By Mark R. Smith, Contributing Writer
Attracting biotech companies and startups can be a hot addition to an economic development mix. Its benefits are vast and span the human experience. The industry is crucial to many sectors, including healthcare, personalized medicine and publicly-funded scientific research, as well as biodefense – and as the World has found out in no uncertain terms during the past two years, pandemic preparedness.
It also a critical component within the academic sector, creating myriad economic development opportunities for a variety of jurisdictions, as well as enhancing the reputations of colleges and universities.
On the other hand, it’s also expensive, it’s risky and it can be tough to find the appropriate space to develop what, often enough, turn out to be amazing discoveries.
“It requires a long-term commitment by the local business and academic communities because by its nature, it’s a very speculative industry,” said Brian Darmody, the CEO of the College Park, Md. office of the Association of University Research Parks (AURP).
“However,” said Darmody, “the rewards can be great, so it’s critical that the facilities can sustain themselves while in pursuit of success during the wait for the investing parties, which can include a university, a partnership, a corporation, a startup or a combination there of.”
Lab Demand
Given that it’s common for complications to arise on the real estate side, the AURP, which also has offices in Tuscon, Ariz., formed the Bio Health Caucus for its life sciences liaisons due to the expense of wet lab space, as well as the commitment needed by local governing bodies in attracting and supporting biotech companies, especially startups.
“What can happen otherwise,” Darmody said, “is that the startup can run out of money before its new drug or device is approved by Food & Drug Administration.”
Overcoming the lack of available wet lab space is the first issue, followed by its affordability during the startup phase is second “or is even 1-A,” said Darmody. “The next step is for a startup to acquire and set up sophisticated equipment in a space where it can grow.”
Next come the regulatory challenges. “A given region must have the right zoning to repurpose a regular office building into a wet lab,” he said. “Some codes were written many years ago and building wet lab space was not anticipated by the local authorities who were not in the field.”
On that note, Darmody is hopeful that more wet lab space will come on the market due to the drop in demand for regular office space caused by the pandemic and the ensuing hybrid/work at home revolution. “The hope is that there could be some conversion,” he said, “since office demand is more limited than it was two years ago.”
There could be more news in the industry in mid-June, as the above issues will be addressed by the annual Bio Innovation Organization (BIO) International Convention, which attracts up to 20,000 attendees. This year’s event will be held in San Diego, and starts the day before AURP hosts its Bio Health Caucus that will focus on building facilities for bio ecosystems.
Regional Pull
One requirement for wet lab space is critical mass, which is growing in San Marcos, Texas, which is home to the Greater San Marcos Partnership. The burgeoning region is nestled between San Antonio and Austin, “which are about an hour apart, which means there’s ample room for growth in between the cities,” said President Jason Giuletti, noting that the region was home to 44,894 residents in 2010 and had mushroomed to 67,553 by 2020, according to the U.S. Census.
Traditionally, the region has featured “more of an advanced manufacturing economy, but our proximity to Texas State University (TxState) also lends our market to biotech development, since that’s one of TxState’s strongest sectors,” said Giuletti.
Building on that strength led to the branding of the Texas Innovation Corridor, “which is not reliant on traditional biotech, but innovative biotech,” he said. “For instance, one company from California called Iron Ox is building a 535,000-square-foot facility that will house an indoor farm run by robots.”
San Marcos is also home to TxState’s Science, Technology and Advanced Research (STAR) Park, the Lone Star State’s largest. “The hope is that as its biotech membership grows, we can keep those businesses in the area,” said Giuletti, noting that TxState has an enrollment of about 9,000 students studying in life sciences sectors.
Also feeding the workforce pipeline is Austin Community College, “which also offers a substantial biotech program,” he said. These assets have resulted in that influx of new residents moving into Hays County and the region, “which has been helpful for our workforce development efforts,” despite the national labor shortage that spreads across various sectors. “It’s so far, so good in regard to having an ample talent pool.”
Speaking of the current market, Giuletti thinks that the reshoring of international business locations that has become more prevalent in the aftermath of the COVID-19 shutdown will have a notably positive effect in the biotech industry. “As we move into the endemic stage of COVID-19, companies that are bringing various operations back to the U.S. When to return, they tend to locate around colleges and universities for the faculty and student expertise, as well as workforce advantages.”
That’s key, because “all decisions are being driven by workforce and to how companies can move all of their operations into one spot and marry (or remarry) R&D and production efforts,” he said. “Any advantage to shorten the production process and get product to the consumer is on the radar screen – even if it does costs a little bit extra. Companies are learning that’s more efficient.”
Buying Startups
Heading to the Northeast, from the perspective of Peter Denious, CEO of New Haven, Conn.-based AdvanceCT, pharmaceutical manufacturing is the most active subsector of life sciences in Connecticut. It’s followed by R&D and the next generation of drugs and products, then medical device innovation.
“Across the board, technology is touching the industry,” said Denious. “It’s changing how pharmaceuticals and devices are developed and brought to market, due to its heightened use in reaching results via Artificial Intelligence and Big Data. Those disciplines go hand-in-hand.”
Technology has also expedited the timeline of biotech advances, in general. “[Timelines have] gotten very compressed. Just look at what we saw with the expedited development of the COVID-19 vaccine. We’ll see more of that type of speed,” he said, also citing Stamford-based Sema4, which uses Big Data with medical information to make the drug development process more efficient.
What that point about expedience comes down to is that the life sciences industry “is all about innovation,” said Denious, who also noted that biotech especially is driving pharmaceutical advancement and new equipment invention “because the big corporations are usually less nimble with development than highly-focused startups. That’s why many corporations buy small companies to strengthen their own offerings.”
