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Boom or bust?

The Texas Research Park was supposed to spark a biotech boom in San Antonio, with 100 companies and 30,000 employees by 2020. Thirteen years later, only 15 companies with about 300 employees have set up shop. Are Florida's goals for a boom led by Scripps Research Institute overly ambitious?

By KRIS HUNDLEY, Times Staff Writer
Published November 24, 2003

SAN ANTONIO, Texas - York Duncan remembers the January 1990 dedication of the first building in Texas Research Park, a project intended to spark a biotech boom for this city.

Duncan had been on the job as the park's director of sales and leasing for only four days and the park lacked a single tenant, but his boss boldly assured the crowd that 16 biotech companies were lined up, ready to move in.

"I hadn't even made a phone call yet," said Duncan, now president of the foundation that runs the park. "That president lasted about nine more months."

As Florida tries to launch a biotech business bonanza with more than a half-billion dollars in government incentives to Scripps Research Institute, the lessons of San Antonio may be worth remembering - starting with the dangers of letting hype overtake reality.

Undisputed biotech centers such as Boston, San Francisco and San Diego developed over several decades, fueled by a potent mix of academia and entrepreneurship, rather than being the inventions of an economic development task force. Like Florida, San Antonio set out to build a biotech economy from scratch. The results have been mixed.

More than 20 years after biotech captured the imagination of civic and business leaders in this city in South Texas, it's still painfully slow going.

Snakes may outnumber workers on the park's 1,236 acres of rolling brushland about a half hour west of the Alamo. Clustered along the park's paved loop road are two multitenant office buildings, a laboratory, two office buildings housing independent cancer research organizations and two, soon to be three, university-related research buildings. Also tucked among the trees are 80 apartments to house university grad students.

Total number of for-profit companies in the park: about 15. Total employees: about 300. That leaves the park little chance of meeting the optimistic projections that it would house 100 companies with 30,000 employees by 2020.

"You can very easily oversell a large project, and that's what happened here," said Duncan, who joined San Antonio's biotech venture after the initial hoopla. "There were well-known community leaders expecting 10,000 jobs within two to three years. If they had thought sanely, they wouldn't have thought that."

Florida's expectations for Scripps' campus in Palm Beach County are even more ambitious. When Gov. Jeb Bush earmarked $369-million in federal funds for Scripps' incentives, boosted with another $200-million from the county, he touted an economic study showing tremendous payback. It projected the California institute would serve as the catalyst for creating nearly 44,300 jobs within 15 years.

There are notable differences between the San Antonio biotech experience and Florida's nascent efforts.

More than a dozen years after opening, the Texas park's total investment is $130-million, less than a quarter of what Florida and Palm Beach County have promised to invest in Scripps' new campus.

About two-thirds of the money invested in the San Antonio park is from public sources, mostly University of Texas funds. But in the early years, wealthy Texans put up much of the cash to get the project rolling. Among them were H. Ross Perot and Gen. Robert F. McDermott, then chief executive of insurer USAA. A wealthy oilman donated the park's land.

Though Florida's Gov. Bush was the driving force behind the Scripps' deal, his brother, George W., was not as willing to throw public money into the biotech effort in San Antonio when he served as Texas governor from 1994 to 2000.

The park's director said that in at least two cases the lack of state incentive money led potential tenants to move elsewhere. One of those companies made a presentation to Gov. George Bush's Biotech Council, outlining the offers it had received from other states. To drive home the message that Texas wasn't even in the game, it showed a picture of a dead armadillo. (Texas recently approved a $295-million incentive fund for new business of all kinds that the park hopes to tap in the future.)

Perhaps the most critical difference between the biotech efforts in Texas and Florida is that San Antonio lacks the star-power of Scripps, the nation's largest non-university recipient of grants from the National Institutes of Health. The research magnet in the Texas park is an affiliate of the University of Texas San Antonio that's only a dozen years old and recently lost its high-profile lead researcher.

