Laronde Raises $440 Million in the Largest Life Sciences Venture Round this Quarter

 By David Gross

Flagship Pioneering-backed Laronde announced a series B yesterday, raising $440 million in this quarter’s largest VC round this quarter, just ahead of the $430 million Pivot Bio raised last month.  The “Endless RNA” or eRNA developer plans to use the funds to advance research and build out its manufacturing capacity.

Endless RNA is intended to get around the immune system’s ability to respond to previously seen RNA sequences by closing it in a loop, concealing its contents.  This allows for repeat dosing of medicines that is not possible with standard linear RNA.  This is the second major “nonlinear” RNA funding this year, with Orna Therapeutics receiving $100 million earlier this year from a syndicate including Novartis, BMS, and Gilead/Kite for its circular RNA technology.

While Orna is focused for now on replacing autologous cell therapies by repeatedly delivering CARs into patients, Laronde has grander ambitions to produce a platform that could include 100 medicines.  Both approaches will require significant lab and clinical manufacturing capacity.  Last year, Orna entered into a sublease for 20,000 square feet @$95 per square foot at 620 Memorial Drive in Cambridge, about two miles west of Kendall Square on the west side of the MIT campus across from the BU bridge.  Laronde says it will need to hire 100 people, which depending on the manufacturing/lab mix would suggest a need for 40,000-60,000 square feet of space but is currently using Flagship’s Cambridge offices.   Flagship recently leased 208,000 feet at the new Boynton Yards development in Somerville, a mile north of Kendall Square, where Laronde could expand. 

Top Four Metros Account for 67% of 2021 Biotech IPOs

By David Gross 

Much as has been the case with VC funding, the top four life sciences markets have accounted for 67% of the industry’s IPOs and SPAC mergers this year, with Boston holding a small lead over the Bay Area.  In total, 86 life sciences companies have completed IPOs or gone public by merging with SPACs.

The year started with one of the largest IPOs in industry history for a preclinical company when Seattle’s Sana Biotech went public at a $7 billion valuation in an offering that raised $600 million.  Such a high valuation for a preclinical company was seen as evidence of an overheated market for biotech stocks.  However, since its early February arrival to the public markets, Sana has lost 1/3rd of its value, while the broader biotech XBI index has fallen about 25%.

In addition to Sana, many of this year’s larger IPOs have lost value. Emeryville’s Zymergen went public at a $3 billion market cap but has given back nearly 2/3rds of its value after announcing it wouldn’t see revenue for at least a year and a half.  Dallas-based Instill Bio went public at a similar valuation and has given back 1/3rd of that value.   San Diego-based Singular Genomics nearly reached a $3 billion valuation but has given back 1/2 of its value since a June peak.  UK-based Centessa, which keeps a US HQ in Boston, has lost ¼ from its June peak.  

It’s been a big year for SPAC mergers, with San Francisco’s 23andMe leading the way.  23andMe announced it would go public via SPAC right around the time of the Sana IPO.  Since then its lost just under half its value, and now holds a $3.7 billion market cap.  Other large SPACs have included San Francisco’s Nuvation Bio, Redwood City’s Bolt Biotherapeutics, and Nautilus Bio of San Carlos.  

With the XBI Biotech ETF trailing the broader S&P by 30 points, it’s been correction year for biotech stocks, an impact felt strongly in many of the larger offerings.  However, the FDA is on pace to match last year’s near record 53 approvals, and CAR-T and immuno-oncology continue to show strength here, an important factor in lab leasing due to these technologies creating outsized demand for space.  While valuations for some major offerings have dropped, the pace of offerings hasn’t, as the industry’s fundamentals haven’t worsened even if some investor enthusiasm has.

Umoja Leasing 146,000 Square Feet near Boulder for CAR-T Manufacturing

By David Gross

Seattle-based Umoja raised a $210 series B last quarter, the largest venture round this year outside of Boston, the Bay Area, and San Diego.  The immuno-oncology company announced today that is expanding into Louisville, Colorado, near Boulder, where it has broken ground on a new manufacturing facility.

Immuno-oncology and CAR-T developers tend to consume a lot of high rent space for clinical manufacturing.  Umoja, however, is creating an in vivo therapeutic approach to I-O that is intended to reduce manufacturing requirements relative to standard ex-vivo approaches.   Nonetheless, there are still viral vectors and other components they will need to produce in a standard GMP manufacturing environment.

