Monday, June 03 2019
It is no surprise we are seeing a renewed investment in the Life Sciences industry along with an accelerated growth plan. Tech has been slowly creeping its way into the circle for years and has enabled – through AI and machine learning – the fast-tracked optimization of analysis and the exponential expansion of application areas in both pharma and biotech.
You might ask “Are start-ups really becoming so powerful?” and “Is this shift in the industry truly significant?” The short answer is yes, although for multiple dynamic reasons. Innovation is, in essence, a new method or idea so it is only fitting that the upper hand on that front lie in the young companies fighting for a niche advantage in the market and that the underdog cities in which they choose to establish be technologically noteworthy themselves. They must foster environments for innovation and collaboration while also offering competitive benefits when it comes to quality of life and how far the investment money can propel these companies toward profitability.
Big tech companies have seen this trend as well and are not blind to the opportunity. Take Amazon for instance – three of the final cities that were under consideration (although hotly debated if they truly had a shot) for their second headquarters are on the list of upcoming cities for the life sciences – Philadelphia, Nashville and Austin. Now some may look at those and see a simple location balance by being opposite their Seattle headquarters but it is no coincidence that these three cities are also growing biotech hubs. They foster innovation and are attractive for varying reasons to the minds of tomorrow. This last year Amazon took many bold steps toward claiming a hold on the healthcare industry not only in Medical devices but in drug sales and delivery as well as in launching its own generic brands through a partnership with Aurohealth. Amazon also just announced the expansion of their Austin campus adding more than 800 new jobs, with research and science being one of their top priorities. With their eyes peeled on these life science hubs there will most likely be a few acquisitions of health tech start-ups from them this year and recruitment of talent to build upon their healthcare goals.
As Big Pharma aims to become more focused on specific disease areas and tailor their portfolios for profit, they will also look to start-ups. The constant incubation of new ideas and the next generation innovation that is required for success of these young companies is something that strongly attracts Big Pharma and why an increased number of mergers and acquisitions have materialized. It is often cheaper for pharma to buy smaller, established companies instead of creating the innovation teams themselves. This also allows them to monitor early success without taking on the extreme risk of failure and the distraction of getting a business off the ground. Even with the largest pharmaceutical companies each having innovation hubs of their own, they often look outside of their home grown success to find the niche entrepreneurs who are pioneering the industry and to keep tabs on them before they grow too large.
Although the established biotech ecosystems throughout the country are still having major success, the evolution of the industry pleads investors, site selectors and professionals to instead wisely focus their keen attention on the sleeper cities primed to disrupt the coastal empires. Austin, Pittsburgh and Denver are the best kept secrets and their immense potential is about to erupt.
Hailed by many as the next Silicon Valley, Austin is situated within a close distance to both Houston and San Antonio who house renowned Cancer research hubs such as M.D. Anderson and the May’s Cancer Center, respectively. This home grown success has seen many recent breakthroughs such as Jim Allison’s 2018 Nobel Prize winning work with T Cells, proving that the immune system can in fact fight Cancer. Due to this, it is no surprise that both biotech and pharma companies – large and small – would want to join forces and strategically place themselves close to the action. Couple that with the $3 billion CPRIT Grant fund, it is easy to see the strong investment Texas has placed within the life-sciences looking forward.
With the industry-evolving movement of tech integration within scientific research and medicine as well as the growing number of collaborations being nurtured, Austin also has the strong advantage of hosting a vast amount of large tech companies: 3M, Apple Inc., Hewlett-Packard, Google, Facebook, AMD, Applied Materials, Cirrus Logic, Cisco Systems, eBay/PayPal, Bioware, Blizzard Entertainment, Hoover’s, Intel Corporation, National Instruments, Samsung Group, Silicon Laboratories and Oracle Corporation – to name a few. As more and more of these companies explore the growing goldmine that is healthcare, they provide key insights into where investors, sight selectors and leadership should focus their attention and prepare for the next growth-spurt.
The first of those clues comes from Apple, who just announced at the end of this last year, that it will be building a $1 billion campus in North Austin, joining the already impressive cluster of talent. The existing campus is already Apple’s second largest in the nation and with this expansion it could rival Silicon Valley. When asked about the project, Apple CEO Tim Cook said “Talent, creativity, and tomorrow’s breakthrough ideas aren’t limited by region or zip code,” and that they are proud to “significantly deepen our quarter-century partnership with the city and people of Austin”. As Apple expands their technology with medical devices and new health monitoring capabilities of their smart watches as well as its internal healthcare services HealthKit, CareKit, and ResearchKit, they will look to hire many highly qualified project heads and young innovators alike.
