Rhode Island’s business, academic, and government leadership is looking to a recently released report for guidance in growing the state’s life-sciences cluster by building on past successes and looking past some recent setbacks.
The public-private Rhode Island Economic Development Council’s new Economic Growth Plan 2008, which can be read here, recommends a host of legislative, regulatory, and marketing efforts aimed at elevating the nation’s smallest state into a not-so-small player in attracting biotech, pharmaceutical, and medical device companies.
And while Rhode Island has long argued that its border with Massachusetts is an advantage, it also illustrates how much the state’s nascent 40-company life-science cluster must grow before it approaches the size, let alone the top-tier status, of its neighbor.
The Growth Plan has already spawned efforts to enact two new bills in the General Assembly, as well as other follow-up work.
One key follow-up effort began earlier this month when state House Majority Leader Gordon Fox (D-Providence) and state Senate Majority Leader Teresa Paiva Weed (D-Newport) introduced House Bill 7889 and Senate Bill 2450, creating a 21st Century Workforce Commission to be overseen by EDC and the 16,000-student Community College of Rhode Island system.
The commission would consist of academic and business leaders statewide charged with making specific recommendations in how Rhode Island should strengthen its community college system to bolster its workforce-development effort.
Fox is also working with state Sen. William Walaska (D-Warwick) on another bill that would create a $20 million Growth Capital Guarantee Fund aimed at funding startups that demonstrate proof of concept but have yet to complete the clinical tests needed to bring new products to market.
In addition to the bills, a regulatory change is in the works. Rhode Island will soon issue new rules for its “Certificate of Critical Economic Concern” program, aimed at coordinating fast-track reviews by multiple state and local agencies on projects expected to add jobs within targeted industries.
BioRegion News last week discussed the Growth Plan, the follow-up by officials, and the broader challenges of building a life sciences cluster in Rhode Island with Saul Kaplan, executive director of the public-private Rhode Island Economic Development Corp.
Why did the EDC use this report as the vehicle for articulating its agenda?
Every year we lay out an agenda. Sometimes it relates to legislative actions. In this case, it was a complete economic growth program. We feel that during difficult economic times, it’s even more important to lay out a very clear vision of the kind of economy we’re tying to build here in Rhode Island, and a specific set of action steps we can take to move toward that vision.
The EDC has spoken for years about drawing higher-wage jobs to the state. How does this plan help where past efforts may not have?
It continues the effort. We’ve been, since I’ve been here, we’ve been focused on creating an innovation [economy], one that creates higher-wage job opportunities. And we’ve been, each year, aligning our programs, activities and partnerships around that vision. And this economic growth plan for 2008 lays out a specific set of items that will allow us to build on that progress.
Two of those items have been translated into legislative proposals [HB 7889 and SB 2450]. What are the prospects for passing both this year?
We’re optimistic. They’re both important components of our overall economic growth plan. It’s important that we pass this legislation as well as continue to implement the other items in the plan.
If CCRI recommends more life-science training, how does Rhode Island avoid what has happened in some other parts of the country, where jobs have been created at fairly low starting salaries and a sizeable percentage of graduates can’t find jobs in the industry?
We’re focused on strengthening a series of sectors that we call the high-wage target sectors. Health and life sciences is one of the sectors, but also information technology, digital media, the defense and marine technology area, the financial services area, and two other areas [Advanced manufacturing/industrial products, and consumer products and design]. We have six sectors. What we find is that a lot of the sectors have common requirements in terms of the kinds and experience they need. What we want to do is align our education and our workforce development system to that innovation economy strategy. We know if we do that, we’re going to have a better pipeline of individuals that can work across those sectors. That way, we’re spreading our risk across multiple sectors, not betting on any one sector that can go up and down depending on the economic cycle.
Wasn’t the Science and Technology Advisory Council [STAC] supposed to do this a few years back?
STAC was something that we’re directly involved with. We staff the STAC effort out of EDC. STAC is advising us on how we increase our innovation capacity: How do we strengthen our research platform across the state? How do we enable more new company creation? How do we create an environment where all companies can innovate? What you’ll see is, a couple of the programs in our economic growth plan are direct recommendations that were proposed by the STAC council, which I also serve on.
The report speaks of strengthening research alliances between institutions. Given the work of STAC, what obstacles to collaboration remain?
We just want every year to build the glue to strengthen this network. This takes advantage of our state’s small size. We have 11 colleges and universities here, all within close proximity to each other. We want to engage all of them in a research alliance that allows us to put out a true statewide platform to increase research activity, which would better position us to bring in more federal research support as well as private-sector research support.
Rhode Island has built a nascent life-sciences cluster by capitalizing on both proximity to, and lower commercial space costs than, Boston, New York, and New Haven, Conn. Why does EDC think Rhode Island is still unable to compete with these areas as well as it could?
