Issue Date: September 1, 2014
Life Sciences Come To Life In New York
Two drug industry watchers were opining recently on Twitter regarding the relative strengths of the major U.S. life sciences research hubs: Boston/Cambridge, San Diego, and the San Francisco Bay Area. In jumped Bernard H. Munos, reminding the two—and their followers—not to forget New York City, the “dark horse” hub.
Munos, founder of the InnoThink Center for Research in Biomedical Innovation and a former R&D adviser to Eli Lilly & Co., is a real enthusiast for the blossoming pharma and biotech research community in New York City. That enthusiasm is shared by a growing number of drug companies, large and very small, not least of which is Munos’s former employer.
Lilly is the anchor tenant at the Alexandria Center for Life Science, a campus opened three years ago by Alexandria Real Estate Equities amid the cluster of hospitals and medical schools on the East River in midtown Manhattan. Pfizer and Roche now have labs at the Alexandria Center that are collaborating with hospital and university scientists in the neighborhood.
The Twitter exchange, however, also highlights a broader perspective, one in which New York City, despite its research assets, is still largely ignored as a hub.
Not that the city’s assets are hidden, argues Munos. New York, he says, boasts a heritage of scientific innovation, a huge concentration of Nobel Prize-winning researchers, and $1.4 billion in National Institutes of Health funding—a level second only to Boston/Cambridge. But the elements of success have never coalesced into a significant pharma research community.
As smaller cities nurtured biotech companies, becoming synonymous with a thriving new industry, New York City maintained its identification with Wall Street. The market collapse of 2008 did little to change perceptions. And New York City is still viewed as a hostile environment for small life sciences companies, owing to the cost of real estate, the dearth of venture capital for start-ups, and the lack of entrepreneurial management that thrives in the better-established hubs.
As a result, discoveries made in New York have gone elsewhere—often to Boston/Cambridge or San Diego—to be developed and commercialized.
But perceptions are changing as a 12-year effort to attract the biotech industry finally gains traction in New York City.
New leaders at several major research institutions—Rockefeller University, Weill Cornell Medical College, and New York University School of Medicine—have championed the kind of partnerships that industry seeks as it recalibrates R&D. A public-private support system for start-ups has fostered an emerging community of entrepreneurs. And the city received a big boost at the end of July when Accelerator Corp., a Seattle-based venture capital firm, announced an investment of $51 million to support small, scientist-run companies that will operate in the Alexandria Center.
The breadth of support for a New York City hub is reflected in the list of contributors to the Accelerator fund, which includes the investment arms of Lilly, Pfizer, and Johnson & Johnson, as well as venture capital firms and Alexandria itself.
In Munos’s view, New York City’s ascent is being aided by a transformation in the way pharmaceutical research is done after the end of the blockbuster era of multi-billion-dollar drugs. Large corporate research centers are closing around the world as drug firms migrate R&D to urban clusters where scientists work with nearby academic and institutional labs. “The dynamic of innovation is changing,” Munos says. “Cross-pollination is essential.”
By way of example, he points to Roche’s 2013 shuttering of its huge U.S. headquarters in Nutley, N.J. The Swiss company moved some research across the river to Alexandria, where the company is a premier tenant in the center’s West Tower, the second building at the facility to open.
“From everything we know about innovation, New York has a winning recipe,” Munos says. “It has brainpower, diversity, and countless networks for cross-pollination.” The Alexandria Center, he says, will help create a locus at which academic discoveries can be translated, in partnership with big pharma, into commercial products, fostering new firms that stay in New York City.
This new formula, however, didn’t develop overnight. According to Maria Gotsch, chief executive officer of the Partnership Fund for New York City, the city has been working to build the life sciences sector since the early 2000s. It was then that Mayor Michael Bloomberg’s administration brought business leaders and the deans of the academic centers together to promote the city’s science assets in the hopes of attracting a developer such as Alexandria.
“It was a little bit of ‘build it and they will come,’ ” Gotsch recalls. And they have been coming, first with the opening of the Alexandria Center’s East Tower in 2010 and Lilly moving in labs it acquired from ImClone Systems. Soon thereafter, Pfizer moved in with one of its Centers for Therapeutic Innovation (CTI), an initiative in which the company also works with academic researchers in hubs such as Boston and San Diego.
The East Tower is now filled to capacity with other companies, including Kadmon, started by ImClone founder Samuel D. Waksal. Accelerator will be Roche’s upstairs neighbor as it builds out 8,400 sq ft of lab space.
And last week, Alexandria announced that Intra-Cellular Therapies, a biotech company spun off from Rockefeller University, has leased more than 16,000 sq ft of the West Tower. The real estate firm claims the tower is 81% leased or under negotiation. Meanwhile, Alexandria plans to begin construction on a third tower to open in 2017.
But to be a successful hub, Alexandria and the rest of the city need small, entrepreneurial companies.