According to documents filed with Louisville economic development authorities, Umoja will spend $44 million on tenant improvements to outfit the space, with the expectation of laying out a total of $70 million of capital expenditures over the first five years of operation.  The company is receiving tax abatements from the city as an incentive to move.  In return, it is expected to hire 100 people at the facility as well generate sales and use tax from the equipment purchased with the capital dollars mentioned above. 

CAR-T and CAR-NK companies are important to life sciences economic development and real estate not only due to the large amounts of space they require for clinical manufacturing, but also because they tend to locate these manufacturing sites in a high rent areas at or near HQ.   Companies such as Vor, Senti, Artiva, and Nkarta have all expanded CAR-T or CAR-NK facilities in Boston, San Diego, and the Bay Area recently.  Umoja could have found comparable industrial space around Seattle to the property its leasing in Boulder, so this is a significant development for Colorado’s life science industry.

The property is located at 725 Tech Court in Louisville, a recently developed building in the Colorado Tech Center.  Cannabis provider Charlotte’s Web’s production facility is located across the street.  

Personalis Leases 100,000 Square Feet in Fremont, CA, Will Move HQ There

 By David Gross

While there’s been a lot of talk about companies leaving the Bay Area, diagnostics manufacturer  is staying in the region, just moving across the Bay.  The company current leases 45,000 square feet in Menlo Park where it had an initial base rent of $61 per square foot, and will be moving to a new 100,000 square foot facility in Fremont where it will pay $45 per foot after a discount expires.

The company is planning a $200 million budget, or $200 fit out of the space, with a landlord TIA (Tenant Improvement Allowance) expected to cover just over 75% of that. 

Located near industrial properties, the area west of I-880 in Fremont generally draws lower rents than areas of the East Bay closer to San Francisco, or anywhere in the peninsula.  However, not needing partnerships to survive like most biotech companies, diagnostics manufacturers have a tendency to spread out from traditional clusters, with 10x Genomics about 15 miles away in Pleasanton, where it recently signed a new lease for just $38 per square foot,  and Bio-Rad up in Hercules in a lower rent area.

While it sells liquid biopsy assays to pharma companies, Personalis reported last quarter that over half of its revenue come from the VA’s Million Veterans Program, for which it has sequenced over 125,000 human genomes.

Vor Takes 43,000 Square Feet in Cambridge for Cell Therapy Manufacturing

 By David Gross

CAR-T and CAR-NK drug developers have extensive and sensitive manufacturing requirements, which often requires taking relatively large amounts of space in expensive markets.  Vor is the latest company in the sector to add to its footprint, more than doubling its presence at Longfellow Partners’ 100 CambridgePark Drive facility from 33,000 square feet to approximately 76,000 square feet.  The building is located near the Alewife T stop in Cambridge.

Vor is adding over 30,000 square feet on the 3rd floor of the building and over 10,000 feet on the 1st floor.  It is paying nearly $68 a foot for the 3rd floor and $85 a foot on the 1st floor.  It will use the space for a cGMP compliant, in house clinical manufacturing site for its CAR-T and Hematopoietic Stem Cell (HSC) candidates intended to treat Acute Myeloid Leukemia (AML).   

Longfellow Partners acquired 100 CambridgePark Drive in 2017 and converted it from lab to office.  Other tenants in the building include Trillium Therapeutics and Moda Labs.  In total, Longfellow is converting 600,000 square feet across three buildings within a development on CambridgePark Drive.  Alewife is five stops further from Boston than Kendall Square, with lab rents that are about 1/3rd cheaper.  

Bay Area Lab Space Clubhouse Chat

I'll be leading a discussion on Bay Area lab space trends, next Wed, Sept 1, at 5p Pacific on Clubhouse.   

Three of the Most Important Lab Leases Signed this Quarter

By David Gross

Biotech stocks are undergoing a correction and venture funding has fallen back from the exuberant levels of Q1, but lab space continues to lease at increasing rates in top markets.  Following are three of the top leases so far this quarter:

Epizyme – Kendall Square - 43,000 feet @ $105 per square foot

Epizyme is a small molecule developer of oncology drugs that seek to modify gene expression via epigenetics rather than through DNA editing or gene therapy.  The company moved into Alexandria’s 400 Technology Square in 2012 and renewed its 43,000 square foot facility there in 2017 for $66 per foot.  But 2017 was a very different time for Kendall Square, and it renewed again in July, this time for $105 per foot.  

