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Growing a biotech hub: a tale of three cities

This article first appeared in the St. Louis Beacon, April 11, 2012 - In 1960, San Diego hardly seemed the kind of place poised to be the next  launching pad for an emerging, innovative breed of high-growth, cutting-edge scientific exploration.

The coastal border city lacked a deep pool of old-growth industry and didn’t have a true research university or even a medical school at a time when St. Louis, the 10th-largest city in the nation, boasted two respected, century-old institutions of higher learning, a well-heeled corporate economy and three-quarters of a million people within its borders.

Five decades later, San Diego is home to a bevy of research institutions and companies, ranks in the top three in the biosciences and is a magnet for venture capital in bioscience. The city has more than three times the population of St. Louis, which has since fallen out of the top 50, and even its expanded metro area ranks a couple of ticks higher than its Midwestern counterpart.

By contrast, the most serious biotech efforts here are just a few years old.

How did it happen? Ask Mary Walshok and you get an answer that’s as blunt as it is ironic.

“They had no other choice,” said Walshok, an associate vice chancellor of the University of California-San Diego. “We didn’t have Monsanto. We didn’t have Ralston Purina. We didn’t have McDonnell Douglas. We didn’t have General Motors. We didn’t have big companies that created jobs and created wealth.”

So, they made them.

“It happened out of necessity,” she said, “not out of virtue.”

It may seem odd that St. Louis' biggest strength -- the strong manufacturing and corporate economic base that sustained it through the 20th century -- may also have dampened the pioneering entrepreneurial spirit the city now needs to become the thriving hub of innovation many wish it to be in the 21st.

Over the past decade, a coalition of local public and private entities and individuals have been working to construct a biosciences presence here that they hope may someday rival the three coastal biotech giants: San Diego, Boston and San Francisco. In that light, it’s worth asking how those cities got to where they are today. The answers aren’t as similar as one might think.

San Diego: Instant greatness

San Diego may not have been a hotbed of biological research in 1960, but it wasn’t without an economic engine. That engine was heavily skewed toward the military. Walshok said that a strong naval presence as the Cold War ramped up created an impulse to build R & D as a key component of the economy.

“I don’t think this was happening in St. Louis or in Pittsburgh or a lot of other places, in part because you had big Fortune 500 companies and legacy industries, old families. Things were going just fine,” said Walshok who has done research comparing biotech in San Diego, St. Louis and Philadelphia. “San Diego had none of this so you start to see zoning decisions and economic development strategies that are focused on R & D.”

It also affected educational facilities. The University of California campus where Walshok now works opened in the mid-1960s.

Meanwhile, as naval and aviation work expanded, the region began to cash in on the explosion of federal research dollars that defined the post-WWII era. Cash came from not only the Department of Defense but also the National Institutes of Health, the Department of Energy and the National Science Foundation. Major defense contractor General Atomics was founded in the mid-'50s and the Salk Institute for Biological Research, a few years later. The forerunner to what would eventually become the Scripps Research Institute was already in operation.

Everyone began to focus on creating what Walshok called “instant greatness,” doing whatever they could to lure, not just dollars, but established researchers from other locales. It was about building an academic culture, not just letting one grow.

“Many places around the country are doing this now, but they are starting with promising young assistant professors,” she said. “These guys hired senior people from Yale, from Carnegie Mellon, from MIT. These people already had grants, already had doctoral students, already had connections to the federal research establishment so a town that had been isolated from the world got connected to the global scientific community.

“By the 1980s, there were hundreds of millions of dollars in research going on in a place that had nothing in the 1960s,” she said.

A growing business in “venture real estate” also helped. Private interests would develop research facilities and industrial parks with the hope that their tenants might acquire federal research grants from which the developer could expect either rent or a stake in a burgeoning company. It’s something that’s been a mainstay in California for four decades.

“In fact, it’s a joke that there are as many real estate millionaires in Silicon Valley as there are company millionaires,” Walshok said. “You have an entire business culture that is risk-oriented in places where you see clusters of biotech companies. It’s not just that you have good research institutions.”

As the Cold War wound down, San Diego began to focus more heavily on translational research looking for ways to commercialize its potential. It was an impulse that led to the foundation of CONNECT, a group that worked to link entrepreneurs with the resources they needed to be successful -- from marketing professionals to venture capitalists to accounting and legal services.

Though the whole process may have seemed intentional, in many ways it was evolution as much as intelligent design. It began primarily as an effort to keep the Navy harbored in the area and wound up putting San Diego, a bit unintentionally, on the ground floor of an entirely different emerging R & D industry.

