New York state has many ingredients for a top-tier life sciences cluster, but entrepreneurs must join with universities, research institutions, venture capitalists, and government officials for the industry to finally blossom into an economic powerhouse, panelists agreed at a conference held last week by the state’s biotech industry group.
In particular, New York City — where a 1.2 million-square-foot research campus is under construction — shows promise, panelists said, noting that New York City’s strengths include its concentration of venture capitalists and other financial services professionals, the presence of key research centers, and strong tech transfer activity.
During the year that ended June 30, New York City’s half-dozen largest academic research institutions, or the “Manhattan Six,” launched 19 startups, just two fewer than their six counterparts in the Boston-Cambridge, Mass., region, noted Kathleen Denis, associate vice president of Rockefeller University’s office of technology transfer.
During that time, the $507 million in revenue generated by the New York startups spawned by the Manhattan Six — Columbia University, Memorial Sloan Kettering Medical Center, Mount Sinai School of Medicine, New York University, Rockefeller University, and Weill Cornell Medical College — surpassed the $340 million in combined revenue of the Boston-area startups, Denis said.
But over that same year, Denis said, the Manhattan Six attracted just over half the research dollars netted by the Boston-Cambridge six — $1.7 billion vs. $3 billion — and just half the roughly 1,200 invention disclosures, 355 new license and option
agreements, and 1,053 active revenue-bearing licenses generated in the Boston region. The Manhattan Six, by contrast, racked up 610 disclosures, 177 licenses and options, and 523 revenue-bearing licenses.
Denis and other conference speakers said the high cost of living in New York City and vicinity makes it hard to draw workers, while a shortage of lab space has kept rents high, and entrepreneurs must search hard for social and business networking groups specializing in their industry. Denis said a survey of CEOs of the startups spawned by the Manhattan Six a few years back showed 50 percent considered locating in the New York City area, including northern New Jersey, but only 20 percent did so: “Fully half of those companies two, three years ago did not even consider this as an area to locate a company to start.”
Just two of the 14 start-ups created as of June 30 by Rockefeller University remain in the New York metro area — one in the city, the other in New Jersey.
“The others were driven by where management and where money wanted to locate,” Denis said. “There seems to be not only a valley of death for technologies [seeking early-stage funding] but a valley of death for residence in New York.”
Denis moderated a panel talk, “The Paths to Innovation,” at “New York’s Bioscience Community: Building on the Foundation,” an afternoon-long conference held at New York University Medical School on Oct. 10 by the 250-member New York Biotechnology Association.
Abram Goldfinger, executive director for industrial liaison/tech transfer at New York University School of Medicine, illustrated the financial promise of tech transfer: NYU’s Applied Research Support Fund has invested on average about $50,000 in 34 startups, leveraging $25 million in industry funding. Ten of the companies developed technology suitable for license from the university, generating $15.2 million in license income, and drawing another $9.7 million in corporate research funding.
Nathan Tinker, NYBA’s president, told the audience of more than 100 attendees that New York City and its namesake state face growing competition for companies and jobs, both nationwide and increasingly from overseas. That heightens the need, he said, for an overall economic development strategy geared to life science businesses and institutions.
“While other states are developing statewide initiatives focused on biotech, New York is still a bit piecemeal in the way it’s taking place,” Tinker said. “The state needs to spend more time and effort to develop a strategy to not only build internally the businesses that are coming out of the universities, and tap that innovation, but draw companies from outside of the state into what is becoming a powerful technology cluster.”
Not On the Calendar
That has proven easier said than done. Speaking to BioRegion News after the conference, Tinker said his group has sought for months to hammer out a statewide biotech strategy by meeting with Gov. Eliot Spitzer, without success. A Spitzer spokeswoman at deadline had not responded to a BioRegion News e-mail message asking when such a meeting might take place.
One of the industry’s statewide priorities emerged over the summer, when a consortium of seven New York universities submitted to the state a formal request for $8 million a year for at least the next three years to help develop a computational biology network using supercomputers situated at Stony Brook University, part of the State University of New York system, and Rensselaer Polytechnic Institute. [BioRegion News, June 4].
Stony Brook and RPI formed the consortium along with Columbia University, Cornell University, NYU, SUNY Albany, and SUNY Buffalo.
