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No Mirage: Study Author Explains Support For Betting On Bio in Northern Arizona

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Northern Arizona’s life-science industry grew by nearly 20 percent between 2001 and 2005, more than three times the national average for all sectors during that period, according to results of a recent study by Battelle Memorial Institute.
 
The study also found that the sector’s average annual salary in the state was $45,000, compared to an overall private-sector average of $27,000.
 
Together, these and other statistics have convinced many business, academic, and government leaders in and around Flagstaff that the rewards outweigh the risks when it comes to betting more of the region’s economy on the life sciences ― a conclusion that mirrored the one made by the Battelle study.
The report, “Growing Northern Arizona’s Bioscience Sector: A Regional Roadmap,” [see story, this issue] was the second regional biotech study to be completed in the past month by Battelle and the vice president in its technology partnership practice, Walter Plosila.
 
In October, Plosila and Battelle completed for the Association of University Research Parks a 40-page study that quantified the economic benefits of the 174 research parks in the US and Canada based on a survey. [BioRegion News, Oct. 29].
 
Plosila recently discussed the northern Arizona roadmap report, the region’s life sciences resources, and its challenges to growing a healthy cluster with BioRegion News. Below is an edited transcript.
 

 
One of northern Arizona’s key anchors in the life sciences is the headquarters and facilities of W.L. Gore, a medical device maker. How did Gore come to the region?
 
The story is that Bill Gore himself liked to hike in the Grand Canyon, so he said to himself, ‘If I like the canyon and the quality of life here, why don’t I put some facilities here?’ It became the core anchor for the region’s life science base. They do have an expansion underway in Flagstaff, but they have also made major announcement about multiple facilities in the Phoenix and Tempe areas that they plan to invest in over the next five or so years.
 
What factors will most likely create the critical mass of life sciences companies that northern Arizona seeks to grow? Do you envision more spin-offs of Gore, necessarily, or of Northern Arizona University?
 
Several things. First, Gore itself needs suppliers, so the supplier chain could be much like Warsaw, Indiana, or Memphis, Tennessee, or Minneapolis, wherever you have medical device firms, they tend to have strong supplier chains. That’s actually not the case today in Flagstaff, but it could be a possibility in the future. They don’t have a lot of suppliers locally, but that’s one opportunity area. Second is, there have been — I wouldn’t call them spin-offs, because that’s not what Gore would call them, but ex-employees of Gore have formed new companies, at least a couple of them. That’s another growth opportunity.
 
Third is that Northern Arizona University is actually expanding its research base, moving into some efforts that hopefully will lead to a biomedical engineering degree, and increasing their internships in a whole range of things. About 25 percent of Gore’s employees today are NAU graduates. But around the country, firms tend to go where they can get the talent these days, not the other way around, which was the old economy. Flagstaff offers an opportunity with that talent base to both attract and grow companies.
 
And the last point I make is part of our strategy. We talk about emphasizing and building a range of things, including a tech transfer liaison function that NAU doesn’t have now. It’s run by [Arizona State University] for them. NAU also needs a tech industrial liaison function, and some technology commercialization funding to do pre-prototype development, due diligence-kind of stuff. There are several firms that have sprung from the universities. And [the region] has Paul Keim, [director of the Translational Genomics Research Institute or “TGen” North in Flagstaff] a world-renowned infectious disease specialist in anthrax located there, so they have some major research depth.
 
We also identified some other areas in the strategy of where [the region has] depth, areas that we feel will lead to some startups and spin-offs, buttressed by the fact that the city’s already actively addressing that. They’ve got a [US Economic Development Administration] grant, and with NAU’s support the city’s actually building an incubator facility. That’s located in a science and technology park they created that’s anchored by a research facility of [the US Geological Survey]. That’s pretty amazing for a town the size of Flagstaff.
 
Where does the talent now go?
 
The talent now leaves because it can’t find the jobs in Flagstaff. Gore hires some, but they don’t hire all. They like to hire [graduates with] master’s degrees and above in biomedical engineering. And like any major device firm, they like to hire people with more experience than just being out of school. Having other employers that can hire from that talent pool will not only improve the retention of the talent but also help to diversify the economy.
 
Given the brain drain, why are northern Arizona stakeholders pursuing a growth-from-within strategy? That would appear to be a longer-term approach that would take a while to bear fruit.
 
