Outside the Biotechnology Clusters
Every year, more locations promote themselves as hot spots for biotechnology. Do any of them have the potential to become the next San Diego or Boston? Business Facilities has uncovered a few areas showing promise.
Over 40 regions in the U.S. are currently targeting biotechnology to grow their economies, up from 14 just five years ago, according to the national Biotechnology Industry Organization. This is because biotechnology not only impacts our everyday lives, but also holds great economic promise.
“Nearly every part of the world is looking to its future dramatically affected by biotechnology,” says G. Steven Burrill, CEO of Burrill and Company, a life sciences merchant bank. “The technology being developed for new diagnostics, therapeutics, and vaccines will revolutionize everything that we do.”
According to “Beyond Borders,” Ernst & Young’s 2007 global biotechnology report, biotechnology is on track to become a $100 billion industry before the end of this decade. Today, the biotechnology industry is comprised of 5,000 companies worldwide, collectively earning $50 billion in revenue with hundreds of products on the market. The industry greatly impacts other sectors, including drug development, agriculture, and energy.
But you can’t just grow a biotechnology hub overnight; it can take decades to mature. For example, Boston, San Diego, and California’s Silicon Valley took over 20 years to become the biotechnology hotbeds they are today.
Experts point to several factors that must be in place for a city to grow a biotechnology industry, including local venture capital, first-class research facilities, strong universities, and a large and talented scientific pool. “The challenge for every location in the world is to have enough of those critical factors to feed it and have momentum and sustainability,” says Scott Sarazen, the global biotechnology markets leader for Ernst & Young.
“It’s mind boggling how many cities would like to become biotechnology clusters,” says Gautam Jaggi, editor of “Beyond Borders.” “Not all of these areas are going to be successful, so there is wisdom in developing a strategy and leveraging what your biotechnology strength is.”
The cities we’ve chosen to profile in the remainder of this story meet this test. None have yet to reach the level of a global biotechnology capital—but all these emerging North American biotechnology locations are worth keeping an eye on.
St. Louis: Bio-Belt of the Midwest
According to several studies—including a major one in 2000 by the Battelle Institute—St. Louis, MO is starting to make its mark on the biotechnology map. The Battelle study determined that due to the city’s existing wealth of science corporations (such as Monsanto Co., Pfizer Inc., and Sigma Aldrich) and educational and research institutions (such as Washington University, St. Louis University, BJC Healthcare, and Missouri Botanical Garden), St. Louis has the potential to become a world leader in the area of plant and life sciences. The study also reported that the city would need to enhance several other areas (including incubators, venture funds, facilities, and workforce) for this to happen.
Since the study, the city has grown to employ over 15,000 at more than 400 biotechnology companies, particularly in the areas of plant and life sciences. Over $500 million in venture capital has been spent to support these efforts, and several venture capitalists, including Prolog, RiverVest, and Oakwood, have moved into the city.
Several biotechnology incubators, such as the Nidus Center for Scientific Enterprise and the Center for Emerging Technologies, have been formed to help biotechnology start-up companies grow. Akermin, Inc. moved into the Nidus Center in 2004 after developing portable fuel cell technology at Saint Louis University. The company is hoping for a breakthrough that will lead it towards commercialization over the next few years.
“The environment at the Nidus Center is very conducive to sharing thoughts and ideas with other companies in a similar stage of development,” says Louis Hruska, president & CEO of Akermin. “Also, knowing our facility infrastructure is well-handled allows us to focus on the development of our technology.”
Akermin, Inc. received funding from the BioGenerator, an incubator located in the Nidus Center that provides start-ups with financial support for hiring their first employees, setting up laboratories, and beginning development of their products.
“Our BioGenerator works very closely with the tech transfer department at the local universities in trying to identify technologies that can be successfully commercialized,” says Susan Pais, director of operations at the Nidus Center.
The Nidus Center has helped create over 100 jobs in the region, and due to the generally higher wages of life sciences jobs, the incubator contributes over $5 million in wages.
To further attract biotechnology start-ups, several prominent St. Louis schools and other organizations formed CORTEX, the Center for Research, Technology and Entrepreneurial Exchange. The $55 million non-profit organization plans to develop biotechnology office and research buildings on 246 acres in the Midtown St. Louis area. CORTEX projects its efforts will lead to the creation of more than 12,000 jobs over the next 25 years and new city tax revenues in excess of $400 million.
