NYPEN, EDC and L2WS Present “The Bioscience Cluster for the 21st Century”

     Approximately one year ago LabToWallStreet (L2WS) established a correspondence partnership with the New York City Economic Development Corporation (EDC). The goal of the partnership was, and is, to educate the global L2WS readership on developments at the governmental level regarding the growth and development of the life sciences industries and “bio-business” in NYC and the Tri-State area. This article represents not only the next step in a productive collaboration, but also a tangible representation of progress made towards the mission for which both organizations are very passionate.

     On 17 November 2005, L2WS and EDC were co-hosts to a panel discussion and networking event sponsored by the New York Private Equity Network (NYPEN) entitled “The Bioscience Cluster for the 21st Century”. The two authors of this article, together with John Pacifico of Canaan Partners and NYPEN’s Healthcare arm, worked for many months to plan and execute the event. The goal was simple: organize leaders and heavy hitters from important constituent practice areas of the industry (representing variegated backgrounds and industry perspectives), provoke discussion with good and important questions, and continue the “bioscience” momentum that NYC is presently experiencing, subsequent to the announcement of plans for the East River Science Park (ERSP).

     The panel was composed of the following esteemed individuals:

• Seth Rudnick, M.D. – Managing Director, Canaan Partners (Moderator)
• Dr. Eric Rose – Surgeon-in-Chief, New York Presbyterian Hospital/Columbia Univeristy
• Andrew Alper – President of the NYC Economic Development Corporation
• Joel Marcus – CEO, Alexandria Real Estate Equities/Alexandria Equities LLC
• L. John Wilkerson – Co-Founder and General Partner, Galen Partners

     Each of the panelists has a vested interest in the New York City life sciences industry; Seth Rudnick and John Wilkerson are equity investors based in the area, Andrew Alper is in charge of NYC’s economic development efforts across all industries, with a particular emphasis on life sciences, Dr. Eric Rose is affiliated with one of the city’s premier academic/medical institutions (and is involved with area startups as well), and Joel Marcus is leading the development of ERSP (see attached bios for further background information). Although each possesses an incentive to promote and encourage growth, questions and answers were intended to generate realistic discussion.

     Simply put, the moderator and panel were engaging, and the quality of discussion and subsequent audience commentary were tremendous. In retrospect of the discussion, the most salient points can be summarized into three primary categories.

What is New York City Doing Right?

     Over the course of a dynamic and lively discussion, it became clear that the panelists were in unanimous consent that NYC and the Tri-State area possess many characteristics and elements essential to a successful life sciences industry.

     Academic talent and top-notch life sciences research are the bedrock of innovation associated with biotechnology, and Eric Rose was quick to point out that NYC is home to tremendous academic talent, including multiple Nobel laureates.

     Another critical element is investment capital; between Seth Rudnick and John Wilkerson is represented over $2.0B of capital available for investment into life sciences opportunities.

     Critics of NYC often suggest that available and affordable real estate is a challenge facing the growth of biotech in NYC, a topic that was introduced by Eric Rose in his description of the development of his own biotech company (Nephros). A more optimistic outlook was provided by Joel Marcus, who described development plans for the ERSP in great detail, with a focus on the fact that the buildings will be constructed on a speculative basis (indicative of his confidence in NYC’s growth potential), and that the finished product will serve and recruit tenants from biotech companies of all “shapes and sizes”.

     Andy Alper echoed Marcus’ enthusiasm, detailing the three primary initiatives underway at the EDC on behalf of the City of New York. These initiatives are the result of many months of primary research, including conversations with local, national, and international companies, and include the following:

