CLSA in GEN News: Top 10 U.S. Biopharma Clusters
By Alex Philippidis | GEN News
Sept. 23, 2018
What makes a top-tier biopharma cluster? The standard answers involve a critical mass of resources including the brightest scientific and business minds capable of attracting public and private funding; powerhouse universities and healthcare systems, with endowments reaching into the billions; research institutes, often named for billionaire benefactors; and drug and tools & technology developers that can translate investment into net income.
Top biopharma clusters come down to dollars and cents, and more of those resources are increasingly concentrated in fewer places: “These zones represent a growing erosion of geographical diversity in America’s higher education system. These areas are raking in thousands of awards, worth billions, and are reinforced with billions of venture capital [VC] funding and huge amounts of new lab space,” Josh Peters, a Ph.D. student in biological engineering at Massachusetts Institute of Technology, observed in a July 16 commentary published by the Genetic Literacy Project.
Those clusters haven’t varied in recent years. Indeed, this year’s GEN List of the nation’s top 10 biopharma clusters includes all 10 regions that made last year’s list—though the 2018 rankings show one region growing quickly enough to jump two positions from last year (to No. 7), and another rising one spot (to No. 4). Consequently, one region fell two spots (to No. 9), and another slid down one notch (to No. 5).
The other six marched in place—as did a handful of up-and-coming regions just outside the top 10. These include Austin, TX (tenth in patents), Pittsburgh (eleventh in NIH funding with 1,147 awards totaling $567.5 million), and Denver (eleventh in both VC with $173.97 million in 17 deals, and in lab space with 6 million square feet). Denver dipped from ninth in lab space, despite expanding its inventory from 4 million square feet in 2016.
GEN ranks regions based on five criteria:
- NIH funding—Taken from the publicly available NIH RePORT database, for the current federal fiscal year, from its start on October 1, 2017, through September 10, 2018.
- VC funding—Taken from figures for all of 2017 and Q1 and Q2 2018, furnished by the publicly available PwC/CB Insights MoneyTree™ Report.
- Patents—Based on the number of patents containing the word “biotechnology” awarded since 1976 in namesake cities and suburbs where key companies are located.
- Lab space—Based on total-size-of-market figures, in millions of square feet, furnished by the commercial real estate brokerage JLL in its annual U.S. Life Sciences Outlook report for 2018—which mentioned GEN’s 2017 list of Top 10 U.S. Biopharma Clusters.
- Jobs—Based on JLL’s report. While job numbers are included in the rankings, less weight had to be given to job totals in regions where GEN has found widespread discrepancies in job figures. However, workforce size was factored in when deciding the ultimate position of a region.
- #10. Chicagoland
Th Windy City and vicinity received favorable attention in February, when commercial real estate giant CBRE spotlighted the region’s emergence as a significant life sciences cluster: “Chicago is well-positioned for future growth in life sciences thanks to its large cluster of pharmaceutical and biotech companies and world-renowned research institutions such as Northwestern University, the University of Chicago, Rosalind Franklin University and the University of Illinois at Chicago, Fermi, and Argonne Labs,” Scott Brandwein, executive vice president with CBRE in Chicago, said at the time.
Since then, the news has been mostly good; Bannockburn, IL-based AveXis was acquired by Novartis for $8.7 billion, a deal completed May 15. “There’s such an opportunity for more to happen in Chicago,” AveXis President and CEO Sean Nolan told Crain’s Chicago Business. But earlier this month, Takeda Pharmaceutical confirmed it will shut down its U.S. headquarters in suburban Deerfield, IL—a casualty of the planned £46 billion ($61 billion) acquisition of Shire—and relocate to the Boston/Cambridge, MA, region, where Shire has its U.S. operational HQ in Lexington, MA. A Takeda spokesperson told the Chicago Tribune that an unspecified number of employees will be offered jobs elsewhere with the company. Takeda notwithstanding, Chicagoland ranks highest in jobs (seventh with 52,668, according to JLL). The region places ninth in VC ($332.21 million in nine deals), patents (1246), and lab space (8.8 million square feet), but lags in NIH funding (tenth with 1627 awards totaling about $688.2 million).