Spitzer and state officials have not commented on the consortium’s initiative but have said they are committed to growing biopharma and other tech-based industries. The governor has continued the state’s participation in “NY Loves Bio,” a public-private effort with NYBA and the nonprofit New York State Economic Development Council, which represents state and local job attraction professionals.
Earlier this month, Spitzer’s top tech official — Edward Reinfurt, acting executive director of New York State Foundation for Science, Technology and Innovation — assured attendees of the 8th Annual Nanobiotechnology Symposium, held at Cornell University in Ithaca, that the state would step up its support of technology commercialization in life sciences, nanotech, and other fields. Reinfurt joined NYSTAR in June after serving 27 years as vice president of the business council [BioRegion News, June 18].
Spitzer’s ability to advance policy initiatives has suffered in recent weeks. Unlike the open legislative process of many other states, policymaking in New York relies on compromises crafted in closed-door talks between governors and two legislative leaders, Assembly Speaker Sheldon Silver (D-New York City) and state Senate Majority leader Joseph Bruno (R-Brunswick).
Spitzer’s relations with Bruno remain damaged after a scandal in which two aides gave the Times-Union newspaper of Albany police records purporting to show that Bruno broke New York law by using state aircraft for political trips. While Cuomo and Albany County attorney general David Soares have concluded no laws were broken, the scandal has diverted the attention of top state officials and remains under investigation by both a new Spitzer-appointed Commission on Public Integrity and a state Senate panel that has threatened to subpoena Spitzer to testify under oath.
Also fractious, albeit far less rancorous, conference participants agreed, is the state’s multiplicity of regional economic development efforts from governments, business groups, and public-private agencies — a consequence of the state’s “home rule” tradition, which deemphasizes the regional planning seen in, say, California.
That helps explain why the state’s life sciences industry is as far flung as it is. While New York City leads the state with 11 major academic research institutions, 26 research centers and labs, and 112 biotech and pharma businesses, its suburb of Westchester County can boast of more than a dozen later-stage companies — many at the Landmark at Eastview, a 750,000-square-foot R&D campus operated by BioMed Realty Trust with a $145 million, 360,000-square-foot addition now under construction.
Buffalo, meantime, is home to a state-established Center of Excellence in Bioinformatics and Life Sciences, which houses the Hauptman-Woodward Medical Research Institute and Roswell Park Cancer Institute, as well as the Buffalo Niagara Medical Campus and the University at Buffalo. And the state’s biotech incubator is located at Stony Brook University.
“There are assets all around the state, and we want to take advantage of maximizing all of them,” said A.J. Carter, an Empire State Development spokesman. “The idea is to look at growth sectors, and biotech is one of those sectors that we have a nice head start on.”
Costs and Incentives
Still another problem, conferees agreed, is the state’s sky-high cost of doing business, and Albany’s efforts to lessen that burden for businesses.
On Oct. 10, the Tax Foundation, a nonprofit tax policy group based in Washington, DC, ranked New York as 48th of 50 states in its 2008 State Business Tax Climate Index, ahead of only New Jersey and dead-last Rhode Island. The foundation said it sets its rankings by weighing each state’s corporate tax, individual income tax, sales tax, unemployment tax, and property tax.
New York fared even worse in the Milken Institute’s annual Cost of Doing Business rankings released in August — second-to-last in the nation, or 31 percent above the national average, with only Hawaii ranking lower at 51.5 percent above the average. Milken bases its rankings on wage costs, tax burden, electric costs, and industrial and office rents.
Vijay Aggarwal, president and CEO of Aureon Laboratories, a developer of technologies that predict post-treatment recurrence of several types of cancer, said living costs in metro New York have hampered the company’s hiring: “Aureon has been singularly unsuccessful in attracting people from any place west of Pittsburgh to come and live in the Manhattan area.”
For years, the state has assisted tech businesses through its Qualified Emerging Technology Company tax credit program. Eligible companies have 100 or fewer employees, gross sales of up to $10 million, and R&D spending of at least 3.2 percent of sales. QETC companies are credited the average number of full-time employees based in the state, times $1,000. The credit runs three consecutive years.
Life sciences companies need more in incentives from the state, said Kenneth Pokalsky, director of government affairs for the Business Council of New York State. The council is the state’s largest business group with 3,100 members, including most pharma giants with operations in the state, such as Pfizer, Wyeth, Bristol-Myers Squibb, and Johnson & Johnson — though not many biotechs, he said, adding: “We certainly have room at the table for any of you that are interested in working with us.”
