Biotech sector still hot despite cooling economy

The pandemic led to an explosion of interest in biotech. While a cooling economy has had a slight effect, the industry is still booming. Demand for lab space was at an all-time high in the Bay Area last year, and the industry is expected to have increased its footprint locally by 30% this year.

Along Oyster Point Boulevard in South San Francisco, bulldozers are clearing industrial warehouses. Huge construction crews have been replacing single-story factories with skyscrapers.

“As you can see, all the skin of the building is ripped down,” said Marc Pope, executive managing director for Cushman & Wakefield, a commercial real estate company. “You can see the steel going up.”

What was once a neighborhood of cream-colored, single-story businesses is now a glistening alley of biotech companies. Pope pointed to the headquarters of AstraZeneca, JLabs and 23andMe. Each building was decked out with concierge services, spas, day cares and fitness centers.

“All these amenities are recruiting tools,” Pope said. “There is so much competition to get the best of the best.”

The pandemic has been very good for business. “It put the market on steroids,” he said. “Capital markets have been cooperative. [The] venture capital community has been very cooperative. COVID really put a spotlight on things.”

Last year, investors spent nearly three times more than usual on life sciences in California. South San Francisco City Manager Mike Futrell projects that these companies will double their footprint from 12 million square feet to 25 million square feet within the next few years.

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“Diagnostics for a long time was [much less marketable to investors than] the biotech industry,” said Joe Panetta, president and CEO of Biocom California, a trade association for the life sciences. “You couldn’t raise money for a diagnostic to save your life, literally.”

But all those COVID rapid tests changed that. And companies want to get ahead of the next novel virus, so there’s a lot of venture capital focused on infectious diseases.

“Those new companies are not only growing themselves,” Panetta said. “But they’re attractive to large multinational pharmaceutical and biotech and medical device companies, many of which are headquartered in California.”

Then there’s obviously the pandemic success of mRNA vaccines. Two of the COVID vaccines used messenger RNA — or genetic medicine — to trigger an immune response to combat the virus. Now, companies like ReCode Therapeutics plan to use mRNA to treat other respiratory diseases.

“What we’re doing is building on all that great innovation from the vaccines to go beyond vaccines,” said Dr. Shehnaaz Suliman, ReCode’s CEO

The company just opened a lab in Menlo Park. Suliman pointed to a small, hand-held nebulizer that looks like a flying saucer releasing a fine mist.

“That allows the medication to be deposited in their airways and go directly into the cell types that we want to affect,” she said. A patient can inhale the medicine into the lungs, where the mRNA will hopefully correct the genetic errors that cause ciliary dyskinesia or cystic fibrosis. Instead of shots, patients can use the nebulizer every few days to keep their disease in check.

Technology based on mRNA could eventually target numerous diseases that have stumped researchers for years, Suliman added.

“Imagine the possibilities if you could undo a gene that was responsible for Alzheimer’s,” she said. “Imagine the possibilities if you could get into a tumor cell because you were able to deliver a genetic medicine directly into the cell that was responsible for that cancer. This is the range of possibilities.” Her list goes on and on.

Even though daily headlines continue to warn Americans of a pending recession, ReCode has raised $200 million in venture capital funding. It has nearly doubled its staff since January.

“In our ecosystem, the entrepreneurs are salivating because this is a great time to be in biotech,” Suliman said. “And it’s a great time to be accessing capital to develop great science.”