Tuesday, September 21, 2021

Tandem Diabetes Leases 181,949 Square Feet in San Diego at $62.18/Foot

 By David Gross

Tandem Diabetes, a manufacturer of insulin pumps, has leased 181,949 feet from Kilroy at 12400 High Bluff Drive, with a lease term that goes through 2035, and includes two five year expansion options.   In addition, Tandem has a ROFO (Right of First Offer) for another 34,569 square feet in the development.  

With some existing space expiring, the new lease will increase Tandem’s regional footprint to 360,000 feet in San Diego, making it the fourth largest tenant headquartered locally, after Illumina, Dexcom, and Sorrento Therapeutics.   

Once fully occupied, Tandem will be paying an initial base rent of $62.18 per Square Foot, consistent with recent leases in the San Diego area.  But since its acquisition of the Del Mar Corporate Center, Kilroy has been pushing the region’s life sciences cluster.  With the move to High Bluff Drive, Tandem will be pushing itself four miles north near Del Mar, a significant move away from the region’s life science industry holding a tight position around I-5 and I-805 in Torrey Pines and the Sorrento Valley.

Kilroy issued a press release noting that a total of 303,000 square feet had been leased in Del Mar, adding in new deals with Sorrento and DermTech.  Kilroy is planning to build another 600,000 feet in the area just north of the Ted Williams Freeway which it is branding “the 56 Corridor”.

Monday, September 13, 2021

Opentrons Takes 48,000 Square Feet in Long Island City

 By David Gross

Lab robotics supplier Opentrons has signed a ten year lease for 48,000 square feet at the Innolabs facility in Long Island City.  The company will be moving its HQ there from nearby in Dumbo.  The location, at 45-18 Court Square, is across the tracks from Alexandria's Center for Life Sciences on 48th Avenue and near the entrance to the Queens-Midtown Tunnel.  Crain's is reporting asking rents were around $85/foot.

I've long thought Long Island City had a lot of potential for life sciences.  Located where Amazon wanted to build one of its HQ2's, it has the downtown adjacent location that allows for better accommodation of biotech ceiling, power, and HVAC requirements than midtown office towers, and is across the East River from both the Sloan Kettering/Rockefeller U labs in the East 60s, and NYU's cluster around East 30th St.  Innolabs, the landlord, is a joint venture among King Street Properties, GFP Real Estate, and the Carlyle Group. 

Tuesday, September 7, 2021

Bezos-backed Altos Labs Taking 250,000 Square Feet in Redwood City, 60,000 Square Feet in San Diego

By David Gross

The San Francisco Business Times is reporting that anti-aging startup Altos Labs will be taking a quarter million square feet of lab/office space near the Oracle campus in Redwood City, along with 60,000 feet in San Diego.   While details of its technology are just coming out, a recent article in the MIT Technology Review mentioned hiring scientists with little expectation of near term revenue.   While the immediate impact on medicine will be limited, the impact on California's top two life sciences real estate market will be notable, as this will make Altos one of the largest venture or angel-funded tenants in both markets. 

Sunday, September 5, 2021

San Diego's Homegrown Public Companies Now Leasing 6.4 Million Square Feet....Part 1

 By David Gross

As the life sciences industry continues to grow, it’s spawning new publicly traded companies at ever increasing rates.  In San Diego alone, there have been 22 biotech IPOs (Including one SPAC merger) in the 2020s, compared to 46 during the entire 2010s, 26 during the 2000s, and 9 before 2000.  But I wanted to determine what this meant for lab space absorption and how consumption might be changing.  

In total, San Diego life sciences companies that have IPO’d going back to the 80s currently occupy nearly 6.4 million square feet of space in the region.  The breakout below shows how much IPOs from each decade are using.

The big drop off from the 2000s to the 2010s is largely due to Illumina, which went public in 2000 and now occupies 1.25 million square feet in San Diego.  Negating its outsized impact would have left the 2000s at around 50,000 per foot, same as the 2010s.   However, there is also a survivor impact holding up the 2010s averages.  Of the 45 companies that went public in the 2010s, 38 are still leasing space, either on their own or through a company that acquired them.  However just 13 of the 26 companies that IPO’d in the 2000s are still leasing space in a former or current corporate entity.     As a result, square feet per surviving company fell off noticeably between the 2000s and 2010s.

CAR-T and -OMICs Lead the Way
While it can be tempting to come up with generalizations of square feet per dollar raised, or other broad metrics, to do so overlooks industry subsectors that naturally lease more space, notably cell therapy, gene therapy, CDMOs, -Omics, and diagnostics.  At 83,000 square feet, CAR-T developer Poseida Therapeutics has one of the largest footprints among San Diego companies that have gone public this decade, due to sensitive clinical manufacturing needs.  Meanwhile, preclinical Design Therapeutics had a larger IPO than Poseida, raising nearly $300 million, but currently has just 12,000 square feet in facilities.    

In addition to cell and gene therapy, -omics companies lease greater amounts of space per dollar of funding.  Sequencing company Singular Genomics raised nearly the same amount as Design Therapeutics but has 77,000 feet of space and added 50 people between March 2020 and March 2021 as it prepared to scale up its manufacturing operations.  Privately held sequencing provider Element Biosciences recently took 101,000 square feet.  These areas remain some of the most capital-intensive in the industry.

