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Report Says Northern Arizona Must Tame Soaring Housing Costs to Grow Bioscience

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Northern Arizona can best expand its life sciences industry over the next several years by addressing a lack of affordable housing, as well as spending more for facilities, stepping up technology commercialization, encouraging more entrepreneurs, and persuading more students to stay in the region and build careers within the industry, according to a recent report on the area’s bioscience sector.
 
By combining those policy priorities with the area’s existing strengths — such as the presence of a growing medical device maker, a large research university, and a new facility at the Translational Genomics Research Institute —  the region that includes Flagstaff, Ariz., and Prescott, Ariz., can grow its economy through jobs that pay well above the region’s average, according to “Growing Northern Arizona's Bioscience Sector: A Regional Roadmap.”
 
The Battelle Memorial Foundation’s technology partnership practice prepared the 127-page report for the Northern Arizona Bioscience Steering Committee, with financial support provided by the Flinn Foundation. The steering committee consists of northern Arizona’s key life sciences stakeholders, including Northern Arizona University, the city government of Flagstaff, and the public-private Flagstaff Economic Council.
 
“Two fundamental issues will determine whether Northern Arizona succeeds in the biosciences. Novel and creative solutions will be needed to address the issues of affordable housing and worker shortages,” the report concluded.
 
Walter Plosila, a vice president in Battelle’s technology partnership practice, told BioRegion News last week that the region must develop housing for future life sciences workers if the industry is to grow.
 
Between August and October, according to the online real estate search site Trulia, the median price of a home in Flagstaff stood at $322,868, down more than 12 percent from a year ago, yet almost double the $188,233 median price for the same quarter in 2002. In Prescott, Trulia found the median price slipped over the past year from $383,702 to $351,859, well above the $184,517 of August-October 2002.
 
According to a survey released Nov. 21 by the National Association of Realtors, the national median price of an existing single-family home stood at $220,800 in the third quarter, down 2 percent from $225,300 in the third quarter of 2006.
 
“The cost of housing is comparable to California, so when [employers] do recruit folks in, they have a sticker-shock problem because it’s so expensive to live there,” Plosila said in an interview, adding that fractiousness among public and private institutions has not helped matters: “Each institution has its own idea, including the city, about how to solve the housing supply cost. The fact is, because they aren’t working together, nothing is getting solved.” [see Q&A, this issue, for a complete discussion of the report with Plosila].
 
A Growing Base of Biotech Employees
 
The report identified 37 life sciences businesses employing a total of 5,522 people in Arizona’s Coconino County and neighboring Yavapai County as of 2005. They included the 4,199 jobs and 12 companies in the Flagstaff metropolitan statistical area, as well as the remaining 1,323 jobs and 25 companies in the Prescott MSA.
 
Between 2001 and 2005, life sciences employment in the Flagstaff and Prescott regions rose a total 831 jobs, or 15 percent. Flagstaff employment rose by 19.5 percent, compared with 12.3 percent in Prescott. The national increase in life sciences employment during that time was 6.2 percent.
 
Even more significant to the groups that commissioned the study, average annual wages in life science jobs rose above the overall averages for the region and nation — up 24.5 percent in Flagstaff and 34.3 percent in Prescott, compared with 20.4 percent higher nationwide.
 
While hospitals accounted for the largest sub-sectors — 70 percent in Flagstaff and 86 percent in Prescott — the fastest-growing life sciences sector consisted of medical device and equipment companies, due mainly to the presence of WL Gore, which alone employs some 1,600 employees in the medical products division it has headquartered for nearly 30 years in Flagstaff.
 
About one-quarter of that total joined the company over the past two years, since the report estimated Gore’s 2005 regional workforce at 1,200 employees. The company manufactures devices that facilitate blood flow and breathing, from stents and catheters to implants used in vascular, endovascular, interventional, general surgery, cardiothoracic, oral, and orthopedic procedures.
 
Gore intends to grow further, both in and outside the Flagstaff region. In February, the company announced plans to add 40,000 square feet at its Kiltie Lane campus in West Flagstaff, a plan projected to generate 100 additional jobs. Six months later, the company opened a new $38 million, 133,000-square-foot office and manufacturing facility off Kiltie Lane, accounting for 200 of its Flagstaff-area jobs.
 
Gore is also growing further south in the state. In August, the company announced it had purchased for $27.2 million a 40-acre parcel in North Phoenix, about a mile southeast of the Carefree Highway/I-17 interchange, within the North Gateway Village Core, an area where officials have planned for commercial growth. The company will use that site to house two buildings where a total 300 jobs would be based; construction is not expected to start until early 2009.
 

“We’re trying to project forward and produce new channels, new revenue, be an economic driver” for the region.

“This location allows us to expand our operations in the Phoenix area’s vibrant job market while taking advantage of the depth of experience we have in Flagstaff,” said John Sininger, leader of Gore’s medical products division, in a press release.
Gore already leases a Phoenix production facility near Happy Valley Road, as well as office space in nearby Tempe, Ariz.
 
Gore’s growth, the report said, offered the region an anchor upon which to build a larger medical device cluster consisting of many more businesses, some of which could serve as suppliers to Gore.
 
“Northern Arizona needs to build on its medical device and hospital sectors while at the same time diversifying its bioscience industry base in other areas,” the report concluded.
 
The region’s hospital sector consisted of three hospitals totaling 2,944 jobs in Flagstaff, plus another two hospitals employing 1,132 in Prescott. The ability of those hospitals to expand and attract new researchers for additional R&D growth should be enhanced, the report said, with the opening in April of the $46 million TGen North facility in Flagstaff, as well as plans to open a 200,000-square-foot science and technology park on 9 acres in Flagstaff, next to the US Geological Survey facility.
 
Other signs that northern Arizona held a strong potential for life sciences growth were a pair of figures cited in the report that rose between 2001 and 2005:
  • Growing R&D volume — More than double, from $6 million to $16 million, but still a fraction of the $255 million carried out by institutions in Phoenix and elsewhere in southern Arizona.
  • Growing federal research funding — NAU increased its total NIH research funding for biomedical research and basic biological sciences from $1.4 million to $2.6 million. NAU researchers on average saw 20 percent annual increases in their grants, compared with 10.2 percent nationally. Paul Keim’s genetics lab at NAU collects the university’s top amount of life sciences R&D funding, toward research on infectious disease genetics and the development of genotyping systems for bioterror agent identification.
Lee Drickamer, NAU’s vice president for research, told BioRegion News the university has also seen growth in its bioscience programs, with a steady increase in recent years to the current roughly 100 majors. That increase should continue, he said, since NAU over the summer opened a brand new laboratory for its Department of Chemistry and Biochemistry.
 
The university’s bioscience expansion was also helped by $4 million in state funding contained in Arizona’s fiscal 2008 state budget. The money is intended to create new health professions programs in the state to combat shortages in biomedical science and clinical lab sciences jobs, as well as broader health sciences positions such as physician assistants.
 
Drickamer said the report was a call to action that succeeded in setting direction for northern Arizona’s life sciences effort.
 
“We’re trying to project forward and produce new channels, new revenue, be an economic driver” for the region, he said.
 
NAU said its effort to boost research quality and funding will help the university as it joins with Arizona’s two other universities, Arizona State University and the University of Arizona, to pursue a multi-million-dollar grant from NIH to bolster their ability to conduct statewide clinical trials.
 
While exact amounts have yet to be determined, Drickamer said the colleges will need to raise a mix of public and private funds: “You’re probably looking at $6 (million) to $7 million in state bonding authority to begin a building in the $80M plus-or-minus range.”

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