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The Race for Space
Will lack of labs, uncertain future of Route 34 park, orphan the biotech baby?
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Business New Haven
7/14/97
By: Lori Green
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Every so often biotech and biomed firms both in the U.S. and overseas gain valuable discoveries from experiments conducted in the space-bound payload labs of NASA launches. As far as Connecticut is concerned, the lab space most critical to biotech progress lies right here on the terra firma of greater New Haven. Yet the scarcity of ready-to-use labs in the area has eager scientists, with microscopes and Bunsen burners in hand, wandering among the debris of the region's under-developed sites and partially equipped lab facilities.
Biotech firms in the state currently occupy more than 189,000 square feet of lab space, with a projected need for an additional 130,000 square feet of turnkey research or “incubator” facilities by 1998. While firms focused on primary research or breakthrough technologies have not yet generated thousands of jobs, employment figures continue to rise.
Says Debra K. Pasquale, president of Connecticut United for Research Excellence Inc. (CURE): “This industry is important to us and will generate jobs and stimulate the economy. We have seen it happen with a high degree of success in states such as North Carolina, Massachusetts, Maryland and California. These states have invested in spec lab space to enhance biotech.”
Pasquale adds that funding is not the issue, since scientists themselves are securing the capital to develop compounds that turn into medicines or genetic engineering applications.
A slide show presented a few weeks ago to Gov. John G. Rowland by the state's high-tech “cluster” committee called for “strategic, targeted subsidies in infrastructure and facilities and R&D investments,” and the creation of a “world-class incentive package.”
As stakeholders - including government, a consortium of research universities, incubator firms, larger pharmaceutical partners and companies eager to be the first to commercialize biotech discoveries - are all painfully aware, however, lab space costs between $250 and $600 per square foot to build, compared with typical office space rates of $80 to $120 per square foot. And where venture-capital angels fear to tread, developers will not rush in.
Although the cry for suitable lab facilities is heard mainly from start-up or emerging biotech companies, pharmaceutical heavy-hitters such as Bayer, Pfizer and Bristol-Meyers Squibb - which often midwife the discoveries of incubator firms - also support some type of public-private partnership to respond to the urgent need for labs. The start-ups often create new compounds or prototype chemicals that are later taken into clinical human trials and then, if effective, to the marketplace by the large drug companies.
Other established and well-capitalized biomed companies such as Norwalk-based Perkin-Elmer, which employs 1,100 of its 5,700 employees in Connecticut, are not directly impacted by the lab space crunch - they simply build their own.
“There is a lack of an overall strategic plan for growth in this industry in the state,” says Mark C. Rogers, senior vice president of corporate development and chief technology officer for Perkin-Elmer. Rogers says that his company has chosen to work with organizations other than CURE that “have been more effective in helping to grow our business.”
In an interview with BNH a year ago, Victor Budnick, president of Connecticut Innovations Inc. (CII) hedgingly forecasted that the “chances were better than 50-50” that a new biotech park along New Haven's Route 34 would be completed and would be open for business within 18 to 24 months.
Twelve months along that timeline, Budnick now reports: “We've believe we've secured $4 million to $5 million from the state. The venture firms don't want to invest in bricks and mortar, and developers are uncomfortable with tenants who often do not have secure financial statements. So we're trying to bridge the gap by finding financial institutions who are willing to take on a little more risk.” State input is likely to be in the form of bond issues and lease-loan guarantees to developers.
Total capitalization for the New Haven project is around $12 million, which Budnick hopes to have in place by the end of the summer in order to get that first crucial building up within the next six months. There are significant others, such as the legislators sitting on the state's Commerce Committee, who are lending credence to Budnick's expectations.
“I think it's going to happen,” says State Rep. Marilyn Hess (R-150) of Greenwich, a ranking member of the Commerce Committee. “CII wants to earmark funds to utilize as loan guarantees and have the state back them, but as third- or fourth-level underwriters. They're really not asking for anything that isn't set up already. The bond package that comes up for review on July 21 could very well include provisions for these types of loan guarantees to real estate developers investing in biotech.”
Hess stresses, however, that the state is “not in the grant business” and that she would not support direct subsidies or further tax credits beyond extended write-offs for longer periods of time at this point. She contends that government does have direction on the biotech issues, and in mid-July specific action plans will be presented to the governor for approval.
Why are developers so skittish about investing in biotech lab space when, according to Fabio Sampoli, senior vice president of the Greater New Haven Chamber of Commerce, 97,000 of the 100,000 square feet of space at Science Park is leased? Says Sampoli: “Developers are not rushing in because lab space is so costly to build compared to ordinary office space, and much of it is 'swing' labs, where firms move in and out quickly as their research progresses. These swing labs will never be 100-percent occupied.”
As far as Route 34 is concerned, Sampoli, too, expresses an inscrutable optimism. “If everything goes according to plan we might see some movement very soon,” he says.
Details on the progress of the Route 34 park however, still remain murky. The scope of Yale's potential role remains unclear as well.
According to Gregory Gardiner, who heads the university's Department of Cooperative Research: “Yale has developed a business model where a building would be erected that we [Yale] could fill up with biomed companies - about ten to 12 over a period of three to four years.”
Gardiner adds that Yale's venture-capital network could be tapped to help fund both Yale-spawned incubator firms and to attract additional biomed/biotech firms to New Haven.
Where such a facility might be sited (Gardiner will not discuss the Route 34 site specifically) and what entity would “own” it are questions for which there are no ready answers. David C. Driver, president of Science Park and point man for the Route 34 venture, and others at Yale declined to provide specifics for this report.
So much for space. A 1996 New Haven chamber survey of the 78 biotech/biomed companies located in the region revealed that 70 percent were growing and intended to relocate for expansion within the coming three years. Sixty percent indicated that the region was meeting their needs only “somewhat” or “not very well,” and were concerned most with business costs, an overall onerous regulatory climate and a deficient infrastructure.
As well, lack of timely road and sewage construction, permit grants and airport shortcomings were frequently cited by industry insiders as issues obstructing expansion.
Says State Sen. Brian M. McDermott (D-34) of Wallingford, Senate chair of the Commerce Committee: “We've brought down the corporate tax rate from 14 to 8.5 percent, and are actively working on reducing workers comp and unemployment rates. The biotech partners need to agree on an agenda devising legislation for next year, and we all need to come up with specific regulations that need to be changed or simplified.”
McDermott is another believer in the prospects of the Route 34 project, adding that engineering plans are well underway at Diversified Technologies Corp. in North Haven.
Even if and when completed, however, will a new urban-based research park be attractive to leading-edge firms?
“We built our own campus since we couldn't find developers who wanted to do laboratory space,” says Jim Nolan, president and CEO of the Institute for Pharmaceutical Discovery (IPD) and the Institute for Diabetes Discovery (IDD). IPD signed an option to purchase a 100-acre tract of land on the Branford-Guilford line, partly because most of the space still available at Science Park is unfinished for lab use.
Nolan also believes that a suburban location is essential for competitive reasons and is in keeping with other biotech corridors located around Boston, in Maryland and in North Carolina's Research Triangle. Says Nolan, “We need to recruit high-level staff - and these scientists are accustomed to living and working in suburban environments.”
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