• Addressing NYC’s perceptual challenge: having been branded as the world’s leader for finance, fashion, and Broadway, people do not think of NYC as a place to “do biotech”. Nonetheless, the science is ever-present (as expounded by Dr. Rose), and the EDC is working to communicate the fact that NYC not only has some of the greatest scientific assets in the world, but that it is also a great place to build a company.
• Development of an entrepreneurial environment: A hallmark of a successful biotechnology cluster is frequent interaction amongst key players such as venture capitalists, scientists, and support organizations, because the dialogue generates entrepreneurial activity. These players certainly exist in NYC, but they have not traditionally mixed on a regular basis. Alper also suggested that the evening’s panel discussion, with its attendance of venture capitalists, technology transfer representatives, scientists, and industry professionals, was a step in the right direction.
• Real Estate: Further to comments made by Joel Marcus, Alper pointed out that NYC’s existing space solutions (the incubators at Audobon (Columbia University) and SUNY Downstate) are not sufficient to attract and retain companies. Alper also clearly stated that it is the City’s hope that the ERSP development will be the flagship for the NYC cluster and spur further bioscience development.

      In his description of proactive governmental efforts, Alper made additional comments that provided energy to the discussion. Specifically, he mentioned that it is the City’s perspective that academic institutions are finally starting to synergize with respect to collaboration on research and technology transfer initiatives and that NYC possesses better “intangible” benefits than any other city in the USA (including a diverse population, access to investment banking, a highly educated population, and virtually unlimited entertainment options).

     John Wilkerson reiterated the importance of the “intangible” factor as a key NYC asset with anecdotes of his only NYC-based portfolio company. Although he did not provide the name of the company or any description of its platform/offering, he did mention that it is located in NYC on a strictly serendipitous basis, because “the company’s Chairman lives in NYC”. Although not the originally chosen location, Wilkerson indicated that all of the company’s employees are now very happy in the city, and that they would not have it any other way.

What is New York City Doing Wrong?

     Despite obvious optimism for NYC and the potential for a successful biotechnology industry, it was evident from the discussion that each of the panelists perceives major challenges facing the City’s efforts to develop a bioscience cluster.

     During optimistic dialogue on NYC’s potential (which was the inspiration for his financial commitment to build the ERSP on a speculative basis), Joel Marcus pointed out a critical challenge: a lack of true entrepreneurial talent. He went on to remind the audience that NYC had a chance to develop an entrepreneurial core through the pending success of ImClone, had Sam Waksal not made the unfortunate decision to break the law. According to Marcus, Waksal was perceived as a talented entrepreneur, a sort of being that is impossible to replicate (the negative impact of ImClone’s downfall was a theme that was reiterated throughout the discussion). Andy Alper agreed with Marcus in his discussion of the initiatives underway at EDC.

     As previously mentioned, both human talent and academic talent are key elements to a successful biotech cluster. Although Eric Rose expressed his strong support for the academic talent housed within NYC institutions, he did suggest a number of challenges affecting the mindset of academia. Specifically, it is his perception that NYC academics need to develop a more commercial mindset, as relationships with industry are critical to successful spinout, establishment, and development of biotechnology companies. In addition, Rose pointed out a fact that may not have been aware to many in the audience: the rate of capital reinvestment on behalf of NYC institutions is quite low. One of many examples is the fact that Columbia University has made a tremendous amount of money from the patent invented by Dr. Axel (which also was critical to the early success of the biotech industry), and has reinvested none of that capital into biotech programs, inside or outside of the University.

     Additional challenges described by Dr. Rose include “hospitality” and poor capitalization on a key existing asset base. In his efforts to develop Nephros, Dr. Rose received preferential treatment from multiple geographies well outside of NYC, including Sardinia, Italy, and Research Triangle Park, NC. Accordingly, the manufacturing facilities and corporate offices are located in these geographies, respectively, and the implication is clear for the development of further incentives to retain growing bioscience companies. Dr. Rose did not deny that many bioscience companies of all sizes have been retained in NYC, but he did suggest that the most established of the group, i.e. the “Big Pharma” companies that call NYC home, are not taking an active enough role in developing industry close to home.

     The panel made it clear that challenges facing NYC are not limited to academia and human capital – despite the presence of a tremendous amount of financial capital, local investors have traditionally not been very active in fueling Tri-State area biotechnology companies. As previously mentioned, John Wilkerson’s only NYC portfolio company is located in the City by sheer circumstance. However, both Wilkerson and Seth Rudnick agreed that the low investment rate is not because of lack of interest, but rather, because of low deal flow. The answer to this challenge is of course on NYC’s shoulders to develop the circumstances that will allow company formation and development to flourish; the subject of the bulk of the remaining discussion.

