Reality bites: Amgen’s (NASDAQ: AMGN) decision to leave Washington state is a serious blow to our local bioscience ecosystem. Those who think that all of those people who got laid off (or choose not to relocate) will be able to find biopharma jobs here in Seattle are kidding themselves. Our community is not large and robust enough that the employees of large companies being acquired or shut down can readily find local re-employment in the biotech arena.
And what about the research these employees were conducting? Budget cuts often have strong negative impacts on research productivity. One day you’re working on an exciting project to develop a new medicine, and the next day the company is closing down your location and your fate is up in the air. This is more than a personal tragedy. Your project may be abandoned for any number of reasons and wind up in a scientific black hole from which escape is quite difficult. Even if you have the entrepreneurial inclination to start a new company by licensing the intellectual property associated with your old project, there’s no guarantee that your former employer will go along with your idea. Think how embarrassed the company might be if you succeeded! Your success could lead to a strong rebuke of the company’s senior management, and to avoid this potential problem, it may simply put your project on the shelf “for future consideration.” The company also avoids the issue of having its “deep pockets” sued if some problems arise in the clinic with a drug it licensed out.
Big Pharma Decisions Are Often Tied to Short Term Economic Considerations
Biopharma companies have some economic advantages that few other industries share. Most notable, of course, is monopoly pricing that is not tied to the cost of goods, but to the perceived benefit they bring. Having said that, those that are publicly traded companies must answer to their shareholders. This leads most of them to take a short-term economic view, and when they change plans it can be devastating to a community. In 2005, the U.S. Supreme Court ruled in a widely criticized decision (Kelo vs. City of New London) that private property could legally be taken by government and turned over to private developers to boost the local economy. In this particular case, developers wanted the land to build amenities (shops, a hotel, condos) to support new laboratory facilities to be built in New London, CT, by Pfizer. Families were evicted, houses were bulldozed, the land was cleared, and then Pfizer decided not to build labs there after all. The area, which used to be a middle class neighborhood, deteriorated and became a dumping ground. The city would have been much better off if Pfizer had never suggested building its labs there.
Amgen announced plans in 2006 to build out the rest of the Seattle Helix campus; this would have potentially doubled the number of employees at the site. Sadly, those plans were abandoned several years later at the start of the great recession in 2008. These examples illustrate that even Big Pharma’s Big Plans can change in a hurry.
Former Immunex employees may have noted the irony in Amgen’s second quarter earnings report that accompanied the news that its Washington state locations were being shut down. Marketed products acquired from Immunex when it was purchased (etanercept, sold as Enbrel) as well as products in the pipeline that were developed at least partly by Immunex employees (panitumumab (Vectibix) and denosumab (Prolia/Xgeva)) contributed a whopping 39 percent of product sales. These drugs also showed some of the largest year over year sales gains: Enbrel was up 7 percent, Vectibix 42 percent, and Prolia/Xgeva 29 percent, while sales for legacy Amgen products Neulasta/Neupogen were down 1 percent and Aranesp/Epogen sales were essentially flat.
What Will Become of the Helix Campus?
The issue of what will happen to the Amgen campus also remains up in the air. A number of suggestions have been put forward, including making it the site of a new university (e.g. the Washington Institute of Technology). Amazon could reconfigure the space as a stealth lab where Jeff Bezos and company can work on their skunk work projects. Novo Nordisk has just announced that it is going to assemble a new obesity group. The Helix site would very nicely accommodate both Novo’s existing Seattle diabetes group as well as their newly announced obesity program, but they will probably stay in South Lake Union. Another idea is to convert this large space into a biotech incubator, although this seems a bit problematic. Seattle already has a small biotech incubator (Accelerator’s 18,000 square-foot facility) and it would be difficult to fill the relatively humongous Helix facility (750,000 square feet), although a portion of it could be used for that purpose. Janssen, the biotech arm of Johnson & Johnson, has set up large biotech incubators in Boston and San Diego, and it recently announced the development of a new 30,000 square-foot facility for South San Francisco that could house up to 50 startups. A large building housing many companies could help generate the mixing of people and ideas that are important in helping shape the growth and development of new biotech companies.
Could the Helix site become home to the area’s largest biotech company, Seattle Genetics (NASDAQ: SGEN)? The campus could comfortably fit all of its current employees (almost 700) with lots of room to grow. If Seattle Genetics did take the space, though, it would simply open up a big hole in Bothell, WA, its current location. Given how expensive it is to build out laboratory space, it would be nice if the Helix facility stayed a focal point for the local biotech community. I’d hate to see the buildings torn down and the property converted into a hotel for passengers using the nearby cruise ship terminal. Filling a space this large will not be easy, and much of the value, of course, resides in the waterfront property itself.
Successful Biotech Hubs Are Built on History
San Francisco has managed to grow as a major biotech hub without having lab groups from Eli Lilly, GlaxoSmithKline, AstraZeneca, Novartis, Merck, J&J, or Sanofi. Some of these companies don’t need to have a direct presence in the area because they have subsidiaries in the region (e.g. AstraZeneca’s Medimmune unit is located in several cities just south of San Francisco). What the Bay Area does have, of course, is Roche’s Genentech group, branches of Pfizer and Bristol-Myers Squibb, UCSF, and a strongly developed, academia-based incubator program, QB3, among its assets. Similarly, Boston’s biotech hub survives without Lilly, AstraZeneca, J&J, Bayer Healthcare, and Roche. But it does have branches of Pfizer, GSK, Novartis, Sanofi, and Bristol-Myers Squibb, along with a number of successful large biotechs, well-funded startups, and a large number of academic powerhouses.
One component that stands out to me is the historical continuity of early biotech companies in each city. Genentech helped launch the biotech revolution in South San Francisco, as did Biogen Idec (NASDAQ: BIIB) and Vertex Pharmaceuticals (NASDAQ: VRTX) in Boston. All three grew to be economic dynamos that were built on foundations of scientific excellence. Immunex might have joined this group but for the fact that it ran into serious manufacturing bottlenecks for its breakthrough rheumatoid arthritis drug etanercept, and that helped seal its fate. Seattle has no surviving biotechs from the 80s, and only four that I can identify from the 90s: CTI BioPharma (created in 1991), Omeros (started in 1994), Seattle Genetics (founded in 1998), and Dendreon (launched in California in 1992, and then relocated to Seattle in 1998). All are currently marketing their own drugs, although Dendreon and CTI face some serious financial headwinds that put their future prospects in doubt. The lesson seems clear: to thrive in this business, it is a good idea to grow big early and expand on your initial successes.
I never thought much about it when I moved here in the mid 80s, but over the years I’ve heard repeatedly from different quarters that recruiting people to Seattle is difficult because of our relative geographic isolation in the upper left corner of the country. Boeing made that same kind of argument (the need for a more centralized location) when it moved its corporate headquarters to Chicago in 2001 after some 85 years in Seattle. Whether our location really impedes Big Pharma companies from setting up outposts here is unknown, but there’s no way to alter this geographical reality.
The closure of the local Amgen facilities brings into sharp focus a number of the challenging issues that face our local biotech community. Tomorrow, in the third and final part of this article, I’ll review some of the other important questions facing U.S. biomedical research, compare our state’s funding of biotech initiatives to several others, and pose a series of questions that can be used to help guide us forward in crafting a workable plan to reinvigorate biotech in Seattle.