Gotsch says she sees evidence that things are moving in the right direction, albeit on an uphill climb. “We are never going to be the low-cost player,” she admits. “I think one of the challenges is that New York City is a big place and there are a lot of competing interests. On the plus side is the depth of science in the academic and medical centers and the clinical expertise. But that doesn’t solve the problem for early-stage companies.”
The dilemma Gotsch describes presents an opportunity for Accelerator, says its CEO, Thong Q. Le. The company has a model of funding and providing management support to the earliest-stage entrepreneurs. It has already applied the approach in Seattle, fostering a dozen start-ups. While looking for a new market, it found in New York City an environment much like Seattle when it started there, according to Le.
“For us to successfully launch and establish operations, we need an industrial base, and we need to know we have support from the local research institutions. We typically look for an ecosystem where there is a lack of early-stage biotechnology investment capital,” he says.
Le says he was intrigued by a new spirit of collaboration among leaders at local institutions. “There seemed to be a willingness to embrace public-private partnerships where their researchers work actively to find creative ways to commercialize technologies.”
With the Alexandria Center in place and its owner willing to invest in the fund, “it seemed silly for us not to take a shot,” Le says. “So we are making a big bet that we can apply our model the way we have in Seattle and make it happen in New York City.”
For Joel S. Marcus, CEO of Alexandria Real Estate Equities, the investment in Accelerator is part of his own bet that New York is ready to take off. And Marcus says he should know, given that his firm is the “dominant force” in Cambridge, where it is the largest owner of lab space after Massachusetts Institute of Technology, and in San Diego, where it is the largest research landlord in the Torrey Pines section. Alexandria also has major holdings in the San Francisco Bay Area and in North Carolina’s Research Triangle Park.
Marcus is familiar with the earliest developments in the city, having been appointed by Bloomberg in 2001 to cochair a task force with Sanford I. Weill, the former CEO of Citigroup, charged with scouting prospects for a life sciences industry.
The city found land for a research center at the site of an old laundry facility and parking lot between Bellevue Hospital Center and NYU Langone Medical Center. Alexandria prevailed in its bid for the project. After attracting larger companies, Marcus is now counting on Accelerator to fill in the small-company funding and management gaps identified by the task force.
New York officials kept up support for the life sciences even as a major information technology presence emerged in the city, says Eric J. Gertler, managing director of the Center for Economic Transformation at the New York City Economic Development Corp. (NYCEDC). Just as New York’s Silicon Alley rose quickly to the surprise of those who thought that Silicon Valley owned the information technology research landscape, he insists that a New York City life sciences center will soon take its place among the country’s major hubs.
Gertler points to the New York Genome Center in downtown Manhattan and Cornell Tech’s planned campus on Roosevelt Island as evidence that a diverse life sciences sector is rising.
And the academic-industry partnerships envisioned by city planners more than a decade ago are starting to happen as the universities along the East River start to work with the research wings of the big pharma companies at the Alexandria Center. Timothy P. O’Connor, vice president for university research operations at Rockefeller, says the research culture is changing rapidly as an infrastructure rises to support that change.
Already, he notes, Rockefeller is involved in projects with Pfizer’s CTI labs at the Alexandria Center. The universities themselves have formed a partnership called the Tri-Institutional Therapeutics Discovery Institute, which last year announced a collaboration with Takeda Pharmaceutical in which the Japanese drug firm has chemists working in New York.
In addition to its work with Rockefeller, Pfizer is finalizing a clinical protocol with a lead investigator at Memorial Sloan Kettering Cancer Center on an antibody-drug conjugate to treat malignant melanoma, says Anthony Coyle, chief scientific officer for Pfizer’s Boston-based CTI program. The Pfizer lab is also working with NYU Medical Center.
Judith Dunn, head of Roche’s new Translational & Clinical Research Center at Alexandria, says her firm was attracted by the collaborative opportunities and clinical infrastructure in the city. “We looked up and down the East Coast and decided on New York,” she says. “We felt the science and the ability to conduct discovery research as well as clinical trials offered us a lot of opportunities that were largely untapped.”
The venture capital community in New York is getting the same feeling. Misti Ushio, managing director at the investment firm Harris & Harris, says the financial market collapse in 2008 led to a rethinking of investment in the city that is working to the advantage of an emerging life sciences hub.
“By far the majority of our portfolio currently and historically has been outside of New York City,” says Ushio, a chemical engineer who spent 10 years in R&D at Merck & Co. “About 12 or 18 months ago we took a step back and said, ‘Let’s really take a look at what’s going on in New York.’ ”
The Alexandria Center and the Accelerator fund, which Harris & Harris invested in, are poised to add vital financial and management support to lure small companies, Ushio says. “In that one area, you could have the whole spectrum in terms of sizes of company.”
Beyond that center, she points to Harlem Biospace, a new city-sponsored facility in northern Manhattan. Opened last September as a space for the earliest-stage life sciences entrepreneurs, it is already filled to capacity with tiny companies with names such as CytoDel, EpiBone, and Exsponge.