“The biotechnology industry is a geometrically growing industry,” says John Dubinsky, founder and CEO of CORTEX. “Four or five years ago, it became obvious that in order for St. Louis to build a biotechnology industry, we needed to make space available for up-and-coming commercial biotechnology companies.”
Two tenants, Washington University Medical School and Stereotaxis, Inc. have already leased more than 50% of the space. Stereotaxis designs, manufactures, and markets a cardiology instrument control system used to treat coronary artery disease and arrhythmias. In 2006, Solae Co., a joint venture formed by DuPont and Bunge Ltd. to develop soy-based foods, announced it will build its $40 million headquarters in the CORTEX area.
“There’s no question that communities like Boston, San Diego, and San Francisco have a head start to St. Louis, but if you look at 10 to 12 other cities interested in growing, St. Louis would be at the top of that list in terms of assets that can be built on,” says Dubinsky. “The growth of biotechnology is one of the top two priorities of the state. We have a lot of financial and intellectual resources available for biotechnology companies that want to come to St. Louis and be in this market.”
Powering Biotechnology in the Lone Star State
The state of Texas has launched two major funds to help grow its biotechnology industry. One of the funds, the Texas Emerging Technology Fund (ETF), provides $200 million in grants to biotechnology companies, while the Cancer Initiative, passed by the Texas legislature in November 2007, will provide $3 billion for cancer research.
Dr. John Mendelsohn, president of the M.D. Anderson Cancer Center in Houston, says the Cancer Initiative will pump in much needed funds to recruit world-class scientists to Houston.
“Over half of cancer research goes on in the greater Houston area,” says Mendelsohn. “The initiative will expand research on cancer to bring opportunities to develop intellectual property, will attract entrepreneurs and venture capitalists to the community, and convert discoveries that are economically useful to hopefully treat and prevent cancer.”
M.D. Anderson is located on the campus of the Texas Medical Center, the largest collection of medical institutions in the country. Over five billion patients visit the Texas Medical Center every year.
“One of the main reasons that Houston is an obvious place for biotechnology is not only the research occurring at the Texas Medical Center in a concentrated way, but also the huge amount of opportunities to transfer new ideas to patients,” says Mendelsohn.
To further expand biotechnology commercialization in the Houston area, M.D. Anderson and the University of Texas (UT) Health Science Center at Houston joined forces to develop the UT Research Park, an area of over 100 acres of land that houses public and private research facilities for both cancer and heart disease.
Houston’s biotechnology community has doubled in the last four years, with a total of about 140 life science companies today. Genentech Inc., the world’s second-largest biotechnology company, just bought Houston start-up Tanox, Inc. for $1 billion. Tanox developed the FDA-approved asthma medicine Xolair.
“The combination of the ETF and Cancer Initiative funds have really set the state apart,” says Jacqueline Northcut, president and CEO of BioHouston, an organization formed to stimulate technology transfer and commercialization in Houston. “In a healthy biotechnology ecosystem, you have to have a good churn of companies. We have a lot of new companies starting, experiencing terrific success, and getting bought out by larger companies, such as Tanox getting acquired by Genentec. That is success.”
Like Houston, San Antonio is working to cultivate its biotechnology industry. Currently, the city’s biotechnology sector is comprised of 108,000 employees and has an annual economic impact that exceeds $14 billion.
Community and industry leaders formed BioMed SA in 2005 to raise the visibility of San Antonio’s biotechnology industry, and serve as a catalyst to accelerate growth of the sector.
“It’s very difficult to build a sector from scratch,” says Ann Stevens, director of BioMed SA. “San Antonio is well on its way to becoming better known for its bioscience companies due to its strong academic research and military medicine and growing number of serial entrepreneurs.”
The largest engine of R&D growth in San Antonio is the UT Health Science Center at San Antonio, a major component of the South Texas Medical Center, a conglomerate of 12 major hospitals and 45 research, education, and clinical facilities. With an operating budget of $576 million, the UT Health Science Center at San Antonio ranks in the top 5% of all U.S. universities and nonprofit institutions that receive federal research funding. The institute is also internationally recognized for conducting the world’s largest Phase I drug development program for new cancer drugs.
