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What Can Washington Do to Revitalize Biotech? Q&A With Gov. Inslee

Xconomy Seattle — 

Seattle biotech isn’t what it used to be. A decade ago, Seattle was basking in the glory of one of the biggest pharmaceutical success stories ever—etanercept (Enbrel). The region was home to what you could call five major league life sciences companies. I’m talking about locally grown biotech companies with big dreams, a strong foundation in science, and at least $100 million of cash in the bank to try to make something happen for patients.

Today, Seattle has two of those companies—Seattle Genetics (NASDAQ: SGEN) and Dendreon (NASDAQ: DNDN).

As someone who writes about innovative, newsworthy life sciences companies around the U.S. every day, I have kept a whiteboard in my office the past five years to keep track of companies. I used it to remind me of not just the major leaguers, but all the innovative small fry in our biotech community that I need to follow as well. Every year, that list gets smaller for Seattle companies. Precious few new biotech companies are being built in Seattle that have the desire, the capability, or the resources to play anymore on the national stage. Talented life sciences professionals, young and old, tell me consistently that they can’t find biotech jobs in this town.

This is a story that you don’t hear often told, and probably won’t be emphasized today at the Governor’s Life Science Summit in Bellevue, WA. But I know many of our readers are struggling to understand why Seattle’s once thriving biotech community has taken such a big step backward over the past few years, particularly when other communities—Boston, San Francisco, San Diego—continue to march ahead. There are tremendous scientific assets in this town. There are plenty of smart and creative people. Washington state has some of the best quality of life in the country. And yet, where are the game-changing life sciences companies being started and built? Not here.

As you can see, I’ve been pretty grouchy lately. I was not in the mood to tolerate the usual happy talk the other day when I had a chance to speak for 20 minutes by phone with Gov. Jay Inslee. The Governor, a Democrat elected last year, is a longtime friend of biotech from his days in Congress. He knows the issues better than most public officials. I didn’t want to hear a stump speech. I wanted to ask Inslee about some of the real-world problems in local biotech, I wanted to hear him acknowledge them, and maybe even offer some kind of constructive idea on what the community can do to help lift itself up again. You can take a look at what he had to say.

Here are edited excerpts of the conversation earlier this week with Gov. Inslee.

Xconomy: Why keep doing the Governor’s Life Science summit?

Gov. Jay Inslee: This is one of the main springs of our economic growth in our state. We have 92,000 jobs, $11 billion worth of [economic output] in our state. This, along with aerospace and Internet-based companies, is an absolute pillar of our economic growth. We think the sky is the limit for biotech in our state. The reason that biotech fits our state perfectly is we understand intellectual ecosystems. Having a critical mass of intellectual talent, and understanding of how that critical mass is important in any intellectual-based industry is something we get very deeply in Washington. It’s a tremendous growth opportunity. Anybody who has seen what’s going on in South Lake Union right now, and in other communities around our state, would understand that.

X: What role can the state play here? In the past, your predecessor set up the Life Science Discovery Fund. It’s been cut back pretty severely with the budget cuts. Are you happy with this Fund, and is it something you want to continue?

JI: We can play a role in quite a number of areas. No. 1, we can use our tax structure to create incentives for R&D, which is the lifeblood of this industry. We intend to explore that to focus our R&D tax credits on startup companies, where the real risk-takers are. We think we can help by making sure we have a pipeline of intellectual talent by increasing our STEM education and our tremendous universities. We think we can help in accelerating the pace of commercialization from our colleges. The University of Washington has doubled the pace of commercializing the R&D they are doing. We are having success increasing the rate of commercialization. Fourth, we want to continue to succeed. Once we have startups and they are acquired by larger entities, we want them to maintain their operations here. We don’t want to be victims of our own success. That happened when ZymoGenetics was acquired by Bristol-Myers Squibb. They maintained a vigorous research presence on the shores of Lake Union. We have some other ideas I can’t talk about at just this moment about how to increase the effectiveness of our state [Life Science Discovery Fund] investment.

X: Are you happy with the Life Science Discovery Fund?

