There’s a hushed quiet in the waiting room at a midtown Manhattan fertilization clinic called Reproductive Medical Associates as a dozen women flip through magazines, the glossies a welcome distraction from their scheduled treatments and consultations. But just down the hall, in a window-rimmed corner office with views of Central Park, conversation ping-pongs back and forth as Piraye Yurttas Beim, a scientist and entrepreneur, updates the clinic’s co-director on her startup’s progress.
“What does 20% risk of multiples mean? That’s a very high risk compared to the general population,” Beim says. Her startup, Celmatix, uses a sleek interface to present data points like that in a form that women looking to conceive can easily understand. Celmatix’s ability to analyze pregnancy probabilities is part of a revolution in personalized medicine, delivered to exam rooms via mobile app, that hopeful inventors and investors are eagerly pursuing.
An hour ago, Beim—who also holds a PhD in the genetics of mammalian infertility—was on the phone with one of those investors; now, she’s tailoring her pitch to Dr. Alan Copperman, who is piloting Celmatix in his SoHo clinic. “We realized it’s okay to start putting in our UI [user interface] points of view that will support the physician,” she says.
Dr. Copperman nods vigorously. He and his team see Celmatix as an upgrade to the existing tools obstetricians use to discuss the likelihood that pregnancy will result from a treatment option like in vitro fertilization, or IVF. “It’s a whole new way of counseling patients,” he says. The meeting ends with promises of introductions, and talk of, possibly, the development of an egg calculator. Beim slips out the door and on to her next appointment.
The CEO and mother of two has reason to hurry. Having raised $13.5 million in venture money in seed and Series A rounds since she and cofounder Laura Towart Bandak started the company in 2009, Beim is racing the clock to commercialize before going broke. (According to Marketdata Enterprises, the infertility market is growing and could hit $4 billion by 2018 as the science improves.) Celmatix boasts a growing team and reputation, but time is money, especially in New York City. And, like any number of other biotech startups in the city, Celmatix’s ability to stay here—close to a growing wealth of research partners, investors, and design talent that attracted Beim in the first place—remains uncertain.
The nation’s bigger biotech hubs, like those in Boston and the Bay Area, beckon Celmatix and other promising biotech startups with their well-bred gene pools of talent, real estate, and investors. Even as the biotech industry as a whole reaches new highs, this is an ecosystem that New York City—home base to so many other industries—has struggled to build.
There’s a deep incongruity here. The city boasts nine of the country’s top medical centers, and the state ranks in the top three for National Institutes of Health awards; in a typical year, New York City captures around 6% of the research grant dollars doled out by the NIH. But less than 2% of the venture capital dollars invested in U.S. biotechnology and medical device startups go to New York City-based startups, according to a Fast Company analysis of industry data tracked by PricewaterhouseCoopers. Right-sizing that share of deals would generate an additional $250 to $350 million per year—over $1.5 billion since 2010.
Last May, Eric Gertler, director of the Center for Economic Transformation at the city’s Economic Development Corporation (NYCEDC), summed up the mood among the city’s investors and entrepreneurs, telling an audience at a biotech conference that New York is “not living up to its potential.”
The fact that Celmatix has lasted so long in Manhattan is a new phenomenon. Before investors embraced “virtual biotech,” in which companies outsource costly lab work to research organizations, the five boroughs were prohibitively expensive to entrepreneurs in need of wet lab real estate. Many companies were founded here, but few stayed; most teams decamped to the suburbs or biotech hubs in Boston, San Diego, and Silicon Valley. Now all eyes are on a handful of mid-stage startups like Celmatix, which sit at the forefront of the wave of biotech startups considering a permanent New York address.
Under Mayor Michael Bloomberg, the city successfully nurtured the emergence of startups in its biggest legacy industries, like advertising, fashion, and finance. Startups may be small, but the jobs they create are just the tip of the iceberg; below the surface, happy hour destinations emerge, dry cleaners open, interior designers win clients.
The stakes are high for city leaders like Mayor Bill de Blasio, who is now responsible for leading the way on job creation and diversified economic development. Officials, planners, and entrepreneurs have eyed biotech as a potential growth industry for over a decade. And barring an impending bubble, it would be. Amidst a growing number of acquisitions and faster drug approvals by the FDA, the biotech industry is seeing all-time highs. BioCentury, an industry publication, reports that an unprecedented 110 biotech companies went public last year, raising a record $9 billion. According to PricewaterhouseCoopers and the National Venture Capital Association, venture capital investment in private biotech firms was up 29% over 2013’s numbers, to $5.97 billion, about the same as the record set in 2007.
“We’ve thought a lot about the bioscience space in particular because we think New York City is really uniquely positioned to be a leader in this industry,” Kyle Kimball, president of the NYCEDC, said at an event last year. “We really have a lot of the great building blocks to be a world leader in bioscience: pharmaceutical companies, biotech companies, academic science, academic medical centers, the venture capital community.”