What Is The Prognosis for NYC?

     Further to the comments regarding lack of interesting investment deal flow from NYC, each of the panelists had an idea as to why, given the presence of the necessary elements of a successful biotech cluster and NYC’s tremendous intangible benefits, there is no industry core of which to speak.

     According to Andy Alper, the perspective of the EDC is actually quite optimistic in this regard. The job of the EDC is to maintain a true diversification of the area economy, and a key focus area is to capitalize on the existing and vast potential of life sciences resources. To that end, the EDC maintains that a solid industry core does exist, but it gets “lost in the shuffle” of everything else going on (i.e. Alper’s previous comments regarding Wall Street, fashion, and Broadway).

     John Wilkerson expanding on the theme of deal flow to suggest that investment opportunities follow available real estate. He pointed out that developers around the world are seeking to “turn parking lots into biotech parks”. Plans for the ERSP notwithstanding, Wilkerson suggested that NYC truly needs a “triggering event”; something that will create hundreds of biotech companies in a short period of time. Following this comment, the panel discussed the well-known example of Hybritech in San Diego; following Eli Lilly’s acquisition of Hybritech, executives left the company and started at least 42 new companies in the area, according to EDC research. Wilkerson also mentioned that ImClone could have been NYC’s “triggering event”.

     A subsequent example of the impact of a “triggering event” was given by Seth Rudnick, who recounted the story of Dennis Liota’s receipt of a $500M check for the sale of his biotech company. The bulk of this capital has been set aside for or reinvested into biotech companies by Emory University, which has spawned numerous early stage opportunities in the Atlanta area (and also an important lesson for Columbia University via the previously discussed Axel patent revenues).

     The discussion concluded with further elaboration by Joel Marcus and Andy Alper on plans for the ERSP. Marcus responded to Wilkerson’s point to suggest that ERSP may be the very “triggering event” that NYC needs, inasmuch as development plans call for three towers and will be filled with companies of all sizes in order to “get the right mix”. Furthermore, it is the developer’s intent to create a much-needed “focal point” for the industry, i.e. a physical space for all industry constituents to congregate. Marcus and Alper both agreed that upon a successful “triggering event” and continued momentum, NYC can easily develop a “vibrant” biotech atmosphere that will be impossible to overlook.

Conclusion

     It is the belief of the authors that the panel discussion “The Bioscience Cluster for the 21st Century” was an important event for the NYC biotech industry for many reasons. The panel discussion included testimony from the experts, each of whom gave an exceedingly positive outlook for NYC, despite a realistic assessment of the challenges facing the development of a biotech industry. Most importantly, the timing is right for biotech in NYC, and the City is on the verge of many exciting near-term developments. Specifically, the excitement generated by the ERSP was palpable; John Wilkerson commented that he was getting “energized” listening to Joel Marcus describe development plans for the complex, a sentiment that was visibly shared by other panelists and members of the audience.

     This “energy” is indicative of the momentum presently encapsulating NYC bioscience. It is quite possible that the ERSP will provide grounds for a “triggering event” to catalyze and propel bioscience in NYC and the Tri-State area. Existing plans provide at least a partial real estate solution, and companies of all varieties will be represented. As importantly, the ERSP will provide an opportunity for novel partnership models between academia, biotech, and pharma, a concept that has long been advocated by L2WS.

     The authors believe and hope that the energy and momentum will help to solidify the biotech industry in NYC; it is in fact the inspiration for the passion that is shared in a collaborative mission. There is no doubt that under the right circumstances, NYC is the best place to grow a business. Each of the panelists mentioned the “intangible” benefits that vindicate NYC’s self-proclamation of being the center of the universe. According to one panelist, other biotech clusters have “gelled” better than NYC, but an optimistic outlook suggests that it is only a matter of time before NYC reaches and surpasses the threshold of critical mass.

     Stay tuned for more collaborative efforts between NYPEN, EDC and L2WS – it is the goal of each organization to continue to capitalize on the existing momentum!

