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THE COASTS ARE CALLING AS BIOTECH STARTUPS SCRAMBLE FOR WET LAB SPACE
  •    Rachel Melcer
    Of The Post-Dispatch
  • St. Louis Post-Dispatch (MO)
  • October 28, 2002
  • Section: BUSINESS PLUS
  • Edition: FIVE STAR LIFT
  • Page 8

* This area's available wet labs can't keep up with the demand as more new biotech companies leave incubators and set up as full-fledged businesses.

Biotech and life sciences entrepreneurs say that unless St. Louis quickly increases its stock of wet labs, they may have to pack up their genetic code maps and engineered seedlings and head for the coasts.

They are being lured by the rush of running water, the hum of overhead hoods, purified air and a wilderness of workbenches with room for experiments galore.

Such spots are scarce in the St. Louis area. Competition is fierce for what exists, and developers are slow to build more.

Couple the need for facilities with the draw of late-stage venture-capital investors, most of whom are based in the East or West, and the siren song becomes stronger, said several entrepreneurs and those who would develop St. Louis into the BioBelt, a hub for biotech and life sciences.

Plenty of people are working on the problem.

The Coalition for Plant and Life Sciences, a group of business, civic and academic biotech boosters, is seeking public and private funds. And developers and designers anticipate a wet-lab building boom. Various cities and St. Louis County are mapping out areas where tax-rich research parks might go.

So far, though, little is happening. And young companies say that if they should get their big break, they won't be able to wait for a buildout or new construction here.

"It's a common question that (startups) have, whether they'll stay in St. Louis, because there isn't a business center or a biotech area," said Jack Erion, co-founder and chief executive of BioSynthema Inc. "Whether we would stay in St. Louis is something that's already being discussed."

His company is developing cancer tests and treatments in a couple of labs it is beginning to outgrow at the Center for Emerging Technologies, a St. Louis incubator.

Marcia Mellitz, president of the center, said she sees a wet-lab bottleneck ahead, for companies that graduate out of the incubator and for startups seeking room at her full inn.

"You try to anticipate and not wait until you're desperate, but here we are," she said. "At some point, we have to say, 'Are we serious about being in this game or not?' "

Most tenants of the center, such as BioSynthema, work with scientists at nearby universities and medical schools. The region's other biotech and life sciences incubator, the Nidus Center for Scientific Enterprise in Creve Coeur, has a similar geographic appeal -- it is on the campus of agrosciences giant Monsanto Co., across the street from researchers at the Donald Danforth Plant Science Center. But Nidus, too, is full.

And while St. Louis has a lot of biotech strengths -- strong companies, universities, a premier genome research center and world-class botanical garden among them -- the need for basic infrastructure could outweigh them all.

"The problem you've got in St. Louis is that although people are saying they want to do all this life sciences stuff, (startups) are really constrained," said Terry Kungel, chief executive of DzGenes LLC, which occupied an outdated wet lab in the basement of St. Mary's Health Center.

Wayne Barnes, president of DNA Polymerase Technology Inc., bought an old warehouse at 1508 South Grand Boulevard that had been converted into office space and turned half of it into a wet lab. He patched together benches and bought used autoclaves to fit his budget.

"We don't have anything fancy, but we have what we need. And I've told my people that if they need more space, they have to build it," he said. "We had to do this because it really was hard to find anything."

Projects could blossom

The problem isn't a lack of ideas. Plans abound for wet-lab and research-park developments, with three garnering the most buzz:

* Technopolis, a redevelopment district east of Forest Park that touches the Center for Emerging Technology, St. Louis University, Washington University Medical Center and the Missouri Botanical Garden.

* A mid-St. Louis County area bounded by Gateway Boulevard, Warson Road, Olive Boulevard and Lindbergh Boulevard. It touches Monsanto headquarters, Nidus and the Danforth center.

* Chouteau Lake & Greenway, a massive, multipurpose redevelopment plan that would connect the Gateway Arch and St. Louis riverfront with Forest Park in a corridor running along Chouteau Avenue; it would include a still- undefined technology corridor.

And the need for such projects is clear.

If the St. Louis region increases its share of the national biotech market to 1.25 percent in 2006 from the 1.2 percent it captured in 2001, it will need 2 million more square feet of lab facilities, according to a new study commissioned by the St. Louis County Economic Council; the cities of Maryland Heights, Olivette and Creve Coeur; the Danforth and Nidus centers; McEagle Development Corp.; and the Desco Group Inc.