At 6.4 million square feet, San Diego’s hometown public companies are now leasing nearly three times as much as the 2.2 million square feet big pharma is leasing there, which includes 30,000 feet at J&J’s JLabs incubator.  I’ll have more analysis on San Diego leasing trends in Part 2 of this series.

Wednesday, September 1, 2021

Suburban DC/Maryland - High Unlevered Yields, Modest Lab Rents

By David Gross 

A few weeks ago I wrote about how Suburban Maryland is not a premium rent market.  While downtown DC nearby has been one in the office sector, land is plentiful in its suburbs with no geographic restrictions like the Bay Area and San Diego have, and no major lab space clusters barely a mile of downtown like Boston has.   As a result, lease rates for new wet lab space are generally around $35-$40 per square foot, a far cry from the $60-$110 rates seen in Boston and California.  Considering that DC’s office rates are often comparable to Boston’s, this represents a significant discount for lab space considering the high educational demographics of the Washington area.

Maryland has long been a secondary market for Alexandria, representing nearly 10% of its portfolio, but just 6% of rent revenue due to lower rents than Boston/San Francisco/San Diego.  This has made me question why Boston Properties, which has long had a large presence in high office rent markets, would invest in Maryland as it pursues lab tenants, going against its “premium, low barriers-to-entry” strategy.

While Suburban Maryland doesn’t have the venture funding levels to sustain even San Diego rents, it does offer moderate land acquisition costs with rents that run about $10 higher than Suburban Philly or Research Triangle.  As a result, the yields there can be strong even when rents aren’t impressively high.  In recent SEC filings, Alexandria has reported unlevered yields on new Rockville, MD developments above 8%, compared to 6%-7% in Boston and the Bay Area.  (Unlevered yield = annual property income/total investment excluding debt service costs).  Total acquisition and construction costs in Maryland run around $500 per foot, compared to over $1,000 per foot in larger biotech hubs, but rents are high enough to push yields higher than lower rent or higher cost markets.

While high unlevered yields might make Maryland look attractive for more development, if enough wet lab space developers chased this yield those rents would drop bringing them down quickly.  With the region accounting for just 2% national life sciences venture funding, it is heavily dependent on big pharma spinoffs like AstraZenca’s Viela Bio (now part of Horizon Therapeutics), mature biotechs like Novavax, and NIH, which headquarters its National Center for Advancing Translational Sciences at Alexandria’s 9800 Medical Center Drive building in Rockville.  This tenant class is unlikely to push rents to the levels seen in venture-heavy markets in Boston and California.

Maryland and suburban DC require careful assessment of market conditions for lab developers, but can provide them with strong yields while offering tenants lower rates than other major metro markets.   

Verve Therapeutics Leases 105,000 Feet in Fenway-Kenmore for $91 per Square Foot

By David Gross

While rents are topping $100 per square foot in Kendall Square, there is not much to be saved jumping across the river to Fenway-Kenmore, where Verve Therapeutics has leased 105,000 square feet at Alexandria's new Fenway development located at 201 Brookline Avenue.   Alexandria bought the 510,000 square foot property under development earlier this this year as part of a deal that also gave it the old Sears building at 401 Park Drive which it is redeveloping into lab/office.  In addition to $91 initial base rent per square foot, Verve will receive a $200 per square foot TIA (Tenant Improvement Allowance) from Alexandria to build out the space.

The location is a few blocks south of Fenway Park and Kenmore Square, and a few blocks north of the Longwood Medical Area.  With Kendall Square effectively out of space, the neighborhood is filled with new construction, with Alexandria targeting 1.8 million square feet of total space nearby, and IQHQ developing its Fenway Science Center, which will place a 20 story tower and 10 story mid-rise right on top of the Mass Pike.  Both of those buildings will be visible just outside the Green Monster from Fenway Park.

Verve, which is developing a gene editing candidate to tackle cardiovascular disease, went public in June and is expecting to submit its IND to the FDA early next year to begin clinical trials.  It is currently subleasing 19,000 square feet at Alexandria's Tech Square in Kendall Square, where it paid an initial base rent of $98 per foot.  The new lease commences on August 1, 2022.  With a current burn rate of approximately $60 million, the total costs of the lease including taxes and maintenance should account for about 15-20% of the company's cash burn after commencement.

Oakland-based Versanis Bio Raises a $70 Million Series A

 By David Gross

I’ll have the month end VC stats out as soon as I get my head out of lease documents, but August finished off strong after a tepid start.  The latest funding announcement comes out of the East Bay where Versanis Bio, a portfolio company of Aditum Bio, announced a large Series A to advance clinical trials of its anti-obesity monoclonal antibody.

You may be thinking the East Bay is typically for syn bio or CRISPR companies, but Aditum was started last year by two Novartis veterans as a holding company, and they brought in Atlas Ventures and Medicxi to syndicate the largest round they’ve done for a portfolio company.  The company will begin Phase 2 trails of the drug created at Novartis.  Versanis is currently based in downtown Oakland in Aditum’s 1100 Broadway office suite, which it shares with three other Aditum companies, and which also means it will likely be shopping for space, using Novartis facilities, or looking for a significant contract with a CRO.    

Tuesday, August 31, 2021

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. 

Monday, August 30, 2021

Top Four Metros Account for 67% of 2021 Biotech IPOs

By David Gross 

uch 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.  

Sunday, August 29, 2021

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.

Friday, August 27, 2021

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.