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Insight & Intelligence : Dec 27, 2011
Largest U.S. Biotech Clusters Faced Similar Challenges This Year as Seen Elsewhere
California, Massachusetts, North Carolina, and Maryland have had to find ways to deal with lower funding and attract more firms.
The four states with the nation’s largest biotech clusters showed that they too were not immune to challenges common to most U.S. regions seeking to build their life science presence. Hurdles included a capital squeeze particularly for early-stage biopharmas, the reality of the industry’s international growth, and the need to attract new businesses and retain existing ones.
All four top-tier biotech states—California, Massachusetts, North Carolina, and Maryland—did, however, find numerous ways to address these challenges. They rolled out new financing programs or tweaked existing ones. In some cases they reached out to regions around the world. In others they identified promising niches within their clusters. Signs of success could be seen in a series of new construction and expansion projects.
Biocom, the life science industry group for the San Diego region, is stepping up efforts to help smaller biotechs find partners, Joseph Panetta, president and CEO, told GEN. San Diego biotechs captured $317.66 million in venture capital in the first three quarters of 2011, down from $331 million in the first nine months of 2010. The number of biotechs reportedly dipped from 45 to 41 between 2010 and 2011.
Biocom is looking to draw Chinese companies to San Diego and that region’s life science companies to China. The organization plans to open an office in Shanghai next year and possibly one in Taizhou.
BayBio, the industry group for the San Francisco Bay Area, is also trying to help smaller biotechs. It plans to launch its own contract research organization (CRO) in the second quarter of 2012. “Our focus would be to allow startups and entrepreneurs to send projects into the CRO at very low cost, with entrepreneurs paying just for materials, consumables, and some of the administrative cost,” Gail Maderis, president and CEO, told GEN. “But we would serve everyone up to the Genentechs and Bayers and Amgens of the world and everybody in between.”
BayBio and Biocom will team up March 8–9 to host the CALBIO2012 conference. “With the capital constraints, we’re bringing out a lot of the disease foundations to talk to our companies on partnering and funding opportunities,” Maderis remarked.
BayBio and Biocom have also identified industrial biotech as a fast-growing niche. In a survey of 33 companies in this sector with at least one employee, they observed a six-fold job growth from 2006 to 4,504 jobs this year.
Biofuel companies, though, are facing some of the same regulatory hurdles as their biopharma counterparts. California insists that biomanufacturing plants pass muster with the state’s Food and Drug Branch, a counterpart to the FDA. A bill to preclude the California Food and Drug Branch from requiring inspections for drug and medical device manufacturers who meet federal FDA requirements has passed the Assembly but not the Senate.
During 2011, Massachusetts basked in the expansion activity of pharma and biotech giants. Seven projects totaling more than 1.5 million square feet began construction, according to Richards Barry Joyce & Partners LLC.
The largest, at 1.1 million square feet, is composed of two 550,000 sq. ft. buildings for Vertex. Biogen Idec also has two properties under construction, Broad Institute is working on an expansion, Pfizer has lease with MIT to relocate the company’s cardiovascular, metabolic, and endocrine diseases (CVMED) and neuroscience research units, and another facility is being built on a speculative basis by Skanska.
The construction wave will continue into next year, Susan Windham-Bannister, Ph.D., president and CEO of the Massachusetts Life Sciences Center (MLSC) told GEN, fueled by cutbacks elsewhere in the nation. Novartis plans to break ground on a new building in 2012 and Ipsen announced plans to build a $45 million R&D facility.
Worcester Polytechnic Institute (WPI) broke ground on its Biomanufacturing Education and Training Center, funded in part by a $2.2 million MLSC grant. The center has signed Abbott Laboratories, Bristol-Myers Squibb, and Shire Human Genetic Therapies as inaugural partners. MLSC has been forced, however, to make do with $10 million a year; it was expected to have $25 million annually when it was expanded in 2008.