Sorrento Therapeutics – Sorrento Valley/San Diego – 163,000 feet @$61.20 per square foot

While rates in La Jolla, Torrey Pines, and the Sorrento Valley haven't gotten the attention the soaring rents of Kendall Square have,  existing tenants could be in for some sticker shock on renewals.   Sorrento’s nearly 16 year lease at Healthpeak’s 4930 Directors Place property is significant because the company is co-terming all of its other leases in the neighborhood, where it has an additional 237,000 square feet.  Moreover, having both R&D and manufacturing operations, it has placed a huge demand in the neighborhood.

A number of leases in the submarket were signed ten years ago at much lower rates, with upcoming renewals likely to greatly increase rents.  Inovio, for example, leased 26,000 feet at BioMed’s Wateridge Circle development for just $30/ft in 2013.  Even with escalators, they won’t hit $40 by lease end in 2023.  Last year, Anaptysbio took 45,000 square feet in the same development at $50.20 per foot, a 60% increase over what Inovio’s 2013 deal, though they were able to negotiate a $190 per foot TIA (Tenant Improvement Allowance) to help fund their buildout.  Renewing tenants shouldn’t need that kind of TIA, but Sorrento’s deal will be an important comp in any negotiations.  

Nkarta – South SF - 88,000 sq ft @ $76.80 per square foot

South City is an interesting submarket compared to peers around Boston and San Diego due to the formerly super high costs of office space around the Bay Area.  Rents in the West Coast’s biotech capital have been holding in the mid-60s for the last four years.  It was a cheaper alternative to the City of San Francisco pre-COVID.  Surrounded by software and Internet companies, Nektar Therapeutics, for example, leased 136,000 in 2018 in SoMa at $80/sq ft, a neighborhood where asking rents are now struggling to hold at $50.  Meanwhile things in South City have held steady and it has become a more expensive alternative to the bigger city to its north due to concerns about new taxes (Prop C) and CAM charges in San Francisco, while retaining a strong presence of large pharma companies looking for partnerships.

South City and the Peninsula had started to push into the high 60s, with Alexandria signing a number of tenants, including Codexis and Iovance, to leases at $67-$69 in San Carlos, and Annexon taking space nearby in Brisbane at $69/ft.  Nkarta’s deal to take 88,000 feet at $76.80 was a significant step up given how stable rates have been in South SF over the last few years, and also suggests we could soon see a Peninsula tenant top Nektar’s “San Francisco bubble” $80/ft deal from 2018.

The Biotech Correction Continues - XBI Trails the S&P by 34 points in 2021

By David Gross

Monthly life sciences funding levels have fallen from a torrid $4 billion in January and February to $3 billion last month, a level likely to repeat in August.  While interest and enthusiasm in biotech remains high, investment in the industry is going through a correction, with returns on the XBI ETF now trailing the broader S&P 500 by 34 points in 2021.

For the last few years Biotech has outperformed the broader market.  But with this year’s correction, the five year returns on XBI are now practically equally to the S&P 500.  

While stock market returns have come back down to earth this year, there is no loss of faith in the long-term promise of the industry.  Fund sizes keep getting larger, with Bain Capital recently announcing its newest life sciences fund will put nearly $2 billion of capital to work.  And the industry continues to account for over a third of non-SPAC, non-ETF IPOs.  Moreover, while total venture funding has fallen since the beginning of the year, large deals are still occurring, with four U.S. rounds this month topping $200 million, including Sonoma Bio’s $265 million Series C and XtaiPI’s $400 million Series C.

Some of the ceiling on funding isn’t just related to the correction, but the limitations placed by ultimately being dependent on insurers, Medicaid, and Medicare for payment.  This is why the industry needs to continue to expand beyond therapeutics.  While Zymergen’s recent challenges were a setback here, Elon Musk’s Neuralink plus Ag Bio developers PivotBio, Appel Sciences, and Sound Agriculture combined have raised over $900 million this quarter, or nearly 20% of all U.S. life sciences funding.  With interest in CRISPR for Agriculture also growing, synthetic and ag bio are poised to push the industry beyond medicinal applications and will likely play an increasingly important role in the industry’s next phase of growth.