The second clue, although harder to pick up on, resides in the unannounced leases by Google – the most active tech giant in healthcare. Not only have they leased all 150,000 square feet of office space at the under-construction Saltillo mixed-use development, but they have also signed a lease for ALL 35 floors of a new downtown tower that is being built. This move is as big of a bet on Austin as it is a promise to expand its engagement and provide thousands of new jobs. Google currently has 800 employees in Austin but with the combined capacity of the new leases, could house more than five thousand. When commenting on the recent move and the trend of California companies to make Austin home, Diana Holford, senior vice president of JLL noted “Austin has the talent they need and want... Most of these companies first get a toehold in our city, then they find success here and grow exponentially.” Not only has Google expanded its investment in the health insurance startup Oscar Health with $375M but they also continue to expand into the biotechnology space by participating in Alector’s recent $133M Series E to fund the company’s investigation of new drugs for Alzheimer’s Disease.
Following in these strategic wagers are other major tech companies also expanding their Austin footprint including Oracle, Facebook and Indeed. But it’s not only Big Tech that sees the profit in Central Texas but Big Pharma as well. Merck’s recent launch of its new health innovation IT Hub within the Dell Medical School’s Health Discovery Building exemplified this notion and came with a promise to foster a healthy economy. When explaining the move, Clark Golestani, president of Emerging Businesses and Global CIO at Merck mused: “We’re coming to Austin because it’s such a creative, collaborative community, with a strong technology base. Alongside partners like Dell Med and local startups, we hope to combine that with innovation in healthcare to help improve lives.”
Possibly one of the more unlikely new Austin additions comes in the form of the Army Futures Command. Although often focused on warfare machinery and weapons, the Army also has a strong research arm with emphasis on psychological and neurodegenerative diseases – specifically Traumatic Brain Injury (TBI), Post-Traumatic Stress Disorder (PTSD) and Chronic traumatic encephalopathy (CTE) – all of which can result from the many hazards soldiers face throughout their service. The Army has smartly identified its past leisureliness when it come to innovation and has chosen to headquarter in a city that will instead force efficiency and broad thinking. 500 employees will work in an effort to advance the research investment in science and technology – among other areas – and their renewed effort in collaborating with start-ups. Of note is their chosen location and partnership with many young innovation hubs around the city including Capital Factory and The International Accelerator in which they will look for groundbreaking ideas and products to further propel the strength of the military.
The International Accelerator is exclusively focused on foreign-born entrepreneurs and each year it selects up to 10-12 startups from nearly 1,700 applications it receives from 30+ countries. One startup stands out of its portfolio of 18 startups. It is a life science company called InSyBio, a computational biology company with significant IP and tools on the AWS, targeting the discovery of biomarkers in the quickest possible time and least cost. As an example, state of the art analytical tools analyzed public available data from 200 Parkinson’s patients and discovered 834 possible indicators of biomarkers. Running the same data through InSyBio’s set of analytical tools produced only four biomarkers with a 100 percent accuracy. InSyBio is poised to drive this industry with their breakthrough analytical tools in such areas as personalized food, various types of cancer and degenerative diseases.
Coming in eleventh in NIH funding - according to Genetic Engineering & Biotechnology News (GEN) - with 1,147 awards totaling $567.5 million, Pittsburg is making a name for itself in the Biopharma world. Going from a steel town to one regarded for its AI and Medicine has been no easy task, but this city has attracted notable health and tech giants with the educational gems that are Carnegie Mellon and the University of Pittsburg. Along with those established companies, Pittsburgh is also quickly becoming an exciting innovation hub of life science research and start-ups with a slew of industry initiatives and investment capital.
One of these giants taking advantage of the brain power is Thermo Fisher who just this last year established a Pharmacogenomics Center of Excellence with the University of Pittsburgh. This center has said it will aim to “combine expertise and technology in genomics, bioinformatics, implementation science, medication response phenotyping and education” as well as “discover and validate medication response predictors in patients, overcome clinical implementation barriers and demonstrate the value of pre-emptive PGx testing in routine clinical practice”. This marks a huge insight into the evolving industry and the push toward precision medicine. With this collaboration and the supportive culture derived from the city, Pittsburgh is positioned to upset the east coast ranking of biotech ecosystems.
Others that call this city home include a growing pool of dynamic businesses ranging from early-stage start-ups to established Fortune 500 companies. Part of this portfolio include ALung Technologies – a medical device company treating respiratory failure, Cognition Therapeutics Inc. – who develops small molecule therapeutics with a strong focus on the toxic proteins behind Alzheimer’s and other neurodegenerative diseases and Mylan – who boasts over 7,500 products on the market globally.
To accelerate this growth, the city has established many Life Science initiatives such as Innovation Works, UPMC Enterprises and the Carnegie Mellon Disruptive Health Technology Institute. As a collective, these enterprises aim to foster partnerships, raise capital and leverage the strategic power of their alumni in the pursuit of bolstering start-ups and growing them to global success. These also reinforce the fact that Pittsburgh is actively working to expand its reach in the biotech and pharma industries with million-dollar investments and allowing entrepreneurs access to a vast number of resources. They offer preference to start-ups looking to find an advantage in the market and realize that by nurturing these young companies, Pittsburgh expands its hold and influence on the industry.