“We have had a lot of success in translating our research into commercial entities that have been successful on their own or have been bought out at high multiples,” says Brian Herman, vice president for research at the institute.
One of the most notable examples of this success is CardioSpectra, a UT Health Science Center San Antonio spin-off company that develops diagnostic catheters to help doctors better predict which patients are at risk for a heart attack. CardioSpectra, one of the first companies to receive funding from the ETF, was purchased in December 2007 by Volcano Corp., a medical devices company from California, for $25 million.
CardioSpectra could receive additional funding for its optical coherence tomography technology (OCT), an imaging system. According to a report from the publishers of BioOptics World, the global market for OCT systems is currently around $200 million and is expected to top $800 million by 2021. This is good news for San Antonio, as Volcano Corp. plans to keep CardioSpectra in the city.
Arizona Builds Upon its Biotech Bases
Local and state leaders in Arizona are using the state’s strong research base in genomics and personalized medicine to position itself as a major player in the biotechnology industry.
Arizona’s Bioscience Roadmap, a 2002 study by the Battelle Institute, identified Arizona’s key biotechnology strengths in its universities and medical centers, as well as its research, technology transfer, and commercialization capabilities. The study also noted that in order for Arizona to become a national leader, it had to first strengthen its medical research base and build a critical mass of bioscience firms and jobs.
The Translational Genomics Research Institute (TGen) was launched in Phoenix, AZ to serve as a catalyst to bring organizations and industry together to grow biotechnology in the region. Overall, $90 million in private and public funding was provided to launch the nonprofit institute.
“We’re not San Diego, we’re not Boston,” says MaryAnn Guerra, TGen’s chief business officer. “How do we get in and survive without having 20 years of resources to capitalize on? TGen was built with the idea to not reinvent what other people are doing, but to collaborate and be a seamless integration between science and business.”
Translational genomics research is a relatively new field employing advances arising from the national Human Genome Project and applying them to the development of diagnostics, prognostics, and therapies for cancer, neurological disorders, diabetes, and other complex diseases. TGen offers biotechnology companies clinical programs, new technologies in laboratories, and sponsored collaborative research agreements. Since TGen began, its annual budget has grown from $20 million to $50 million.
One of the organization’s newest biotechnology initiative, TGen Accelerators LLC was formed in February. This $20 million venture-capital fund is intended to help early-stage bioscience companies that work in areas such as pharmaceuticals and medical tests or provide services for diseases such as cancer, Alzheimer’s, and multiple sclerosis.
“If we are truly going to be translational, we have to have a strong discovery engine, which is TGen,” says Guerra, who also serves as president of TGen Accelerators. “Accelerators was formed as the group that helps shepherd that technology from a lab and into commercialization.”
More biotechnology investment came to Phoenix in February 2007 when Abraxis Bioscience announced its plans to spend $21.5 million on two TGen-related personalized medicine initiatives that test and develop targeted cancer treatments.
“The Abraxis investment is big for a company outside of Arizona,” says Guerra. “I think it is a validation of what we are doing here.”
As part of the global initiative to develop personalized medicine, the Virginia G. Piper Charitable Trust and Flinn Foundation launched a $45 million initiative in October 2007 to develop personalized molecular diagnostics under the Partnership for Personalized Medicine. This initiative is a collaboration of the Biodesign Institute of Arizona State University, TGen, and Piper Trust.
“Through the Piper and Flinn investments, Phoenix has a good chance to become a biotechnology center,” says Guerra. “Two separate foundations coming together to leverage their resources to do something substantial in this field of personalized medicine—it’s pretty remarkable.”
Arizona’s other rising biotechnology star is the city of Tucson, whose bioscience economy is being expanded through programs such as the Technology Research Initiative Fund (TRIF), BIO5, and the new Arizona Bioscience Park.
The state of Arizona’s TRIF fund, set up to increase funding for biotechnology, helped to create BIO5, a University of Arizona (UA) institute that is focused on bringing together researchers, faculty, and students to conduct interdisciplinary research and translate that into real world applications in medicine and agriculture. BIO5’s 317,000-square-foot facility at UA was designed to provide companies with adaptive technology and space without costing a fortune.
