During Alexandria Real Estate Equities’ first-quarter earnings call, the firm’s executive chairman and founder, Joel S. Marcus, noted that the life sciences industry is enduring a decline in biotech venture capital funding and a rise in inflation. These trends, he said, are creating a “have and have-not” division.
On the “have” side are the larger biotech companies and the biotech companies that have products nearing commercialization. The haves are “as flush as ever,” Marcus remarked. “[They] are as flush with cash as ever,” Marcus said. He noted that they are estimated to have over $500 billion of available immediate cash following two years of record VC activity buoyed by the scramble to develop COVID-19 vaccines and drugs.
On the “have-not” side are small- and medium-capitalization biotech companies with preclinical and/or clinical programs. Their valuations have been dropping as investors sell off shares and pursue other opportunities. Marcus observed, “The open markets of the last nine years, by and large, are closed.”
“Most private companies are generally well financed, and the venture firms have raised mountains of capital. So, they’ve got pretty long runways,” Marcus elaborated. “But I think the people who went public, particularly the people who went public too soon, are caught in a bit of a squeeze with cash burn.” He indicated that he had in mind companies that were “preclinical” and those that were “clinical” to some degree and possibly lacking early readouts of data.
“And so, for those, I think you can expect they will not be on track to expand,” he continued. “Some will contract and reduce their workforce and maybe their space. We’ve seen some of that in different markets.”
Yet Alexandria during Q1 also announced expansion projects that included a 427,000-square-foot core R&D facility to be leased by Bristol Myers Squibb in San Diego and a 334,000-square-foot facility to be leased by Eli Lilly and Company in Boston. (The latter facility, at 15 Necco Street in Boston’s Fort Point section, is to accommodate Eli Lilly’s $700 million Institute for Genetic Medicine.)
Another real estate firm planning new facilities nationwide is IQHQ. It acquired the Elko Yards site in downtown Redwood City, CA, for a mixed-use project that is to include life sciences space. And Mark Goodman & Associates plans to start construction later this year on a 16-story, 503,000-square-foot life sciences development in Chicago’s Fulton Park section.
The scramble by regions to attract life sciences companies is of abiding interest to GEN. Since 2014, GEN has issued annual, nationally quoted rankings to indicate which regions are most competitive. This year, we compiled rankings based on:
- NIH funding—Figures for NIH funding were taken from the publicly available NIH RePORT database for the current federal fiscal year through April, plus all of fiscal year 2021 (October 1, 2020, through September 30, 2021).
- Venture capital (VC) funding—Figures for all of 2020, all of 2021, and the first quarter of 2022 were compiled by regional life sciences groups and two trackers of venture capital activity (CipherBio, an SVB Financial Group life science data platform, and PitchBook, which joins with the National Venture Capital Association to publish the quarterly Venture Monitor reports).
- Patents—A tally was kept of the number of patents containing the word “biotechnology” that were awarded to companies located in namesake cities and suburbs.
- Lab space—The highest total-size-of-market figure, in millions of square feet, was furnished by any of several commercial real estate companies, including CBRE Group, Cushman & Wakefield, JLL, and Newmark.
- Jobs—The preferred sources for jobs figures were regional life sciences groups. Alternative sources included commercial real estate firms.
Chicagoland, which consists of Chicago and its suburbs, has a life sciences workforce big enough to rank sixth (about 88,000 according to the Illinois Biotechnology Industry Organization, or iBIO). Beyond jobs, Chicagoland ranks ninth in NIH funding (2,172 awards totaling $1.076 billion), patents (1,874), and venture capital ($1.7 billion consisting of $1.698 billion from 2020 to 2021 [iBIO] and $2.4 million in Q1 2022 [CipherBio]). The region finishes 10th in lab space with 1.6 million square feet, according to iBIO, which also reports 1.3 million square feet of lab space under construction and 5.3 million square feet of proposed new life sciences developments.
|9. North Carolina (including Raleigh-Durham and Research Triangle Park)
Raleigh-Durham and Research Triangle Park anchor a North Carolina life sciences presence that ranks fifth in NIH funding (2,716 awards totaling $1.899 billion). The Tar Heel State’s growing list of biopharma projects have moved it a notch to seventh in lab space (15.7 million square feet, according to Colliers)—and with 4,800 jobs announced in 2021 and 1,300 in Q1 2022, North Carolina should rise well above its number nine jobs ranking. (The total jobs figure is 70,000, according to the North Carolina Biotechnology Center.) The state ranks 10th in patents (1,851) and venture capital ($998.53 million consisting of $956.83 million in 2020–2021 [NC Biotech Center] plus $41.7 million in Q1 2022 [CipherBio]).