The business council has begun formulating a “2008 Innovation Agenda” of policy items intended to assist life science and other tech-based businesses. Among them:
- Expand QETC by offsetting half the cost of new investments and 90 percent of new R&D spending;
- Extend beyond the current 10 years the amount of time that biotech companies can carry forward tax deductions on their net operating losses;
- Allow companies to convert old investment tax credits they cannot use with the alternative minimum tax to refundable tax credits tied to investment in new R&D and technology;
- Create and fund regional consortia charged with commercializing new technologies;
- Promote deployment of broadband Internet access;
- Consolidate the state’s 40 or so job-training programs and allow employers to direct funds to positions most in demand; and
- Train more teachers for careers teaching math, science, and engineering.
“With some intelligent policies, New York state can be ahead of the curve,” Pokalsky said.
Growing life sciences within a coalition of tech sectors helped San Diego’s biopharma industry blossom into one of the nation’s top clusters, with a number-one ranking in a 2004 Milken Insittue study, said Allan Paau, a former tech transfer head for the University of California, San Diego, who is now vice provost for technology transfer and development at Cornell University’s Center for Technology Enterprise and Commercialization.
Paau said the presence of multiple tech industries helps draw managerial talent to the region: “If you’re a CFO looking for a job, you don’t care whether you work for a bio or IT company.”
Tinker told BioRegion News his group has begun working with Pokalsky and the business council, as well as his group’s pharma industry counterpart New York Health Products Council, to hammer out proposals benefiting the life sciences industry.
“The more the business council is able to drive its innovation agenda, the more the state will have to pay attention to biotech,” Tinker said in the interview. “That’s where the economic activity is being created, where the jobs are being created.”
“While other states are developing statewide initiatives focused on biotech, New York is still a bit piecemeal in the way it’s taking place.”
Addressing conferees, Tinker said nearly all of the industry’s jobs are based in New York City and its suburbs of Long Island, Westchester, and even northern New Jersey — 51,978 drug/pharmaceutical, 35,228 research/testing, and 19,252 medical device positions. Next highest is Rochester with 5,996 drug/pharma and medical device jobs; the Buffalo-Niagara region with 5,837 drug/pharma and med device jobs; and Albany with 3,634 research/testing jobs.
Focusing Across Tech Sectors
The business council’s approach of focusing across technology sectors is the same one employed in a statewide economic development strategy recommended by a consultant in a 60-page report issued last July. “Delivering on the Promise of New York” was prepared for Empire State Development Corporation, the state’s economic development agency, by management consultancy AT Kearney and released July 17.
“New York’s best hope for the future is to focus both statewide and regional investments on emerging sectors — especially nanotechnology, bioscience, and cleantech — which have the potential to create up to 330,000 new jobs by 2014, doubling the rate of job growth the state experienced between 2002 and 2006,” the report concluded.
The Kearney report recommended a host of changes to the state job attraction effort that would reverse actions taken by Spitzer’s successor, George Pataki. They include renaming Empire State Development; folding NYSTAR within that agency; finding an academic home and sponsor for a bioscience center approved last year for New York City but not funded; and drumming up more private investment for the state’s six “Centers of Excellence,” including the one at Buffalo.
While the Albany center focused on nanotechnology, and nanoelectronics has generated $1.2 billion in private investment in addition to the state’s $342 million and the federal government’s $162 million, Buffalo and four other centers not devoted to life sciences racked up only $135 million in private investment, in addition to the state’s $244 million, and $638 million from Washington.
A separate figure was unavailable for Buffalo and the four other centers — the photonics-optoelectronics center in Rochester; the wireless and IT center in Stony Brook, and the environmental and energy systems center in Syracuse.
Kearney also recommended retooling the “Empire” economic zone program to favor creating higher-wage, technology-based “innovation economy” jobs. “The program treats all job creation as equal, not recognizing the difference between jobs which promote high-impact growth and those that don’t,” he said.
