvo Cutting Own Path

Privately held Solvo focuses on in vitro drug discovery assays, diagnostics and therapeutics related to membrane transport proteins and multidrug resistance in cancer and other diseases. It has a fee-for-service screening business that brings in revenue while it chases drugs on its own. It's a common business model in Hungary, where the government will supply pre-seed or seed rounds and has a program similar to the SBIR grants in the U.S., but in which the VC infrastructure is lacking.

"There are more tool companies [in Hungary] and service providers" with "mixed business models" to help bring in revenue, Duda said. Solvo pads its service revenue through grants - it has 67 employees, and five of them work exclusively on applying for grants, having brought in 30 research grants to date. Some might not call that a true revenue stream, but to Duda, "money is money," and in biotech it's hard to come by.

It came in handy with Budapest-based FastVentures, a minority shareholder in Solvo that invested in 2000 and has been pushing for an acquisition to obtain an exit.

"We don't want to sell the company," Duda said, so they negotiated a buyout price for FastVentures, and the deal is almost done.

The firm will look to do another private round soon, hoping for $2 million to $3 million. "We don't need a lot more than that," Duda said. Beyond that, it would consider seeking an initial public offering in two or three years, "on Nasdaq, if possible."

Sitting at a table at the edge of the Hungary pavilion, Duda thought back to his first time to BIO, years ago. He walked around then, taking in the size of the convention by himself.

"It was a bad feeling," he said. "Everyone [in biotechnology] was here, but I knew I was the only Hungarian.

"Now look," he said, motioning behind him.