It is, and always has been, the goal of LabToWallStreet to promote and enhance discussion regarding ways to make the New York life sciences scene stronger and more competitive. In our Q4 2003 issue we presented an analysis of life sciences clus­ters in New York State, which utilized “cluster theory” to present an implicit thesis that the state of New York can be considered its own biotechnology cluster, with regional centers of excel­lence in specific capacities. With respect to the development of bioscience enterprise on a state-wide and regional level, we made numer­ous recommendations, including:

1) The pursuit of geographic and application-specific cen­ters of excellence

2) Provision of incubator space and financial incen­tives for fledgling companies

3) Incentives for geographically-focused venture capital funds and investment

4) The creation of a biotech “czar” to drive industry development

As New York’s primary metro­politan area, the center of world commerce, and home to our publication, we also tend to pay particular attention to New York City. For example, the same issue outlined some of the major challenges facing the development of biotech­nology within the New York City area, including:

1) The competitive nature between universities and the disconnect to industry

2) The contrast between the fast-paced urban corporate mindset and the esoteric nature of biotechnology, including and especially the time and risk that challenge return on investment

3) Attraction and retention of managerial and scientific talent

4) The cost of laboratory and office space…when it can be located

5) The inability to impose “biotech culture” from above or from the outside

 

There is also an additional challenge, one that our mission statement seeks to specifically address: connectivity amongst the stakeholders and value-added constituencies within the biotech­nology industry. The vehicle that we have created to address this challenge is of course LabToWallStreet, and within its pages, we unfortunately cannot solve the above-mentioned chal­lenges facing NYC. However, we can provide a voice to reach decision makers, those who are “in the know”, and those who are dedicated to growing biotech in New York.

It has come to our attention that various organizations are undertaking specific initiatives to establish, develop, and retain biotechnology in New York City, through focused recommenda­tions to key leaders. Thus, it can be debated whether the advice that we provided a year ago was heeded, or whether we simply commented with pre-science on a topic of importance. Regardless, we thought it would be worthwhile to revisit the topic of introspection a year

later, through a presentation of city-specific economic develop­ment efforts for the life sciences industries occurring elsewhere around the country.

 

Established Clusters:A Process of Renewal to Keep Competitive Edge

San Francisco

The city of San Francisco points primarily to the forma­tion of Cetus, and the historic meeting between Bob Swanson and Herb Boyer in 1976 (which led to the formation of Genentech), to claim bragging rights as the birthplace of the biotechnology industry. In the years that have followed the establishment of these two and many other Bay Area firms intending to capitalize on new discoveries in the life sciences, city-dwelling biotech propo­nents have watched with dismay as surrounding areas, primarily South San Francisco and Palo Alto, have been able to lure both established and new companies through offering attractive real estate and financial situations without compromising the intangible cultural elements that have always made San Francisco attractive for technology-oriented companies. As a result, I am told that only one actual life sciences company presently resides with-in the San Francisco city limits.

 

At present, there are a number of efforts underway that intend to reverse this trend. The most relevant include the establish­ment of the Mission Bay Life Sciences Campus at the University of California, San Francisco and Mayor Gavin Newsome’s formation of a biotech recruitment task force populated by leaders in finance, industry, law, and gov­ernment. I had the good fortune to speak with Tony Stolis, Managing Director of Pacific Bridge Life Sciences (a firm involved in the development of the Mission Bay Campus) regarding these and other efforts. Ironically, Stolis is a regular lecturer at a Bay Area uni­versity (UC Berkeley Extension) on the subject of industry cluster formation, and thus is able to discuss San Francisco’s current efforts through the scope of “cluster theory”. Per his lecture notes, as a general principle, the four necessary elements for a successful life sciences cluster are as follows:

1) Access to competitive science (not only research that can be transferred into a commercially oriented entity, but also a coop­erative atmosphere and mutual understanding between aca­demia and industry)

2) Access to talent (both scientific and managerial expertise, anchored by a willingness to be in the specific geography of question)

3) Money (Including the obvious element of geographically focused investment capital, as well as the lack of cumbersome government-imposed barriers restricting the free flow of capital or impeding operating efficiencies)