We think we’re a competitive player now. We’re strategically located in the Northeast knowledge corridor. We think we’re part of that regional innovation center. We don’t want to isolate ourselves. We want to participate more fully as part of that regional knowledge corridor. And the stronger the region is, and the better we position the region, the better Rhode Island is going to do. We have a strong playing hand to come to that regional table with now. We’ve worked hard to increase our innovation capacity and position Rhode Island as a meaningful player within the region, and it’s beginning to work. We feel good about our position within the region, and we want to participate in regional dialogue in how we position the northeast part of the country as the innovation center of the country and the world, which is what it should be.
How is that effort beginning to work in the life sciences?
In the life sciences, in addition to having Amgen’s world’s-largest mammalian cell culture-manufacturing facility located here within the state [in West Greenwich, RI], we also have many successful small companies. Alexion Pharmaceuticals recently came into Rhode Island [by acquiring the former Dow manufacturing facility in Smithfield, RI, in 2006] and is opening a new manufacturing facility here later this year. We just had a small company called Neurotech Pharmaceuticals, which is in later-stage clinical trials, announce expansion plans within the state [Neurotech announced Jan. 16 it would build a 27,000-square-foot office and manufacturing site at the Highland Corporate Park in Cumberland, RI, using $4 million in financing secured through the EDC and its Rhode Island Industrial Facilities Corporation and Rhode Island Industrial-Recreational Building Authority. The facility is anticipated to be in operation by Q2 2008. — Ed.]
We’re starting to get some real momentum in the life sciences space. When you combine it with a strong research platform at Brown [University], [the] Lifescan [hospital system], and the University of Rhode Island, and the work that’s been done in our Slater program, to provide seed capital to early-stage companies coming out of the university setting, we’ve not got the entire continuum from the bench into the clinic and through to commercialization.
You mentioned Amgen. How much did the company’s operational cutback and lay-offs a few months back hurt the cluster?
You never like to see any company that has to take a step back. But Amgen is very strong. They are a good citizen within our business community. And they have a very innovative manufacturing platform here, and they will continue to be a strong presence here and continue to grow here. The contraction had more to do with what Amgen is working through at the corporate level in terms of future products in the pipeline. The manufacturing facility here makes [the arthritis treatment] Enbrel. And [Amgen’s new-build portion of the facility] BioNext facility is world-class. It’s a very strong player and it will be here for a long time.
Given the likelihood that Massachusetts will enact a billion-dollar Life Sciences Initiative bill, plus drug maker Shire citing that bill as a factor in deciding to expand in Lexington rather than Rhode Island or North Carolina, how much is Massachusetts an obstacle to Rhode Island’s growth?
We don’t see it as an obstacle to growth. We need a strong region, and we need Massachusetts and Boston to be a strong player in helping us position the innovation economy that cuts across state borders. We should be positioning the entire region for investment. And we know that Rhode Island will get more than its fair share if we continue to strengthen our positioning.
How much is Rhode Island’s tight state budget this year an obstacle to the life-sciences effort?
The governor, in his budget, level-funded the economic development and STAC initiatives, so we’ll see what happens as the General Assembly works through the budget. The governor was very supportive and continues to want economic development to be a big part of the agenda for the future. We continue to work on it. It’s a tough budget year, not just here in Rhode Island but all over the country. It is these tough economic times that only increases our resolve to play offense and to aggressively put out a clear vision and a specific action plan.
Do the economic times explain the EDC’s pursuit of the growth capital fund? Is this meant to compensate for reduced investment in early-stage companies by banks and venture capital firms?
We want to make sure there’s enough growth capital available — everything from seed capital for early-stage companies to growth capital and working capital for existing companies that have opportunities to grow. It’s really important that we have the whole continuum of financing programs available here within the state, we also need to modernize many of our programs. A lot of the tools that we’ve had available to companies here were great for an industrial-era economy, but do not meet the needs of today’s high-tech growth companies. Part of what we’re doing in our economic growth plan is modernizing those tools and creating a set of finance programs that are directly relevant to an innovation economy.
The report speaks of the state looking to reduce its overall contingent liability. Can you explain that?
The Growth Capital Guarantee Fund is a new program that will provide $20 million of guarantee authority to the EDC, which will align with the needs of today’s growth companies. We have an old program on the books called IRBA, the Industrial Recreational Building Authority. That was created in 1958, and provided us with $80 million in guarantee authority. But it was solely for the guarantee of fixed-asset loans. What we’re using all of that capacity. It’s not what companies are coming to us for today. We’re going to take down that authority to $50 million, which will free up $30 million in capacity, replace it with a $20 million new guarantee program better aligned to the needs of today’s growth companies. We’re, in the net, going to reduce the state’s overall net contingent liability by $10 million.
