GEN: Top 10 U.S. Biopharma Clusters
Is the glass half empty or half full when it comes to the health of the life sciences industry, as reflected by the business of building and operating biopharma lab and office space? Depends on who you ask.
Last month, short seller Jonathan Litt’s Land & Buildings Investment Management published a white paper explaining its short position in the nation’s largest life-sci real estate developer/manager Alexandria Real Estate (ARE) Equities. Land & Buildings concluded that people working from home resulted in 50% less use of cell phones in Alexandria’s buildings during the 12 months ending in February, versus the year ending February 2020, soon before COVID-19 upended the world.
Alexandria is a publicly traded real estate investment trust with an asset base of 74.9 million square feet and approximately 825 tenants in North America, including seven of the 10 largest GEN-ranked biopharma clusters.
Alexandria found a defender in commercial real estate investor Brad Thomas, who unlike Land & Buildings takes a long position in the developer. Thomas asserted in a commentary that Alexandria enjoys a sustainable competitive advantage that includes the research activity being conducted; its concentration in campuses built within core centers of innovation; and continuing life sciences growth.
“There is a unique desire among life science entities to cluster together in campus ecosystems like ARE has pioneered in order to drive productivity and collaboration, to recruit and retain top talent, to attract strategic capital, and to ensure best-in-class, 24/7 operations of their mission-critical real estate,” Thomas observed.
Among the positives Thomas cites for life-sci: An estimated market value of $5 trillion-plus, a steady pace of FDA drug approvals continuing into this year, and annual funds (including venture capital, public market investment, government grants, and private philanthropy) ranging between $450 billion and $500 billion year-over-year: “The unmet need matched with an increasing armamentarium of new and improved tools, provides a limitless opportunity set for the life science industry.”
Cautious with capital
That optimism is shared by Alexandria’s closest rival among life-sci developers—privately-held BioMed Realty, a Blackstone portfolio company that owns and manages 16.3 million square feet of life-sci space in the U.S. and U.K., including five GEN-ranked clusters.
Speaking with GEN, BioMed Realty CEO Tim Schoen acknowledged the numerous challenges faced by life-sci companies in recent years—including the bear market, inflation, rising interest rates, and the regional banking crisis of the past winter.
Despite all that, Schoen said, biopharmas have continued spending on R&D, and accessing NIH grants and venture capital, even if the pace of VC investment remains below the record highs of a few years back.
“We’ve seen a period of time here in the last year where companies have really been cautious with capital, and they’re trying to extend their runways to get to the next milestone. So you’ve seen a slowdown like a lot of people talk about in the press. You’ll see the headline come out that real estate slowed—and it has. The volume of transactions has slowed, as has the number of tenants in the market,” Schoen explained.
But in its core markets, he added, BioMed is seeing vacancy levels at or near pre-COVID lows for companies seeking space.
“We’ll start to see that demand come back as tenants meet their next milestone and need to expand as well as take more space, because they’ve got the funding now that they needed, particularly in the core markets,” Schoen predicted. “Whether it’s UTC [University Town Center] or Torrey Pines in San Diego, whether it’s South San Francisco or the Peninsula or the Emeryville area in San Francisco, or East Cambridge in Kendall Square, in Boston, or South Lake Union in Seattle, those markets are always going to be strong and have a real depth of talent and companies that are looking for space.”
Five criteria
Since 2014, GEN has issued annual, nationally cited rankings to indicate which regions are most competitive in efforts to attract life sciences companies. This year’s rankings are based on:
NIH funding—Figures for NIH funding were taken from the publicly available NIH RePORT database for the current federal fiscal year through July 18, plus all of fiscal year 2022 (October 1, 2020, through September 30, 2022).
Venture capital (VC) funding—Figures for all of 2022 and the first half of 2023, as compiled by regional life sciences groups and PitchBook, which joins with the National Venture Capital Association to publish the quarterly Venture Monitor reports.
Patents—A tally of the number of patents containing the word “biotechnology” and towns and cities within a given region or state. This past year the U.S. Patent and Trademark Office (USPTO) overhauled its public patent database, resulting in larger numbers as search results now capture references to cities and states among inventors and even the text of patent claims within patent families, in addition to assignee companies or institutions.
Lab space—The total-size-of-market figure, in millions of square feet, as furnished by regional life sciences groups. In regions that do not compile such information, the figure cited is the highest by any of several commercial real estate companies, including CBRE Group, Colliers, Cushman & Wakefield, JLL, and Newmark.
Jobs—The preferred sources for job figures were regional life sciences groups. Alternative sources included commercial real estate firms.
10. Chicagoland
Trammell Crow on July 17 announced two expansions by tenants at its 725,000-square-foot Fulton Labs campus in Chicago’s Fulton Market area. One is the Chan Zuckerberg Biohub Chicago, which took about 28,200 square feet. Chicago beat out 36 U.S. cities that submitted 57 applications to host the Biohub. The other, venture capital firm Portal Innovations, is growing to 55,000 square feet by adding 6,000 square feet. Portal Innovations raised a $100 million financing in May to invest in life sciences startups in Chicago and elsewhere.