“We consolidated our core facilities, which is a big benefit for industry and researchers,” says Vicky Chandler, director of BIO5.
“Companies starting up here can connect to industry scientists, as well as faculty and students at the university with flexible work agreements, minimal service fees, and no intellectual property issues.”
In January 2008, the National Science Foundation granted $50 million to launch the iPlant Collaborative, based at and administered by BIO5. The grant is the largest-ever gift of its kind from the National Science Foundation to an Arizona university or institution. The collaborative will design computer systems that can analyze vast quantities of scientific data and tackle global issues such as climate change and renewable energy.
To help technology transfer and commercialization grow, UA is developing a new Arizona Biosciences Park, a 660,000-square-foot park that will function as a conduit for technology transfer.
“We are projecting that the Bioscience Park will have a huge impact on our economy, with about 2,200 employees and approaching $7 or $8 million in economic impact once the first phase is completed,” says Bruce Wright, UA’s vice president for economic development.
Saskatoon: Canada’s Plant Biotech Pioneer
Saskatoon, the largest city in the Canadian province of Saskatchewan, is considered by many to be a plant biotechnology pioneer. Some of the first-ever plant biotechnology developments took place in the city over 15 years ago. Since then, Saskatoon’s biotechnology base has grown to over 30 biotechnology firms, including international companies such as BASF Canada, Bayer CropScience, Monsanto, and Dow AgroSciences, as well as local start-ups Philom Bios Inc. and Biooriginal Food & Science Corp. With approximately 30% of Canada’s agriculture biotechnology industry, Saskatoon contributes 15% of all Canadian biotechnology R&D and over CA $1 billion in sales.
Saskatoon is continuing to contribute to biotechnology advancements through achievements such as the development of an E. coli vaccine at the Vaccine and Infectious Disease Organization and the development of the CA $173.4 million Canadian Light Source synchrotron, one of only six third-generation synchrotrons in the world and the only one in Canada.
“Saskatoon is a leader in terms of plant biotechnology,” says Royal Hinther, head of business development at the National Resource Council Plant Biotechnology Institute (NRC-PBI) in Saskatoon. “We are unique because we are dedicated to plant biotechnology. A lot of areas have pharmaceuticals and plants are a second thought, but they are our primary focus.”
Several important components of Saskatoon’s biotechnology infrastructure are NRC-PBI, Agriculture Canada, and Innovation Place, the city’s science research park.
Innovation Place, an 80-acre science research park established in 1980 adjacent to the University of Saskatchewan, is home to 144 agricultural, information technology, and environmental and life sciences companies, which together employ more than 2,300 people and contribute over CA $250 million per year to the regional economy.
Companies at Innovation Place have access to facilities such as the Innovation Place Bioprocessing Center, an advanced bioprocessing facility, and the L.F. Kristjanson Biotechnology Complex, which includes growth chambers, 43 greenhouse compartments, nine furnished laboratories, and enriched laboratory space.
The NRC-PBI was established in 1983 to commercialize plant biotechnologies for the economic benefit of Canada, with total revenues averaging CA $16 million to CA $18 million per year. NRC-PBI’s 77,000-square-foot incubator, the Industry Partnership Facility, allows companies that locate there to work side-by-side with researchers.
“Our incubator is quite unique, since we have only one company that is from Saskatchewan,” says Hinther. “We have a U.S.-based company called Targeted Growth that has located at our incubator and partnered with Monsanto to commercialize techniques to increase the yield and health of crops.”
Another company to locate at NRC-PBI is Saponin Inc., a private company from Ottawa, ON. It is studying the potential of a plant called Saponaria Vaccaria—a prairie carnation. The plant’s qualities include production of a very fine starch, which is of unique interest for cosmetic and medicinal purposes.
“Saponin is one of our rising stars right now,” says Hinther. “It is building on technology developed at NRC-PBI.”
NRC-PBI also investigates canola seed genomics and the mechanisms of drought tolerance and disease resistance. Hinther sees a big opportunity in biofuels because of the attention renewable energy is receiving.
“A lot remains to be seen how biofuels are going to pan out in terms of long-term sustainability, but there is a lot of opportunity in biodiesel in terms of the plant-derived oils being used as additives to increase lubricity,” says Hinther. “The opportunity can be in the billions of dollars.”