JI: Yes. We’re having success, despite some budget challenges here in the state. That’s just one tool in the toolbox. I want to mention one other thing: we think we can increase foreign marketing opportunities for our products. I’ll be in China soon speaking at a biotech summit in Shanghai to increase our opportunities.

X: You mentioned earlier that when you go around South Lake Union, you see biotech. But when I walk around there, as someone who covers biotech, I see mostly Amazon, and a few NIH-supported research centers, and a few Big Pharma research operations, like Bristol-Myers Squibb and like Novo Nordisk. But not homegrown local biotech companies that are big and have ambitions to get bigger. Just a couple weeks ago, I did a story about how many companies our region has that have $100 million of cash in the bank. It’s one measure of a biotech company with big ideas and the resources to pursue them. Seattle has actually gone backwards on that measurement over the past 10 years. There are only a couple left. That compares to 35 and 25 companies of that caliber in the big hubs of Boston and San Francisco. Are you concerned that biotech has gone backwards in Washington state?

JI: It shows there’s some work to be done. But we do have some successes. Nanostring just won marketing approval of a new diagnostic test for breast cancer. We do have some success stories. We do have to improve our access to venture capital. That’s something we’re very interested in doing. We have networks to make sure that happens.

I’d like to point out that these startups do not usually have signs on top of them with red, flashy lights on them. The nature of startups is to be small and under the radar. We have had successful startups that have been acquired and then leave the area. It’s part of our focus that when we have successful technological development, we want its manufacturing and larger support stays in the state of Washington. It’s one of the things that I think you rightfully point out, we need to work on.

It’s not just about biotech, either. I’m heading out now to Philips in Bothell, WA, which is rolling out a new ultrasound product. We’ve got medical device firms doing well in our area. That cluster helps the whole healthcare delivery system, as well as global health. Our global health cluster, between the Gates Foundation and PATH and others, are doing well. It’s not strictly biotech. We look at this as a life science cluster.

And, when you talk about walking around Lake Union, it’s not just Lake Union. I’m in Bothell now and we have some good things going on.

X: I hear you, and it’s a fair point to raise about medical devices, and Philips does have a big investment in Washington. But I cover a lot of those startups that don’t have big signs on their building, and there aren’t as many of them anymore. I know there are numbers coming out of the UW that say they are creating companies. But very few of those have raised any money, or have enough of a plan to say they will be around in a few years and growing.

JI: Seattle Genetics has been here for many years, and if you look at some of the success they’re having, it’s very exciting. That’s someone you ought to have on your radar screen.

X: I know about Seattle Genetics and have written a lot about it. But are you looking at any other ideas to stimulate more entrepreneurship and get more economic development out of some of that big research base you mentioned at UW, at Fred Hutch. I’m thinking about things like making it easier for entrepreneurial faculty members to start companies, while keeping their day job, or being able to fall back on it.

JI: We are exploring those options. We have had some success. Like I said, we doubled the commercialization rate from the UW. We intend to continue at that accelerated pace. There are some things we are looking at to clear cobwebs away from some of those people so they can become entrepreneurs. So the answer is yes.

Now, I know none of them are the equivalent of an Amazon at the moment, in terms of those companies coming out of the university. But that doesn’t dissuade me one bit in thinking this is very important and will be successful. These are nascent new companies. I’m happy we’ve doubled it already.

X: But I think a lot of people look at this from a job creation perspective, and I’m sure you hear about it, too. I talk to a lot of graduate students, postdocs, really smart young people coming out of these universities who cannot find jobs. There just aren’t jobs. There aren’t the kind of growing companies in the Seattle area anymore where they can find work. What do you say to those people?

JI: I’d say you should be pleased we are focusing on this area to accelerate creation of these clusters. You should be pleased we are doing an R&D tax credit that will increase investment. You should be pleased that our commercialization effort is increasing commercialization. You should be pleased that we are decreasing some of the regulatory hurdles these new companies have. You should be pleased we are going to be the only state in the country that has a regulatory index to judge our regulatory climate for these companies, which will tell us how successful we are in permitting so that when new companies get started, they can get going. You should be like a lot of people in our youth with tremendous intellectual capability – be ambitious, and impatient to get going. That impatience is real and well-founded. I think we have a bright future here.