Another South City Lease Tops $70/Sq ft

 By David Gross

Small molecule oncology developer ORIC Pharmaceuticals recently extended its lease at Healthpeak’s 240 Grand Avenue building, renewing over 33,000 square feet for an initial base rent of $70.20.  This is the second major lease to top $70/ft in South City, where rates had been holding in the high 60s.   While ORIC’s stock has taken some hits this year, it recently received an IND from the FDA to being clinical trials of its CD73 inhibitor, intended to reduce resistance to chemotherapy.  

A major question is here whether Healthpeak will redevelop its Britannia Pointe properties on Grand Avenue, which mostly consist of one to two story buildings adjacent to Genentech HQ.  With available space decreasing and rent rates increasing, these properties could be targets for future redevelopment.  

Another Ag Bio Funding in the East Bay

By David Gross

Last month, Pivot Bio raised over $400 million in one of the largest rounds ever for an East Bay Ag Bio company.  The momentum there continues with Sound Ag of Emeryville pulling in a $45 million Series C led by Bayer.  

Sound was founded in 2019 to improve crop yields through nitrogen optimization within fertilizers.  The core of the technology is an epigenetic approach to helping food plants grow.  By applying epigenetics to modify gene expression, and not altering the plant's DNA, the company claims it can increase yields beyond what is possible by editing DNA via CRISPR-based approaches.

Sound is headquartered in Wareham Development's 5858 Horton Street building, a 270,000 square foot facility whose tenants also include Berkeley Lights and Nutcracker Therapeutics.

Just-Evotec Opens 130,000 Square Foot cGMP Manufacturing Facility in Redmond, WA

 By David Gross

Just-Evotec Biologics has completed construction of a 130,000 square foot cGMP facility outside Seattle in Redmond, WA.  Just was funded by the Bill and Melinda Gates Foundation and was acquired by Evotec of Germany for $90 million in 2019.

The facility will house 300 employees, or nearly 500 per square foot, once fully operational.  Merck has already purchased $15 million of capacity there to produce anti-cancer antibodies.  Unilke traditional monoclonal antibody manufacturing sites, Just-Evotec will use continuous processing, not batch processing, for scaling up cell cultures.  Continuous processing also integrates downstream chromatography steps, with the objective of increasing productivity by reducing the downtime that occurs between serial batch steps in traditional antibody manufacturing.

Asking rents for industrial space in Redmond are in the low 20s.

Waltham-based I-O Developer Immunitas Raises a $58 million Series B

 By David Gross

Immuno-oncology remains a favorite area of VC investment, as well for real estate given how much space many I-O developers require.   Immunitas, backed by Novartis and Bayer, announced a $58 million Series B today to prepare its checkpoint inhibitors for the clinic.  The funding follows  $39 million Series A raised in 2019.

Immunitas is headquartered at King Properties' 130 Winter Street building in Waltham, MA.  Other tenants there include TScan Therapeutics, Immunogen, and Dyne Therapeutics, who is subleasing there for $51 per square foot.

Another Kendall Square Lease Tops $100/Sq Ft

 By David Gross

Back in May, Relay Therapeutics took 41,000 square feet at BioMed's 60 Hampshire Street building in Kendall Square for $110 per square foot.   Epigenetic cancer drugmaker Epizyme has now joined Relay in Kendall Square's over $100 club with a two year extension of its existing lease at Alexandria's 400 Technology Square building around the corner.  

Epizyme, whose stock has been falling and whose CEO was recently replaced, signed on for just two more years, committing to its 43,000 square feet footprint through November 30, 2024.  Epizyme has been in the building since its redevelopment in 2012 and when rents were about half of what they are now. 

Epizyme renewed its original lease in 2017 at $66 per square foot, which will have risen to $84.41 by the end of its term in 2022 with escalators.  Therefore, the new deal will require it to pay 30% more upon commencement compared to its existing lease.   Other tenants in the building include Novartis, Arkuda Therapeutics, and Casma Therapeutics.

    

BioLabs Prepares for Expansion into DFW

 By David Gross

BioLabs, the co-working site for life sciences, continues to make progress toward opening its DFW location in December.   The 37,000 square foot facility will be in the Pegasus Park development, which is near both the UT Southwestern Medical Center and Love Field airport.   It will also be the company's first away from the coasts, where it covers many traditional life sciences markets with the notable exception of the Bay Area.

