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Surprise, Ariz., Taps Catapult Bio to Attract Life Science Startups to Desert Boomtown

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This story was originally posted on April 1.

The spring-training home of the Kansas City Royals and Texas Rangers baseball teams is looking to a new partnership for a home run of a different sort — namely an influx of early-stage life sciences businesses eager to develop a life sciences cluster in a suburban city northwest of Phoenix.

Surprise, Ariz., has joined with an accelerator of life-sci businesses, Catapult Bio, in hopes of developing a cluster of startup companies eager to grow in a city that has boomed from a population of 7,000 two decades ago to 30,848 in the 2000 US Census, and to 75,000 in 2004.

Catapult Bio, a Phoenix-based, non-profit provider of gap funding and other services to develop and commercialize life science discoveries made in Arizona, will carry out "due diligence" reviews on life science companies, as well as provide strategic advice, joint branding, and other services.

Catapult, which launched earlier this year, is a spinout of the Translational Genome Research Institute’s TGen Accelerators program. The city of Surprise is its first formal partner.

"We thought it was a really good match-up, where we're going to be out there talking to new companies. We're going to be helping stimulate new companies. We're going to be seeing technology that we hope will go into new companies," Catapult Bio CEO MaryAnn Guerra told BioRegion News last week.

"If that's what the city of Surprise is doing, we can work together. And if we get ideas, we can help inform them of their potential. And if there's something there, we might be able to facilitate the transaction. We might be able to help create the company, and leverage the resources of all the parties to create some economic development."

Guerra said Catapult will tap into its "Finish Line Fund," which has $2.5 million available this year, directed at startup projects with the potential to form companies. Those startups, she said, will be in late stages of discovery research, but unable to secure capital and unable to get the attention of busy tech transfer offices — the "valley of death," as entrepreneurs call it.

"If it looks like it could be a company, then we would try to assemble the money, the board, and what is necessary to create that company. And then we'd have to find a place for them," Guerra added. "If Surprise happened to be the right place, it might go to Surprise."

campus.jpgThe Finish Line Fund could grow in future years if Catapult Bio succeeds in raising additional funds beyond operating dollars, she said.

Over the next two months, the city and Catapult Bio will create a life sciences advisory committee with an as-yet-undetermined number of members, as well as agree to a series of additional goals and milestones for developing a local life-sci cluster.

"We'll want to bring together partners that know how to get biotech companies that have a great idea, and get them out of the lab and into the market. We know we want people with that type of experience, who know how to find access to resources and management and other business capabilities that a small company might not have," Jeanine Jerkovic, economic development manager for the city of Surprise, told BRN.

"We have a lot of talent in the community. There are a lot of resources. Catapult can help us with pulling together some of the real knowledgeable players, and to help us learn what kind of space these companies really need, versus what maybe they think they need," she added in an interview.

Jerkovic said Surprise has a space in mind for those early-stage life-sci companies — the 58,000-square-foot City Hall property at 12425 W. Bell Road, which the city plans to vacate in June, when it moves its municipal offices to a $61 million new facility under construction at the city's Surprise Center downtown campus.

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On April 2, the City Council approved the marketing of the soon-to-close City Hall as a life sciences incubator, with the goal of developing a local biotech cluster in the Phoenix suburb.

Converting the current City Hall — actually a campus of four single-story buildings with a central courtyard entrance, originally developed as a shopping center — into a biotech "innovation center" is projected to cost about $3 million. That includes the $1 million it would take "to complete a lot of repairs and maintenance that will need to take place after we move out" of the property, which costs $200,000 a year to operate, Jerkovic said.

Surprise hopes to fund as much of the $3 million as possible through the American Recovery and Reinvestment Act, the $787 billion measure signed into law by President Obama with the goal of stimulating economic activity and lifting the economy out of its current turmoil.

The partnership plans to develop an application process, then a graduation path for the innovation center's tenant companies, many of which Jerkovic said would be "later-stage" startups: "We'll end up having a pretty strong biotech, life-science focus, though we'd like to remain open to a variety of technologies."

The center, she said, would satisfy one key need of those startups — namely for lab space at below-market rents that "we'll probably negotiate case by case."

While medical devices and aging-related diseases seem to be promising technologies for the innovation center, Jerkovic said it's too early for the facility to narrow itself to one or a few specialties.

Late last week, according to the Arizona Republic, City Manager Randy Oliver said that Surprise is looking to charge tenants rent of $2 a square foot for the first year; $4 a square foot the second year, and $6 a square foot for the third year --- compared with $30 to $40 a square foot at Scottsdale's SkySong, a business and innovation center. Tenants would be responsible for utility costs and tenant improvements. Low as the rents seem, the city reasons it would fare better than if it were to pay the estimated $150,000 to $200,000 annual cost of keeping the building shuttered for future reuse.