But the nation’s existing biotech hotspots—in the suburbs of Boston and in Silicon Valley—are bolstered both by more capital and by the influence of large pharmaceutical companies that can help feed talent into the startup world. In New York, by contrast, finance and media capture most investors’ attentions, and the nascent biotech scene remains a hodgepodge of smaller efforts, with startups tackling everything from health care IT to complex genomics.
Celmatix, however, sits at the intersection of two trends that could finally turn the tides in favor of the Big Apple. On the one hand, investors are increasingly open to the virtualization of biotech companies—indeed, many now require a virtual approach, as a way to better manage costs and risk. At the same time, city-sponsored efforts to build wet lab space in Manhattan and Brooklyn are finally taking off, providing biotech startups with options closer to home than the office parks of New Jersey, Westchester, and farther afield. In effect, both sides of the real estate equation—a reduced need for space and the availability of more space—are evolving in favor of the city’s biotech companies.
Beim is cautiously optimistic that her growing team will be able to stay in New York. At the moment Celmatix operates on a virtual model, with third-party labs completing its genetic sequencing, but the startup may need to build out lab space in order to comply with regulations as it transitions out of R&D.
Would that space be in New York? “I think it would,” Beim says, but she’s hesitant to commit. “There are lots of ways to leverage the infrastructure that have come up in the last several years.” Plus, her team values the cross-disciplinary energy that infuses the company’s headquarters, located in a coworking space in Manhattan’s Meatpacking District. “We love the buzz of excitement here, that feeling that everybody is making something from scratch,” she says.
The city’s failure to become America’s biotech epicenter hasn’t been for lack of trying; New York has been shelling out grant dollars and tax breaks for years, with mixed results. The de Blasio administration is pursuing plans initiated by Mayor Bloomberg for an expansive life sciences campus on Roosevelt Island, in cooperation with Cornell and Israel’s Technion, and officials recently floated the idea of building another biotech center near Bellevue Hospital. In December 2013 the NYCEDC announced grand plans for a $100 million life sciences fund, but the dollars have yet to fully materialize. That same year the nonprofit gave $626,000 to Columbia professor Sam Sia and Christine Kovich, his wife, to seed the development of Harlem Biospace, a 2,300-square-foot coworking space for early-stage biotech startups on West 127th Street that opened last spring.
“We’ve tried to make it different than another lab,” says Matthew Owens, Harlem Biospace’s executive director. The space is postage-stamp tiny, with a shared wet lab on the premises. But with its tall ceilings, chandelier of Edison lightbulbs, and benches upholstered in vintage Army tents, the place nods toward a new golden age of innovation. Over a dozen startups now call Harlem Biospace home, testing a range of ideas, from cancer therapies to gut microbial ecosystems, while outsourcing a portion of their experimentation to outside labs.
In many ways, Harlem Biospace is a correction to the Alexandria Center, a complex of marble, glass, and tastefully recycled materials—complete with urban farm—perched near the East River on 29th Street. The monumental biotech campus broke ground in 2007, with a hefty tax break and aspirations to cater to startups—Beim even took a hard-hat tour, as the first 310,000 square feet took shape. But rents at both the first building, which opened in 2010, and the second building, which added an additional 410,000 square feet when it opened in January, have been priced far above what early-stage companies can afford.
“We want the companies to be world-class,” says Joel Marcus, CEO of Alexandria Real Estate, which developed the complex and has built urban clusters of life-science facilities across the U.S. “We don’t want anyone diddling around.”
During a tour last spring, every surface gleamed, from the white-paneled elevators to the table settings at chef Tom Colicchio’s Riverpark restaurant, tucked off the lobby. The complex plays home to established names like Pfizer and Roche, and has built partnerships with seven hospitals and research institutions in the city.
More affordable options are steadily emerging: SUNY Downstate is adding new space at the Brooklyn Army Terminal, and Harlem Biospace is vying to expand its footprint and establish an uptown biotech corridor. But even with the added lab capacity, New York City’s biotech community would be stuck in the doldrums if it weren’t for the parallel evolution of virtual models, which allow biotech startups to contract out costly wet lab operations.
“Young entrepreneurs are almost always overwhelmed,” says Tom Cirrito, a startup advisor and New York’s unabashed virtual biotech evangelist. “They have patents to worry about, raising money, hiring.” Virtual operations are cheaper, he says.
Based on his work as an early employee at Stemline, a New York-based oncology therapeutics company that started as a virtual company and continues to operate as one today, Cirrito is optimistic that virtual biotech will finally put the city on equal footing with other industry hubs. At the same time, he recognizes the challenges of making the model work. “It’s very management-intensive because it’s all about relationships,” says Cirrito, an immunology PhD. To encourage loyalty and motivation among employees at his contract research organization, one virtual biotech founder based in Cambridge told the Wall Street Journal that he uses Champagne and gift cards.