- #9. Seattle
Seattle’s academic and research institutions have long dominated the region’s biopharma cluster, which may explain why its highest ranking is in patents (sixth with 2087). The University of Washington (UW) School of Medicine is completing construction within its South Lake Union campus of a $145-million, 165,000-square-foot tower to include research labs and offices, a retina clinic, a diabetes institute, urgent care, and neighborhood clinics. UW also broke ground in April on a $230-million, 290,000-square-foot Population Health Initiative building, for which the Seattle-based Bill & Melinda Gates Foundation gifted $210 million and the state of Washington, $15 million.
Seattle ranks eighth in NIH funding (1328 awards totaling $843 million), VC ($372.41 million in 21 deals) and lab space (10 million square feet), but tied with Raleigh-Durham/RTP for tenth in jobs (36,102, according to JLL). The region has weathered numerous commercial challenges in recent years, from the loss of Amgen to the end of the state R&D tax credit. But in August, Alexandria Real Estate Equities disclosed that bluebird bio agreed to lease 12% (roughly 25,000 square feet) of the 205,000-square-foot 1818 Fairview, in Seattle’s Lake Union section. Earlier this year, Astellas Pharma shelled out $100 million for Seattle-based Universal Cells, a pluripotent stem cell developer, while Seattle-based Juno Therapeutics was acquired by Celgene for $9 billion in a deal announced January 22 and completed March 6.
- #8. Raleigh-Durham, NC (includes Research Triangle Park, NC)
Days before Florence ravaged North Carolina as a hurricane and later a tropical storm, Merck & Co., Novartis, and Pfizer were among the biopharmas that halted operations at facilities throughout the eastern half of the state. The need to rebound from the storm is surely far more important for regional biopharma leaders these days compared to cluster rankings. The region shines in NIH funding (fifth with 1831 awards totaling $1.027 billion), but less so in patents (tenth with 1124) and jobs (tied with Seattle for tenth with 36,102 according to JLL, though the state-funded North Carolina Biotechnology Center tallies more than 63,000 statewide.
The region ranks seventh in both lab space (12.4 million square feet) and VC ($480.71 million in 18 deals)—with most of the capital coming in two mega-deals: Brii BioSciences, a Durham, NC, developer of new infectious disease medicines exclusively for the Chinese market, raised $260 million in early-stage financing. And Precision BioSciences said on June 26 it had closed on an oversubscribed $110 million Series B round toward further product development efforts based on its ARCUS® genome editing platform. That platform has attracted Gilead Sciences enough to launch a potentially more than $445 million collaboration, announced September 12 and aimed at developing therapies targeting the hepatitis B virus (HBV). Another mega-deal was announced September 18, a $250 million round by microbe-based agricultural biotech Indigo Ag.
- #7. Los Angeles / Orange County, CA
Los Angeles County on September 20 announced creation of the not-for-profit BioLA, or Bioscience Los Angeles County, where County CEO Sachi A. Hamai in July named Douglas Baron its director of biosciences. LA/Orange is seventh in NIH funding (1748 awards totaling nearly $853 million) and patents (1,612), but tenth in lab space (7.9 million square feet) and VC ($221 million in 21 deals). A new home-grown life-sci VC firm has emerged with the September 5 launch of the $320 million Westlake Village BioPartners, led by Beth Seidenberg, formerly of VC powerhouse Kleiner Perkins, and Sean Harper, who will retire in January from Amgen as executive vice president of R&D. The following day, Thousand Oaks, CA-based Amgen—a founding sponsor of BioLA—and AstraZeneca won the FDA’s Breakthrough therapy designation for their asthma candidate tezepelumab, after Phase IIa data showed annual asthma exacerbation rate reductions of 62% to 71% depending on dosage.
Amgen is the region’s largest biotech with 20,800 employees as of December 31, 2017. Jobs are the region’s greatest strength, ranking second with 122,012 according to JLL—though the California Life Sciences Association counts 115,619 in L.A., Orange, Santa Barbara, and Ventura counties. The region also continues to generate startups: On September 13, the Los Angeles Biomedical Research Institute (LABioMed) hosted its fifth annual Innovation Showcase, spotlighting 32 new bioscience companies. LABioMed is constructing an 18,000-square-foot bioscience incubator on its campus, set to open in March 2019.