X: You mentioned an R&D tax credit. I thought there already was an R&D tax credit for companies in Washington.

JI: We think we have some ideas, which we’ll be talking about in the legislature next session, on focusing better on startup companies which are in more need. We think we can improve the R&D tax credit vehicle to help startups.

X: You also mention regulations. Is there an example of one or two of those that are being streamlined or repealed that you think will be helpful?

JI: Probably not just directed to life sciences, but our regulatory climate in general—from land permitting to environmental regulations—we are doing a lean management exercise throughout the permitting process. We are developing an index to actually score our state’s regulatory climate. We’ll be first in the nation to do that, so we can focus all of our agencies to be effective. It’s not just for life sciences, it’s for aerospace and everything else.

X: Last year at the summit I seem to recall you said something about establishing a chief innovation officer for the state in your office. Did that ever happen? If so, who’s doing that job?

JI: It’s going to be in the Department of Commerce. We’re setting up a life science sector lead in the Department of Commerce. We think it’s important to have a focused place where the industry can have in working with all the agencies they have to deal with. That will happen in the next few months. I’m happy for that to get going.

X: So you haven’t named that person yet?

JI: We have not. One of the first orders of business is working on one of the things you talked about—to increase the rate of commercialization from our colleges, and enable entrepreneurs to do their great work.

X: I know you’ve been paying attention to economic development in the state for many years. Is there any strategy or approach that has been tried before that you think just doesn’t work, and you don’t want to do anymore?

JI: I think the days of just developing a sewer system and a road system and an industrial park and waiting for people to come is certainly not the most effective economic development policy. Right now, the most effective economic development policy is to create intellectual talent and to set up a way for it to foster growth in your community. The secret now is much more about intellectual talent than it is in infrastructure. It’s probably something that not all communities have figured out, but we certainly have in the state of Washington. We understand this industry is based on an intellectual ecosystem that supports creativity. People bounce ideas off one another, and from one company to another, and from one institution to another. That’s the name of the game. We get that.

There is one other thing I’d like to mention about ‘soft power.’ We talk about ‘soft power’ with statesmanship or foreign affairs. There’s a very important asset our state has, which does help us from a competitive position. That is our quality of life here. People can set up companies anywhere they want. They aren’t dependent on infrastructure. I can tell you from talking to CEOs that when people are looking into where to put a company, our lifestyle is a very important asset. Our mountains, our water, our clean air, our cultural amenities are very important when recruiting talent. This is a great place to start a company. There are a lot of smart, hip, young people who want to live here. It’s an asset, and we want to maintain it.

X: It’s one of the reasons I like living here. One last thing. Who do you lean on for advice in the biotech community? Not just the person you are looking to hire in this sector lead job, but people you trust and respect and who help you think about things.

JI: Just a stream of consciousness here, but Clay Siegall (CEO of Seattle Genetics), Chris (Rivera, the president of the WBBA), my friends at Philips. I hate to list names and leave someone out, it’s a great way to lose friends. I’ll just say I have a whole host of people who give me advice on this industry, and we meet regularly. Probably every month I’m having a meeting with one leader or another.

X: When you have these meetings, do you engage in constructive problem-solving, or does everybody just say ‘Wow, everything’s fantastic’?

JI: No, I think people feel we are in a very competitive environment. We do want to provide better access to venture capital. We are always looking for ways so the state can help in a more direct way. Investment is a possibility. I think people want to push the envelope here. We’re not satisfied with our efforts. This has such upside. The genetic research is going on is so exciting, we want to push the envelope. We can continue to push. The status quo is not acceptable to us. We want positive change.

X: Part of it, I think, does require a little bit of luck. If Dendreon had a little more luck, it may have made a difference.

JI: That’s true. Which pro team is going to synthesize something first and get it to work? You can’t totally predict that. But we’re going to help as many as we can.

X: Unfortunately, I can’t be at the summit this year, but I’m glad to hear you haven’t forgotten about it completely.

