Bioscience Clusters - Convergence and Coordination
31 Dec, 2006By: Kevin M. Mayer
We’ve been told that the biosciences represent the future. And plainly we believe it. Otherwise, we wouldn’t lavish so many resources on commercializing the biosciences. And yet it is still difficult to grasp how thoroughly the biosciences will reshape our lives.
To imagine the impact of the biosciences, particularly with respect to commerce, it may help to think of the commercial consequences of the Cold War. The Cold War was more than geopolitics. It was communications.(The Internet was designed to survive the destruction of redundant links.) It was transportation. (Portions of the interstate highway system were to serve, in a pinch, as landing strips.) It was residential development. (Suburban sprawl was justified, in part, as a way to disperse a vulnerable population.) It was logistics. (The supply of far-flung bases helped inspire distribution techniques, including the so-called warehouse on wheels.)
Similarly, the biosciences are more than drug development. It is about emulating nature at a profound level. Not only are versions of natural substances to be produced. Versions of natural processes and natural systems are to be created and dedicated to commercial applications. These applications, sometimes called convergence applications, will span multiple industries. And the security implications go far beyond those of the Cold War. Think of the security represented by improved health, enhanced food supplies, or environmental remediation. Think of manufacturing processes that conserve scarce resources, or alternative energy sources that limit global warming.
No wonder, then, that practically every region on the continent(and around the world) is determined to commercialize the biosciences. In nearly every region, the model of development is the cluster, a self-reinforcing community of institutions, including universities, corporations, and government agencies. Many regions hope to achieve in the biosciences what Silicon Valley achieved as an information technology cluster.
Actually, Silicon Valley itself has plans for the biosciences. For example, the Silicon Valley Economic Development Alliance is promoting a biosciences cluster that includes the following components:
• San Jose BioCenter: a facility equipped with wet/dry laboratory and office space serving high-potential life science companies.
• California Institute for Regenerative Medicine: a state agency established in 2005 that provides $3 billion in funding for stem cell research at California universities and research institutions.
• Bay Bio: a life science association.
• Stanford Bio-X Center: a set of computational tools in molecular, cellular, and tissue and organ research.
• California Institute for Quantitative Biomedical Research (QB3): a cooperative effort among UC Berkeley, UC Santa Cruz UCSF, and private industry that focuses on the intersection of quantitative sciences with biological systems.
• UC Berkeley Center for Information Technology Research in the Interest of Society (CITRIS): a new $100 million science and technology center that will focus on the application of IT in several fields including bioengineering and bio-informatics.
According to Melinda Richter, executive director of the San Jose BioCenter, “The BioCenter is a ‘bioconvergence center’ that fosters the development of companies that achieve the convergence of bio on many other technology platforms, including drug development, medical devices, diagnostics, nanotechnology, biophotonics, bioinformatics, and more.”
The BioCenter is funded by the San Jose Redevelopment Agency, which provides the public investment in the BioCenter on behalf of the City of San Jose, and the San Jose State University Foundation. These organizations provide key infrastructure items such as lab facilities, equipment, lab services, and business services — significant expenses for fledgling companies, especially with the decline of grant and seed funding. Richter notes that immediate goal of the investment is to create economic wealth for the local region. She adds, however, that broader benefits may be realized. “The hope is that bioconvergence companies will advance health care, energy, food, water, environmental, and space applications that will benefit society globally.”
Concentration of Bioclusters
Traditionally, bioscience clusters have been highly concentrated. According to several large studies, the dominant bioscience clusters have been located on the coasts, confined to roughly a dozen urban areas. In fact, these clusters are so dominant — in terms of funding from the National Institutes of Health, relationships with large pharmaceutical companies and medical institutions, availability of venture capital and commercial lab space, and numbers of start-ups and patents granted — that some analysts have suggested other regions will have difficulty competing unless they seek out unusual niches.
However, these studies tend to emphasize therapeutic or diagnostic applications, not so-called convergence applications. Which specialties will be the first to be “converged”? It is hard to say. This may explain why bioscience initiatives tend to pursue several specialties simultaneously, even if the efforts are new or relatively small.
In 2002, Lubbock, Texas created the Lubbock Regional Bioscience Initiative, a non-profit economic development organization. Intended to promote development in the West Texas region, the Initiative in its first year stimulated the formation of the Wes Tech Ventures Fund. Since then, financial assistance has been provided to a range of companies with activities in the crop sciences, medical devices, pharmaceuticals, and information technology. Some of these companies include Selenium, Ltd, Auxano, Ltd, and Receptor Logic, Ltd.
In addition, Dale Gannaway, director of the Initiative, also serves as executive director of the West Texas Coalition for Innovation and Commercialization (WTCIC). The WTCIC was formed to encourage innovation and entrepreneurship in the region, and capture funds for businesses through the Emerging Technology Fund, a $200 million program established by Governor Rick Perry to encourage technology innovation in the state.
Like many regional institutions, the Initiative cites a combination of incentives. Some would apply to any industry. Others are particular to the biosciences. In the Lubbock region, general incentives include a low cost of living, low property taxes, a large and highly educated workforce, a well-developed transportation infrastructure, and two foreign trade zones. Incentives more particular to the biosciences include the 3,000-acre Reese Technology Center and proximity to five colleges and universities, including a Tier One research institution, Texas Tech University.