The Tar Heel State is also dealing with a tight state budget, scrambling to plug a $2.4 billion deficit for the fiscal year that started July 1. State legislative leaders cut about $2 million, or 10%, of the North Carolina Biotechnology Center’s $19.5 million subsidy, leaving the center with about $17.5 million for the fiscal year. Lawmakers also failed to create the proposed Life Science Development Corp., which was to finance companies with $100 million from a 15-year private investment from banks and institutions.
Disappointments such as these were more than balanced out by other activity. In 2011, officials increased from 5% to 7.5% the percentage of pension funds the state can invest in alternative investments in biotech, green tech, and IT. Last month state treasurer Janet Cowell announced a $35 million “accelerator” offshoot to the $232.3 million North Carolina Innovation Fund launched last year. This accelerator offshoot is aimed at early-stage biotechs.
2011 also saw North Carolina adding new vaccine manufacturing facilities. On December 12, North America’s first cell-culture vaccine production plant was dedicated in Holly Springs. The US Department of Health and Human Services and Novartis Vaccines and Diagnostics have committed a combined $1 billion.
November 14 marked the completion of a $42 million, 97,000 sq. ft. plant designed to manufacture vaccines using tobacco leaves. Additionally, Merck & Co. is nearing completion on expanding the Maurice R Hilleman Center for Vaccine Manufacturing from 200,000 to 272,000 square feet. The facility is a live-virus vaccine manufacturing plant and is expected to obtain FDA approval in 2013.
More good news on the real estate front came from Biogen Idec. In April it broke ground on a 180,000 sq. ft. space that will consolidate patient services and administrative offices as well as expand its laboratory and research space.
In terms of financing, Tranzyme Pharmaceuticals went public, though it was forced to lower its share price from $12 to $4. A brighter spot was venture capital, with investors reportedly pumping about $146.2 million in biotech startups during the first three quarters of 2011 compared with $112.6 million a year earlier. But the number of biotech companies winning funding dipped during that period, from 11 to eight.
Maryland biotech startups seeking capital will have a new option in 2012: the new InvestMaryland fund. The state will auction off up to $100 million of tax credits to insurance companies that pay state premium insurance taxes. The auction is expected to yield a minimum $70 million, of which 67% will be allocated to three or four venture capital firms to invest in promising startups in biotech as well as cleantech, green tech, and mobile health. The remaining 33% will be deposited into the state’s 15-year-old Maryland Venture Fund.
“What we anticipate is that by June of 2012, that the first tranche—the first year’s funding—will be in place,” Judy Britz, Ph.D., executive director of the Maryland Biotechnology Center, told GEN. “Over time, we might invest $1 million to $2 million in one company, but it probably will begin with initial investment in the hundreds of thousands.”
To attract ex-U.S. firms, Gov. Martin O’Malley (D) led a delegation that in December wrapped up a six-day trade mission to Hyderabad, Mumbai, and New Delhi. The delegation and the Federation of Indian Chambers of Commerce and Industry agreed to create an India-Maryland Center in Maryland.
During the trade mission, India’s Jubilant Life Sciences reported plans to spend $20 million to triple its warehouse space in Maryland and add new jobs. Also, the Bethesda-based professional group Women in Bio opened its first international chapter in Mumbai.
Dr. Britz said the Maryland Stem Cell Research Fund is drafting its first-ever request for proposals from companies seeking grant funding; until now, almost all grants have been awarded for projects in academic institutions. The state this year kept stem cell program funding at FY 2011’s $12.4 million, about half what was available three years earlier. State funding for Maryland Biotechnology Investor Tax Credits is also stable at $8 million, the same as FY 2011 and $2 million above FY 2010.
That stability of funding is about the best biotech clusters can hope for from state governments, at least until the economy emerges from the recession. Once that happens, the challenge will be more about spending smarter, especially since the U.S. faces the uncertainty that goes along with political turmoil and the certainty of competition from China, India, and the rest of the world.
Alex Philippidis is senior news editor at Genetic Engineering & Biotechnology News.
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