Biopharmaceutical venture capital investment climbed from $4.52 billion in 2013 to $5.29 billion in 2014, a 17% increase, according to Dow Jones VentureSource.
Joel Marcus, chief executive of Alexandria Real Estate Equities Inc., has been in biotech since its early days. From 1984 to 1994, he had a law career with expertise in the biopharmaceutical industry that included time as general counsel and secretary of Kirin-Amgen Inc., a joint venture between Kirin Brewery Co. and Amgen Inc.
In 1994 he founded Alexandria Real Estate Equities, a real estate investment trust that owns, operates and develops properties for the life-sciences industry. The company, which has properties in biotech hubs such as San Francisco and Cambridge, Mass., is also a venture capital investor. Since 1996 it has made more than 250 investments.
Venture Capital Dispatch spoke with Mr. Marcus about trends fueling the biotech boom. The questions and answers have been edited for length and clarity.
What are some of the most important ways the biotech industry has changed since you got into the industry?
It’s fundamentally different than 1983, the industry has grown up substantially. There’s a new generation of companies beyond Genentech and Amgen. The nature of the science has progressed pretty dramatically, especially in cancer. What has not changed for the positive is the lack of full funding for the FDA, although the agency’s done a great job on an under-budgeted situation getting things approved that should be approved. I think NIH is underfunded—we’re losing a lot of young scientists, so that is something I hope Congress will turn their attention to. I think the longer it’s underfunded, the less opportunity to create basic scientific breakthroughs. Pharma is coming out of the last decade with better business models, the private sector is doing great, it’s the public sector that’s been struggling under cutbacks and gridlock.
What are some emerging areas of opportunity in biotechnology?
The area we’re really interested in, that’s been slower in evolution in scientific advancement, has been neuroscience. The fact you’ve got an aging population in Asia and Europe makes this the most compelling opportunity of all in market size. We think clinical trials in the neuroscience area have been a lot less advanced than cancer, so we hope that will be a new big opportunity. When you do an Alzheimer’s study you need thousands of patients over a long period of time. We [have] got to figure out how to make that a more effective approach. We’re looking at how the FDA and other key stakeholders can lead clinical trial reform.
With the resurgence of bioscience industry, occupancy in your properties is 97%. What impact is competition for space having on companies?
In [our] locations, particularly Cambridge, you have not only biotech, you have pharma moving back to the urban innovation clusters in a big way, so they’re competing against biotech. You also find tech companies like Microsoft and Akamai fighting for space in Cambridge, which is getting very tight. We’re seeing big demand and that’s causing a big squeeze. Smaller companies and medium-[size] companies are looking at Watertown and Route 128. We have in our development pipeline a million square feet in Cambridge.
We’re finding the same thing [in Mission Bay, San Francisco]. You have biotech there, you have venture there, [and] now you have tech there. Uber took land to build two big buildings that could have gone to life science but didn’t.
Why are companies leaving the suburbs for cities like San Francisco and Cambridge?
It’s access to talent and the need to be close to collaborate where the industry ecosystem thrives. Companies are very, very drawn to that.
Do you think that new biotech hubs will emerge in the near future?
There may be another cluster or two over time that emerges. Most recently, New York City has emerged as a strong hub. I think right now Texas is ripe for an explosion of life science work. The commercial sector isn’t there, but the quality of clinical practice and the quality of research and treatment is certainly first rate. There are four things you need to make a cluster thrive: risk capital, great location, great management, great science.
Write to Brian Gormley at email@example.com.