The incentives that matter most to a biosciences company largely depend on its stage of development. In general, newly created companies care about access to capital and laboratory facilities, and more mature companies care about traditional site selection criteria. These include a low cost of living, a skilled workforce, and reliable and affordable transportation and utility infrastructure. However, bioscience companies of all kinds value proximity to an academic research base and reliable technology transfer mechanisms. Also, bioscience companies concentrating on diagnostic and therapeutic applications value proximity to regulatory agencies.
That said, perhaps the most distinctive biocluster ingredient is the availability of laboratory facilities. And it is often a critical ingredient. If it is lacking, even a region with every other advantage can suffer. For example, authorities in the New York region were frustrated to find themselves presiding over a dubious achievement: a net export of life science jobs. Often, firms would begin labs at New York research institutions and then move out of town as they expanded.
The New York region ranked second in funding from the National Institutes of Health (NIH) from 1999 through 2004, receiving almost $1.5 billion in 2003 alone. And in the last decade, it ranked first in the total number of biotechnology-related patents issued. However, among the10 leading recipients of NIH funding, it ranked last in availability of commercial lab space. This lack of space complicated regional efforts to attract and retain commercial companies.
In response to this problem, Mayor Michael R. Bloomberg announced in 2005 that Alexandria Real Estate Equities, a California real estate investment trust specializing in the development and management of laboratory space, was selected to build the East River Science Park — a privately financed, 870,000 square foot, $700 million complex of healthcare laboratories on the campus of Bellevue Hospital Center.
Availability of laboratory space is a problem in many regions. It’s expensive. Growing companies can seldom afford their own, and landlords are reluctant to invest in the necessary tenant improvements. (For a biosciences laboratory, these improvements may exceed $300 per square foot, compared to $50 per square foot for a typical electronics laboratory.) Will a tenant stay long enough to justify the expense? What if it fails to win regulatory approval? How easily may specialized space be re-leased to another bioscience company?
Typically, a biosciences laboratory needs enhanced HVAC, electrical, and plumbing systems, as well as over-standard floor-to-ceiling heights to accommodate these systems. Air and exhaust requirements may account for 35 percent of structural costs. And delicate equipment — gene sequencers, microarrays, electron microscopes — may demand vibration isolation.
All these requirements sound forbidding. However, it remains to be said that many bioscience companies are service-oriented. In addition, outsourcing represents something of a wild card. Traditionally, the outsourcing of laboratory work to contract manufacturers in the biosciences has been undertaken cautiously. Intellectual property and regulatory issues were deemed too sensitive. But even companies that require wet labs may not be doing FDA-regulated work. And other industries, notably the electronics industry, have pioneered the outsourcing of increasingly sensitive processes. The biosciences may follow suit. If so, landlords may feel more confident about speculative building. And, as the biosciences grow, re-leasing may become less of an issue.
In the meantime, public assistance and public/private partnerships are attempting to fill the gap. The effectiveness of such initiatives will vary by region. For example, each region will create a pattern of incentives to address a common paradox: the ideal building type — single-story “flex” space— is best suited to regions favoring low-density development, whereas the most highly developed clusters tend to be in urban areas.
Refurbishing vacant manufacturing facilities in urban areas has had mixed success. For example, the Science Park development in New Haven, CT, a publicly subsidized venture, has provided low-cost incubation space to several biotech start-ups. However, these start-ups have provided few jobs to the city. Several start-ups did eventually expand, generating jobs, but for other areas. One company, CuraGen, announced it was moving to an 88-acre campus in Branford, CT, a nearby suburb.
More Than the Sum of its Parts
Although segmenting the development life cycle (see Table 1) and identifying individual challenges is a useful exercise, the essence of an industrial cluster is coordination. This point is especially important when marshalling the resources of an entire region, as the Council of Competitiveness has indicated in the case of Mexico. In its report on the Mexican Life Sciences Initiative, the Council notes that the nation possesses the necessary assets and institutions to create a vibrant life sciences sector. However, the Council also highlights opportunities for enhanced coordination. These include recommendations for government-led initiatives promoting regional network organizations, technology transfer, and international partnerships.
In its efforts to develop a biosciences cluster, the Baja region of Mexico has acted at both levels — identifying isolated challenges and devising policies to foster cooperation. “We decided we needed more research and development, more manufacturing service centers, more distribution centers, and more engineers,” said Sergio Tagliaprietra, Baja’s economic development secretary. “And we saw that we must do something to incubate activities that have high value in the future.”
At the organizational level, Baja authorities have:
• combined the efforts of business leaders and government officials in identifying potential investors.
• reformed educational curricula to reflect the needs of high-tech industries.
• adopted legislation that make it easier for companies to invest and expand operations in the state.
“It’s by strategy, not by accident,” notes Tagliaprietra, “that Baja is moving from low-cost manufacturing, which has attracted a growing list of international competitors, toward more value-added products.”
Regional coordination is also evidenced in Canada’s Technology Triangle, which includes the Guelph-Waterloo Biotechnology Cluster. The Triangle already boasts of established clusters in diverse industries. The attributes that have encouraged these clusters include:
• G7 leadership in containing business costs and instituting tax incentives for research and development.
• the ability to attract talent from around the world. (The region attracts roughly double the level of immigrants related to the United States.)
• four post-secondary educational institutions and over 150 centers of research.
• the University of Waterloo’s liberal intellectual property policy. (The inventor, not the University, holds the patent.)
According to John Tennant, the Technology Triangle’s CEO, “The region is positioned to maximize innovation … in agri-science, bioinformatics, bio-manufacturing, medical imaging, health informatics, photonics, nanotechnology, medical devices, and environmental science.”