The mid-St. Louis County area could capture up to 40 percent of that demand, or 800,000 square-feet of lab space, over the next five years, the study said.

"We think this is a node that could really blossom," said Denny Coleman, president and chief executive of the St. Louis County Economic Council. "Certainly, you never put your eggs all in one basket, but when you have a niche like this that has been handed to you by the private sector and institutions (such as the Danforth Foundation), you'd be foolish not to try to expand it."

Bob Calcaterra, president of Nidus Center, said its tenant companies were eager to grow and graduate, but they also want to remain in a collegial environment.

"They want to be part of the cluster because they see it as exciting," h e said. "And they've found they can interact with each other here, so they want to be able to interact somewhere else, too."

Urban research district

Developers and designers, too, are eagerly awaiting the new market. But, so far, none is willing to risk large-scale investment on entrepreneurs with vague credit and indeterminate futures.

Unlike their counterparts in long-standing research hubs, such as San Francisco and Boston, local builders are new to the scientific startup market -- and that's part of the problem, said Bill Odell, design principal at Hellmuth, Obata & Kassabaum Inc., which has worked on wet labs and high-tech buildings nationwide.

"Not only do (St. Louis developers) not know a lot about labs, but they look at XYZ Genomics Co. that is 1 or 2 years old and doesn't have any credit rating, and they don't understand the science," Odell said. "So it looks real high-risk to them and, in some ways, it is."

Building wet-lab space costs about $300 a square foot, nearly three times as much as Class A office space, according to local developers. The cost per square foot to convert offices or warehouses into wet labs ranges from $175 to $225, depending on the complexity of the project.

"And, at least in our community, you don't do speculative buildings at that cost," said Paul McKee, co-chairman of Paric Corp., which built the Nidus Center and Center for Emerging Technology. McEagle Development is a sister company.

In the down economy, virtually no one is breaking ground on any sort of project without secure anchor tenants and iron-clad financing. Projects that were in the works have stuttered or stopped.

Desco Group had optioned a 240,000-square-foot building at 4100 Forest Park Avenue with the intent of converting it into wet-lab space for graduate companies from the Center for Emerging Technology next door.

Despite the availability of city tax incentives, Desco hasn't yet been able to find an anchor tenant secure enough to make the project work, Chief Executive Mark Schnuck said.

So Desco is "looking at other opportunities that would allow us to get into smaller facilities . . . in a number of areas," he said.

Schnuck declined to comment on whether his company is among developers pursuing a proposed wet-lab building near the Danforth Plant Science Center.

Still, Schnuck said he is convinced the Technopolis district around the Center for Emerging Technology will work. Interest is high among researchers, entrepreneurs and the universities.

Donn Rubin, executive director of the Coalition for Plant and Life Sciences, said he is meeting with stakeholders in that area to rejuvenate the Technopolis project that was proposed more than two years ago. They are planning from scratch for an "urban research district" in the same geographic area but working to get away from the Technopolis tag, which is connected with a project that hasn't been able to get off the ground.

Perched and ready

The need for wet labs is not new, but the impetus to build them is lacking, Rubin said. What's needed is public and private sponsorship to take the onus off profit-driven developers -- at least until the local biotech industry matures enough to guarantee a steady stream of paying tenants.

"It's a chicken-and-egg challenge," he said. "Once the demand and the level of supportable rents are demonstrated, then one should expect few if any additional subsidies. But at this stage, some public sponsorship is needed to get it off the ground."

The fear is that if wet-lab construction doesn't get started soon, growing companies will leave, and the biotech market won't materialize.

"If St. Louis gets its act together, this is by far the biggest opportunity for growth in the region, no comparison," HOK's Odell said. "If we don't, we will miss the boat."

Dr. Paul Olivo, president and chief scientific officer of pharmaceutical development startup Apath LLC, is concerned about the local options for his company once it graduates from Nidus.

If Apath succeeds in attracting venture-capital investors, "they would be a little concerned about putting money into mortar instead of experiments. So there would be pressure to go to a place where there is existing lab space, say, San Diego," he said.

"And time is money. The motivation to invest is because you think a company is perched and ready to do great things, and you want them to do those things as soon as possible."



(1) Color Photo by ANDREW CUTRARO / POST-DISPATCH - Jack Erion (left), president of BioSynthema, works in his lab alongside Dan Burleigh, a research scientist, last week at the Center for Emerging Technologies.
(2) Color Photo by ROBERT COHEN / POST-DISPATCH - Chief scientist Milko Kermekchiev of DNA Polymerase Technology works in the wet lab at the company's offices last week.



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