The good fortune of having nearby Yale University as a biotech anchor helps in AdvanceCT’s efforts, “as it’s a powerhouse in pharma development, R&D and in the end, addressing society’s needs. It attracts considerable investment from the National Institutes of Health (NIH) and from venture capitalists, too,” said Denious, noting that Connecticut receives $691 million in grants annually from NIH—the fifth most in the country per capita.
Yale is a magnet not only for researchers, but companies that want to be in its rarified orbit. “For instance, Alexion, a startup with Yale roots, was bought by AstraZeneca, and the latter is investing more in our state,” he said, adding that Connecticut is ranked no. 3 per capita in attracting biotech money, according to TEConomy Partners and the Biotechnology Innovation Organization.
Today, Connecticut is receiving investment via developers and property owners that are noticing that empty office space can be repurposed, as Darmody noted, into wet lab space; in addition, the venture capital community, Denious said, “is going gangbusters nationally and we’re seeing [considerable] activity in our state.”
“All told,” said Denious, “what we’re seeing is a gain in momentum in addressing healthcare solutions and saving lives.”
Cell Generation
Approaching the biotech industry from the manufacturing sector is Manchester, N.H.-based Advanced Regenerative Manufacturing Institute (ARMI), a nonprofit member of Manufacturing USA. The U.S. Department of Defense-funded provided ARMI’s initial funding of $80 million.
ARMI is working to scale the manufacturing of cells, tissues, and organs by applying automation, for starters, to manual lab processes. “To explain the process,” said Julie Lenzer, chief innovation officer, “imagine a patient who was diagnosed with a torn anterior crucial ligament (ACL).”
“Today, the doctors would take a tendon from elsewhere in the body or from a deceased donor and replace the ACL,” said Lenzer. “But a tendon and a ligament don’t work the same way. That scenario is okay for the average person, but for an athlete, it makes them prone to re-injury. STEL Technologies is working to regenerate ligaments using cells that the human body will not reject, such as from sheep and other animals or perhaps the patient’s own STEM cells.”
That approach is changing how the medical industry views chronic diseases, such as diabetes, at the cellular level. “We’re trying to figure out how to manufacture tissues and cells faster, more consistently, and in an automated way so it doesn’t require Ph.D.s to do it,” she said, “because going the lab route is expensive, manual and lacks an approach for volume.”
The overall trend is toward more personalized medicine. “Our vision is not only to continue refining our Tissue Foundry, but perhaps even to replicate it across the country – near hospitals that specialize in transplants – to bring organ regeneration mainstream,” said Lenzer.
She can see it coming. “Around the medical industry, digital health has taken off: We now have virtual doctor appointments, digital health records and artificial intelligence (or machine learning), which is used to look for trends and read scans,” she said. “Digital technologies also tend to be less expensive, making healthcare more accessible; that’s especially important in rural areas.”
In addition, that approach stems from the National Science Foundation’s new technology directorate that calls for Technology, Innovation and Partnerships – or TIP – that was discussed during a session at SXSW about Reinvigorating Science and Technology for the Future of U.S. Innovation. It builds upon the agency’s commitment to serve as a beacon of U.S. innovation, advancing the frontiers of research and education across all fields of science and engineering.
In the end, it’s about “the power of the body and using it for healing,” said Lenzer. “It takes a great deal of money, time and patience to bring these things to market.”
Biotech Uptick
Matt Brady spends his time surmising the needs of life sciences companies from the commercial real estate perspective: as a principal and senior vice president for Rockville, Md.-based Scheer Partners, he specializes in the scientific market.
While his potential clients repeat the need for funding, he called the life sciences investment scene “timid” so far this year. “A great deal of money was invested in 2020 and 2021, much of which was predicated on multiple potential exits and quick liquidity via public offerings. But with the initial public offering (IPO) market pulling back as it has this year, I think the venture capitalists have taken a step back to evaluate the sector.”
But those cautious observers are “not retreating so much as seeing how the market has evolved,” Brady said. “The venture capital groups still have a ton of dry powder, so they need to get that money out in the market. It’s just a matter of time before they start making additional investments in early-stage technologies, though some only invest in later-stage technology that has been proven.”
“And that,” he said, “is still very risky.”
Just how much has the IPO market slowed? “In 2021, we saw about three IPOs per day,” he said, “but so far this year, we’ve only seen about 30. So that’s one less funding mechanism and/or exit for scientific companies or venture capitalists.”
In addition, during the past two years, clinical studies all but stopped due to COVID-19. “There were very few [studies] investors could bank on,” Brady said. “Today, however, they’re starting again, and information is being disseminated. I think those with the best clinical trial results will ascend to the top of the funding ladder.”
While citing top biotech hubs in Boston/Cambridge and the Bay Area, followed by San Diego, Maryland, the Research Triangle in North Carolina and Philadelphia/New Jersey, Brady thinks the biotech industry will turn upward this year and added that “We’re well on our way to wet lab space in the market across the country,” he said, “and if demand remains constant, I think it will be absorbed quickly.”
He also pointed to focusing on the “four legs” on the biotech stool: Intellectual property, capital, real estate and people, “with every life sciences hub. But just understand,” said Brady, “that the stool is only as high as the shortest leg.”
Bio: Odenton, Maryland-based Mark R. Smith joined Expansion Solutions after having written about site selection among the vast number of topics he has covered in the business universe. That part of his career began in 1993 when he joined The Daily Record, a Baltimore business and legal publication, where he delved into the worlds of economic development and commercial real estate, among numerous other industries; in 2003, he was named editor-in-chief of The Business Monthly, another Maryland publication that covers the scene in the Baltimore-Washington Corridor counties.
Concurrently, he’s written at length about the film and video industry for a variety of publications, and about his other loves, including music, sports and leisure.