4) Real estate (Facilities for com­panies to operate, grow and collab­orate, as well as a forward-looking development plan and the absence of restrictive zoning covenants)

Thus, the comprehensive goal of the Mission Bay development effort is to strike a productive balance between industry and academia, with proactive assis­tance from city government. When completed, the 303-acre mixed-use development will house 20 structures with 2.65 million square feet of program space (see map graphic), accom­modating up to 9,100 full time employees/students. In addition to furthering academic programs at UCSF, the development is intended to act as the basis for attracting biotech companies to expand or build headquarters nearby, by providing immediate access to a fully-contained resi­dential and academic communi­ty dedicated to cutting edge technology as well as novel part­nership models with academia.

The buildout of the Mission Bay Campus is expected to con­tinue over the next 15 to 20 years. Specific plans for the first phase include the following:

1) Genentech Hall: A five-story, 434,000 square foot building housing programs in Structural and Chemical Biology, Molecular and Development Biology, the Molecular Design Institute, and the Center for Advanced Technology. This facility is already complete.

2) Genetics, Development and Behavioral Sciences: A five-story research facility dedicated to the elucidation of the genetic basis for behavior and disease. The facility is complete and will house 400 scientists at full capacity.

3) California Institute for Quantitative Biomedical Research (QB3): A computa-

tional biology consortium between UCSF, UC Berkeley, and UC Santa Cruz. Occupancy scheduled for February 2005.

4) Helen Diller Family Cancer Research Building: A facility that will provide space to researchers at the U CSF Comprehensive Cancer Center and the 15 major laboratories of the UCSF Cancer Research Institute. Groundbreaking scheduled for late 2004.

5) Gladstone Institutes: A six-story 180,000 square foot facili­ty dedicated to research in the fields of virology, immunology, and neurology. The architecture of the facility emphasizes the link between structure and function in biology. Occupancy scheduled for November 2004.

6) Campus Community Center: A four-story collection of student services e.g. fitness, conference center and activity center. Occupancy scheduled for winter 2005.

7) Housing Complex: A mixed-use facility to provide housing for approximately 753 students and post-docs, as well as 10,000 square feet of retail space. Two parking structures for 1,400 cars will also be close by.

With respect to the recruitment of companies to the development and surrounding area, there is effort going on behind the scenes that Stolis declined to discuss due to confidentiality restrictions. However, one trans-action has been disclosed to date; the sale of 500,000 square feet of buildable space to Alexandria Real Estate Equities, the nation’s leading developer and manager of biotechnology office and labora­tory facilities. Additionally, there are serious and directed recruitment efforts are under-way to bring biotech companies both large and small to the area, facilitated by Mayor Newsome’s “panel of experts”. The Mission Bay project is a gamble in some senses, as its ultimate success will be determined by the num­ber of companies that set up shop in the area, and the value of commercial projects developed by or in conjunction with the UCSF academic programs. Regardless, the proactive efforts on behalf of government, acade­mia, and industry working in unison should be an instructive beacon for the city of New York.

Boston

 In addition to our Q4 2003 New York overview, loyal read­ers will also remember a preceeding analysis of cluster theory that we presented in Q1 2003, which discussed the critical mass movement in New York City in comparison to other developed and developing life sciences hotspots in the USA. In this issue we provided commentary on the historical features and attributes that have enabled the Cambridge/Boston area to devel­op into arguably the nation’s, and possibly the world’s, most prominent biotechnology cluster. We also commented on forward-looking and proactive efforts that were underway at the time, including and especially invest­ments and facilities expansion on behalf of Big Pharma compa­nies intended to tap the area’s biotechnology expertise.

 Specifically mentioned were Abbott, AstraZeneca, and Novartis. While it is far too early to tell if these large-scale investments have paid off, a cur­sory review of recent press releases emanating from Boston/Cambridge (not dealing with the unexpected but impres­sive Red Sox World Series victory) indicates that the trend is continuing: Genentech and Elan (among others) are seek­ing various types of real estate in the area (10,000 and 20,000 square feet, respectively). We see this as significant not only because of further vindication of the Boston cluster’s potential, but also because Big Biotech is now getting into the game; these two companies are traditional “poster child” biotechnology companies to many industry watchers.