“Nobody said, ‘Oh, if we do this in the '60s we’ll have biotech collectors in 2000,’” Walshok said.

Boston: Ingredients in need of a recipe

No one had to say that in Boston either, but unlike its West Coast counterpart, the tech industry there developed a bit more organically.

“We had a head start over most every other area in the world when it comes to the modern biotech industry,” said Pete Abair, director for economic and global affairs at MassBio, a nonprofit that promotes the industry.

Like San Diego, much of the Massachusetts biotech boom was built on education, but it wasn’t the made-from-scratch affair that it was on the West Coast. Abair said 122 colleges and universities are packed into the rather compact state, including Tufts, Harvard and MIT, which began producing entrepreneurs who frequently found space in Boston and Cambridge. Proximity to research hospitals was also a boon as was access to that most important of research needs – ready cash.

“Boston historically was also one of the 12 or 15 most important places for capital formation to take place so you had an indigenous, savvy investment community here that was looking for a new industry.”

That left Massachusetts as a good starting point for biotech, a field that now employs some 45,000 people and attracts more than $1 billion in annual venture capital to the state, a figure that represents almost a quarter of the entire amount in the United States and puts it second only to the biosciences behemoth of California.

The big boom came three decades ago, largely because of the government. Ironically, it wasn’t federal dollars but federal permissiveness that led the way. In 1980, the U.S. Supreme Court ruled that genetically modified organisms could be patented. Congress passed the Bayh-Dole Act, which permitted private entities to retain intellectual property rights over inventions resulting from federal research loot. The twin decisions opened the way for life sciences to become a business.

“That’s when you really had a lot of biotech companies start to bubble up because now you could buy technology that was researched using federal funds from universities and hospitals,” said Abair. “That was a pathway to create companies.”

Biogen, founded in 1978 as one of the earliest biotech concerns, quickly became a part of the Massachusetts supercluster. By 1985, it was instrumental in working with five other companies to form the organization that Abair now works for. MassBio was originally created for the rather mundane purpose of acting as a purchasing collective.

“They were small companies getting killed by the pricing on lab supplies, equipment and materials,” Abair said. “They got together and said we need to act as a group and increase our buying power.”

Later, it also became an industry advocacy group just as similar organizations have around the nation.

Boston’s story may be substantially different than San Diego’s, but the seemingly accidental nature of its evolution sounds much the same.

“Nobody sat around a table in 1978 and said let’s create a biotech industry,” said Abair. “It happened because the ingredients were here, but not the recipe.”

San Francisco: ‘Blood, sweat and tears’

There is some debate about who has the oldest biotech hub. But Travis Blaschek-Miller of BayBio, a nonprofit trade association in San Francisco, traces the American entrepreneurial spirit to the California Gold Rush of the 1800s, a time when treasure was to be found in the California hills. Entrepreneurs, he said, are as San Franciscan as the Golden Gate Bridge.

“It really stretches back to the founding of the state before entrepreneurship was a word,” he said. “It was just called ‘blood, sweat and tears.’”

In reality it was the development of molecular biology at UC-San Francisco and Stanford that seemed to kick things off.

“Sharing their knowledge, (researchers) came up with a couple of molecules they could replicate. (There) was a global competition in the mid-'70s to come up with synthetic insulin. (This) ultimately morphed into human growth hormone and then a few other molecules,” he said.

Founded in 1976,Genentech became a focus for the industry. Like Biogen, it is among the founding generaion when it comes to corporate ventures in biotech. Even before that, however, Cetus, another early adopter was created in 1971 in Emeryville. By the early 1980s, Chiron Corporation had joined the list.

The momentum continued to build as later in the decade agricultural biotech would gain a foothold. By the 1990s, northern California was also becoming increasingly key in the quest to map the human genome.

As of 2008, the biotech industry in that part of the state bragged on nearly 1,400 companies employing some 90,000 people. The forerunner to BayBio was founded largely as a job board in 1989.

So was it organic like Boston or managed like San Diego?

“It’s both,” said Blaschek-Miller. “It’s organic growth based on that innovation but then buttressed by policies by the communities around here to capture, maximize and provide the best auger for growth of the industry.”

He talked about developing proper zoning and comprehending the process of biotech, joking that civic leadership just needed to understand the three "Ps" necessary for the industry to grow: permitting, process … and parking.

Blaschek-Miller said both the cities of South San Francisco and San Francisco recognized early on the potential in the area and, ever the entrepreneurs, some even have an eye out for potential cross-pollination.

“There is now also a natural collaboration that is happening between biotechnology companies and some of the digital organizations that operate here for unique digital health opportunities that exist,” he said.