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What Have You Done for Me Lately?

The New York City life sciences got a boost this year when two biotechs, ImClone Systems Inc. and Eyetech Pharmaceuticals Inc., announced plans to expand operations in the city.

Jack Lucentini
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The New York City life sciences got a boost this year when two biotechs, ImClone Systems Inc. and Eyetech Pharmaceuticals Inc., announced plans to expand operations in the city. The decisions bucked the trend that has biotechs quitting the city because of a lack of available lab space. Coincidental or not, the announcements occurred around the time that the Food & Drug Administration approved or signaled support of their newly developed drugs. In another success for the city, Pfizer Inc., the world's biggest pharmaceutical company, has also announced plans to create 1,000 new jobs at its Manhattan headquarters.

All this positive momentum gives city and industry officials hope that the life sciences-biotech sector is poised for takeoff. "We're confident that the number of New York success stories will explode in the next few years," especially since many of its biotechs are reaching stages where the FDA will decide whether to...

IS IT ENOUGH?

But industry experts say the city needs to go much further to build up the life science-biotech business, which according to the New York City Economic Development Corporation (NYCEDC) includes 51 biotechs and four large pharmaceutical companies. Industry officials argue that the city and state must remove obstacles to growth, such as the shortage of affordable laboratory space, and provide tax-break incentives.

The constant stream of spin off biotechs from the city's universities wind up quitting the big city when their lab space requirements exceed 5,000 square feet, says Maria Gotsch, senior vice president of the New York City Investment Fund. "At the exact point where you want to retain these companies, at the FDA approval process, that's where we lose them."

In 2001, the city launched a campaign to attract and retain more biotech and pharmaceutical companies as part of a reorganizing of the NYCEDC by Mayor Michael Bloomberg. Under the direction of NYCEDC president Andrew Alper, a former investment banker with Goldman, Sachs & Co., the number of staff devoted to biotech industry development rose from one to four among the 25 total staff members focused on industry development. The drive includes an effort to market the city's strengths to the life-sciences industry, and to provide more affordable laboratory space citywide.

It's unclear whether the efforts have yet borne fruit. ImClone and Eyetech officials explain their choice to expand in the city by citing, in part, its excellent universities and financial markets, but give little credit to city officials. "The city has not done anything in particular to encourage ImClone to stay in New York," says ImClone spokesman David Pitts. However, tax breaks have been offered to some companies (Pfizer is one example), though such actions have been the exception rather than the rule." (See p. 12).

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PLANNING AHEAD

<p>Audobon Biomedical Science and Technology Park</p>

Over the years, New York City officials have announced several grandiose plans for life-sciences industry growth, but "they almost never pan out," says Raymond Fersko, managing member of Ferskos LLC, a New York law firm specializing in biotech.

A few projects are moving forward, however. City officials are planning an East River Park biotech incubator, in an effort to address the city's shortage of laboratory space. The incubator would be on the East River between Bellevue Hospital and New York University Hospital and would have 800,000 square feet of lab and office space.

Andrew Alper, president of the New York City Economic Development Corporation, says he's had interest in the space from a large European pharmaceutical company, an operator of clinical trials, and a medical device manufacturer.

It's one of five sites citywide where city agencies and private groups hope to build biotechnology incubators – projects that will ensure "that when doctors and sci-A entists have an idea for a new technology, there's a place for them to go," Alper says. The four other sites are the Brooklyn Army Terminal, the Hutchinson Metro Center in the Bronx, a site in lower Manhattan, and an expansion of Columbia University's Audubon Biomedical Science and Technology Park in upper Manhattan, the city's biggest biotech incubator (see p. 8).

But few of the efforts have gotten far. The city and the New York City Investment Fund has have been out marketing these sites to developers, says Investment Fund senior vice president Maria Gotsch. This can be slow going, because developers need to first be convinced they "can get the rents necessary to make it worthwhile," says Mitch Gipson, the Audubon Center's executive director.

The city and state own most of the land being proposed for incubator space and may help fund the projects, officials say, though it's unknown how much they would contribute. Audubon center officials say the city has promised to help fund their planned expansion which would add 240,000 square feet of incubator space to the existing 100,000 square feet, but that a specific dollar amount hasn't been committed. Closer to fruition is a plan for a relatively small expansion at the Advanced Biotechnology Incubator at SUNY Downstate Medical Center.