Pittsburgh also has a sizable infrastructure to encourage this success. With $3 billion in regional research and development, the city combines the needed core competencies in life sciences and overlapping disciplines allowing distinctive opportunities to create and commercialize market-leading solutions. As a serial life sciences entrepreneur so eloquently put it “Pittsburgh is one of the only regions with a top-ranked medical research school, a top-ranked integrated healthcare system, a top-ranked computer science school, and a supercomputer.” It has expansive registries of clinical data for research, 27 Foundations with $8 billion in assets and is third in venture capital per capita. The city also attracts a very young and innovative crowd with the third-highest demographic of 25- to 34-year-olds holding graduate or professional degrees in the workforce. Start-ups look for benefits within their cities and Pittsburgh offers a much more affordable option while still being close to Big Pharma, a vibrant foodie scene, and proud alumni who give back – think Mark Cuban.
Although not the first city that comes to mind when thinking about biotech or pharma clusters, Denver is a rapidly-growing area in the life sciences. Ranking eleventh by GEN in both venture capital with $173.97 million in 17 deals, and in lab space with six million square feet, it is definitely a city to watch. In fact, based on life sciences employment, employment growth, venture capital funding, National Institutes of Health funding and several other criteria, the JLL Life Sciences Report ranked the Denver/Boulder biotech market as #13 in the country. The region is home to many prominent pharma, biotech and medical device goliaths such as AstraZeneca, MedTronic and DePuy Synthes.
Why is Denver beating the odds? Not only does it have a large amount of available real-estate for lab space, but it has been innovative in turning pre-existing establishments – such as restaurants or clean tech offices – into the needed expansion of their life science companies. With these labs also comes the need for proper waste facilities and containment areas, both of which Colorado boasts. They have one of the only 13 “select agent” biocontainment facilities in the U.S. as well as a Level 3 Biosafety Laboratory at CSU. The 14,000-square-foot Good Manufacturing Practice (GMP) building that is the Gates Biomanufacturing Facility assists clinical, academic and commercial researchers. Its focus is to aid in the development of clinical-grade products from biological discoveries.
With growing numbers and Colorado’s biotech industry raising over $1 billion in 2018, Denver in poised to make it into the top 10 biotech city rankings in the next few years. It already has over 16,000 bioscience workers across 730 companies throughout the city – proving its ability to recruit and retain top research talent and business locations. It also holds many state tax incentives based upon sales as well as offers the third-lowest costing lab rental spaces in the country. Couple that with a high average annual wage within the bioscience sector - $84,000 – and a low cost of living and it is a no brainer why these young innovators view Denver as a striking option.
To further foster this innovative culture, Denver has many incubators and accelerators with a large amount of successful companies – think Clovis Oncology and their growing appeal to Glaxo-Klein Smith as the next company to be acquired following the Tesoro takeover. Getting in on the action is the University of Colorado’s Anschutz Campus whose Innovation Office brings together and attracts participation from many industry partners, entrepreneurs, and investors. With a focus on the next generation of medicine, they aim to provide expertise in licensing, copyrights and patents as well as provide a pipeline for discovery, creation and commercialization of new therapies and/or devices. The Anschutz Campus also just received a $120 million gift that they report will be directed towards the backing of “activities critical to bioscience and healthcare growth in Colorado, including faculty recruitment and technology transfer.” The Colorado Bioscience Association also makes a large impact having awarded more than $52 million in grants and continues to promise working toward increased access to capital – an important factor when start-ups consider a move to Denver.
As is easy to extrapolate, technology is here to stay and is now at the forefront of what is soon to be an unprecedented life science industry. Biotech and Pharma are primed for massive breakthroughs through the enablement of AI and Machine Learning and that innovation has already started changing the way in which diseases are diagnosed and treated. Thanks to the supportive environments fostering the growth of start-ups, new ideas now have a platform on which to impact change and accelerate the evolution of precision medicine.
It would only be wise for economic development organizations to get in on the ground floor of these disruptive companies and focus on the unconventional biotech hubs inspiring strategic innovation and collaboration. Significant dollars have been expended in developing mega sites and for the recruitment of major employers.
Some communities have benefited from these investments, but most have not. It is high time to pay attention to opportunities in small startups and build an entrepreneurial ecosystem in your community whether small, medium or large community. Innovation is not a zero-sum game in the economic development process and most often is abundant in your community. It only needs a bit more love and care. Moreover, an entrepreneurial ecosystem has become an essential pre-requisite to having success in recruiting major companies.
Where will you place your wager?
InSyBio is a pioneer bioinformatics company focused on precision medicine and biomarker discovery, through the advanced, integrated analysis of big data, for areas such as Cancer, Neurodegenerative Diseases and Nutrition. In the last year, the company has accomplished breakthrough research on Glioblastoma, Stroke and Nutrition. To learn more, visit www.insybio.com or email: firstname.lastname@example.org
AngelouEconomics is a leading corporate site location and economic development consultancy. The firm has provided site location services to clients with over $18 billion worth of projects in the technology sectors globally and developed over 600 economic development strategic plans for U.S. and international clients. To learn more, visit www.AngelouEconomics.com or email: Angelos@AngelouEconomics.com (512-658-8400 cell)