NEW YORK, Nov. 12 - It may be called the capital of the world, but when it comes to genomics and bioinformatics research, New York City has been a bumpkin’s backwater.
That may soon change.
A veteran venture capitalist is now planning to launch a fund worth $150 million to cover proteomics research in the northeast corridor, with a particular focus on New York City. In addition, several major universities throughout the city are working to build new research parks or incubators, and Mayor-Elect Michael Bloomberg has joined Senator Hilary Clinton and Governor George Pataki in a call to boost biotech here.
The city’s biotech backers tell GenomeWeb that genomics in particular may enjoy a bright future in the city as investors consider the sector’s smaller need for expensive custom-built wet-lab space an advantage.
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New York City's assets as a potential biotech hotspot are obvious, according to industry watchers. The city is home to more than two dozen major medical centers, including research institutes like Columbia University, Memorial Sloan-Kettering Cancer Center, Rockefeller University, and New York University. Pharmaceutical industry heavy hitters like Merck and Schering-Plough are just across the river in New Jersey. Plus, since the city is the center of the financial industry, entrepreneurs have ready access to venture capitalists and investment bankers.
Fred Nazem, managing partner of New York City-based venture capital fund Nazem & Co., says his company plans to launch a fund dedicated to proteomics at the beginning of 2002 and expects that at least some of the companies he funds will be in his own backyard.
The city is a “storehouse of unbelievable value,” he says.
According to David Rubin, President and CEO of Cognia, a Manhattan-based bioinformatics company, “the universities here are topnotch—but relatively undertapped by startups. I can’t believe more companies haven’t tapped into it,” he says.
For Rubin, New York City also offers unparalleled networking opportunities and “provides fantastic opportunities to speak on panels, and in banking meetings.” He recently moved Cognia from Mountain View, Calif., in large part to get better access to the funds and top scientists that the city has to offer, he says.
Another draw is the city’s central location: Boston and Washington, DC, are both a short hop, and neither Europe nor California is an unbearable trek. Plus, the city is on the traveler’s path. Many people come to the city to pitch to investors, so it’s easy to schedule meetings and keep in touch, Rubin says.
Still, Cognia has few compatriots. According to the New York Biotechnology Association, there are probably only 30 biotech companies in New York City—about half as many as in Philadelphia, a two-hour drive from midtown Manhattan.
… may require deep pockets
The single biggest obstacle to genomics firms wanting to set up shop in New York City is real estate, analysts contend. First of all, there is very little available space ready to rent. Columbia University’s Audubon Biomedical Science and Technology Park, which hosts 19 early-stage biotechnology companies, has been full ever since it opened in northern Manhattan in 1993.
Secondly, building new labs isn’t easy. Real-estate and construction costs are prohibitively expensive in the city, and the additional cost of specially-built lab space pushes rents far beyond what most startups can afford. One New York City biotech backer said basic development costs could top $450 to $500 per square foot in Manhattan, pushing monthly rents on new lab space as high as $50 to $60 per square foot—prices few startups can pay. By comparison, rents in Maryland’s red-hot biotech corridor of Montgomery County hover at around $35 a square foot before custom improvements.
“The issue in New York is that the value of the underlying real estate is so expensive,” explains Ken Berkman, senior vice president at Scheer Partners, which advises biotech companies on real estate in Rockville, Md., which is in Montgomery County. “Then you take the level of improvements, and the cost could be astronomical.”
Berkman added that development costs in high-density urban office buildings typically top those in suburban research parks.
The genomics advantage
It may not pose such a painful problem for information-intensive genomics companies or bioinformatics firms, Cognia’s Rubin says, explaining that without a pressing early need for cheap wet lab space, these firms might have more incentive to brave the city.
Moreover, the city’s big research institutes are now moving forward with projects that would help soften the space crunch—the first significant projects since the early 1990s.
The State University of New York Downstate Medical Center, in Brooklyn, for example, is building a 50,000-square-foot biotech incubator, and its first tenant is slated to move in by January. NYU, located in lower Manhattan, is backing another earlier-stage project for a 300,000-square-foot research park, and Memorial Sloan-Kettering, on the city’s east side, has been working to coordinate other research institutes behind a third project.
Rubin maintains that New York City can be tough on fledgling firms. Investors in California are more adventurous and the clustering of small companies makes mergers and acquisitions easier, he says.
“Companies [in New York City] probably have to be more robust sooner,” he said. Still, he hasn’t regretted the move: “We’re happy to be here, craziness and all.”