- Jack Lucentini

Another obstacle to development is the lack of collaboration among neighboring states to attract companies to the region as a whole, some industry observers say. Such cooperation, they add, is vital to the success of any attempt to build up life sciences in the city specifically. Raymond Fersko of Ferskos LLC, a New York law firm specializing in biotechs, says the city's current efforts, while greater than those of the past, probably won't "be the basis for the development of New York City as a biotech center for the country." It would be more practical to market the region, including New York, New Jersey, and Connecticut, he says.

By promoting the region, some of the stark contrasts between the states can be minimized while accenting the benefits. For example, while New Jersey has already passed a law that channels state funds into stem cell research, a similar bill is languishing in the New York State legislature, says Duncker.

"The solution has to be regional," agrees NYCEDC's Alper. Different areas complement each other, he says, pointing to how New York's scientific strengths complement New Jersey's manufacturing facilities. But some analysts say little collaboration is taking place. "We haven't seen any concrete programs or evidence" of it, says Keith Brownlie, a consultant specializing in the New York area life sciences industry for the accounting and consulting firm Ernst & Young.

Bill Fair, NYCEDC vice president for healthcare and biosciences, says partnerships of this type haven't occurred because the campaign to attract more biosciences is still young. "Initiatives where New Jersey, New York, and Connecticut have joined hands and said 'kumbaya'... has not happened," Fair says. "But it's something we're very interested in," and officials from the states do talk about ways to help each other, he adds.

GIVE 'EM A (TAX) BREAK

Insufficient tax-related incentives can also limit the growth of the city's life-sciences industry, officials say. The major tax break program specific to biotechnology within the city or state is the Qualified Emerging Industry Tax Credit (QETC), which provides up to $450,000 in incentives for investments in emerging technologies, and additional monies for job growth in high-technology companies. But there have been few takers, Duncker says, in part because companies complain of too many conditions that must be met to participate in the program. For instance, only companies that are less than eight years old qualify. Only 27 companies used the QETC in 2000, the last year for which the statistics are available according to Michael Bucci, a spokesman for the New York State Department of Taxation and Finance. NYBA's Duncker says that's a relatively small number considering that the credit applies both to biotech and other high-tech activity.

In response to such complaints, NYBA is lobbying "to make the credits more valuable, and also to streamline the process of getting them," Duncker says. The association has also won Governor George Pataki's support for a program to let money-losing companies raise cash by selling their net operating losses to profitable companies, which would in turn take additional tax write-offs from the losses, she adds, but this hasn't become law yet.

There are other tax break programs in New York City, but the mayor tightly limits their use and none are specific to life sciences, says Joseph Lacy, managing director of Stadtmauer Bailkin Biggins, a New York City-based consulting firm. Pfizer received a tax break commitment of up to $46 million on the condition that it create 4,300 jobs, but, Lacy adds, that deal was an exception. "Most of the biotechs out there are generally 50 to 100 employees. They're high-quality jobs, but it's not the type of employment impact that the economic developers find very sexy." Mayor Bloomberg's policy of limiting tax breaks is reasonable, says Lacy, as it helps avoid the interstate competition that tax break programs often engender. But, he adds, it still hurts biotechs. Duncker says the city could encourage life sciences industry growth by adapting the incentives designed for other industries, "so they can apply to biotechs if possible, and streamlining the permitting process."

FIXING A PERCEPTION PROBLEM

But all these efforts may be for naught if companies have the sense that New York City is a bad place to do biotech. "The perception right now is that New York doesn't 'get' biotech," says Ron Cohen, CEO of Acorda Biotherapeutics, a biotech that started in the city but moved to the suburbs soon after. "When biotech over the last 20 years was really taking off in Boston, San Francisco and San Diego,... [in New York], the leaders chose to emphasize other things." Some other states habitually invite biotech executives to tour their biotech parks, and their governors attend the huge annual meetings of the Biotechnology Industry Organization, he adds, but little of that has happened with New York.

City officials say they're trying to address the image problem by relentlessly talking up New York's strengths during industry meetings. Alper says he has used a PowerPoint presentation highlighting New York at least once a week over the past year, in places like England, France, Germany, Korea, China and parts of the United States. The presentation notes statistics such as New York's 25 major academic research institutions and medical centers, and the 129 Nobel laureates who have either studied there or been on various faculty in the city. "The most common reaction we get is 'You know, you're right. New York wasn't on our radar screen and it should have been'," he says.

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