City and state officials have certainly taken notice of the rampant and productive devel­opment of biotech in and around Boston, as well as the external investment and the cre­ation of jobs high in both qual­ity and value. In response, and in order to further develop the prospects and economic rewards for biotech and Boston, Mayor Thomas Menino has recently created the “LifeTech Initiative”.

Specific elements of the LifeTech Initiative include, but are not limited to:

1) BioSquare: A 14-acre, 2-million square foot biomedical research park under active development in Boston’s South End with proximity to Boston University Medical Center and Boston Medical Center. Two buildings are complete with a third (670

Albany Street, an eight-story, 160,000 square foot laboratory facility) scheduled for delivery in October 2005.

2) LifeTech Innovation Fund: A city-sponsored venture capital fund of up to $10M to invest directly into local biotech com­panies and to support other investments in local companies.

3) LifeTech Founders Fund: A city-sponsored capital allocation to provide low-interest loans to entrepreneurs intending to cre­ate and maintain companies within city limits.

Although a city-specific effort, the LifeTech Initiative is enhanced by efforts at the state level. For example, the Emerging Technology Fund is a $25M set-aside approved by the Legislature to be invested and allocated by the quasi-state Mass Development agency as part of a broader economic development package intended to bring technology-oriented jobs and companies to Massachusetts. The Fund’s first transaction was a $2M loan granted on 18 October 2004 to Acusphere (a specialty pharma­ceutical company with proprietary porous microparticle formulation technology) to finance a manu­facturing facility in Tewksbury.

Considered comprehensively, the goals of the efforts underway in Massachusetts can be summa­rized into three primary points: Promote innovation in the life sciences and biomedical research Support academic research through proximity to and novel partnerships with industry Stimulate the growth of biotechnology enterprisethrough the creation and reten­tion of jobs specifically within city limits

The specific endeavors activat­ed to achieve these goals by Menino et.al. are strikingly similar to the Mission Bay effort in San Francisco in theory, scope, and stage of development. Most gratifying to us, the Boston and Mission Bay efforts exemplify, in an eerily reminis­cent fashion, the recommenda­tions that we made for New York, but in a manner specific to their own geographies.

Nascent Clusters: Innovation Works in Science…and in Business

Pittsburgh

When most people think of Pittsburgh, the connotation is one of old-line traditional indus­tries, including and especially steel (and in the political elec­tion season, ketchup). It is not at the top of many lists for established biotechnology clus­ters. However, the city should be included among the most proactive due in large part to a relatively new public/private partnership effort to invest in, develop, and retain its life sci­ences resources: the Pittsburgh Life Sciences Greenhouse (PLSG).

The founding institutions behind PLSG are the University of Pittsburgh, Carnegie Mellon, UPMC Health Systems, and the Commonwealth of Pennsylvania. Interestingly, the organization started as an inter-academic col­laboration, and merged with a similar effort undertaken by the

Commonwealth following the allocation of tobacco settlement money. With reference to the afore-mentioned LabToWallStreet publications, we appreciate the PLSG mission statement, which reads: “…develop critical mass in the life sciences industry cluster in the Pittsburgh region”. To support its mission, PLSG has developed five specific strategies to enhance regional research and biotech industry, and a vision to develop and market the Pittsburgh communi­ty to the world as a leading venue for life sciences. Execution occurs through a focus on existing regional research and industry strength areas, defined as the Four Pillars (below).

1) Drug Discovery Tools and Targets

2) Therapeutic Strategies for Neurological and Psychiatric Disorders

3) Tissue/Organ Engineering and Regenerative Medicine

4) Medical Devices and Diagnostics At press time I am scheduled to speak with Doros Platika, M.D., PLSG’s President and CEO, which undoubtedly will provide further insight into this novel approach. Meanwhile, a review of the organization’s pro-grams reveals that the most striking characteristics are its unique methods of bridging the gap between academia and industry and its commitment to effective technology transfer and the subse­quent financing and development of early stage biotech companies (including the cultivation of scien­tific and managerial talent at all levels). PLSG programs that support these conclusions:

1) University Facilities Fund: Intended to provide laboratory and research space to area uni­versities for program expansion in the Four Pillar areas