BIOS for NYPEN

Speaker Bios

Andrew Alper, President of the New York City Economic Development Corporation: Andrew M. Alper was appointed President of the New York City Economic Development Corporation (EDC) by Mayor Michael R. Bloomberg on January 15, 2002. EDC is the City’s primary vehicle for business recruitment, corporate retention, and economic development services. As EDC President, Mr. Alper also serves as the Chairman of the New York City Industrial Development Agency (IDA), a public benefit corporation administered by EDC that encourages business development, industrial expansion, and employment opportunities in New York City. He is also a director of The United Nations Development Corporation and Queens West Development Corporation.

Prior to joining EDC, Andy was Managing Director and Partner at Goldman, Sachs & Company. During his twenty-one year tenure at Goldman Sachs, Andy served as Chief Operating Officer of the Investment Banking Division and Co-Head of the Financial Institutions Group.

After completing his undergraduate degree at the University of Chicago, Andy went on to earn his MBA from the University of Chicago Graduate School of Business. Andy is Vice Chairman of the University of Chicago Board of Trustees, a member of the Council of the University of Chicago Graduate School of Business and a trustee of the Columbia Grammar & Preparatory School.

Andy and his wife, Sharon Sadow, an attorney in private practice, reside in Manhattan with their two children.

Joel Marcus: J.D., C.P.A. – Chief Executive Officer, Founder and Director of Alexandria Real Estate Equities, Inc., a $3 billion total market capital NYSE company with a stellar 8-year public track record is the pre-eminent real estate investment trust focused principally on the ownership, operation, management, acquisition, expansion and redevelopment and selective development of properties containing office/laboratory space, the Labspace^® niche which we pioneered.^SM Such properties are designed and improved for lease primarily to pharmaceutical, biotechnology, life science research, product, service, defense, educational and translational research entities, as well as related government agencies.

Mr. Marcus has extensive expertise, experience and contacts in the life sciences and real estate industries. He is highly experienced in real estate, finance and capital market matters, venture capital and mergers/acquisitions. Mr. Marcus has been involved with the formation, financing and operations of companies ranging in size from multi-billion dollar conglomerates to start-ups. Mr. Marcus won the 1999 Ernst & Young “Entrepreneur of the Year” Award: Los Angeles – Real Estate. He is nationally recognized for his experience and expertise in strategic partnering and was one of the original architects of the Kirin-Amgen joint venture. This joint venture owns the rights and financed the development of erythropoietin and granulocyte colony stimulating factor, the two leading genetically engineered pharmaceutical producers. Mr. Marcus was one of the original architects and founders of The AcceleratorSM Seattle, Washington, and The New York City Orthopedics Technologies Venture, New York, New York. He received his undergraduate and graduate degrees from the University of California, Los Angeles.

Dr. Eric Rose: Dr. Rose is an international authority in the surgical management of heart failure. From 1982 to 1992, he led the Columbia Presbyterian heart transplantation program, during which time it became the most active program in the United States. Dr. Rose pioneered heart transplantation in children, performing the first successful pediatric heart transplant in 1984. He has investigated many alternatives to heart transplantation, including cross species transplantation and man-made heart pumps. He has authored or co-authored more than 250 scientific publications.

As principal investigator of the Randomized Evaluation of Mechanical Assistance for the Treatment of Congestive Heart Failure (REMATCH) clinical trial, Dr. Rose led 129-patient, 22-center study proving the survival and quality of life benefit of ventricular assist devices (LVADs) for the long–term treatment of terminal heart failure.

Dr. Rose holds numerous academic and hospital posts, including chairman of the department of surgery and Morris and Rose Milstein/Johnson & Johnson Professor of Surgery at Columbia University College of Physicians & Surgeons. He serves as Director of Surgical Services and Surgeon-in-Chief at Columbia Presbyterian Medical Center of New York Presbyterian Hospital. He is also the Associate Dean of Translational Research.

Dr. Rose received his bachelor’s degree from Columbia College and his medical degree from Columbia University College of Physicians and Surgeons. His postgraduate training was in general surgery and cardiothoracic surgery at the Columbia Presbyterian Medical Center.