Also expanding within Chicagoland is Trammell Crow’s life-sci portfolio. The Dallas-based developer broke ground in February on the $225 million, 302,000-square-foot second phase of Hyde Park Labs, whose anchor tenant is the University of Chicago. In suburban North Chicago, Rosalind Franklin University last month completed 14,000 square feet of wet lab space in its Innovation and Research Park. And in Evanston, TCC is building the 177,575-square-foot Evanston Labs, set to open next spring. Chicagoland ranks sixth in jobs with a life sciences workforce of 90,941, as tallied by the Illinois Biotechnology Industry Organization or iBIO. Beyond jobs, the region ranks ninth in patents (4,452), and 10th in both NIH funding (3,820 awards totaling $1.91 billion) and venture capital ($1.2 billion in 2022 [iBIO] and $112 million in Q1-Q2 2023 [PitchBook]. Chicagoland placed only 11th in lab space (more than 1.98 million square feet, according to iBIO), but that figure expected to rise in coming years since the region has 456,442 square feet of lab space under construction.
9. Seattle
Seattle can boast of three biotechs that have attracted billion-dollar-plus buyouts by larger biopharmas since March: Bothell, WA-based Seagen (formerly Seattle Genetics) is being acquired by Pfizer for $43 billion, the year’s biggest acquisition deal to date. That deal has already sparked an in-depth antitrust review including a “second request for information” from the U.S. Federal Trade Commission (FTC) this month. Chinook Therapeutics is being bought by Novartis for $3.2 billion while CTI BioPharma was scooped up for $1.7 billion by Swedish Orphan Biovitrum (Sobi) in a deal completed last month.
Moderna announced plans to open a 220-person Seattle office focused on scaling up artificial intelligence and cloud-based tools in March. Also that month, the Fred Hutchinson Cancer Research Center opened its second building, a $320 million, 150,000-square-foot outpatient clinic. However, Fred Hutch spinout Affini-T Therapeutics is shutting down its Seattle lab, some of whose 17 staffers have been offered relocation to the company’s Watertown, MA, headquarters. Across Washington state, more than 300 life-sci facilities and organizations support more than 100,000 jobs with an annual economic impact of $35.5 billion and showed a 33.6% increase in job growth from 2015–2021, statewide industry group Life Science Washington reported in May.
Seattle ranks seventh in venture capital ($1.2 billion last year, $381.8 million in January–June 2023, according to Life Science Washington), and eighth in NIH funding (2,805 awards totaling $2.206 billion). But the region places ninth in lab space with 9.257 million square feet of lab space (Life Science Washington), and 10th in both patents (4,125) and workforce size (approximately 43,500, also according to Life Science Washington).
8. North Carolina
Pfizer was spared from human tragedy when a tornado with wind speeds of up to 150 mph damaged its manufacturing plant in Rocky Mount, NC, on July 19. All 4,500 Pfizer staffers were safe and accounted for, the company confirmed. But the twister severely damaged the roof of the 1.4 million-square-foot facility, which had produced “nearly 25%” of all sterile injectables used in U.S. hospitals.
Pfizer is one of 39 life-sci and related companies to announce expansions or relocations in North Carolina since January 2022, generating more than 3,500 new jobs, according to the state-funded North Carolina Biotechnology Center. The pharma giant in January agreed to acquire for an undisclosed price Abzena’s 100-person manufacturing facility in Sanford, NC, set to expand to 300 people by 2025. Sanford is where Pfizer last year began a $500 million expansion at another site designed to boost its production of gene therapies. Also in January, Eli Lilly announced a $450 million expansion of its nearly completed $474 million Research Triangle Park pharmaceutical manufacturing campus, set to create 100+ new jobs. More recently, chronic kidney disease cell therapy developer ProKidney said in June it will create a $485 million manufacturing facility in Greensboro, NC, by 2027 that will employ up to 330.RTP and Raleigh-Durham anchor life-sci activity in the Tar Heel State, which ranks highest at fifth in NIH funding (4,612 awards totaling $3.482 billion). But North Carolina has sparkled lately in venture capital funding, where it has climbed to sixth (from 10th last year) with $844.867 million in 2022 and $721.067 million in Q1–Q2 2023, according to the North Carolina Biotechnology Center. The Center counts “more than 75,000” jobs across the state, which ranks the region eighth. North Carolina is also seventh in lab space (17.6 million square feet according to Colliers) but finishes eighth in patents (4,552).
7. Greater Philadelphia
The City of Brotherly Love and its suburbs—which extend into parts of southern New Jersey and northern Delaware—have positioned their region in recent years as a magnet for cell and gene therapy development, drawing upon anchors that include University of Pennsylvania’s pioneering Gene Therapy program led by James M. Wilson, MD, PhD, Children’s Hospital of Philadelphia (CHOP), The Wistar Institute, Roche-owned Spark Therapeutics, turnaround-focused Passage Bio, and The Discovery Labs in suburban King of Prussia, PA.
