For biotech startup founder Piraye Yurttas Beim, leaving New York City is often tempting.
“Every month we’ve been here I’ve considered it,” she said. Tax incentives from nearby states, New York’s high bar when it comes to regulating labs, lack of access to top healthcare investors, and more space have all been enticing reasons to head elsewhere. But she’s stuck it out.
Beim, the CEO of personalized reproductive-health startup Celmatix, has kept her company’s headquarters in Manhattan for the past 9 years, despite Hurricane Sandy wiping out its lab in 2012 and resorting to sawing down employees desks as the company doubled in size so that they could stay in their current workspace.
Beim says despite these challenges she’s committed to staying in New York because of its proximity to top reproductive health facilities, such as Weill Cornell and Reproductive Medical Associates, which give Celmatix a strong pool of talent to recruit from. Celmatix makes a software that collects clinical data for fertility clinics and has a genetic test that screens for risk factors associated with female fertility.
“Because of the clinics and research partners here, we’re here,” she said. “We’re going to find a way to make it work.”
Beim isn’t alone. About 150 biotechs now call the Big Apple home. While New York is historically known as a leader in industries like fashion, finance, and media, and still lags way behind biotech hubs like San Diego and Boston, the city is slowly making a name for itself.
New York-based biotechs brought in $822 million in 2017 from venture capitalists from 85 deals, up from $411 million in 2013 from 49 deals, according to data compiled by Pitchbook.
New York is also home to major pharmaceutical companies like Pfizer and Bristol-Meyers Squibb and academic medical centers like Columbia University Medical Center, Albert Einstein Medical College, and the Icahn School of Medicine, which make it attractive to young biotech companies.
Already, lab space is being set up in places like the Alexandria Life Sciences center on the East River, which houses everything from a startup incubator to large pharmaceutical companies like Eli Lilly. New incubators like Johnson & Johnson’s JLabs are opening their doors this year. The incubators address some of the issues around early-stage funding for companies that’s been missing in the past, giving more entrepreneurs a chance to put roots down in the city when they’re just starting out.
But as Celmatix saw firsthand, even if biotechs are started in New York, it can be difficult for them to stay once they grow.
“I think today there are resources to start a biotech company that are amazing,” Beim said. “But what doesn’t exist is resources for growth stage.”
Real-estate woes
Existing lab space in New York is virtually impossible to find, John Cahill, senior vice president of life sciences Jones Lang LaSalle Brokerage, told Business Insider. And even if a company does manage to find work space, real estate is very expensive, ranging from $75 to $115 a square foot. That’s more than the cost in San Diego and on par with Cambridge, although there’s a lot more space available in both those cities.
“New York City lags by about 10 to 15 years,” Cahill said.
New York’s state and local government recognizes these challenges. In 2016, the state and city committed more than $1 billion combined in an initiative known as LifeSci NYC, which will be used in part to provide tax credits given to early-stage companies in hopes of getting them to stick around and funding some of the initiatives like JLabs.
The funding is also being used to build new spaces for companies to grow into. A chunk of the funding will be used to build an “Applied Life Sciences Hub,” lab space for research and development. Proposals for what the hub might look like are due May 17.
The intention of the hub is to raise the status of New York City’s biotech scene to the level of other major biotech hubs across the country, said James Patchett, the president of New York City Economic Development Corp., which is overseeing the campus’s development.
“Our goal is to make it so you have to be in New York City, so that the cost is not the object — we’re not there yet,” he said. “We have to overcome some of those cost barriers in the near term to build a sufficient ecosystem that we will become a necessity.”
Competing with Cambridge
Real-estate developers also see opportunity. In 2017, Taconic Investment Partners and Silverstein Properties announced plans to build out lab space on the west side of Manhattan. The place, Hudson Research Center, aims to add 150,000 square feet of lab space, and the building is charging about $80 a square foot for lab-ready space.
Redeveloping the space will cost about $1 billion, and the first 15,000 square feet of prebuilt space is expected to be read to use by 2019, with the rest following in another 18 months, CBRE’s Jonathan Schifrin and Alessio Tropeano, who are leasing agents for the building, told Business Insider.
Maria Gotsch, president and CEO of Partnership Fund for New York City, who’s been working to promote the biotech scene in New York for the past 15 years, sees other challenges for the city apart from real estate, including a lack of a biotech ecosystem like you might see in Cambridge’s Kendall Square and dearth of seed funding for early-stage companies.
The shortage of space for biotechs in New York, Gotsch said, is a relatively recent occurrence. Until recently, weren’t even enough biotech companies who chose to remain in the city with most founders choosing to relocate to the West Coast. “They weren’t even starting here,” she said.
Still, despite the strides that Gotsch and others have made to entice growing biotechs to remain in New York, not everyone will stick around.
Modern Meadow, a startup that makes cruelty-free biofabricated leather, chose to move out of its headquarters in Brooklyn’s Sunset Park neighborhood last year after outgrowing its space and into larger digs in New Jersey on a former pharmaceutical campus.
It kept a foothold in New York, though, retaining a design and research facility in Brooklyn.
Said Modern Meadow CEO Andras Forgacs, “We’re now getting the best of both worlds.”
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