On the front page of the Tuesday edition of Investors Business Daily, Reinhardt Krause wrote a great article on the expansion of the biotechnology boom around the U.S.
California and Boston, where biotech giants such as Genentech (Private:DNA), Amgen (NASDAQ:AMGN), and Biogen Idec (NASDAQ:BIIB) were born, continue to be the leaders in biotechnology. But more and more states are initiating plans for large biotech research establishments. Already, Maryland and San Diego have established biotechnology driven economies, and Washington, Colorado, and Pennsylvania, among others, are attempting to establish their own life science research hot spots. In fact, the biotech industry in Colorado has enjoyed a 38% increase in venture capital funding in 2006. Adam Rubenstein of Colorado Life Science Deal Flow is very busy trying to keep up with the venture capital flowing through his state.
Enter Florida, the southeastern state that continues to enjoy a robust economy, driven by the hot Real Estate market of the last decade, and the increase in immigration, both national and international.
Florida is welcoming more than 1000 new residents daily. Of the new residents, about 44% are less than 35 years old. This influx of people, especially at that young professional age, tends to signal that a job boom is occurring. In a recent survey, 33% of newcomers state that the main reason for moving to Florida was to find work, while only 17% said the climate was the main motivator.
Aging Population Provides Healthcare Demand
But statistics show that these young professionals are transients, making money and having fun in the sunshine state, then leaving, while the older population is in Florida to stay. This has generated large communities of retirees who are aware of their health needs, and are financially capable of doing something about it. Today in Florida, 1 out of every 6 people is 65 years of age or older. Nationally, only one in 8 is 65 or older. The state’s older population is expected to double by 2030, as the number of 85 year olds is expected to jump to almost one million.
So it is not surprising to see Healthcare as one of the top priorities to Floridians. Medical clinics and hospitals are top tier in South Florida. In fact, Dick Cheney had his aneurysm treated in a South Florida medical clinic back in 2005. But demand for healthcare in Florida continues; more hospital beds, better quality drugs, and new innovative treatments are needed. The state of Florida is willing to spend money to answer those demands.
Importing Expertise from California
It all began in 2003 when the Scripps Research Institute of La Jolla, California, was promised by Palm Beach County a significant amount of financing to establish a biotechnology research hub in the state. Scripps accepted the proposed $500 million in financing, and initiated plans for a mega biotech site on the Western fringes of Palm Beach County.
Problems arose when environmental groups worried that large scale construction would cause significant damage to the nearby everglades. A judge agreed to stop construction plans until the environmentalists could study the potential effects of the Scripps research complex, which could take at least two years. Scripps decided to move the planned research center to Jupiter, just north of West Palm Beach. The center would be constructed on one of Florida Atlantic University’s campuses. So far, Scripps has cost the state $650 million in financing.
This much honey tends to attract more bees. Torrey Pines Institute for Molecular Studies lobbied for financing from Palm Beach County for establishing a large research center in Boca Raton. Palm Beach County denied the request, citing the institute’s relatively small level of federal funding dollars. Torrey Pines finally received $100 million from St. Lucie County, about an hour drive north of Palm Beach. Ground breaking for the new site is expected by March.
Burnham Institute for Medical Research also wants a strong presence in Florida, and has so far received over $300 million in state and local incentives to establish a life science research site near Orlando. Not to miss out on the handouts, SRI International of Silicon Valley opened its new marine technology research complex in St. Petersburg. A permanent facility is expected by mid-2008. Almost $50 million has been invested in SRI so far.
In-State Research Activity
Not to be outdone by its cousins to the north, the University of Miami announced that it will initiate a large scale life science research network that will rival most of the big cities in the nation. The two phase plan called for about $1.5 billion to be spent. The first phase had already begun. In 2006, a 336,000 square foot clinical research institute began the roll out of facilities in downtown Miami. Another 182,000 sq ft biomedical research institute will open in 2007, while the university’s first hospital is expected by 2010.
The second phase of the university’s plan calls for an even larger complex, about 1.4 million square feet of research space. The second phase is expected to create 5000 new jobs, and have a combined impact on the city’s annual income of about $263 million.
Biotechs Getting a Piece of the Action
These projects will surely have a tremendous impact on the life science business in the state. Appropriately, BioCatalyst International, a firm founded by a co-founder of Genzyme (GENZ), moved its office headquarters from Virginia to West Palm Beach. The firm provides financing capital and business management for biotech firms. Surely, BioCatalyst is looking forward to capitalize on the expected roll out of development stage biotech companies in the coming decades here in Florida.
Utek Corporation (UTK) of Tampa has been very busy in the last couple of years, and is expected to get even busier. The company specializes in technology transfer management for Florida companies and universities. It has been seeing increasing interest in Florida-born intellectual property from both national and international entities.
Poniard Pharmaceuticals (NASDAQ:PARD), under its previous name NeoRX, entered into a collaborative agreement with Scripps at Jupiter. The company will provide the institute with about $2.5 million over 26 months to conduct research. Poniard will have world wide exclusive rights to any treatment developed.
It is not only state firms that are increasingly making Florida their new business focus. Biotech companies are sprouting out of Florida universities ahead of the expected surge in venture capital.
Oragenics (ONI) of Alachua is targeting oral disease. The company’s exciting research is centered around replacement therapy, which utilizes a single topical treatment for life long protection against tooth decay. The tiny company, with a market cap of only around $20 million, was a University of Florida start-up.
Axogen of Gainesville, a company focusing on repairing peripheral nerve damage arising from injuries, raised almost $8 million back in February of 2006. The company is expected to launch its first product this year.
Venture capital spending on U.S. biotech companies continues to rise. According to research firm VentureOne, biotech companies received a total of $3.1 billion in venture funding across the U.S., up from $2.5 billion the year before. For Florida to see a bigger chunk of that cash flow, it will have to do a better job at spending its own money. Florida has so far lagged behind. As of 2004, 51.6% of research and development spending in Florida was for life science research, while nationally, that percentage is higher, standing at almost 60%.
There still is room for the biotech industry to grow in Florida, and there are plenty of research institutes, life science companies, intellectual property law firms, and venture capital groups waiting for a piece of the pie.
The biotech boom will happen in Florida, but questions still remain; when will it occur, and how much will it cost?
The next decade should give us the answers.