He is certified by the American Board of Thoracic Surgery and is a member of many professional societies, including the American College of Surgeons, the Society Thoracic Surgery, the American Surgical Association, the American Heart Association and the American Association for Thoracic Surgery.

L. John Wilkerson, General Partner, Galen Partners. Dr. Wilkerson, co-founder of Galen, is the former Chairman of the Wilkerson Group. Dr. Wilkerson launched his career as a Group Product Director for Ortho Diagnostics, Inc., a Johnson & Johnson Company. He then joined White Weld & Co. as a healthcare security analyst, and after Merrill Lynch acquired White Weld, he joined Smith Barney as a Vice President specializing in medical analysis and research. Dr. Wilkerson joined Channing, Weinberg & Co., Inc. as a senior officer in 1980 and later purchased control of the firm’s healthcare consulting division to form the Wilkerson Group, one of the industry’s leading healthcare consultancies.

Dr. Wilkerson holds a PhD from Cornell University, where he specialized in managerial economics and marketing research, and holds an undergraduate degree in biological sciences from Utah State University. Dr. Wilkerson is a founder of the E.L. Rose Conservancy in Pennsylvania, a Director of Health Systems (a five-hospital consortium in New Jersey) and the Harding Land Trust, President of the Museum of Folk Art, and a member of both the Corning University Council and Cornell Plantations. He currently serves on the boards of Stericycle, Inc. and several of Galen´s privately held companies.

SPONSOR BIOS:

NYPEN: About the New York Private Equity Network (NYPEN): NYPEN is the definitive education, leadership and networking organization exclusively for investing professionals at private equity and venture capital funds in the New York City area. NYPEN was founded in 2001, and today has a membership base representing over 300 investment firms. The organization offers education and networking events at which rising professionals within the private equity and venture capital industry can develop their investing-specific skills and knowledge, and at which they can share experiences, benchmark best practices and build networks of fellow investors that will benefit them throughout their careers. NYPEN's unparalleled education events feature today's private equity industry leaders sharing their expertise in forums that are highly interactive and which are dedicated to promoting professional development. The organization's member base includes investors focused on all sectors and stages. Visit our website at www.nypen.org.

NYPEN Directors

• Dan Cohn-Sfetcu, Brookstone Partners
• Marc Cole, Hamilton Investment Partners
• Sergey Dubin, Palisade Capital
• Taru Goel, Broadreach Capital Partners
• Allison Goldberg, Time Warner Investments
• Greg Hersly, Alpine Commercial Capital
• Mark Murtagh, Liberty Partners
• John Pacifico, Canaan Partners
• Rich Relyea, Halyard Capital

NYPEN Sponsors

• 1st West Financial - http://www.1stwest.com
• Ernst & Young - http://www.ey.com
• Kirkland & Ellis - http://www.kirkland.com
• Marsh Inc. - http://www.marsh.com
• Merrill Corporation - http://www.merrillcorp.com
• The Weiser Group - http://www.weisergroup.com

NYCEDC:

LabtoWall Street: L2WS:LabToWallStreet was founded in 2002 as a quarterly publication for and about New York's emerging life sciences scene, with the goal of providing an insider's perspective on the business of science in the State and to serve as a centralized, unbiased exchange of information between all components of the community.

LabToWallStreet continues to play a role in the development of an entrepreneurial-minded, cohesive scientific community in the State, but also helps promote New York's science, venture and human capital, as well as other resources to the global life sciences and financial industries.

LabToWallStreet has evolved to become more than a quarterly publication. Our commitment to connectivity includes m2:molecular mixers (invite-only events that have succeeded in putting professionals face-to-face in a relaxed environment), the L2WS eXchange (an online, interactive forum that mirrors our m2 events and connects members 24-7-365), and numerous conferences we have co- organized to drive timely information to professionals across the industry.

