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$510-million catalyst

Is Florida special enough to lure the biotech boom that every economic developer dreams of?

By KRIS HUNDLEY
Published October 19, 2003

LA JOLLA, CALIF. - Drive the tree-lined streets of the Torrey Pines mesa in northern San Diego and the intoxicating mix of science and money is nearly palpable.

Lush landscaping surrounds shiny new buildings that look like they just materialized off the architect's drawing board. Modern fortresses of granite, stone and glass, their potential is suggested by names incomprehensible to outsiders: Idec Pharmaceuticals, Syrrx, Neurocrine. But the mesa's winding roads also house reassuringly familiar giants - Pfizer, Merck, Johnson & Johnson.

Along these well-planned roads, one name is emblazoned on more than a dozen buildings: the Scripps Research Institute. It is one of the oldest research institutes in La Jolla, Calif., and the recipient of $191-million in research grants from the National Institutes of Health.

Last year, Scripps brought in $1.7-million in royalty income; its president, Dr. Richard Lerner, made more than $1-million in salary and benefits. Scripps' progeny - companies spawned by its scientists - dot the hillside, perpetuating the cycle that moves discoveries from lab to potentially lucrative markets.

Now Scripps proposes to perform the same magic in Palm Beach County, acting as the catalyst that will transform an orange grove into the new heart of Florida's biotech industry. In exchange for more than $500-million in state and local funds, Scripps dangles the promise of high-paying jobs, explosive growth and maybe even cures for diseases ranging from Alzheimer's to alcoholism.

Other less tangible, but no less important benefits of having such a prestigious research institute in the community are quality of life issues. Scripps' researchers judge middle-school science fairs and mentor low-income high school students as lab assistants during summer programs. Winners of a high school essay contest get to talk genome theory with one of the 14 Nobel prize winners who call San Diego home.

Youthful researchers and lab assistants like to surf before work - one of their reasons for selecting Florida's east coast over Orlando. The wealthy enclave of Palm Beach, where the average home price is $3.6-million, also offers another natural resource mined expertly by Scripps in La Jolla: a sizable number of potential donors.

But for all the enthusiasm among politicians in Tallahassee, civic boosters in Palm Beach County and hopeful biotech companies throughout Florida, replication of San Diego's experience won't be a slam dunk. Landing Scripps may be a coup, but recreating San Diego's synergy will be a challenge.

Some say it may be impossible. Joseph Cortright, author of a 2002 Brookings Institution study on the nation's biotech clusters, said the industry is concentrated in nine metropolitan areas and only becoming more entrenched with time. San Diego is the third-largest cluster, coming in behind Boston and San Francisco.

"People want to believe that as biotech grows, it becomes more spread out, like Starbucks," he said. "But this industry just becomes more concentrated. And though what Florida is doing may be heroic by today's budgetary standards, it's too little, too late."

Cortright said the great public chase for biotech - borne out in generous incentive packages offered by governors, mayors and city managers nationwide - is driven "more by the group-think of the economic development fraternity than the economics of biotech."

Among the incentives pitched to San Diego biotechs have been flashlights from Texas (during the 2001 energy crisis) and offers of a free workforce in Canada.

"My colleague calls it an "idea virus,' " Cortright said of the public's biotech fever. "Everybody is going after the exact same thing and the likelihood that any one city is going to succeed is remote."

Based on his study of successful biotech clusters, Cortright said it takes more than a premier research institution to ensure spinoffs.

"There are places around the country where there is lots of research but negligible commercialization," he said, referring to such cities as Detroit, Houston and St. Louis. Venture capital investors who fund research spinoffs often move startups to areas like Boston, San Diego or San Francisco, where they know they will thrive, with experienced management and advisers, Cortright said.

"People have this naive model that if you come up with a great research idea, a company will automatically sprout," he said. "The evidence is that you can have really brilliant insights and innovations, but nothing anchors it in the community. Research alone doesn't get you there. Even a half-billion-dollars' worth of research."

People with close ties to San Diego's biotech community say it will take everything from an abundance of cheap water and energy to aggressive university support and educated venture investors to maximize Scripps' Florida presence.

Standish Fleming, managing member of Forward Ventures, the largest venture investor in biotech companies in southern California, is impressed by Lerner's decision to expand into Palm Beach County.

"He's not afraid of grandiose schemes and he's able to flesh those out better than mere mortals," said Fleming, whose venture firm is based in San Diego. "But Florida is going to have to build the infrastructure."

Among the challenges, said Fleming, will be attracting venture capital firms to invest in spinoffs from Scripps' Florida facility.