“They were overloaded with applications—sort of like an instant ecosystem,” Ushio says. “I think that speaks to how much critical mass there really is in New York and how it needs these places to coalesce.”
Matthew Owens, director of Harlem Biospace, says the facility offers start-ups more than just lab space. “We also provide these entrepreneurs with the support of a community of their peers, experienced mentors, and access to facilities at universities across the city,” Owens says.
Much of that support is provided by ELabNYC, a mentorship and training program initiated by NYCEDC and run by Designtechnologies, a business development consultancy. About 30% of the ventures in Harlem Biospace were placed there through ELabNYC, according to Mary Howard, principal of Designtechnologies. Although a science commercialization culture is not well established in New York, “the entrepreneurs are as hungry as anyone in Boston,” Howard maintains.
ELabNYC is also involved with a long-running incubator at the State University of New York’s Downstate Medical Center across the river in Brooklyn and at BioBat, a 500,000-sq-ft facility managed by Downstate and NYCEDC in the Brooklyn Army Terminal. Located by New York Harbor in Sunset Park, Brooklyn, BioBat leases space to technology companies with an emphasis on life sciences. Its anchor tenant is the International AIDS Vaccine Initiative (IAVI), which moved in in 2008.
Eva Cramer, vice president for biotechnology and scientific affairs at SUNY Downstate and president of BioBat, says BioBat is leasing space in the hulking 1.8 million-sq-ft city-owned terminal, building it out in phases. Phase 1 went to IAVI, which has subleased some space to Modern Meadow, a firm that makes leather products and meat from cell culture. Modern Meadow relocated its lab from Missouri, Cramer says.
BioBat is currently in talks with IRX Therapeutics, a 15-year-old biotech company with a head and neck cancer compound in clinical trials. IRX was spun off from the University of Florida, moved to Long Island, N.Y., in 2000, and set up labs in the SUNY Downstate incubator three years ago. It now needs more space, says Chief Operating Officer Jeffrey Hwang.
“What we have at Downstate adds up to 1,500 sq ft,” he says. “At BioBat, we could be offered about 6,000 sq ft. It gives us room to consolidate our employees from three different locations.”
BioBat will offer much lower rent than is available in Manhattan. “I looked at the original Alexandria space when it was promoted as an incubator development space, and I laughed,” Hwang says. Alexandria was asking for twice the $30 to $40 per sq ft he anticipates paying in Brooklyn. “It’s crazy. No venture-capital-backed company can afford to pay that kind of rent.”
Access to the Alexandria Center’s neighborhood from BioBat is not a problem, Hwang contends, given the city’s public transportation system. He and Cramer envision a ferry line that will serve river-facing research infrastructure.
Accelerator’s Le acknowledges that space in Alexandria can be twice as expensive as that at BioBat, but Alexandria is angling for much smaller companies than IRX in its effort to foster start-ups—companies that, like a typical New York apartment renter, operate in small quarters. He also emphasizes that tenants at Alexandria will get what they pay for with a location at the center of the city’s medical community.
A confident Marcus of Alexandria says firms can use the laboratories on the Alexandria campus for short periods of time, almost like hotel rooms. He brushes aside views that the current lack of small tenants at his complex is a problem.
“Any assertion that we have only big companies and not small ones is simply jealousy,” Marcus says. “It’s like asking the supermodel, ‘Why do you have a mole on your face?’ Well, okay, we have a mole on our face. But we’re the supermodel.”
NYCEDC’s Gertler shares Marcus’s confidence that the dark horse is coming up on the inside track. “Right now the energy is so exciting. We are attracting a lot of investment,” he says. He offers the example of the recently launched Early-Stage Life Sciences Funding Initiative, a $100 million funding partnership involving NYCEDC, Lilly, Celgene, and GE Ventures that is aimed at supporting local entrepreneurs. “I wouldn’t underestimate a New York entrepreneur,” Gertler says.
Munos agrees, citing Medidata Solutions, a clinical trials software firm that started in New York City and has stayed there. “They will pass $300 million this year,” says Munos, who is on the firm’s scientific advisory board. “They leveraged that unique brash New York culture, a little bit of street culture.”
Like Gertler, Munos sees the diversity of the city’s post-market-crash economy as an advantage as lines blur between traditional pharmaceutical science, digital technology, and health care finance.
Roche’s Dunn also puts diversity on her list of the city’s hooks. “We’ve really embedded ourselves in New York, taking advantage of not just the life sciences but of New York as a center of many industries. We are discovering how they influence our own.”
Even one of the city’s greatest perceived disadvantages—its late start at coalescing a hub—may prove to be a boon, offers Rockefeller’s O’Connor. “The silver lining to our not having fully developed is that there is a lot of low-hanging fruit,” he says. “The sad thing up to now is that New York has been generating a lot of great ideas and training a lot of people, then exporting. These things create wealth. And we want to keep it here.”
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