The service has attracted Seed and A round startups in other markets, as well as international companies looking to dip their toes in the water of U.S. markets.   While it's not clear what rates in Dallas will be, the firm has charged $300 per person per month and $4,000 per bench per month in the Boston area.    

Neither Dallas, Houston, nor Austin has emerged as the clear life sciences leader within Texas, and this type of facility should be a big attraction for early state, preclinical startups.  MD Anderson Cancer Center, in Houston offers space in small, affordable increments, but the best rates require committing to a direct lease like Ziopharm Oncology agreed to two years ago.  Given that funding levels in these cities remain low compare to these coasts, it will be interesting to see how hard Houston and Austin push to add more flexible term co-working lab space.

The Bay Area Flip - Suburbs Keep Getting More Expensive than the City

 By David Gross

Last year, therapeutics developer Zogenix received its first FDA approval, a drug to treat a rare childhood epilepsy disorder.  Three years ago, it signed a 37,000 square foot lease in Emeryville for $47 per foot, at a time when space in the City of San Francisco across the Bay was going for $70 a foot.  Yet today, rates for the limited lab space in Berkeley/ Emeryville are pushing $70 a foot while subleases in the City’s SoMa and Mission Bay neighborhoods are going for $45-$50. 

While Zogenix is a more of a traditional therapeutics drug developer, Berkeley/Emeryville has become a hot spot for synthetic bio.  PerfectDay, Prime Roots, Finless Foods, and recent recipient of a $400 million+ venture round Pivot Bio are just some of the tenants in this neighborhood two miles west of the UC Berkeley campus, next to the Bay. With only about three million square feet in this submarket, rental rates have soared since Zogenix signed its lease three years ago.  However, some relief should be on the way with Zymergen likely to start subleasing some of its 300,000 square feet in the neighborhood, and BioMed’s 910,000 foot Emeryville Center of Innovation coming online over the next few years.  Nonetheless, with Bay Area life sciences VC poised to top $10 billion this year, the new supply might not be enough to keep rates from reaching closer to $80/sq ft, as they already have in South City. 

While lease rates in areas that border San Francisco are soaring, rates in the city itself are not.  Vir Biotech and BridgeBio signed subleases earlier this year in Mission Bay for less than $50 per square foot, in spite of being across from the new UCSF Medical Center.  Zynga has just added to the glut of available sublease space in the city, with asking rents for its building right around $50.  In addition to life sciences tenants often preferring downtown adjacent sites to downtown itself, CAM (Common Area Maintenance) charges are often higher in San Francisco due to high taxes and propositions passed over the last few years that add to the overhead of leasing there.  

San Francisco attracted a large number of software/Internet companies in the 2010s that previously would have gone to the Peninsula or South Bay.  This not only pushed up lease rates outside the core Financial District, it led the city to get a little cocky about the benefits it provided employers, and overregulation with new taxes like Prop C.  Moreover, life sciences companies, unlike software developers, need to partner with each other more than they compete with each other, which reinforces existing clusters even if they lack lifestyle amenities of walkable, urban neighborhoods. 

The combination of limited demand for San Francisco life sciences space and software companies subleasing their urban offices has put the brakes on many lab projects within city limits.  Most notably, Alexandria has put its 88 Bluxome project on hold after Pinterest paid $89 million to get out of a lease there, but the city is still hoping the new Mission Rock development, near UCSF and between Oracle Park and the Chase Center, will attract life sciences tenants.  But this seems more like hope than reality.  Unlike San Diego and Boston, which have built up clusters within city limits, San Francisco has yet to do that, with Mission Bay sputtering while Berkeley/Emeryville and the Peninsula are running out of lab space.  Life sciences companies usually prefer quick to cheap, and will typically trade dollars for time to the clinic.  But for now, San Francisco is not doing enough to reverse the trend of suburban labs leasing for 50% more than their counterparts in the city.

Invitae Expanding into RTP/Morrisville, NC for $33.50 per Square Foot

 By David Gross

San Francisco-based genetic testing provider Invitae announced earlier this year that it would add 245,000 square feet of lab/office space in Research Triangle Park at 1001 Airport Boulevard in Morrisville, NC.  The company, which reported having 2,100 employees at the end of 2020, plans to hire up to 374 people at its new location.  

