VideoTwo years after its founding in Boulder, Colorado, Sirna Therapeutics Inc. picked up and moved to San Francisco in 2005. While most CFOs might have balked at the idea of relocating to one of the most expensive real estate markets in the country, finance chief Greg Weaver saw the move as critical for Sirna's growth.
"What we need to drive this company forward is to attract and retain the highest-quality talent," says Weaver. "We needed a large, biotechnology-specialized employee and executive pool." That's why the tiny public company headed west to continue its work on RNA-interference therapies — techniques that suppress certain genes and viruses, potentially treating such conditions as macular degeneration and Huntington's disease.
With just 68 employees, $5 million in revenues, and a 2005 loss of more than $20 million, Sirna seemed an unlikely candidate to attract attention from economic-development officials. But San Francisco mayor Gavin Newsom rolled out the red carpet for Sirna and its executives, meeting with them personally to discuss the move. "He essentially said, 'If there's anything you need to facilitate your relocation, let's do it,'" says Weaver. Sirna subsequently caught the attention of pharmaceutical giant Merck, which bought the company in October for $1.1 billion.
Newsom is not alone in his eagerness to welcome biotechnology companies. At last count, some 41 states had programs in place targeting the industry, while many more countries, counties, and municipalities offer their own incentives. Attendance at the Biotechnology Industry Organization's annual trade show has boomed, with exhibitors from Minnesota to Malaysia hoping to attract biotech business. "Everybody's working on it, frankly," says Bruce Johnson, lieutenant governor of Ohio and director of the Buckeye State's economic-development activities.
"States and local governments are looking for the industry of the future," says Gautam Jaggi, a senior manager with Ernst & Young's Global Biotechnology Center. "There is more and more of a feeling among economic-development people that [biotech] has the potential to be the next big thing, and they're all looking to figure out how to attract a piece of it."
From its roots in the 1970s, the global biotech industry has grown to more than $60 billion in revenues and is expanding at a 16 percent annual rate. The industry comprises a range of applications, including new drugs, disease-resistant crops, waste remediation, biofuels, and more. U.S. biotech companies posted a collective net loss of $2.1 billion in 2005, according to Ernst & Young, but that was less than half the loss recorded the previous year. By 2015, spending on biotech drugs could make up a third of the entire pharmaceuticals market, predicts Sherrill Neff, a partner at Quaker BioVentures, a Pennsylvania-based venture-capital firm.
The Biotech Map
Most of biotech's success stories so far have been concentrated in a handful of clusters around the country. According to a 2002 Brookings Institution study, five metropolitan areas — Boston, San Francisco, San Diego, Seattle, and Raleigh-Durham, North Carolina — accounted for 75 percent of the new venture capital invested in biopharmaceuticals between 1995 and 2001. Likewise, those areas received 74 percent of the value of research contracts from pharmaceutical firms, and 56 percent of the new biotech businesses formed during the 1990s.
Now, other regions like Florida, Ohio, Iowa, and upstate New York are competing fiercely to put themselves on the biotech map. "You've got Bio-Alley, Bio-Swamp, Bio-This, Bio-That. It's the current version of the dot-com mania," says Rob DeRocker, a partner with Development Counsellors International in New York.
One of the most aggressive players in the battle for biotech is Florida, which promised more than $500 million in state and local incentives to land a Scripps Research Institute facility in 2005. Scripps, based in San Diego, is building a second campus with 74,000 square feet of lab space and 190 employees in Jupiter, Florida; the facility is projected to eventually expand to 350,000 square feet with a minimum of 545 employees. "That was the largest economic-development coup for this area and for the state of Florida in a very long time," says Kelly Smallridge, president of the Business Development Board of Palm Beach County. In addition to the financial incentives provided, Palm Beach touted its climate, low cost of living, diverse population, access to multiple airports, and business-friendly state government.
While Scripps is a nonprofit and won't generate income tax for the state, Florida officials hope the prestigious research organization will serve as an anchor tenant for a biotech community. The state's economy has traditionally rested on tourism, construction, and real estate, but Smallridge says the long-term plan is to transform Florida's business base from services to knowledge work. "We want to shift the entire educational level of the workforce up several notches," she says. The Burnham Institute, a medical research center based in La Jolla, California, and the Torrey Pines Institute for Molecular Studies, in San Diego, have also committed to building facilities in Florida.
Iowa is also eager to claim a spot in the bioscience marketplace, providing incentives through the Iowa Values Fund, a 10-year economic-development program. The state has focused on biofuels and food- and agriculture-related bioscience, with its targets running the gamut from small companies in the nutrition ingredient market to agriculture conglomerate Cargill.
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