Biopharma companies are expanding beyond the traditional confines of Massachusetts and California with hubs forming – most notably – in the South and Southeast.
Biopharma companies are expanding beyond the traditional confines of Massachusetts and California with hubs forming – most notably – in the South and Southeast. Texas, dubbed Lone Star Bio, and North Carolina (BioNC), in particular, are growing, according to a recent report by BDO.
“For innovative biotech, Massachusetts and California are where the action is, but companies – especially CDMOs – are expanding into the South and Southeast, recognizing opportunities there,” said Patti Seymour, managing director at BDO, in an interview with BioSpace.
“North Carolina, for example, has been active in creating incentives for a long time,” Seymour said. “It has created a critical mass of talent,” in a variety of sectors. Likewise, “Texas is emerging as a center of excellence in gene therapy, with experts at MD Anderson Cancer Center, the University of Texas and other institutions.
“Whether companies stay in those locations depends on their long-term strategies and access to talent,” Seymour said. “In early R&D, the talent is in the major biotech centers. When the company matures and different skill sets are needed, it can move away from those centers. It takes a few early movers to go into a region. Then, once it attracts a few big players, it’s easier to recruit people because there are additional opportunities.”
Bio NC
Knowing this, in 1984 North Carolina laid the foundation to transition its economy from tobacco and textiles to a strong engineering and biotech focus.
To do that, it invested in education. Now the state graduates about 4,000 people each year with advanced degrees in science or engineering, and has a robust community college system that trains people to work in GMP processes, said Doug Edgeton, president and CEO of the North Carolina Biotechnology Center.
The NCBC also works closely with industry, providing training or other expertise to help fill key needs. Along with education, the state legislature developed tax incentives and lowered its standard corporate tax rate to 2.5 percent. The strategy worked.
“Since 2020, life sciences companies in North Carolina have announced plans to create more than 11,700 new jobs and invest more than $8.6 billion in the state,” Edgeton told BioSpace. Although biomanufacturing still dominates, “North Carolina has seen a huge influx of cell and gene therapy companies. That’s partly because a lot of the discovery work on the AAV vectors was done here,” he added.
Biotech companies are located in and beyond the famous Research Triangle Park. Winston Salem is active in regenerative medicine, and Charlotte has two medical schools with Wake Forest/Atrium Health and the University of North Carolina. In the East, Greenville is active in biomanufacturing and is expanding its agricultural technology base. Wilmington, on the coast, has a lot of activity related to PPD. Asheville, more nascent, is developing, too, Edgeton said.
The high-tech industry has a strong presence in North Carolina, too, with Apple, Google, SAS and Lenovo and others located there. AI and machine learning expertise, therefore, is close at hand.
Lone Star Bio
Texas, too, has a strong medical research infrastructure with several notable universities, hospitals and research centers throughout the state. Texas as a whole has an affinity for biotech, said Gabby Everett, director of business operations and strategy and site head for BioLab’s Pegasus Park. For example, “The Cancer Prevention and Research Institute of Texas (CPRIT) was created by a voter initiative in 2008.” It has already recruited 281 cancer researchers and their labs to Texas and awarded more than $3.1 billion in nearly 1,800 grants.
BioLabs, therefore, tapped into a small, thriving ecosystem when it expanded into Dallas earlier this year with a new, 37,000-square-foot facility that has space for 35 startup companies.
“Beforehand, we did a feasibility study to see whether North Texas could support a BioLabs facility,” Everett told BioSpace. That study looked not only at the entrepreneurial ethos in the region but whether the biotech infrastructure (such as funding and the talent pool) was sufficient to support them.
“We expected 15 percent occupancy by the end of the year,” she said. “It will be closer to 50 percent in October.” The occupants include companies developing therapeutics for cancer and neurological diseases, drug design and delivery, lipid nanoparticles and de-extinction technology, as well as diagnostic companies.
Houston and high-tech-focused Austin also have active biopharma communities.
Attracting Investors
One of the challenges to growing the biopharma industry in non-traditional hubs is acquainting potential investors with the space.
“In North Texas, a lot of the funding is focused on energy, which has different norms in terms of due diligence, timelines and outlook,” Everett said. BioLabs is providing some of the know-how potential investors need to understand this industry.
At the same time, growing companies also need to understand their potential investors. To that end, BioLabs and the NCBC each help their constituent companies prepare for discussions with potential investors so they can become more competitive.
In fact, it’s financial considerations that help attract organizations to the South.
“Science is expensive,” Everett acknowledged. “It’s cheaper to do science in Texas.” That broad sentiment is true for most of the non-traditional hubs, enabling companies to stretch their funding dollars. Then, as the companies outgrow accelerators, these states generally have affordable spaces so they can stay in the area.
Affordable real estate is a benefit for employees, too. Redfin lists the average home prices in Dallas and Research Triangle Park at $405,000 and $370,000 respectively, and a home size of about 1,600 square feet. In contrast, the average price in Cambridge and South San Francisco is around $1.2 million for roughly 1,500 square feet.
Onshoring is another, more recent factor in the growth of these secondary biopharma hubs, Edgeton said. The COVID-19 pandemic illuminated vulnerabilities in the pharmaceutical supply chain, creating Congressional interest in returning some manufacturing to the United States. Established expertise helps make an area more attractive.
Expansions or relocations usually aren’t decided on a whim. Typically, organizations have been talking with the state or an economic development council for some time.
In North Carolina, “We try to get in front of the curve by calling on companies years before they’re considering a change. We do a lot of research,” Edgeton stressed, to learn what specific companies do, how they do it and what they need. When the NCBC approaches with its ‘keep us in mind’ message, it’s very well prepared. Such early outreach has been very effective, he said.
North Carolina and Texas are showing there is vibrant life for biopharma companies beyond California and Massachusetts. For growing companies, these regions may be just what they need to stretch their assets, hone their science and thrive.