Spark broke ground in March on a $575 million gene therapy innovation center within Drexel University’s campus in Philadelphia’s University City. In May, construction began on 2300 Market by Breakthrough, a 223,000-square-foot research facility at S. 23rd Street within Philadelphia’s Center City, set to be completed next year. Also in May, Wistar joined with the Pennsylvania Biotechnology Center and Baruch S. Blumberg Institute to launch a partnership committed to seeding, launching and nurturing life-sci startups. Across the region, 1,200 companies specialize in life sciences, one of four industry focus areas of Select Greater Philadelphia, a council of the Chamber of Commerce for Greater Philadelphia that recently launched a website with property and job opening search tools. Recognizing the region’s life-sci growth, the Biotechnology Innovation Organization (BIO) recently selected Philadelphia as the site of its 2027 International Convention.
Greater Philadelphia ranks highest in patents, fourth with 14,969. The region is sixth in lab space (22.8 million square feet according to Colliers) and NIH funding (4,493 awards totaling $2.343 billion). However, Philly and vicinity rank ninth in jobs (71,286, according to Select Greater Philadelphia) and venture capital ($600 million in 2022, $280.27 million in January–June 2023 according to Select Greater Philadelphia citing Dealforma data). Raising VC within Greater Philly is an ongoing challenge: “We need a $10 billion fund that’s Philly-focused,” said Audrey Greenberg, co-founder and chief business officer of the Center for Breakthrough Medicines in King of Prussia, told Philadelphia Magazine in May.
6. San Diego
San Diego-based Prometheus Biosciences figured in the year’s second-biggest biotech M&A deal to date when Merck & Co. completed its $10.8 billion acquisition of the immunology drug developer last month. The region anchored by “the Plymouth of the West” has long been viewed by biopharma giants and up-and-comers as offering boundless opportunities. Speaking of which, Boundless Bio, whose precision oncology therapies target extrachromosomal DNA (ecDNA), closed in May on a $100 million Series C financing co-led by Bayer’s investment arm Leaps by Bayer and RA Capital Management. Two mega-campuses are in the works: IQHQ is developing the $1.6 billion, 1.7 million-square-foot Research and Development District (RaDD) on San Diego’s Pacific coastline, while Sterling Bay and Harrison Street have broken ground on the $650 million Pacific Center, a 500,000-square-foot campus in Sorrento Mesa set to open in Q4 2024.
Among San Diego’s life-sci anchors is Illumina, which is eliminating an unspecified number of jobs under a plan designed to reduce annual expenses by $100 million. The sequencing giant is also vacating its second San Diego campus called “i3”, which opened in 2017 when the company anticipated soon outgrowing its headquarters within “America’s Finest City.” Illumina’s moves followed a turbulent spring for Illumina that saw CEO Francis deSouza resign last month after shareholders ousted his ally as board chairman and elected an ally of activist investor Carl C. Icahn, whose case for change at the company included an exclusive GEN interview. Home to the 2024 BIO International Convention, the San Diego region ranks highest at fourth in both lab space (24.4 million square feet according to statewide industry group BIOCOM, citing a figure from CBRE) and venture capital ($2.557 billion in 2022, $878 million in Q1-Q2 2023, according to BIOCOM California). San Diego places fifth in patents (12,705) but finishes seventh in jobs (77,770 according to BIOCOM California) and just ninth in NIH funding (2,919 awards totaling $1.965 billion).
5. Los Angeles / Orange County
Long a distant third among California’s life sciences clusters, Los Angeles/Orange County has made impressive strides catching up to the longer-established San Francisco and San Diego ecosystems. One area of marked improvement is venture capital, where Los Angeles VC firm Westlake Village BioPartners on July 17 launched a third fund of $450 million, designed to incubate early-stage next-generation biotechs in the “City of Angels” and beyond. Westlake has established eight companies in the region to date.
Drug development is another strength. In addition to giants like Amgen and Kite Pharma, a Gilead Company, the region houses up-and-comers like Agoura Hills, CA-based A2 Biotherapeutics. In May, A2 dosed its first patient in the Phase I EVEREST dose-escalation trial (NCT05736731) assessing A2B530, the first autologous cell therapy developed through A2 Bio’s Tmod™ platform. A2 signaled growth plans last year by leasing 77,000 square feet at 30601 Agoura Road for a new global HQ. By contrast the region’s largest biopharma Amgen this year has shrunk its workforce, which in Ventura County has numbered 5,000-plus people. Amgen disclosed plans to lay off about 300 staffers in January, followed by an additional 450 in March. Amgen hopes to grow, however, through a planned $27.8 billion acquisition of Horizon Therapeutics—and is fighting the U.S. Federal Trade Commission (FTC), which opposes the deal on antitrust grounds.
Los Angeles/Orange County places a strong third in both jobs (134,739, according to statewide industry group California Life Sciences, based on 2021 data published earlier this month), and venture capital ($3.43 billion in 2022 and $1.2 billion in January-June 2023, according to PitchBook). Other indicators, however, lag behind, with the region placing seventh in both NIH funding (3,702 awards totaling $2.25 billion) and patents (5,676), while only ranging as high as eighth in lab space (11.4 million square feet according to statewide industry group BIOCOM California).
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