Yet life sciences companies have benefited from the Empire Zone program. In 2006, the state assisted Bayer HealthCare in shifting 100 Diabetes Care division employees from Elkhart, Ind., to Yonkers, NY, by designating it a “regionally significant manufacturer” eligible for benefits from the Empire Zone for Yonkers, by approval of city officials. The “regionally significant” label applies to manufacturers near an Empire Zone that employ residents of the community where a zone is located, under a program created that year.
A Good Lab is Hard to Find
At the conference last week, Aureon’s Aggarwal told BioRegion News the presence of an Empire Zone was a key factor in his company locating in Yonkers, a former industrial city just north of New York City.
But while the Empire zones were “80 percent” of the reason Aureon chose Yonkers, Aggarwal said another important factor was affordable lab/R&D space. The company has set up shop in a former industrial campus built for Otis Elevator a century ago, now rechristened i.Park and operated by National RE/sources of Greenwich, Conn.
National RE last year paid the city’s Industrial Development Agency $8.5 million to acquire a second Yonkers site, the 116,000-square-foot nValley Tech Center at 470 Nepperhan Ave.
Lab and research space is hard to find throughout the state, especially for early-stage companies that lack either the cash or the credit history of established businesses, or both, said Maria Gotsch, president and CEO of the private New York City Investment Fund, which has invested $87 million in 81 projects since it was established by Henry Kravis in 1996. The fund has set aside $20 million toward future life science projects — half for co-investment with a lead partner in companies, the rest for companies that move into a research campus now under construction.
“We’re going to target early and middle stage companies, because that’s where the capital is the most needed,” Gotsch said. “We’re putting our money where our mouth is.”
Alexandria Real Estate Equities began work earlier this year on the 675,000 square feet that comprises the first phase of its East River Science Park campus, on 3.5 acres sandwiched between Bellevue Hospital Center and New York University Medical Center. That space is set for completion in 2009.
Alexandria also has approvals for a second phase that would bring the project to 1.2 million square feet. The timing of that work will hinge on market demand, the company said. Alexandria has not furnished the cost of East River Science Park, though the city said two years ago it would run around $700 million.
This week, New York Mayor Michael Bloomberg and New York State Assembly Speaker Sheldon Silver announced that they broke ground on the Alexandria project at the East River Science Park, called the Alexandria Center for Science and Technology, which they said will be 1.1 million square feet situated on 3.7 acres.
In addition to the $700 million to be invested by Alexandria, the City of New York will shell out $13.4 million for the project; the state will provide $27 million, slated for infrastructure work; Manhattan Borough President Scott Stringer is contributing $500,000; the New York City Investment Fund, the economic development arm of the Partnership for New York City, will provide $10 million in funding for ERSP tenant improvements; the New York City Industrial Development Agency will provide around $5.6 million; and federal funds will add around $2 million to the project.
Juliette Morgan, director of cluster development with Alexandria, said the real estate investment trust is creating online directories of life sciences talent, activities, and other resources intended to help entrepreneurs grow their businesses. “We’re not live yet, but we will be in four to five weeks. At the city’s request, Alexandria has set aside 100,000 square feet for start-ups taking advantage of the company’s programs aimed at growth,” she said.
“We are actively and genuinely about developing companies,” Morgan said. “What we’re really trying to do here is not just to build buildings, but build places that are meaningful for people to work at.”
Allen Fienberg, founder and vice president for business development at Intra-Cellular Therapies in New York City, said Alexandria’s campus should help the city draw new biotechs — perhaps even his company someday, if it were to outgrow its current space within Columbia University’s Audubon Business and Technology Center.
Audubon has until now been the city’s largest life sciences development, consisting of three buildings totaling 579,000 square feet. Plans call for the construction of two additional buildings totaling 517,000 square feet.
For now, Fienberg said, he would love to stay at Audubon given its below-market rent and amenities such as access to Columbia University’s library and technology. While he’s been wooed by economic development professionals from elsewhere, Fienberg said he wants to keep his company and its 30 employees in New York City. Two of three reasons, he said, include easier access to capital and top-tier institutions like Columbia.
The third, he added, is NYC’s concentration of top scientists like those on his company’s scientific advisory board chaired by Paul Greengard, a 2000 Nobel laureate. Greengard and Fienberg co-founded Intra-Cellular with Sharon Mates, the company’s chairman and CEO.
“A large number of people that we look upon for advice are in the New York area, and it’s one of the reasons why we’ve stayed here.” Fienberg said.