Friday, December 2, 2016

Merck to build new Bay Area R&D campus

Merck has staked out a new R&D campus for itself in the heart of South San Francisco, the epicenter of the Bay Area’s biotech mega-hub. Alexandria Real Estate Equities, the builder of many biotech facilities around the country, will be breaking ground on the site soon after Merck bought into a new, 294,000-square-foot West Coast research complex at 213 East Grand Avenue. The move-in date is being set for 2019.... 
...A Merck spokesman told me back in July that a central research campus in San Francisco would also open the door to about 100 new hires. 
“We will ultimately consolidate our Oncology, Immuno-oncology, Biologics and CMR discovery work into a combined research site,” she noted at the time. “Our Palo Alto site will continue to focus on Immuno-Oncology and Biologics and Vaccines discovery until the long-term facility is up and running.” 
The western migration follows a move by Merck to reduce staff levels at its operations in Kenilworth and Rahway, NJ. The move also affected its North Wales, PA screening facility. And Merck has already picked out a lab in Cambridge, MA for its expanded work in the East Coast hub. Now it’s well along the way to doing the same on the West Coast. 
All of that fits neatly into a broad industry trend that has dominated R&D over the past 5 years. Big Pharma has been identifying central hubs, often in the mega-centers like Cambridge, MA, Cambridge, UK and San Francisco, to concentrate its forces.
It's pretty amazing to me how pharma R&D is sorting itself into either Bay Area or Cambridge enclaves. With the assumption that this is (in the long run) where most of their medicinal chemists (and process chemists?) will be located, I imagine this will have the effect of increasing wages (while gains when compared to cost-of-living will be more modest.)

Does anyone see this trend reversing? I don't. Longtime readers are probably tired of me saying this: the prominence of Bay Area and Cambridge in pharma are due to decades of billions of federal research investments in world-class universities and medical centers combined with a relatively friendly funding atmosphere for entrepreneurial adventures. What this says for other regions and their pharma/biotech hopes isn't very positive, I'd think. 

18 comments:

  1. It's a little surprising to me that btech, which generates a good bit of pollutants, is gravitating to states with tougher environmental and OSHA standards. Seems the opposite of the old joke "Q: why does NJ have more chemical waste dumps and CA more lawyers?, A: NJ choose first."

    Wait a few years and the next trend will be to move to cheaper states in the mid-west. In the meantime, coming up with business plans to move to CA or MA keeps a lot of useless admin drones employed, so I guess that's good.

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    1. The same thought has occurred to me regarding semiconductors in Silicon Valley, but in the ~20 years I've been watching, there's been no great movement to the "cheaper states." Instead, most small centers outside Silicon Valley have shrunk or disappeared, and firms have moved R&D and manufacturing to Asia or Ireland instead of cheaper American sites.

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  2. I wonder when we'll start seeing them move to Austin or Oregon. Much cheaper magical creativity fairy dust in those places, and the chemists will be 30% more innovative just like in SF from being around artsy hipsters.

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    1. Lived in both of those cities (Austin and Portland), and I now live in the bay area. The vibe is different in the bay. It's much more ambitious. Even artsy hipsters are ambitious. I think it would be pretty hard to replicate the exact mix of what makes the bay area unique in other places.

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  3. I'm not buying the argument about universities and medical centers - NJ, Philly, and the RTP already have plenty of world class universities and hospitals. I think it's the MBA herd mentality and misguided ideas about "innovation" coming from "cool" places like SF.

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  4. I'm cynical, but I wonder if the move isn't to pare off older chemists who aren't willing to leave their houses and cost of living in cheaper places to move to expensive places with less resources for them. That way, they can tell people that they didn't lay off their older people, and not have to pay severance or higher health-care costs, while being able to attract younger (cheaper) people. If that's the case, then there won't be a move to flyover areas unless they get serious incentives and want to pare off some more employees. It also wouldn't say much about their view of the value of experience (which is consistent with lots of fields, apparently).

    The presence of VC money and the facility of oversight of funds for generating a local biotech/small pharma seems like a legitimate concern, and if you're expecting those people to find your drugs, then being there makes some sense.

    Part of the consequence of the election seems to me to be that states, and not just people, hold political power. Concentrating money and jobs in those places would seem to be a political target for people who already didn't like them much (NPR had previously blurbed about the coming fight over drug prices).

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  5. "I wonder if the move isn't to pare off older chemists "

    Seems it would be cheaper to pay off the oldster deadwood than to move the whole facility: this also has the benefit of allowing the useful oldsters to stay (note, there is likely the same ration of deadwood/useful among youngsters).

    My guess is this "clustering" is the result of a bunch of expensive pretty PPT slides by highly paid (but remarkably uninformed) MBA consultants. Proximity to capital maybe makes sense, but if that were really the case most businesses would be in NYLON where the real $$$ is. To me it seems the notion of innovation by diffusion is similarly spurious, but it has a patina of credibility and a complete inability to truly prove or disprove.