Young research scientists are increasingly interested in learning that management savvy, entrepreneurial chutzpah, and serendipity—Cirrito met Stemline’s CEO after overhearing him at a Mexican restaurant and deciding to interrupt—but it’s a steep learning curve. Industry-sponsored networking events and university classes have started to help would-be founders make the transition from doing research in a supervised environment to making deals and calling the shots from afar.
One of those classes is led by doctor-turned-investor David Sable, who left his fertility practice for Wall Street at age 43 and now teaches a popular course on biotechnology and entrepreneurship at Columbia University. “I didn’t want to see my students be in a position where they were brimming with ideas and entrepreneurial energy, yet stifled in their ability to lead the process by which they take those ideas and make something tangible,” Sable says. His course, designed to give students “the vocabulary to function on the business side,” has more than doubled in size since he started in 2011.
Beim, the founder of Celmatix, launched her company well before the real estate trends now shaping New York City biotech had coalesced. After connecting the dots between her graduate school research—identifying the genetic pathways likely to sustain a viable pregnancy—and the frustrations of patients at fertility clinics, who were trying to make decisions based on impersonal data about “typical” cases, she bootstrapped the company for over a year. She learned how to pitch investors and developed a business plan through trial and error. As an Ivy League academic who stumbled into life as a first-time entrepreneur, she found little glamour in it. “At one point I had 10 keys on a keychain, and I would call around and be like, ‘Is your couch free tonight?’”
At first, Beim kept at it because her confidence in the science was matched by the vote of confidence she found in young professional New Yorkers grappling with the question of when and how to get pregnant. “We should be using genetic testing to help guide fertility-related decisions throughout the course of a woman’s lifetime,” she says. “We were in our early 30s, living in the city—every dinner party we went to was just a recapitulation of how important it was to get this information in the hands of women.” Later, she experienced the urgency of the Celmatix mission firsthand. “When you want to get pregnant and it doesn’t happen right away, you think—am I doing something wrong? It was amazing to me how incredibly emotional the experience was, even though I understood the metrics.”
And after she and her husband tried for a year, she was ultimately able to conceive spontaneously. “It was a tough year full of a lot of ups and downs,” but one that made her more committed than ever to getting the design of Celmatix right, and in the hands of women. “Everyone who wants this information should have it,” she says.
Meanwhile, as she sought angel investors, she found herself drawn to the West Coast: “Angel investment is a bit more of a hobby out there. They’re on their fifth or sixth generation of successful exits. Entrepreneurs who wanted to help the next generation just weren’t here. That was a struggle,” she says.
But Beim—a transplant from Texas who was born in Turkey—knew she wanted to be in New York. She references something she’d heard Gilt’s Kevin Ryan say: “If New York is dominant in an offline industry, you can be sure that it’s poised to be dominant in an online, tech-driven version of that.” New York, she notes, has the highest number of fertility clinics. “So the doctors are here, the patients are here, my network was here, the biosciences initiative was here, I’d done my graduate work here. All those things aligned, and I love New York.” When it came time to pack her bags and leave behind Cambridge University, where she had been doing embryology research, she booked a ticket to New York.
Fast-forward to 2015, and fertility clinics around the country are testing Polaris, her company’s analytics software, which marries visual design and a proprietary database of fertility-related DNA regions to help doctors and patients discuss treatment options. The “bio” component of the product—personal genetic information provided by an individual patient—will layer onto Polaris next year.
“Ultimately the delivery of the genetic information is going to be so much more powerful now that we have this great software interface and platform to tie it to,” she says.
Early indicators suggest that the tides are slowly turning for New York’s newest startup scene, with the city’s share of U.S. venture capital for biotechnology and medical devices rising from 0.8% in 2010 to 2.3% in 2013. In theory, all the necessary ingredients for a vibrant startup ecosystem are now in the mix: talent, money, mentorship, an entrepreneurial culture, a sense of community, real estate. Networking events and happy hours abound, and there’s even an early-stage incubator dedicated to New York City biotech entrepreneurs.
But quarter by quarter, the trend lines remain erratic, with major deals—like the $27 million that diagnostics startup Exosome Diagnostics raised last year—throwing off the averages.
“The building blocks are in place, and there’s more of an effort to bring everything together,” says Dennis Purcell, senior managing director at Aisling Capital, a health-focused venture firm based in Manhattan. “What we need is a unified vision of biotech in New York.”
In the trenches, entrepreneurs are trying to take advantage of the city’s emerging assets. “There’s enough of a network here that you can meet people, you can fundraise, you can look for clinical trial consultants, you can find patent attorneys who deal with early-stage companies,” says Kate Rochlin, chief scientific officer at the allergy-focused startup Immunovent, one of Cirrito’s advisees and a Harlem Biospace member. Pushing at the boundaries of New York biotech has its challenges, but in a city with such a range of industries and disciplines, it also has its creative freedoms.
“There’s no model for how you have to do it,” she says. “It’s improving and it’s doing it in its own way, and I really like that.”