Paul Hassie, president of Bio-Florida, an association of the state's biotech companies, said the industry grows when there are three components: universities, private businesses in the field and government.

"It doesn't sound like San Antonio has a university anchor, even though they're trying to do everything right," he said. "In Florida we finally have a government that's shown it's interested in promoting this opportunity. Scripps will bring with it something similar to the academic environment, and venture money will follow these ideas so that companies can be spun out of it. I think it will take 10 to 15 years to see the impact we're all hoping for."

People involved with San Antonio's biotech business are downright envious when they hear about Florida's deal with Scripps, which is known for creating spinoffs that attract outside funding. But they say it's still easy to overestimate how quickly biotech may boom. And they think people like Hassie might have to wait a lot longer than he expects for a big payoff.

Jim Dublin is a tall Texan who remembers the first rumblings about biotech in San Antonio back in 1982, after the city lost a bid to Austin for a computer company. As president of a local advertising agency, Dublin was part of a "Tiger Team" of San Antonio big shots, led by then-Mayor Henry Cisneros, who traveled to Research Triangle in North Carolina, Rensselaer Polytechnic Institute in New York and Princeton University in New Jersey, trying to get a handle on how to re-create a biotech cluster in a city that had long been dependent on tourism and the military.

Dublin was there when local oilmen, bankers and landowners made big pledges to the biotech effort, and he was there when those pledges evaporated after the oil and real estate bust in the mid 1980s. He was there when the staff of the foundation that created the park was slashed from 22 to four to erase a $1-million-a-year operating deficit. And though he's frustrated at the slow pace of development at the park, he's nowhere close to giving up the fight.

"I remember the guy at Research Triangle telling me that this is a 30-year project," Dublin said. "And you have to remind everybody every day it's a 30-year project."

Foundation president Duncan, who's sitting on vast acreage that's empty of everything but promise, knows taking that reminder to heart is another thing.

"We had a foundation trustee who was the biggest property owner in San Antonio," Duncan said. "And he'd come by every once in a while and say, "I know this is a 30-year project, but I'm 76 years old. Can't you hurry up?"'

Second thoughts

Looking back, there are many things the founders of Texas Research Park wish they had done differently.

If proximity to existing research organizations is critical, the park missed the mark by miles. The parcel is 27 miles from the local airport and 20 miles from three long-established research institutes, including two nonprofits and the University of Texas' bustling health science center. It is on a tract of land that even Sea World rejected in favor of a parcel closer to town.

Only now, nearly 20 years later, is San Antonio edging out in the park's direction, with the recent development of several multimillion-dollar homes and two golf courses on adjacent land. Citigroup has put a call center campus across the road from the park's entrance.

"There was a real behind-the-scenes battle about the park's location," said Duncan, but closer-in locations lost out to the offer of free land in what was supposed to be a high-growth corridor.

A similar site debate recently flared in Palm Beach County, when Scripps showed interest in a 100-acre parcel across from the Jupiter campus of Florida Atlantic University. Under pressure from state and local lawmakers, Scripps' officials returned to their originally announced location, a 2,000-acre citrus grove that has plenty of room for hoped-for spinoffs.

Plopped far from San Antonio's research action, Texas Research Park had the difficult task of creating a research magnet. With a $15-million gift from Perot, the foundation built a showplace laboratory for the University of Texas San Antonio, named it the Institute of Biotechnology and waited.

It took more than a year for the Texas Legislature to approve operating funds. "Lots of things were forced down UT San Antonio's throat," Duncan said.

Today, the institute has about 100 scientists and graduate students who focus on research in cancer and aging. But Wen-Hwa Lee, a well-known cancer researcher who joined the Institute soon after it opened, recently returned to California.

After 12 years of operation, the institute has not generated a single business spinoff.

"This is a Cadillac building," said Dave Sharp, the institute's interim chairman and professor of molecular medicine. "And the idea of a magnet is good. There just needs to be a bigger magnet."