- #6. Greater Philadelphia
The “City of Brotherly Love” will be the center of biopharma in June, when the Biotechnology Innovation Organization holds its annual BIO International Convention at the Pennsylvania Convention Center. Regional industry leaders will likely trumpet home-grown successes such as Spark Therapeutics, which in December won the FDA’s first gene-therapy approval for a genetic disease for Luxturna™ (voretigene neparvovec-rzyl). Also in Philly is University City Science Center, which is partnering with developer Wexford Science + Technology to complete the 345,000-square-foot lab/office building 3675 Market this fall. Under new President and CEO Stephen Zarrilli, the Science Center has continued to refocus from physical space management toward entrepreneurship programs.
Felix Hsu—senior vice president and head of advanced therapies for WuXi AppTec, which employs 600 people in South Philadelphia—cautioned September 15 in The Philadelphia Inquirer that in gene therapy, “If Philadelphia wants to be a major power, it needs to raise more money,” both private and public. One potential capital source is the University of Pennsylvania, which plans to invest up to $50 million in at least 10 biotech startups over the next three years. Talk about consistency: Greater Philadelphia ranks sixth in venture capital ($772.79 million in 22 deals), NIH funding (1928 awards totaling $886.7 million), lab space (12.8 million square feet), and jobs (56,452, according to JLL, above the 48,900 direct jobs cited by Ben Franklin Technology Partners). The region places seventh in patents (1798).
- #5. San Diego
In a year that has seen robust VC activity, the “Plymouth of the West” and vicinity have enjoyed some of the largest VC financings, thanks to two spinouts of home-grown sequencing giant Illumina: Cancer diagnostics firm GRAIL closed on a $300 million oversubscribed Series C financing, while personal genomics startup Helix achieved the first close of an expected $200 million Series B round, with proceeds set to fund an expansion of the “marketplace” of products based on next-generation sequencing (NGS). Most recently on September 12, Epic Sciences completed a $52 million Series E round, with proceeds set to advance its liquid biopsy tests predicting drug response in cancer patients, as well as integrate its No Cell Left Behind platform with electronic medical records and big data analytics.
San Diego ranks third in VC ($1.095 billion in 52 deals) and fourth in patents (4911), thanks to its strong community of universities (led by University of California, San Diego) and research institutes. The region lags in attracting NIH funding, placing ninth (1554 awards totaling $823.3 million). However, San Diego does much better in lab space (fifth with 18 million square feet) and jobs (fifth with 66,567, according to JLL). According to CBRE, total life sciences employment in San Diego grew by 52% between 2001 and 2016, outperforming both Boston/Cambridge, MA, and the San Francisco Bay Area.
- #4. BioHealth Capital Region [Maryland / Virginia / Washington, D.C.]
BioHealth Capital Region is on the way to achieving its stated goal of growing the Maryland / Virginia / Washington, D.C. region into a top-three cluster by 2023. In addition to longtime anchors such as the NIH and FDA, and academic institutions led by The Johns Hopkins University and University of Maryland system, the life sciences have seen expanded business activity and support from officials led by Virginia Gov. Ralph Northam (D) and Maryland Gov. Larry Hogan (R). The region is already third in NIH funding (3103 awards totaling $1.456 billion), 42% of which was awarded to Johns Hopkins ($605.781 million). Three U. of Maryland schools (Baltimore, College Park, and Baltimore County) garnered a combined $214.528 million.
BioHealth Capital is also third in patents (4943, just 32 ahead of San Diego), and fourth in lab space (with 22.5 million square feet according to Rockville, MD-based Scheer Partners, which measures the entire region [vs. JLL’s 9.5 million for “suburban Maryland”]). VC has improved from sixth in 2016: PwC/CB Insights ranks the region fourth with $944.07 million in 44 deals, but JLL tallies $1.1 billion, good enough for third. This year’s VC includes the $250 million Series A financing completed in February by Viela Bio in Gaithersburg, MD, formed when AstraZeneca spun off six pipeline candidates of its Gaithersburg-based MedImmune subsidiary. However, BioHealth Capital appears to lag in employment: JLL has the region ninth with 41,322 jobs, though Battelle in June showed a more respectable 63,287 jobs as of 2016, good for sixth place.
