By Tom Piombino
For the cell and gene therapy (CGT) sector, recent years have been nothing less than phenomenal. For example, according to the Alliance for Regenerative Medicine, the sector has witnessed skyrocketing investment. The $7.5 billion raised in 2017 was more than tripled by the $22.7 billion raised in 2021.
Besides creating opportunities for CGT companies, such funding is creating a crunch for both real estate and talent. For example, in San Francisco, more than half a billion square feet of manufacturing space has been acquired by CGT companies in the past year. In Philadelphia, where academia is generating intellectual property in the CGT space at a torrid pace, more than one million square feet of new laboratory space is in development.
In North Carolina’s Research Triangle region—where vacancy rates have kept per-square-foot development in the $30’s range (as opposed to downtown Boston’s $100/square foot)—the competition for resources has placed a premium on selection and planning, as CGT programs shift from R&D, which occurs in science clusters, to manufacturing, which occurs in attractive suburban markets.
This shift is a huge challenge for CGT companies. The transition from research and preclinical development to process development and clinical manufacturing is rough. Some stakeholders underestimate the difficulties of taking their businesses to the manufacturing phase, and they end up treading water in a sea of limited options. While the pandemic significantly impacted the office market, many of the available and proposed building conversions cannot provide the rigor or meet the cost expectations of a manufacturing facility.
Site selection in today’s market goes beyond engineering and real estate. It requires bringing knowledge and talent to appreciate the perspectives of more diverse workforces and company cultures while sustaining market growth, promotion, and compliance. From an organization’s project inception, unity of the resources early in a planning process offers owners the perspectives needed to make the right decisions for their businesses while focusing on the big picture of bringing groundbreaking therapies to market. All too often, these decisions are predicated on immediate needs (2 years out) or currently available resources, instead of a vision of technological progress (10 years out).
Site selection can be daunting for the most seasoned real estate professionals, and even more so for people whose expertise is outside of the field. Selecting an attractive site—one with the proper structural capacity, heights, utilities, workforce availability, access to transportation, access to parking, and amenities—can quickly become an all-consuming task for an operating company. Additionally, predicting the needs and wants of a workforce in a transitionary state, post-pandemic, adds another dimension of complexity for people’s whose day job is attending to developing science.
Much like an engineering design process, the building out of early-stage GCT facilities requires a deliberate approach with input from experts whose knowledge in various fields benefits the project as a whole. It must start at the business case inception, utilizing a well-rounded team that can streamline the process and thoroughly explore solutions while addressing needs and challenges across the organization. While speed is incredibly important at this stage, attempts at seeing this inceptionary process as a transaction often result in a misrepresentation of the required outcome.
Using applied experience and several iterations, an experienced project team with an understanding of the business case can recognize trends, similarities, and the opportunities to quickly adapt the solutions that can be acted upon in weeks rather than months. If this approach is taken from the inception of a project, owners can realize considerable benefits and avoid distractions from their day jobs.
First, it brings into focus a clear multiyear plan addressing the operational needs of the organization: Who will need to be hired for research, quality control, manufacturing, maintenance, packaging, and shipping, among other positions? How can an organization build its culture during the growth period? What kinds of efficiencies are needed in the facility? What impact will the operational costs have on funding resources? How does residual value of the asset impact the investor appetite in a facility?
Second, it brings more value to the effort by helping owners explore costs and schedules from the outset. If owners begin months later, during conceptual design, they may belatedly discover that they could have been better positioned to seize growth opportunities.
Planning for companies in a fast-growth period can be daunting, especially in a real estate environment as competitive as the one that currently exists. Company leaders versed in other aspects of the business such as R&D may not have a sense of how much space will be needed in the long term, or of how much effort will be needed to ensure a space meets requirements such as staying up to code.
Onboarding the project team early on can be key to making a project successful because it streamlines the iterative process. By working closely with owners at the inception of the project, team members learn what works for organizations and what does not, building upon the plan as it progresses.
It also develops trust and confidence—two elements that are especially valuable when the team needs to be flexible in the exploratory phase of project planning. Not only do these elements empower team members to present multiple options, including unconventional options, it gives them the space to learn from feedback and converge on the right solution.
When evaluating options, organizations have to focus on important factors for each element of the plan:
Site: This is about more than the location of the facility. The site plays a key role in meeting the organization’s current goals and serves its future growth. With those near-term and long-term goals prioritized, the team can address details such as the need to include multi-floor manufacturing facilities or loading docks capable of accommodating particular types of vehicles.
Also, not to be overlooked in site selection is customer access. Ensuring that an organization’s key audience can easily access these facilities—whether they are in urban areas, which may present traffic and parking difficulties, or in smaller markets, which may not be as easily accessible by commercial transportation—will be a factor in the decision-making process.
Space: The rapid growth in the CGT market puts space at the forefront of planning for small companies. How big does a new facility need to be? What features will need to be included? Can the current building stock in a market serve an organization’s needs, or will a greenfield development be required? Much of the real estate market is developer-driven rather than company-driven, which has both benefits and challenges.
In a developer-driven project, a facility may be fitted out to serve as a manufacturing nexus for cell therapies, gene therapies, and biologics. Alternatively, a facility may meet a particular manufacturing need, once the developer determines the appropriate scale reviews a few solutions. While there are few standard solutions that fit all CGT companies, by taking standard ideas and measuring the options to the needs, organizations can streamline the process by tailoring elements to their requirements.
Brand: More than being about aesthetics, a facility’s appearance has the ability to tell an organization’s story, from its culture to its future plans. While a warehouse can serve a company like Amazon quite effectively, for growing CGT companies wanting to attract top talent and top funders, the impression that a facility presents impacts the mission of the company as well as how an organization can differentiate itself from other companies in a competitive marketplace.
Expectations: There are a lot of companies that can get derailed early on in the process, as their expectations can deviate from reality.
Cost + function + strategy
For owners coming out of institutions that are not well placed, moving to a central location might put them in greater proximity to talent. It also could come with significant extra costs in rent, construction, and operations. Rents within regions, not just
between regions, can swing significantly.
However, organizations also must be honest when considering the costs. For example, is $22/square foot for rent in the suburbs more cost effective compared to $55/square foot near a city core if it means sacrificing the ability to recruit talented people who refuse to work in the suburbs?
In addition, with space at a premium, can an organization live with a real estate strategy that might require a stepped approach to growth? In the rapidly expanding CGT markets, many companies moving from research to trials to manufacturing have compromised on facilities that are too small or in the wrong location, putting growth strategies at risk.
The demands on CGT companies are different from those on other companies. Even as biopharma players have moved into the market, the competition has only increased the difficulty of coping with the market’s growth.
The move from research to preclinical trials to clinical manufacturing is occurring at such a pace that it is leaving some companies waiting at a crossroads without a complete strategy on moving forward. By engaging technical and subject matter experts as part of a project team early in the process, organizational leaders can make decisions that will position their organizations for years of growth.
Tom Piombino ([email protected]) is managing director of the Americas for IPS—Integrated Project Services. For more information on the Inceptioneering process, please visit www.ipsdb.com/expertise/services/inceptioneering.