Limited successes

The park has had some successes. One company, Ilex Oncology Inc., was spun off from a nonprofit cancer research center that has offices in the park. Ilex grew rapidly, doing contract research work for drug companies, and the park built two facilities to accommodate its growth. But within a few years, Ilex decided that it needed to relocate closer to downtown to attract employees. Today, only about 20 of Ilex's 225 workers are in Texas Research Park.

GeneTex Inc., which sells screening products used by cancer researchers, is another success story. The company, started by former faculty from UT San Antonio, moved in 1998 into a $3-million lab built with park and county funds. GeneTex's chief operating officer, James Wang, was one of the first graduate students to get his doctorate through the park's Institute of Biotechnology. Today, the company is self-funded, barely break-even and has seven employees.

"The park gave us plenty of space at below-market rent," Wang said. "Now we want to make billions."

Casey Fox, president and chief executive of BioMedical Enterprises Inc., may be the park's most vocal supporter. He left a faculty position at San Antonio's Southwest Research Institute, a nonprofit that is not related to the park, to start a consulting business in the park in 1990. With his wife handling the finances, Fox also started developing medical devices, including less invasive equipment for harvesting bone marrow and new surgical staples to repair fractures in hands, feet and ankles.

This year, his company will have sales of more than $1-million, Fox said. Self-funded so far, BioMedical Enterprises is profitable and has a staff of 10. Fox is preparing to look for his first outside funding.

"We would not have survived without the research park," said Fox, who made a short-lived attempt to get venture capital immediately after Sept. 11, 2001. "The park's foundation has taken equity for rent and allowed us to self-fund our growth. This company never would have been started, much less still be around, without the park's recognition."

Fox knows he'll have a challenge convincing investors in San Antonio, who are more familiar with the economics of oil deals, to put money behind his biotech endeavors. And he warns that Florida's private investors have to be willing to ante up the capital when Scripps begins spinning off risky technologies.

"That half-billion dollars from the state is just the seed money," Fox said of the public funds luring Scripps to Palm Beach. "If the community doesn't recognize they're going to have to put in five times that amount just to realize the value of that expenditure, they shouldn't do it. Just having the Scripps name is not enough."

Needed: tenants

Educating "angel investors" willing to gamble on startups is one of York Duncan's priorities as he tries to spur growth in Texas Research Park. About a year ago, he helped hire a director for a nonprofit group that advises tech startups and organizes individual investors. So far the group has helped 20 entrepreneurs through a development program and assisted three companies in obtaining local angel funding of about $20-million.

Duncan is also determined to build an incubator to hatch biotech businesses, not on the park's land but adjacent to the university's Health Science Center, 20 miles away on a hilltop packed with hospitals and other research groups. Such a facility would offer fledgling entrepreneurs flexible leases, below-market rent and mentoring from lawyers, accountants and businessmen. Companies nurtured there will be logical tenants for the park as they grow, he figures.

"The incubator has to be within walking distance of the professors who will be starting these businesses," Duncan said. "You're not going to get a faculty member to come to the park for a couple hours, then go back to the campus to teach classes in the afternoon."

Duncan figures it will cost about $16-million to create and fund the incubator. To raise the money, he wants to take the bold step of selling off some of the park's land for residential development. He figures that will raise about $5-million; he hopes to get the rest from state and federal grants, as well as local philanthropists.

Duncan also is trying to get San Antonio's research organizations to work together to land larger government grants.

As he casts his net for tenants, Duncan said there have been low points. About six months ago, after the park's lead scientist decided to relocate, a brainstorming meeting of park supporters left Duncan so depressed he was ready to quit. Then he seized on the idea for the incubator and was re-energized.

"For the last couple of years, my board has told me to go out and stir things up," said Duncan, who just turned 51. "But the real estate is always No. 1. And I will fill it up."

- Times researchers John Martin and Caryn Baird and Times reporter Scott Barancik contributed to this report. Kris Hundley can be reached at hundley@sptimes.com or 727 892-2996.


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