The property is a redeveloped shopping mall located across I-40 from Raleigh/Durham airport.  Invitae's initial base rent is $33.50 per square foot with 3% annual escalators across at 160 month term.   According to media reports, RTP beat out Frederick, Maryland, about 45 miles northwest of DC along the NIH/I-270 corridor, for the location.

Earlier this year, Invitae added 40,000 square feet near its headquarters in San Francisco's Portero Hill neighborhood, moving to a Class B creative space at 444 De Haro Street.   Asking rents in that neighborhood are $45-$50 per square foot post-COVID, not significantly higher than the company paid for its RTP expansion space.

Artiva Biotherapeutics Takes 52,000 Square Feet in Sorrento Valley/San Diego

 By David Gross

With steep manufacturing requirements, Immuno-Oncology developers continue to take on large blocks of space for both R&D and production.  Nkarta recently took 88,000 square feet in South City for this purpose, while fellow CAR-NK supplier Senti Biosciences took 92,000 square feet across the Bay in Alameda.  Down the coast in the Sorrento Valley near San Diego, Artiva Biotherapeutics is taking 52,000 square feet at 5505 Morehouse Road, an Alexandria Real Estate property under redevelopment.

Lease rates are unknown at this time, but asking rents in the area are pushing into the low 60s, and Sorrento Therapeutics recently took over 100,000 square feet nearby at Healthpeak's Sorrento Gateway Project.  

Allogeneic cell therapies like Artiva's offer significant opportunities for real estate developers because they need significant amounts of space and lessees are often less price sensitive than creators of monoclonal antibodies or more mature biologics as there is less industry experience with scaling up these products. 

Biotech VC Raised YTD Plus A Discussion of Lab Rates

 Latest video looking at Biotech VC and Lab Lease Rates is up on YouTube!

Finch Therapeutics Picks up 61,000 Square Feet in Charlestown at $75 per Sq ft.

 By David Gross

Somerville, MA -based Finch Therapeutics, a developer of microbiome therapeutics, is expanding nearby in Charlestown for $75 per square foot with standard 3% annual rent escalators.  The deal also gives Finch a ROFR (right of first refusal) on additional space nearby on Rutherford Drive.

Finch has a $176 million deal with Takeda to develop an orally administered ulcerative colitis therapeutic.  That drug is currently preclinical, but Takeda is going to be taking over the development to accelerate time to and through the clinic.  Finch went public earlier this year, but is down about 1/3rd for its IPO price with a market cap of approximately $650 million.  

Budd Bioworks Developing 450,000 Square Feet of cGMP and office/lab space in Philly

 By David Gross

There's been a lot of news lately about office to lab conversions, but North Philadelphia has ample industrial properties ripe for conversion to biomanufacturing facilities.  The Budd Company of Philadelphia was founded over 100 years to manufacture steel frames for automobiles.  Now 450,000 square feet of its old facility will be converted to 300,000 of cGMP manufacturing space along with 150,000 of lab/office.

While lease rates for these properties tend to be in the teens, the property was acquired at auction for just teens per foot.  The landlord is targeting gene therapy and "older" forms of biologics for the facility, which could make it ripe for biosimilars. 

SwiftScale Biologics Expanding to Oakland

 By David Gross

Monoclonal antibodies are typically grown in eukaryotic Chinese Hamster Ovary or CHO cells.  This leads to a number of challenges in terms of cost, quality, and consistency during manufacturing.  South San Francisco-based SwiftScale Biologics is looking to bring radical change to this process by growing mAbs in bacteria.  This technique is sometimes referred to as "cell free" manufacturing.  To advance this effort, the company is expanding its presence to an industrial building at 2105 Livingston Street in Oakland.   Asking rents for the property are $19.20 per square foot according to LoopNet.

SwiftScale is headquartered near Genentech in South City at in a Class B building at 458 Carlton Court.  Asking rents for that property are approximately $40 per foot, with Class A space nearby now topping $70.

South SF-Based Sonoma Biotherapeutics Raises $265 Million

 By David Gross

Boston dominated big fundings earlier this year, but the Bay Area is coming on strong in Q3, having led all markets in life sciences VC raised in July.  Cell therapy developer Sonoma Biotherapeutics is the latest biotech company in the region to pull in a multi-hundred million dollar round, having just raised a $265 million Series B in a syndicate that included GV (formerly Google Ventures), ARCH, 8VC, and Alexandria Venture Investments.