India’s Biotech Contenders
Over the past few years, India has earned a spot on the global map of the biotechnology industry. India currently has close to 400 biotechnology companies, with total expenditures rising from $150 million in 1988 to $300 million in 1998 to $500 million in 2003. International companies such as Monsanto, Pfizer, AstraZeneca, Unilever, DuPont, Bayer, Novaritis, and Eli Lily have all located in India.
Since biotechnology is a nascent industry in India, the government is taking strides to ensure its growth in the future. In January 2005, the government revised India’s intellectual property rules, offering patent protection for products as well as processes.
“The strengthening intellectual property scenario in India has contributed greatly in attracting international biotechnology players to invest in the Indian biotechnology sector,” says Utkarsh Palnitkar, partner, transaction advisory services, Ernst & Young Private Limited in India.
The government of India’s Department of Biotechnology also announced a new national biotechnology goal to achieve $5 billion in revenues and one million employees by 2010. Its strategy includes providing intellectual property incentives, tax concessions, and grants to support the sector, as well as boosting R&D, commercialization, start-up formation, and innovative product pipelines.
“The market growth and foreseen potential of the Indian biotechnology industry together has been a strong stimulus for the government of India to take an active part in not only supporting, but also enhancing the opportunities available,” says Palnitkar. “Biotechnology has carved its own niche in the economic growth agenda of national and state policymakers.”
Bangalore and Hyderabad are two of the cities spearheading growth of the biotechnology sector.
The pharmaceuticals industry is flourishing in Hyderabad, making the city the bulk drugs capital of India. Known as Genome Valley, the city has a concentration of more than 100 biotechnology companies, 10 centers of excellence, and over 10 health care organizations, including the Centre for Cellular & Molecular Biology, the Centre for DNA Finger Printing, and the Indian Institute of Chemical Technology.
“The Genome Valley biotechnology cluster, consisting of around 231 square miles, is the largest of its kind in India,” says Palnitkar. “Its research clusters act as magnets for high quality talent.”
The Andhra Pradesh state government has been a catalyst for Hyderabad’s biotechnology industry, creating modern infrastructure both for R&D and manufacturing at the ICICI Knowledge Park and the Shapoorji Pallonji Biotech Park, which will soon have a biotechnology incubation center and animal testing facility. The state was also the principal sponsor for the country’s first venture capital fund, APIDS, which provides money to start-up biotechnology companies.
Due to innovative, efficient manufacturing processes, Hyderabad companies have developed a significant manufacturing capacity for biogenerics, which will likely accelerate the development of products for sale in the global market. One such example is Hyderabad-based Shantha Biotechnics’ launch of the hepatitis B vaccine, Shanvac-B, in 1997, which resulted in a 30-fold domestic price reduction of the vaccine. Today, Shantha supplies nearly 40% of the UN Children’s Fund global Hep-B vaccine, which is distributed in Africa, Latin America, and elsewhere.
In 2004, the Karnataka government set up “Bangalore Helix,” a 106-acre biotechnology park that includes the Institute of Bioinformatics and Applied Biotechnology, the Center for Human Genetics, an incubation center, a greenhouse, and an animal care facility.
“Both Bangalore and Hyderabad are using the enclave city approach,” says Gautam Jaggi, editor of Ernst & Young’s “Beyond Borders” report. “These biotechnology parks feed companies, and solve infrastructure problems, [each] with its own sub-economy, state-of-the art infrastructure, and friendly regulatory and business environment.”
Bangalore has grown as a biotechnology center by focusing mostly on innovation in biopharmaceuticals, with companies such as Biocon—which developed Insugen, a proprietary process for manufacturing human recombinant insulin—leading the way. According to BioSpectrum, a publication that tracks the Indian biotechnology sector, the biopharmaceuticals subsector accounts for over 70% of the country’s biotechnology sector and is growing by 30% annually. The subsector has seen revenues of $1.45 billion and is expected to hit the $3 billion mark by 2010.
Bangalore is also starting to see multinational corporations conduct clinical trials in the city, relying upon Indian contract research organizations to manage these trials. For example, Merck and Pfizer (USA), AstraZeneca (UK), and others have contracted Bangalore-based Clinigene, the first lab in India certified by the College of American Pathologists, to conduct trials for them.