I was involved in starting and building the Maryland biotech industry. And when we started that in the mid-1980s, people said the only chance we had was to attract a major pharmaceutical firm, and until then we wouldn’t have a bio industry. Hell, Maryland’s one of the top five in research and testing in the country now, and it still doesn’t have a major pharmaceutical firm. They grew [their bio cluster] from within; they didn’t grow it from recruitment. San Diego’s the same way. And in the end, San Diego and Maryland proved pretty conclusively that [growth from within] can happen. And in 1990, 1991, people like [economist] Joe Cortright would have told us that we were nuts and should have quit, cause we wouldn’t have a chance.
 
The report mentioned that in addition to worker training, the region needs more affordable housing for life sciences and medical device employees.
 
[The region needs] to address the housing issue, either through a partnership with major employers, including the university, writing down the cost of land, rezoning, looking at the neighboring communities as bedroom communities for further development. Flagstaff has had a strong segment of anti-growth sentiment, and so much of the land up there is federally owned land, that it actually creates land shortages, along with [restrictive] zoning. We weren’t experts on housing. We basically provided some of the options that were given to us by talking to many people. Our strong suggestion was, you aren’t going to address the talent shortage unless you address the housing shortage. And you aren’t going to address the housing shortage unless you all start working together.
 
How restrictive is local residential zoning in and around Flagstaff?
 
It depends on who you talk to. On one side, people say they aren’t allowing enough density. There’s a contrary argument that there is too much density. But rather than take sides on it — that wasn’t part of our job to look at zoning issues — I just say there are issues they need to look at, in terms of what really is the impact. In part, it really may be a combination of concerns about having dense development on a few parcels that ends up resulting in such compact development that you don’t take advantage of all the land available. But I don’t know that for sure.
 
What example can you cite of restrictive local zoning in Flagstaff?
 
In the city itself, it’s having to go condo, developing up and not being able to build multiple units in other sites.
 
Can the job growth that you found in the report be explained as employers or institutions are drawn to lower cost regions compared to Phoenix or other parts of the state? Is northern Arizona a cheaper place to do business?
 
Not necessarily. I suspect part of the reason Gore is looking at expanding its facilities in Phoenix is, in fact, because housing costs are less and they can access more of the talent base that comes out of Arizona State University and other employers in the region. Phoenix does have some medical device employers already. And of course, Flagstaff is a much smaller region. I think that gives Gore some more options to fill its shortage of workers by having more sites.
 
Fortunately for Arizona, Gore did look at other states and are happy enough with several things going on in Arizona that they decided to stay in Arizona — specifically the Biosciences Roadmap that Arizona has been successfully implementing was a positive they cited specifically. And the fact the University of Arizona is expanding its medical school to downtown Phoenix, and I think having a medical school they can interact with in terms of their research and development work was also a positive factor. NAU doesn’t have a medical school.
 
You cited also the medical lab sub-sector, which accounts for about 50 jobs in the region. What is its potential for growth?
 
That’s not a lot of jobs to make a lot of noise about. That sector is small research and testing firms that do a range of things. … TGen North has created a presence [in Flagstaff], and a state health lab is also co-locating next to them, and some other research and development lab operations. In most regions of the country, that’s sort of how you start the research and testing side of your bio industry, through a few small labs here and there. That’s where it started in Maryland.
 
What does the near future hold for northern Arizona?
 
I would fully expect you’re going to get spin-off companies coming out of the university research centers, like Paul Keim’s labs in infectious disease and environmental testing arenas. You’re going to get diagnostic and testing kinds of spin-off startups coming out of the university. Again, that’s where Maryland started its bio industry, I’d fully expect that to happen at NAU. Regional universities in many cases don’t have the issues of large, national research universities, which are worried almost exclusively about publishing or perishing. Regional universities like NAU have faculties that are refreshingly entrepreneurial. So they’re looking from their research at ideas that can create new tests, new devices, things like that. There are a couple of firms that have already started on that. So I would expect in the diagnostic testing arena, you’re going to see a lot of growth there.
 
We compared Flagstaff to some of the other comparable regions like Fort Collins, Colo.; and State College, Pa.; and other smaller, university-centric towns around the country. Flagstaff does very well in terms of the dominance of its medical device base, primarily one employer. What they don’t do as well at is they don’t have as diversified a bioscience base as these other regions in research and testing, in maybe bio-ag[riculture], in drugs and pharmaceuticals. The five segments we identified as making up biosciences, you find in most of those university-centric towns they are diversified in two if not three of these areas, and Flagstaff is only in one. One challenge for Flagstaff and northern Arizona is to diversify into more than just devices. And research and testing is probably a likely place.