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    1. Except, at least with layoffs, you tend to get rid of the ones that are more useful (the ones who can find jobs easily elsewhere). On the other hand, that might be true of a move, or the ones that can get jobs elsewhere are happy to go somewhere where there are lots of other places to work. I don't know.

      I could believe PowerPoint Derangement Syndrome infected upper management, but I didn't think it infected investors. Maybe MS didn't target the correct audience when they made it - they should have marketed it to businesses as a way to recruit investors, and maybe taken a cut.

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    2. We already had clustering in pharma's former areas. PA, NJ, and RTP have the advantage of being near non-pharma chemist employers too - people used to move between companies like DuPont or Rohm & Haas and the area pharma companies. I doubt there are very many chemical companies in SF.

      I think you pretty much nailed it with your comment about MBA's with PowerPoint presentations breathlessly promoting the next hot management fad!

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    3. I think it's a combination of clustering and trying to move to the trendy spot. I'm not in pharma, but worked in Silicon Valley for many years at a startup. We were often asked why we were located there rather than somewhere cheaper and closer geographically to the large companies that we worked with (Exxon, Dow, etc) It was all about having the Silicon Valley address for image, and probably also because the senior management wanted to live there. They didn't even set up shop in a cheaper corner of the Bay Area, because it was all about image.
      With enough clustering, it becomes easier for chemists to move from one company to another, and for companies to recruit, so there may be advantages.

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    4. Good point about senior management wanting to live there. If Joe Schmoe the bench chemist has to commute 90 minutes to afford a house for his wife and kids, that isn't senior management's problem. It also seems like a sneaky little way of encouraging Joe to decline the relocation from Philly or NJ, and discriminating against older workers in a way that's impossible to prove.

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  6. "We already had clustering in pharma's former areas. PA, NJ, and RTP have the advantage of being near non-pharma chemist employers too - people used to move between companies like DuPont or Rohm & Haas and the area pharma companies. I doubt there are very many chemical companies in SF."

    There's a more diverse range of jobs for PhD chemists than just biotech/pharma in the bay area. Dupont has a sillicon valley office in Palo Alto (it's more biotech-oriented, though). There's the whole semiconductor/materials science/sillicon valley thing (like the IBM research center in Almaden). Then there are all those renewables startups. There's some hybrid of bioengineering and chemistry/materials science/fine chemicals (Zymergen has been trying to hire organic chemists and materials scientists recently). There's Clorox up in Pleasanton. Then there are all those national labs (LBNL, Sandia, LLNL, a USDA research center just north of Berkeley). GoogleX always seems to be doing a bunch of different things. If you go up the road, closer to Davis/Sacramento, there's some ag companies. I don't know how much crossover there is in those workforces, but there is definitely a lot of different types of science going on.

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  7. Kind of disappointed it's in SSF--East Bay still underdeveloped relative to SF peninsula/south bay.

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  8. It's a move away from chemistry and towards biology/finance.

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  9. I lived/worked in NYC, Europe, the Bay area and the Midwest. I just didn't see the magic in the Bay area. Felt more like people paying a lot of money to look cool with an odd sense of self-importance. The "bohemian" overtures seemed incredibly fake and scripted. The people who made San Fran artsy would not migrate there today.

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  10. I wonder how a successful Calexit would affect the paradigm.

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  11. @AnonDec5at954: Glad I'm not the only one who notices the "odd sense of self-importance" exuded by some San Franciscans (both native and adopted). Rather than envying the "Bay Area Culture", I am perplexed by its contradictions: professing liberalism and social inclusiveness while refusing high-density affordable housing, promoting food boutiques that cater to specialty diets instead of uncouth working-class stomachs, allowing rioters to damage local private businesses, and handicapping public schools through unreasonably low (or improperly allocated) property taxes. Back to the business of science, San Francisco biotech was mostly built on expertise in biologics (mAbs and other recombinant proteins), not small molecules. Yes, there's Gilead, but sofosbuvir came from New Jersey and Genentech's erlotinib came from Long Island. Following the merger with Genentech, many researchers from Roche/Syntex were not "warmly invited" to South San Francisco. Several had the misfortune of relocating to Nutely for its inevitable demise. As others have intimated above, the continuing investments of "Traditional Pharma" (at least those remaining) may reflect corporate herd mentality and blind trend-following. Were the researchers at Merck Frosst, Pfizer Sandwich, Warner-Lambert/Parke-Davis/Pharmacia-Upjohn, GSK-RTP, and other "less glamorous" sites quantitatively less ambitious, less innovative, and less productive than their counterparts in San Francisco?

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  12. Other caveats of the BAy Area: Restaurants jack up the price of food by calling it California cuisine, meaning they use fresh ingredients, as if nobody else in the world does that. People act like the tenderloin district is a wild thrill of danger. It's not. There are bad neighborhoods in some US cities. The tenderloin district is not one of them. Only someone who has been pampered their whole life would be shocked by the tenderloin district. All in all just really fake people, except for the bus drivers. I love the bus drivers.

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