Surprise officials have sought to convert City Hall to biotech use for months. Last fall, the city issued a formal request for proposals for prospective tenants for the site, limiting responses to biotech and pharmaceutical production companies that the city believed were most likely to create high-wage jobs. Of four responding companies, three were life sciences businesses with which the city commenced lease talks after they said they interested in helping create an incubator.

"We liked all of their ideas. We're just not in a position to pay them," Jerkovic said. "The challenge is that in tough budget times, each of the proposals is asking for a significant amount of money just to manage and operate it that would have been above and beyond the facility cost."

That's a change from January, when Oliver told the Republic that a medical device marketer — which the city refused to identify — was the front-runner among three companies responding to the RFP [BRN, Jan. 19].

"With a little bit of work and help with funding, it could be something ideal for a small startup company," Jerkovic said.

Like many communities interested in hosting life sciences employers, Guerra said, Surprise has the challenge of drawing enough of them to attract the interest of other companies and nonprofit institutions: "They've got to figure out how do they get a critical mass. The tough thing is [answering], 'Why would you want to move out to Surprise?' Or to Cave Creek, or Queen Creek — areas where there may not be that critical mass that you want to have if you're forming a new organization."

Surprise plans to answer that question by developing the innovation center, and identifying multiple groups of life-sci businesses likely to be interested in relocating to the city. "We'll be strategizing with them and figuring out what is the best way to do this," Guerra said. "The city of Surprise has a clean slate, and is open to ideas for determining what creative ways we can apply to do this."

Guerra said the presence of a potential site for companies at City Hall can only help Surprise and its partnership with Catapult: "Everybody's hurting for dollars. If you can put forces together that say, 'We can find technologies. Do you have space?' Together maybe we can attract investors or minds with creative way of getting these companies started.

Companies finding their way to the innovation center, she continued, are likely to spin out of large employers — and potential partners for the innovation center — that include Arizona State University in Tempe, Ariz.; a new $175 million testing facility opened by contract research organization Covance in Chandler, Ariz. [BRN, March 30]; and the Sun Health Research Institute in Sun City, Ariz., which develops treatments against Alzheimer's disease, arthritis, cardiovascular disease, fibromyalgia, orthopedics, Parkinson’s disease, and prostate cancer.

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"[Sun] were the ones that got us thinking years ago about doing an incubator. They've got so many scientists there, and they've got ideas that need a place to grow," according to Jerkovic.

The biotech incubator would house tenant companies as well as "a lot of strategic partners, like Catapult Bio, that can help us really think through how to get to the right mix of clients, how to really help companies, how to find access to capital, and all the key elements that you need."

A spinout of the TGen Accelerators program, Catapult was formally launched in January with a $14 million, five-year grant from Los Angeles-based Abraxis BioScience [see sister newsletter Biotech Transfer Week, Jan. 21].

Catapult — which will move later this month into new offices at the Viad building in downtown Phoenix, at 1850 N. Central Avenue — has said that its focus on funding startups seeking to accelerate life-sci growth is intended to satisfy their need for capital to get through pre-commercialization stages, a gap identified in Arizona's Bioscience Roadmap, the Grand Canyon State's blueprint for growing its life-sci industry launched in 2002, and updated annually since.

Catapult works with scientists directly to fund their later-stage discovery research, invests in startup companies, or links them to funding and other resources.

Jerkovic said Surprise reached out to Catapult Bio to form the partnership after the city concluded it needed more expertise to build up the local biotech cluster long sought by officials.

"It's difficult for a community like ours that's just getting started in the biosciences to really discern what a good investment might be," Jerkovic said. "Even if we're not investing equity into a company, we may work out a deal where we're helping them find space or putting significant staff resources to help a company. And it's difficult for us to really vet which ones are real ideas and have potential, and which ones don't."

She said the city had approached TGen first, then Catapult Bio "on a number of occasions, looking for opportunities and partners to help us grow a biotech friendly environment in our community.

Since Catapult is the "traditional group that spins commercial ideas out of TGen, they were the ones we wanted to talk to, to position ourselves to be there to capture some of those opportunities," Jerkovic added.

Surprise is the first entity with which Catapult Bio has launched a formal partnership, but it won't be the last. Catapult's Guerra said other potential partners may not even be municipalities, but private entities like developer Sharon Harper's Plaza Companies, the developer of the 275,000-square-foot Phoenix Biomedical Plaza in downtown Phoenix; and nonprofits like the Greater Phoenix Economic Council, which promotes job attraction and retention in Maricopa County and 18 cities and towns throughout greater Phoenix.

Over time, she said, those communities and organizations will not only be in the Phoenix area but the state's Flagstaff and Tucson metro areas as well.

"Hopefully we'll be doing that across the state," Guerra said. "It's not just an issue of local metropolitan areas, but where's the best place for this company to be formed? Who can help that company and provide strength or resources to make that company successful? And where's the best place to do that?"

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