These will be working capital loans primarily, to companies that need growth capital but were constrained because the only things we can guarantee today are buildings and machinery and equipment. It will just allow us to guarantee loans with a different set of asset classes than the loans we can guarantee today.
Does IRBA get supplanted by the growth fund?
No, it will still exist. It will have a $50 million capacity and create the room for a new $20 million program. We’ll still have both programs.
In the report, the EDC commits itself to calling 5,000 companies, up from 4,200 last year. Why and how will this be achieved?
The business development team here has now fully focused on being out in the marketplace, working with companies small and large to find out what their growth requirements are. What we’re doing is requiring more of our organization to be out in the marketplace. Everybody needs to be out talking to companies, finding out what their needs are, and bringing the tools they need to grow out to them.
Could you discuss the state’s latest marketing effort cited in the report, Opportunity: Rhode Island?
In addition to working with Rhode Island companies, which are going to provide most of the job growth, we will selectively go out and try to attract new investment into the state and new jobs. And Opportunity: Rhode Island is a regional campaign to talk with companies in the life sciences area, in the IT and digital media area, and the financial services area. We’ll be going out, telling our Rhode Island story, bringing executives with us to talk about all the great work that’s been done to turn Rhode Island into an innovation hotspot.
We’re going to invite companies and leaders from those targeted industries to come to an event where we bring a group of Rhode Island business leaders together to help share our Rhode Island story for them. The Commodores is a group of business leaders that will both help finance the program and will participate directly in the outreach and the events themselves.
The report also cited moving the Slater Center for Entrepreneurship in Life Sciencesincubator. Where would it go, and when is that contemplated?
Right now, it’s sitting in [Providence’s] Richmond Square area, and the center of gravity for life sciences research and new company creation looks like it will be over in the Jewelry District. So we want to move the incubator program from Richmond Square to the Jewelry District, and we want to do that in a way that maximizes our ability to connect with other partners in capitalizing a new life sciences development and incubator capacity in the city. I’m hopeful we’re going to go out into the marketplace with [a request for proposals] and talk to all partners, both public and private, to figure out what the best scenario is for relocating the Slater program.
Slater already covers its operating costs with companies that access the incubator space. And we think with our growing life sciences cluster, that we can take on additional space and operate it economically. We don’t need additional state money to do that [beyond the current $3 million spent by the state annually]. We want the state to continue to support the Slater program and to invest into the seed capital fund. But we think the incubator program can be self-sufficient given the demand in the marketplace. We’ll be looking for partners on the real estate side to see if the incubator program can be leveraged into a larger R&D commercial center.
How much would Slater grow under this expansion scenario?
There’s about 7,500 square feet down at Richmond Square. We’ve said that at the minimum, we’d like to go to 10,000 square feet. But we might consider doing more than that, depending on what interest we have from possible partners.
The report spoke of the economic-development potential held by realigning Interstate 195 in Providence. Who will have say over how the former highway land is redeveloped, and how will that benefit the life sciences cluster?
There’s a set of parcels totaling 19.5 acres that will become available at the completion of the I-195 relocation project, which is well under way. A lot of focus has been on the move of the highway. What we want to do now is start to focus on the reason the highway was moved in the first place, which is to open up top-of-the-bay, waterfront-centered property for economic development that has the potential to change the entire skyline of our capital city of Providence. Those are state-owned properties; they’re owned by the Department of Transportation. We’ve just entered into a partnership agreement, EDC and the DOT and the city of Providence, to undertake an effort to assess the redevelopment opportunity and develop a marketing plan for how we’re going to put those parcels into the marketplace.
The city is going through a [zoning] process now in parallel to this, with the zoning requirements defined by the city’s comprehensive plan. As the state parcels are put into the marketplace, in coordination with the zoning requirements, we’re going to figure out how to maximize the potential of those parcels. It has the potential to change the landscape and add significant new office and R&D capacity to both the city and the state.
How much office and R&D space could be developed there?
We’re just finalizing an RFP to bring in a partner to help us with that evaluation. We’ll be going through that process and coming out with recommendations over the next six months. This assessment will help us think through what’s the right way to put these parcels in the marketplace: Do we look at a single developer, or multiple developers for multiple parcels?
As we go through the process, we’ll have a better sense of how much capacity and how many square feet we’ll be able to realize. It will be significant. Within the current zoning, there’s a lot of capacity for new office towers sitting there, so we’re excited about the potential. I think this is the one thing that we’re going to look back 10 to 15 years from now, and we’re going to say, ‘This is one thing we got right. We really maximized the potential of these large development opportunities.’