JI: I’ll tell you one reason I’m paying attention. It’s keeping some of my friends alive. I have friends who are alive because someone took a good idea, made an investment, and built a company around it. I know it can take $1 billion and a lot of risk. We’re not just talking about jobs here. It’s life. If you’re going to grow a company, this is a pretty good kind of company to grow. They’re not just creating widgets, they’re adding birthdays. It’s a good industry.

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4 responses to “What Can Washington Do to Revitalize Biotech? Q&A With Gov. Inslee”

  1. Jim says:

    It’s good to see the rah rah nature of this interview and hopefully something will change, but as we speak the Seattle region biotech industry is literally hemorrhaging people everyday who move out of the region to pursue jobs in other hotbed communities. If the pace of implementation of some of these grand ideas is not expedited, and if the participant companies who are here don’t get some of the local talent into their company soon, then the local biotech community will decay to the point of irrelevance (what would make Seattle any different than the far flung one-company pharma towns?).
    Also, address the needs of the young straight-out-of-college Ph.D.’s, who actually are the most serious issue as their fate seals the deal for future generations who will be turned away from science as they see that many of their peers have not found jobs.There are many Ph.D.’s from the UW, arguably some of the strongest in the nation, who graduate to not a single opportunity and wither away or move away. It’s a very sad situation.
    A good idea would be to establish an incubator infrastructure for biotech companies to share in Bothell where there is lots of available lab real-estate at very reasonable cost. Buy up the used equipment from all the failing companies and help launch a new generation companies. Offer SBRI type funding to help the companies establish themselves and grow. Right now the incubator space of Seattle is extremely limited and lacks the support and vitality of Boston or San Francisco. This could single-handedly change the fate of this region. Help unlock the talent and offer the community an opportunity to grow local ideas.

  2. Jim — I hear your points, and I wanted to make sure that the Governor heard there are some serious problems in the Seattle biotech industry. I wanted to hear him acknowledge the problems, and talk seriously about what can be done to improve things. Thanks for sharing your idea about a Bothell incubator–I hadn’t heard that one before.

  3. Boston Joe says:

    Thanks Luke for once again covering this very important topic. My guess is that the politicians’ standard of a thriving biopharma. cluster is much different then ours. Quickly checking the Careers section of the Massachusetts Biotechnology Council I can find over ten positions that I qualify for. At the moment I can not find one open position here in the Puget Sound region. This is scary considering how low our unemployment rate is here in the Seattle Metro area. He also has to realize it is not just about R&D start-ups (most of these are all “R” and no “D” by the way), but about large-scale biologics manufacturing. These facilities stay a long time, hire a lot of people (not just M.D./Ph.D. and lab. technicians like a research organization, though as Jim mentions this area needs help too), and hire all kinds of employees (scientists, engineers, quality, facilities, skilled manufacturing workers, support personnel, etc.). We seem to have no true large-scale manufacturing here outside of CMC Biologics. Also, SF and Boston have a growing biocommodities sector (biofuels, biochemicals, etc.). Not sure how profitable those enterprises will turn out to be but they are definitely adding good jobs to those two regions and are not just virtual companies with nice websites. Jim is right, at the end of the day there will be only so many biotech. clusters in the US and if we keep losing the critical mass, Seattle will drop out of the bunch and entire companies will just set up in one of the remaining clusters going forward.

  4. Carlos Danger says:

    Maybe I’m just another jaded biotech employee, but having a talking head like Inslee tell me I “should be pleased” about all the great things that are being regarding WA biotech really sticks in my craw. As Boston Joe pointed out, for certain skilled positions, you may be lucky to see a relevent job opening in Seattle once or twice a year. Who has the patience to wait it out a year or more while you burn through your savings, retirement account, etc.? BMS seems to be the only company adding new positions at the moment, while everyone else is treading water, still waiting for the economy to really pick up. I’m not sure what “commercialization efforts increasing commercialization” actually means? I recall a burst of new companies in the mid-2000’s, or at least companies doing a fair amount of hiring in the Seattle area (Alder, Allozyne, Trubion, VLST, Novo Nordisk, Spaltudaq, Theraclone, etc), but I can’t say there’s been much to be excited about the last 5 years. When is the last time the existing Accelerator graduated a company that actually made it to a Series B financing?