Since our founding, we have worked diligently to create meaningful alliances, in New York, around the country and around the globe. Our sponsors, partners, and contributors have played an integral role in propelling what started as a grassroots publication with narrow geographic interest to a valuable source of information that is accessed by scientists, executives, academic institutions and financial professionals on almost every continent.

ORGANIZERS

John Pacifico, NYPEN: John Pacifico is a venture capitalist at Canaan Partners www.canaan.com. John joined Canaan in 2001 and currently augments the firm's national life sciences investment practice by helping to identify and analyze new investment opportunities in the medical device, pharmaceutical and medical diagnostic industries. In addition, John assists existing portfolio companies with various initiatives critical to their overall business mission. Most recently, John served in an operating role at Alsius Corporation, a Canaan medical device portfolio company where he was responsible for several business development projects in the finance, sales & marketing, and manufacturing departments.

Since joining Canaan, John has been directly involved in the financing and exit events of more than 20 life sciences companies and has served as a board observer at Alsius Corporation, Coapt Systems, ReVision Optics, Advanced BioHealing and several other private companies. Prior to joining Canaan, John worked for a mezzanine investment firm where he assisted in the subordinated debt financings of mature-stage companies across a broad array of industries. John is a graduate of the Charles F. Dolan School of Business at Fairfield University with a BS in Finance, where he was also a member of the varsity baseball team, and was recently admitted into Columbia University’s EMBA program which he will start in January 2006. John also serves as a director of NYPEN www.nypen.org, where he leads the group’s healthcare private equity initiative, and of BRITE www.britenyc.org, which he co-founded with fellow NYC professionals to teach inner-city high-school students about business and entrepreneurship.

Monique Salazar, NYCEDC: Monique Salazar is Assistant Vice President for Bioscience for the New York City Economic Development Corporation (NYCEDC). At the NYCEDC, Monique works with the various bioscience stakeholders to build the commercial bioscience industry in New York City. Her position involves identifying and pursuing business development efforts, as well as heading up the City’s marketing and public relations efforts for bioscience. She was part of the team that selected Alexandria Real Estate Equities, Inc. to develop the East River Science Park, an 872,000 square foot bioscience park that will be built in the heart of the East Side Medical Corridor in Manhattan.

Prior to joining the NYCEDC, Monique worked for Tympany, a medical device company in the hearing health area. She also has several years of experience as an attorney practicing in the areas of First Amendment and employment litigation. She serves as a director of BRITE, www.britenyc.org, which teaches inner-city high-school students about business and entrepreneurship.

Monique is also the co-author of a full length feature film, The Cry. The Cry was exhibited at the 2005 Hamptons Film Festival and the 2005 Edward James Olmos Latino Film Festival in Los Angeles, and will be distributed nationally in early 2006.

Monique received her BA from Duke University, her JD from the University of New Mexico, and her MBA from the University of Texas-Austin.

Matt Wotiz, LabtoWallStreet: Matt Wotiz is Associate Director with Lundbeck, Inc., the USA subsidiary of the Copenhagen, Denmark based specialty pharmaceutical group H. Lundbeck A/S.  He has been with Lundbeck, Inc., since its inception in 2001. During this time, he has participated in the growth of the US subsidiary from a core group of three professionals to its present state of close to 200. He is responsible for multiple corporate and strategic development functions, including the establishment of a commercial infrastructure and the identification and execution of high-level growth opportunities, as well as product and technology licensing functions. Additionally, he is directly involved in the management of the H. Lundbeck A/S strategic private equity portfolio.  

Matt is also a co-founder of LabToWallStreet, a suite of media and connectivity solutions designed to unite the stakeholders of the Tri-State life sciences industries while simultaneously communicating the value of the Tri-State cluster to the global community. In 2.5 years, LabToWallStreet has evolved from a grassroots-oriented local publication to an internationally recognized online publication.  

In addition, Matt contributes strategic and financial consulting efforts to a number of NYC-based non-profit organizations and startups, serves as a Trustee to the Children's Museum of the Arts, and is involved in a number of industry-related professional societies and organizations. Matthew holds a MS in Biotechnology from the J.L. Kellogg Center for Biotech at Northwestern University, and a BS in Biology from Washington and Lee University.