Seattle’s life sciences sector, which has long boasted top-tier research institutions and universities, also excels at fostering the growth of companies—which explains its fourth place showing in venture capital ($6.065 billion from 2020 through Q1 2022, according to industry group Life Science Washington). Seattle is seventh in patents (2,461) and eighth in both NIH funding (1,605 awards totaling $1.168 billion) and lab space (15 million square feet, according to JLL). However, Seattle and vicinity only place 10th in jobs (nearly 40,000, according to Life Science Washington).
|7. Greater Philadelphia
Greater Philadelphia places sixth in three of GEN’s five criteria for ranking U.S. biopharma clusters: Lab space (21.3 million square feet, according to Colliers), NIH funding (2,772 awards totaling $1.379 billion), and patents (5,511). The City of Brotherly Love and its suburbs—which extend into parts of southern New Jersey and northern Delaware—place eighth in jobs (71,539, according to the Chamber of Commerce for Greater Philadelphia’s Select Greater Philadelphia Council) and eighth in venture capital ($1.965 billion consisting of $1.93 billion from 2020 to 2021 [Select Greater Philadelphia] and $35 million in Q1 2022 [CipherBio]).
|6. Los Angeles / Orange County, CA
LA/Orange leads the nation in life sciences jobs (187,152 according to statewide life sciences industry group BIOCOM; 103,530 according to California Life Sciences based on a KPMG analysis of U.S. Bureau of Labor Statistics Quarterly Census of Employment and Wages data). The region anchored by the “City of Angels” places sixth in venture capital ($4.467 billion consisting of $3.8 billion in 2020-2021 [regional industry group BioscienceLA based on data from Newmark and PitchBook] and $666.745 million in Q1 2022 [PitchBook]). LA/Orange is also seventh in NIH funding (2,161 awards totaling $1.299 billion), eighth in patents (1,999) and ninth in lab space (11.2 million square feet, according to Newmark).
|5. San Diego
The region anchored by the Plymouth of the West continued to rank higher in venture capital than in other categories. In venture capital, it ranked third ($8.439 billion consisting of $3.619 billion in 2020 [PwC] and $4.82 billion in 2021 and Q1 2022 [CipherBio]), behind Boston/Cambridge and San Francisco. San Diego placed fourth in patents, edging out the third-ranked BioHealth Capital Region by a single patent (6,400), fifth in lab space (22.3 million square feet, according to CBRE), seventh in jobs (72,403 according to BIOCOM; 52,952 according to California Life Sciences based on a KPMG analysis of statistics from the U.S. Department of Labor), and 10th in NIH funding (1,783 awards totaling $1.038 billion).
|4. BioHealth Capital Region [Maryland/Virginia/Washington, D.C.]
The Maryland/Virginia/Washington, DC, BioHealth Capital Region (BHCR) benefits from anchors ranging from Johns Hopkins University to the headquarters of the FDA and NIH. BHCR aims to be a top-three region by 2023, a goal the region has already accomplished in NIH funding (3,992 awards totaling $2.536 billion), patents (6,401), and lab space—35.5 million square feet, according to JLL, which along with Cushman & Wakefield include the 9.2 million square feet of lab space within the NIH Campus headquarters in Bethesda, MD. The region is fourth in jobs (117,378, according to JLL) and sixth in venture capital ($2.384 billion consisting of $2.8 billion in 2020–2021 [JLL data cited by BHCR] and $92.295 million [PitchBook]).
|3. New York / New Jersey
New York City’s longtime strength, its critical mass of academic research institutions, propels it to the top among regions for NIH funding (5,287 awards totaling $3.326 billion). New York/New Jersey finishes third in jobs (128,000, according to CBRE), fourth in lab space (23.8 million square feet of which 79% was in New Jersey, according to Colliers), and fifth in venture capital ($4.862 billion consisting of $2.4 billion in 2020 [PitchBook] and $2.462 billion in 2021 and Q1 2022 [CipherBio]) and patents (5,807). New York City expects 10 million square feet of lab space to come online in the next 10–15 years.
|2. San Francisco Bay Area
The Bay Area is closer than ever to recapturing the top spot it held in GEN’s first U.S. cluster list in 2014. While the region’s sole number-one ranking is in patents (13,550), San Francisco and vicinity rank a close second in jobs (178,958, according to BIOCOM), lab space (46.2 million square feet, according to Cushman & Wakefield), and venture capital ($16.372 billion consisting of $7.068 billion in 2020 [PitchBook] and $9.304 billion in 2021 and Q1 2022 [CipherBio]). The region lags in NIH funding, where it remains fourth (4,236 awards totaling $2.266 billion).
|1. Boston / Cambridge, MA
While its lead over the San Francisco Bay Area has narrowed of late, Boston/Cambridge remains the nation’s top biopharma cluster thanks to number-one rankings in lab space (49.1 million square feet according to CBRE) and especially venture capital ($23.592 billion consisting of $21.6 billion from 2020 to 2021, according to the Massachusetts Biotechnology Council [MassBio] and $1.992 billion in Q1 2022 [CipherBio]). The region is second, behind San Francisco, in NIH funding (5,666 awards totaling $3.172 billion) and patents (10,119), but it ranks only fifth in jobs (104,000, according to CBRE). MassBio tallied 84,296 biotech jobs statewide in 2020.
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