- #3. New York / New Jersey
They may be political rivals, yet New York Gov. Andrew Cuomo (D), who seeks re-election this year, and New York City Mayor Bill de Blasio (D) have both expressed the same desire to grow biopharma. The Big Apple is planning a $100 million “Applied Life Sciences Hub” that would anchor de Blasio’s 10-year, $500 million LifeSci NYC, calling for 16,000 new life sciences jobs and up to 3 million square feet of new life-sci space.
Cuomo has shepherded a separate $620 million life-sci initiative, whose beneficiaries include Tarrytown, NY-based Regeneron Pharmaceuticals, which plans an $800 million, 1500-job expansion in Rensselaer County, in return for $140 million in incentives. That includes $24 million toward tick-borne disease research with the state Department of Health Wadsworth Center Laboratory, which will receive $6 million from the initiative.
Nearly 61% of the region’s jobs are in New Jersey, where Gov. Phil Murphy (D) in July trumpeted Israel-based Teva Pharmaceutical Industries’ decision to move its U.S. headquarters to Parsippany, NJ, from North Wales, PA. Teva promises to transfer and create a combined 843 jobs while retaining 232 existing jobs, in return for $40 million in incentives. The two-state tandem is tops in jobs (130,393, according to JLL), second in NIH funding (4200 awards totaling $2.067 billion), and third in lab space (22.6 million square feet, 16.1 million square feet [71%] of which is in New Jersey). The region places fourth in venture capital ($1.076 billion in 40 deals), and fifth in patents (3208).
- #2. San Francisco Bay Area
The San Francisco Bay Area cluster’s enduring strength resurfaced September 17, when San Diego-based life-sci industry group Biocom said it opened an office in South San Francisco—dubbed “South City” or the “Birthplace of Biotechnology”—and formed an advisory board of regional biopharma leaders. Six months ago, the statewide California Life Sciences Association (CLSA) said it was expanding its office and opening an events center in the City by the Bay.
Already this year, the region has had 15 companies go public, as many as Massachusetts, with a would-be 16th filing on September 14: South San Francisco-based Allogene Therapeutics seeks to raise $100 million, on top of $411.6 million in Series A VC financing racked up since its April launch, when Pfizer contributed its lead allogenic chimeric antigen receptor T-cell (CAR-T) candidate UCART19, licensed from Servier. The region is second in VC ($6.058 billion in 156 deals) and lab space (26 million square feet).
But South San Francisco and neighboring Brisbane alone have 2.15 million square feet of biotech lab and office space under construction and another 3.4 million square feet in ready-to-go projects, according to the San Francisco Business Times. The Bay Area leads the nation in patents (11,163), but is fourth in NIH funding (2951 awards totaling $1.416 billion) and jobs with 74,046, according to JLL—but figures vary widely, from 72,663 (CLSA) to 127,500 (San Francisco Center for Economic Development).
- #1. Boston/Cambridge, MA
Massachusetts Gov. Charlie Baker (R) in June recommitted his state to helping grow its biopharma industry, anchored in Boston and Cambridge, MA, by reauthorizing the Massachusetts Life Sciences Initiative. The $623 million in bonds and tax credits authorized over five years is smaller than the $1 billion, decade-long measure enacted in 2007 by then-Gov. Deval Patrick (D), though the state says it remains as focused as ever on industry growth.
Eighteen of the top 20 biopharmas have a major presence in Boston/Cambridge, and the region continues to welcome companies of all sizes: Alexandria Real Estate Equities this fall will open its second LaunchLabs startup accelerator in Cambridge, as Takeda Pharmaceutical prepares to move its U.S. HQ to Boston/Cambridge (See Chicagoland above). Cambridge-based Moderna Therapeutics in July opened a $110 million site in suburban Norwood, MA. Cambridge this year welcomed expansion plans by AbbVie, among numerous companies, and the openings of Fujifilm Diosynth’s new collaboration center and Thermo Fisher’s U.S. Precision Medicine Science Center.
Boston/Cambridge ranks number-one in NIH funding (4,735 awards totaling $2.457 billion), VC funding ($6.162 billion in 156 deals), and lab space (26.8 million square feet). This year like last, the region is also second in patents (7565), but third in jobs with 90,566 (5% above a year ago) according to JLL, though industry group Massachusetts Biotechnology Council (MassBio) in August reported 69,941 jobs last year.
Click here to view the full article that features CLSA’s 2018 California Life Sciences Industry Report.