Sonoma is headquartered at Alexandria's 400 East Jamie Court property in South City, in the same building where Lyell Immunopharma signed a lease with an initial base rent of $66 in 2019.   

Zymergen Collapse Should Free Up Space in Emeryville

 By David Gross

Synthetic "biofacturing" company Zymergen announced yesterday it would not generate meaningful revenue until 2023, a big delay from the second half of this year as previously announced.  Today the stock is down nearly 80% and CEO and Founder Josh Hoffman is out, replaced by former Illumina CEO Jay Flatley.  With just six quarters of cash in the bank, the company is going to be doing everything it can to trim expenses.  One of those expenses is a 303,000 square foot lease it signed in 2019 at 5300 Chiron Way in Emeryville, a building owned by BioMed Realty.

The Berkeley/Emeryville submarket has become a hub for synthetic bio, building off of tech transfer from UC Berkeley.  The neighborhood is essentially full, with prospective tenants holding out for BioMed's 910,000 square foot expansion around the Chiron Way building Zymergen leased.   Zymergen's plan has been to vacate its existing 252,000 square feet nearby on Horton Street, and move into the redeveloped Chiron Way property.   While specific plans haven't been announced, it would be highly unusual for the company not to shop around the space for subtenants given its cash position.  

Zymergen's exact lease rates on the building were never released, but about a mile away, Berkeley-based Gritstone bio paid $58.20 per foot initial base rent for a lease that started in 2019, when Zymergen signed its lease.  Additionally, Agenus paid $63 per foot for a 83,620 square foot lease last year in Berkeley, the same price paid by Perfect Day last year when it sublet 112,088 square feet nearby.   Other companies in the submarket include Jennifer Doudna's Caribou Biosciences, which recently went public, and ag tech startup Pivot Bio, which raised over $400 million last month in one of the largest life sciences venture rounds this year.  

Discussion about Los Angeles as a Biotech Hub

 By David Gross

We had a great discussion yesterday with the DNA Tie Club on ClubHouse regarding the growth of the LA biotech industry.  Participants in addition to me included real estate developer Ben Pouladian, former SVP at Bench International Karen Fulmer, Arye Lipman, an investor at MarsBio, and Nader Elrashidy from Portal Innovations LLC.

The sentiment seemed to be that LA doesn't need a targeted cluster like La Jolla/Torrey Pines, Kendall Square, or South City to be successful.  Rather, its combination of culture, arts, talent, capital, and low lease rates create a regional strength that should support a few clusters.  While the market hasn't developed to the point where it has focused niches, like Berkeley/Emeryville has in synthetic bio, a med device cluster has developed around Santa Clarita/Valencia with Abbott Labs, Boston Scientific, and Takeda.  As I posted about earlier this week, Cantor Fitzgerald recently paid over $500 a foot for a Boston Scientific's building in that submarket.

In addition to devices, LA has an obvious strength in CAR-T from Kite, and can build off that legacy with Gilead, which has maintained the old Kite office in Mid-City Santa Monica.  Additionally, Culver City-based cell therapy startup Appia Bio raised $52 million earlier this year to advance its CAR-T and CAR-NK biologics.  

Some of the emerging hubs we discussed include Downtown LA, "somewhere" with access to both the West Side and the Amgen Thousand Oaks campus, and Culver City-LAX-El Segundo.  In addition to the NIH Funding and research activity at UCLA, USC, and CalTech, it was pointed out that City of Hope medical center has been active and could end up spinning off more early stage startups east of downtown around Pasadena and Moravia. 

As we've seen life sciences venture funding increasingly spread out beyond Boston, the Bay Area, and San Diego, Los Angeles, which was #5 in VC raised last year after those three and New York, is poised to become a more prominent location for new biotech companies

2020 Biotech VC Recap

 By David Gross

I'll be posting a new 2021 YTD VC video soon, but wanted to share the 2020 recap.  

10x Genomics Paying $38 Initial Base Rent in Pleasanton Expansion

 By David Gross

10x Genomics is taking over the area around the 1-580/I-680 junction about 35 miles east of San Francisco, an area that has traditionally been dominated by software developer Workday.  It recently commenced a lease at 6210 Stoneridge Mall Road, a former Workday building, where it will occupy 145,000 square feet with initial lease rates around $38 per square foot, varying slightly by floor.  