"The first deal will be brutally hard to do," he said. "And there's no assurance they won't just take the company elsewhere, for their convenience, staffing concerns or costs."

Veterans of San Diego's biotech business cite the birth of the medical testing company Hybritech 25 years ago as the genesis of the community's now-flourishing industry. Started by two researchers from the University of California at San Diego, which is just across the street from Scripps, Hybritech got initial funding from a San Francisco venture firm in 1978. In 1986 it was acquired by Eli Lilly for $400-million, leaving its founders with experience and money to plow into new startups. One of Hybritech's founders, Ivor Royston, went on to co-found Forward Ventures.

"Hybritech created our first group of local biotech managers and our first local expert attorneys," said Forward Ventures' Fleming. His administrative partner, Maria Walker, added, "You need national law firms and national accounting firms, all with life sciences expertise."

Relationships with universities are also essential to creating the critical mass necessary to make Scripps work. And the universities have to have technology transfer offices that are experienced in moving discoveries out of the lab.

"UCSD is a giant piece of the puzzle here," said Walker, whose venture firm is working with the university, encouraging early-stage research. One example of the university's role: UCSDConnect, a nonprofit affiliate, runs an incubator-without-walls that helps entrepreneurs connect with everyone from angel investors to accountants. In the past eight years, it has helped 800 companies raise $7.8-billion.

Scripps' Lerner has said he welcomes affiliations with all Florida universities and expects some will even co-locate with his new Palm Beach campus.

"Universities need to be there," he told Florida legislators last week. "The university becomes the anchor. It's like if you go to Rodeo Drive. We're the high-end boutique; but we need Robinson's as well."

Scripps has said that its expansion to Florida will attract big pharmaceutical companies, and that has been the case in La Jolla. Novartis, the Swiss drug giant, has a $200-million, 10-year agreement with Scripps, which gives it a right to develop up to 47 percent of the institute's inventions. Novartis has expanded upon that relationship, building a state-of-the-art, multimillion-dollar, high-speed drug screening facility in La Jolla that's headed by a Scripps scientist.

Another major presence on the Torrey Pines mesa is Pfizer, which is consolidating portions of its research and development on a nine-building campus just down the road from Scripps.

"The pool of talent, skill and knowledge here is quite large," said Mike Varney, vice president of drug discovery for Pfizer La Jolla. "It's a pretty strategic place to be."

Though Pfizer has no formal relationship with Scripps, it often has informal relationships with individual Scripps' scientists. And more of Pfizer's scientists did post-doctoral work at Scripps than any other institution.

Varney said Scripps' challenge in Florida will be to attract the talent and the critical mass it enjoys in La Jolla. And though he is unaware of any discussions about Pfizer following Scripps to Florida, Varney said the institute's plan to focus on organic chemistry at the Palm Beach location makes it more attractive to drugmakers.

"One of the lures of Big Pharma is the organic chemistry component," he said, adding that such research often produces promising drug candidates. "So the same arguments for Big Pharma in La Jolla might be made for Big Pharma in Florida."

People in San Diego are impressed that Florida has made such an aggressive play for Scripps and don't doubt the move puts the state far ahead of other communities in the race for biotech business. Pfizer's Varney said, "It seems pretty generous to me, to pay for this with hard-earned tax dollars. I hope they use it wisely."

April Bailey, director of government affairs for Biocom, a San Diego life sciences advocacy group, said Florida's incentive package is not out of the ordinary.

"I find it more unusual that California doesn't do more to get biotech to stay here," she said. "I'm not really surprised companies are expanding elsewhere, because there's a real scramble for space up on the mesa. But if their economic well-being is enhanced by expansion, it can only benefit the industry as a whole."

But all parties preach patience. Arthur Caplan, chairman of the department of medical ethics at the University of Pennsylvania Medical School, warned that even under the best conditions, biotech is a tough business.

"Genetics is hard," he said. "And this is a game where a lot of people already have a lot of hardware out on the table. I fully believe biotech will deliver, but it may not deliver its breakthroughs for a period of decades. Are Floridians willing to wait?"

- Kris Hundley can be reached at hundley@sptimes.com or 727 892-2996.

THE SCRIPPS SESSION

Gov. Jeb Bush has called a five-day legislative session starting Monday. In the fifth special session this year, Bush wants lawmakers to:

* Spend $310-million in federal economic stimulus money to support an expansion of Scripps Research Institute to Palm Beach County.

* Set aside $190-million in stimulus money that can be spent to attract other companies to Florida.

* Form a nonprofit corporation, exempt from some of Florida's open government "sunshine" provisions, with power to sign contracts and spend money on the Scripps project.

[Last modified October 19, 2003, 02:03:50]


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