2) Technology Development Fund: A capital allocation intended to facilitate the valida­tion of technical and commer­cial feasibility of early stage academic inventions

3) Opportunity Fund: Provides capital to universities to struc­ture competitive pay packages for scientific talent in the Four Pillar focus areas

4) Collaborative Research Fund:Provides capital for the financing of projects initiated jointly between regional indus­try and academia in the Four Pillar focus areas

5) Pre-Seed Fund: A focused endeavor managed through the Pittsburgh Biomedical Development Corporation to provide pre-seed capital to companies at the earliest stages of development

6) Seed Fund: A commitment of $15M for investment into Pittsburgh-area seed and early stage companies managed in conjunction with PA Early Stage Partners

7) Executives-in-Residence Program: Provides a pool of experienced life sciences man­agers to work directly with aca­demic entrepreneurs to form companies, providing guidance on strategic development and early-stage fundraising

In addition, the PLSG boasts 17,000 square feet of incubator space for the development of approximately 10 companies specializing in any of the FourPillar areas, multiple specific networking endeavors designed to enhance connectivity between industry and academia, and a “SBIR Advance” program designed to help life sciences entrepreneurs access federal funding opportunities.

The cities of Pittsburgh and New York share many corollar­ies, including an established metropolitan financial center, well-respected academic centers of excellence in the life sciences, and a nascent but growing core of biotechnology enterprise with significant potential. However, as the mission statement and program roster of the Pittsburgh Life Sciences Greenhouse sug­gests, the Pittsburgh area is succeeding in bridging the notoriously difficult gaps between academia, industry, and government, while simulta­neously planting the seeds for a successful biotechnology indus­try in the next generation. Pittsburgh’s early success is not necessarily a phenomenon unique to its geographical loca­tion, rather, it is the product of much planning and proactive thinking on behalf of multiple industry stakeholders working synergistically.

Conclusion

Although the three economic development initiatives discussed in this article are specifically dedicated to the enhancement of the biotechnology industry “within city limits”, each is unique in its own way. Each is a response to specific realities and proactive endeavors of forward-looking planning. However, at

the risk of over-simplification, analysis suggests that there are a few important conclusions to be drawn: Novel partnership vehicles (particularly between academia and industry) foster innovation and the transfer of technology Specific incentives are neces­sary to keep valuable life sci­ences developments local City and state government commitment is essential…to a point.

At the risk of redundancy, I will again point out that LabToWallStreet has frequently opined that these elements are essential for the successful development of the life sciences industry in New York, and we can now point to specific proj­ects in other geographies to ref­erence the point. Of particular importance for New York is the final point; the paradoxical role of state and local government. Every successful case of biotech­nology enterprise development involves specific and dedicated commitments on behalf of gov­ernment that go beyond “lip service”. In the many conversations Ihave had with local entrepreneurs, the lack of government support, incentives, and committed financing is voiced as a foremost frustration by most (some have done so in previous versions of our magazine). To be sure, gov­ernment involvement can certainly be problematic – Boston’s LifeTech Funds have sparked debate regarding the most prudent use of public funds (as well as the ability of government officials to identify promising investment opportu­nities in the life sciences) – and under no circumstances should

 

 

the government play private industry’s role of building a business. However, it is important to keep in mind that government is just as helpful by what it doesn’t do (e.g. collect payroll taxes for biotech companies relocating to within San Francisco city limits).

In New York’s case a dedicat­ed government effort could go a long way towards providing the catalyst for the development of a biotech cluster that many seem to be expecting. Consider the PLSG mission statement and Four Pillars against the LabToWallStreet call for critical mass and assessment of New York’s regional areas of expert­ise (of which, ironically, there were four), and a theoretical model can be developed. The New York City government’s role in the proposed East River Science Park is certainly a step in the right direction, but the city needs more to be competi­tive… the development of biotech enterprise in New York faces unique and specific chal­lenges and thus requires novel proactive solutions. For now it seems that the attention span of many decision makers is dedi­cated to arranging and providing financing for the buildout of a new Jets stadium on the West Side. However, I wonder if over the course of planning the benefits and drawbacks of the stadium were compared to the benefits and drawbacks of a biotechnology science park similar to Mission Bay or BioSquare?

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