10x is also adding space nearby on Springdale Road, and the road connecting those facilities to its existing presence next to the mall will be renamed "Genomics Place" as the City of Pleasanton does all it can to support the growth of its tech employers.

While PeopleSoft (now part of Oracle) and Workday founder Dave Duffield chose to locate there, Pleasanton is not a traditional spot for either tech or biotech.  Its distance from Stanford, Berkeley, and San Francisco has not made it a top choice for tenants trying to attract workers in either industry.  However, its distance from these landmarks has made it much cheaper than other Bay Area locations, allowing 10x to pay rates half of what it would be paying now in South City or elsewhere in the peninsula.  It has also become somewhat of a biomanufacturing destination, with Emeryville-based Gritstone bio leasing its 43,000 square foot production facilities there for just over $10 per foot.

Immuno-Oncology Developer Agenus Leasing in Emeryville for $63 per Sq Ft

 By David Gross

Berkeley/Emeryville and South City, two submarkets just outside San Francisco, are seeing lease rates push into the 70s as many life sciences companies continue to dance around signing leases in the city.  However as recently as last November, I-O developer Agenus leased 84,000 feet in Emeryville for $63 per square foot.  The property, at 6455 Christie Avenue, is a few blocks west of the Hollis Street corridor where Zymergen and Berkeley Lights have signed leases in recent years.  While space in the area is extremely tight, BioMed is adding 910,000 square feet to the neighborhood with its Emeryville Center of Innovation Property. 

July VC Raised Drops to $2.9 Billion, Bay Area Has the Largest Deals

 By David Gross

The Biotech XBI ETF is now trailing the Year-to-Date returns on the S&P 500 by over 30 points, so it's not surprising that life sciences fundraising has slowed from its torrid pace earlier this year.  After raising nearly $4 billion a month in January and February, the industry raised just under $3 billion in July.  It's fair to say euphoria has slowed to maybe just strong enthusiasm.

The biggest deals in the month came out of the Bay Area, with Berkeley-based AgTech startup Pivot Bio raising over $400 million, and Elon Musk's Fremont-based Neuralink pulling in $205 million.  Because month-to-month fluctuations are common, I wouldn't read too much into San Diego, New York and LA's low numbers for the month.  I'll have a YTD update and a new video on regional trends out soon.

Iovance Leasing 50,000 Sq Ft at Alexandria's San Carlos, CA Campus for $67.20 per Square Foot

 By David Gross

In a lease signed a few months ago, cell therapy developer Iovance Biotherapeutics committed to nearly 50,000 square feet over 10 years at Alexandria's District project in San Carlos, CA, just south of the San Mateo Bridge, with an initial base rent of $67.20 per square foot.  This is nearly $10 lower than Nkarta's recent deal with Healthpeak Properties in South San Francisco.   

With South San Francisco filling up, Alexandria is luring tenants south to the Mid-Peninsula in what it refers to as the "Stanford" submarket, and is in the process of putting over a half million square feet of lab and office into the San Carlos Project.   Immunology developer Allakos Therapeutics signed onto the project right before COVID in late 2019, taking nearly 100,000 square feet at $69 per foot, with a $150 per foot Tenant Improvement Allowance.  As part of this expansion, Alexandria is also developing another half million square feet on Fabian Way and Hillcrest Avenue in Palo Alto, which are in fact close to the Stanford campus.  

Seagen Signs Lease for $15.50/Sq Ft in Everett, WA

 By David Gross

Oncology biologics developer Seagen is taking all 258,000 square feet of a new project in an industrial park 30 miles north of Seattle in Everett, WA.  The initial base rent of $15.50 per square foot might seem extremely low, but the company has a history of moving lab workers into industrial/flex space, as it has done at its Bothell, WA headquarters about 15 miles south of the new space.  Through a combination of its out-of-pocket costs and allowances, the landlord is allocating $156 per square foot to improvements from which Seagen can draw a TIA (tenant improvement allowance) if those funds aren't spent.

Moving into an industrial park next to an Amazon distribution center, Seagen is willing to locate employees in a neighborhood designed for tractor trailers, not people.  Therefore, this should not be seen as a reflection of the true market for office/lab space around Seattle.  Sequencing manufacturer Nanostring Technologies, for example, is paying current rates over $50 per square foot for its headquarters at BioMed Realty's Vue Research Center in South Lake Union.