Comstock's, November 2007
Science Experiment
Biotech companies cluster along I-80
By Rebecca Adler
Despite the economic challenges posed by California’s tax laws and its high cost of living, the 30-year-old biotechnology industry in Northern California isn’t going anywhere.
Biotech companies, which have been locating in the Bay Area for three decades, are expanding in the region, creating what supporters hope will be recognized as the BayBio Corridor. Solano County is expected to be one of the largest benefactors of biotech expansions. Like many other places in the United States and abroad that are trying to win biotech dollars, Solano is situated between top universities and an already thriving biotech industry.
“As biotechnology companies continue to grow in the Bay Area, more and more are looking outward toward Solano County and Sacramento for places to expand,” says Matt Gardner, president of BayBio, a Northern California life science nonprofit based in South San Francisco.
Gardner says Solano is attractive because there is more land available for a considerably lower price than in South San Francisco — where a cluster of biotech companies are located — while still being within driving distance of the Bay Area and four of the nation’s top scientific schools: UC Davis, Stanford, UC Berkeley and UC San Francisco.
Vacaville began attracting biotech companies in the late 1980s when BioSource set up shop there. The city’s streamlined approval process made Vacaville an attractive location for biotech companies, especially after it built a track record with BioSource and Alza, says Mike Palombo, Vacaville’s economic development director.
“Biotech companies take a long time to decide on a site, but once they’ve decided, they want the process to go quickly,” Palombo says. “By the time Genentech and Novartis were interested in locating here, we’d already proven that we know how to deal with biotech companies.” Genentech, which does biotherapeutics research and development, and Novartis which deals in medicine, vaccines and consumer health, have both been in Vacaville for more than a decade and are currently expanding there. Genentech’s recent expansion added 380,000 square feet for manufacturing, bringing the site to a hefty 427,000 square feet.
But the decision to locate in Solano is not easily made by biotech companies. In fact, many build research and development labs in the area while building manufacturing and distribution plants in other states.
“In general, unless it is for research, Genentech does not locate large facilities in California because of the way that California apportions corporate income taxes compared to other states,” writes Kim Nguyen-Gallagher, associate director of community and patient programs for Genentech, in an email.
So why decide to not only expand an already existing site in Solano County, but also to build a new research site in Dixon?
Nguyen-Gallagher says Genentech broke ground in Dixon, a site approved for development in the summer, because of a strong pool of skilled labor in the area (mostly from nearby UC Davis), its reasonable distance from Genentech headquarters in South San Francisco, and a large supply of development-ready land.
A research and development tax credit offered by the state, support from Dixon city government, and a variety of affordable housing options within distance of good schools and recreational activities were also factors in the decision, Nguyen-Gallagher says.
But the company no longer looks to California for its manufacturing facilities, Nguyen-Gallagher says, because of negative tax consequences.
It’s a flaw other biotech states are capitalizing on. Both Massachusetts and North Carolina — California’s largest competitors — are able to offer a central location for R&D and manufacturing, as well as incentives and a highly trained workforce.
“This is a clean, knowledge-based industry that pays its workers exceptionally well,” says Barry Teater, director of communications for the North Carolina Biotech Center. “It’s in our best interest to do whatever we can to draw these companies here.”
North Carolina is doing its best to distinguish itself from the rest, Teater says, alongside every state, and even other countries, competing for biotech companies.
“What we have to do as a state is cut through the competitive clutter,” he says.
By offering land incentives, North Carolina has already cut out one of the biggest challenges to attracting biotech companies: cost. In addition, the state has been working on an integrated school system that gets students interested in biotech careers beginning in high school, creating a stream of workers at all levels.
Solano County has been developing a similar strategy over the past 10 years.
Jim Dekloe has helped develop a biotech program at Solano Community College that trains workers in both science and government regulations of the biotech industry.
Dekloe says the program really developed after Genentech located in Vacaville. This was because many of the workers Genentech was hiring had all the knowledge they needed, but no hands-on experience. For several years, post-baccalaureate students were the program’s main participants.
Today the program has expanded, and many of its incoming students are high school graduates who have already completed the first year of the program through one of four integrated Vacaville high schools.
At UC Davis, Judy Kjelstrom is working to make biotech a larger part of the high school curriculum as well. Education is one of the biggest factors in growing biotech along the Interstate 80 corridor, says Kjelstrom, director of the UC Davis Biotechnology Program.
“We need to let high school teachers see biotechnology firsthand so they get excited about it and pass that excitement on to their students,” she says.
But Massachusetts is also home to a highly educated workforce — and to well-known universities that receive $2 billion in research grants each year. And while Boston compares to California when it comes to cost of living, what sets it apart is incentives offered by the state. In May, Massachusetts Gov. Deval Patrick announced a life sciences initiative that would invest $1 billion in research in the next 10 years.
“Investing in the life sciences is important to Massachusetts because it is one of the top industries in the state,” says Stan McGee, Massachusetts’s assistant secretary of policy and planning. One in seven jobs in Massachusetts are in the life sciences.
“These are high-paying, quality jobs,” McGee says. “Incentives help us to be competitive on a global scale by offsetting the cost of living and the cost of doing business here.”
In addition to bringing in well-paying jobs and an educated workforce, biotech companies bring in other business too. Both North Carolina and Massachusetts estimate that for every one biotech job, four other jobs are created.
Biotech companies hire attorneys to copyright their products; they hire financial advisers and they use local suppliers and vendors, McGee says. Add to that the number of restaurants and recreational businesses that open to support wealthy biotech workers, and wooing biotech companies starts to make sense.
Incentives can only take a state so far though, says Mike Ammann, president of the Solano Economic Development Corp.
“Northern California is known for its innovation in this field,” Ammann says. “Very sophisticated techniques come out of our universities.”
Additionally, California venture capitalists are more likely to take a risk on a new biotech company than venture capitalists in other states are, Ammann says.
Currently, Northern California — including the Bay Area to Yolo — contains the largest cluster of biotech companies in the nation, with 900 companies and 90,000 employees, according to BayBio. That number is expected to double in the next 10 years, Ammann says.
“We’re doing something right if these companies are still expanding and moving to this area,” he says. If anything could make the biotech industry stronger here, it would be incentives for production, Ammann adds.
“These companies come here for the talent we cultivate,” he says. “All of our talent goes into researching and developing new products, only to see it move to Oregon or Singapore for the production phase.”
Ammann says that despite its lack of incentives, California will always be attractive to new companies because it offers a higher quality of life than other states do.
“Companies know their workers are going to want a life outside of work,” he says. “Young, wealthy people want to be in an urban environment, not out in the pines. Not many other biotech regions can offer the urban life the BayBio Corridor has.”
The desire to be around other intelligent people and to live in a culturally diverse, recognizable city is a big draw for biotech companies, he says.
“Incentives would be nice, but they aren’t absolutely necessary. This is an area that cultivates innovation and attracts some of the brightest minds in the nation. We’ll do just fine.”
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