MATT GARDNER is president of BayBio. Gardner helped author  BayBio: Impact 2007,  a new report in whichhe discussed the progress of the life sciences
MATT GARDNER is president of BayBio. Gardner helped author BayBio: Impact 2007, a new report in which he discussed the progress of the life sciences industry and the challenges that lie ahead. (MATHEW SUMNER Staff)
MATT GARDNER is no meteorologist, but he sees shifting weather ahead in the world of biotechnology.

As president of BayBio, an organization whose job is to help foreshadow trends and challenges in the biotech industry, Gardner has a strong grasp on the industry and he needs to be a good prognosticator.

Gardner said the Bay Area, as the premier biotech cluster in the world, has much to be excited about. But at the same time, the challenges fall on a much grander scale. I would call the biotech industry right now sunny with a chance of rain, he said.

Gardner helped author BayBio: Impact 2007, a new report in which he discussed the progress of the life sciences industry and the challenges that lie ahead. He sat down with MediaNews recently to discuss the future of the biotechnology industry; his answers have been edited for brevity.

Q: How would you describe BayBio and what it does?

A: I would call it a biotech chamber of commerce that deals with a similar set of issues, like infrastructure and education, that any other industry would have doing business in Northern California. And on top of that, there are some specialized issues that we spend a great deal of time on as well, from the regulatory processes for drug approval to patent rules to financing the costs of drug development. All of those things together set up an agenda for us where we take on (everything from) very general issues to very specific biotech concerns.

Q: Can you talk about the evolution of biotechnology, and why you think it has grown so large in such a relatively short period of time?

A: Especially in Northern California, the industry has really been catapulted by the presence of some of the other innovative industries. Because the biotech industry came behind everything from semiconductors to multimedia to other IT-driven industries found here ... we had a head start by expertise already built by earlier industries. There's a readiness and a tolerance for risk in Northern California that makes this place completely unique. We get one or two international inquiries a week at BayBio, and one of the most common questions asked is, "How did it happen here?" — because governments and universities everywhere are trying to figure out how they can copy this success story. One of those secret ingredients is the entrepreneurial atmosphere, and it's not one of those things that can be easily replicated.

Q: What are some of the most exciting developments you see now in the biotech industry?

A: Even now after 30 years, we still see wave after wave of new innovations impacting the whole life sciences community here. And so from time to time, a whole new segment of the industry will be born that will send a ripple effect through the rest of the industry around the world. And we are just seeing the beginning of another one now in personalized medicine. As we've come to grips with all the Human Genome (Project) data that we had, computing power has been put to work in our industry. And as we've understood patients with much greater detail, we can almost now match very precisely a one-to-one treatment profile with an individual patient and

GARDNERIBusiness 2determine how well they will receive a certain type of medicine and what kind of susceptibility they'll have to side effects. So that is a very promising set of discoveries that is just being put to work now. At the same time that is happening, things like nanotechnology are having their impact in the lab, where, as an example, we are becoming much faster and much more fluid in our processing of the drug discovery business. The nanotech equipment means we can work through more potential drugs faster and cheaper. (As) we talk about how these things can shape the biotech business, we also can see now that these things are shaping the health care industry, and it will change how health is applied to the patient in the mass-consumer sense. There's no better time than the present for some of these changes to be happening.

Q: The industry faces many important issues. Let's just throw out a few topics — and give me your thoughts, as they relate to biotech. First, access to capital.

A: That's a big one. It means a different thing in different parts of the country and different parts of the world. For years we talked about access to capital as a priority with reference to the venture capital community. And we don't have the same challenge here with venture capital as the rest of the country does. In fact, about 30 percent of the national share of venture investment in biotech and med devices is here, so that gives us a huge leg up compared to the rest of the country. When we say access to capital here, we're more concerned about the cost of developing the number of products the companies have discovered. With 400 drugs and devices in late-stage clinical trials, that is the point that it begins to cost the companies the most. To finish those clinical trials, to see if they've treated patients safely and effectively, and then to try and launch those products and get them out there and into the hands of patients is expensive. So having these products coming onto market simultaneously now means access to capital is a much different need where we're talking in the billions, not millions, of dollars. So for us that means everything from making sure Wall Street is friendly to how we treat taxes in California to how private investment markets treat this industry and everything that costs a dollar that could be scaled down by efficiency and wouldn't necessarily have to cost a dollar. Both directly and indirectly, this industry is going to need every dollar at its disposal to bring along a pipeline of that scale.

Q: Second, intellectual property and patent reform.

A: That's a huge issue for this industry. And the biggest thing to focus on there is that the U.S. Congress is going to visit this issue in 2007. What needs to be kept in mind here is that this industry is built on certainty in intellectual property. Anything that any of our public sector partners do to try and draw that into question will be harmful to this industry, no matter what it looks like.

Most of these companies, when they are initially funded, are done so on a very clear picture of their intellectual property. Because it may be 15 years before you have product revenue based on the amount of time it takes to develop a product, run clinical trials and get the product approved, everything until then is a value based on intangible assets. Until you have your first product approved in this business, you are valued in the potential of the things you are developing. And the potential value of those intangible assets is all wrapped up in whether you own your intellectual property and how clearly you own it.

Q: Third, the Food and Drug Administration.

A: The biotech industry, generally speaking, had a very positive experience working with the FDA. It has been a tremendous partner for the industry in making sure the drug approvals work efficiently. The major concern that we have in the big picture is that the review times have gone up, on average. So once you've completed clinical trials and submitted an application to have a new drug approved, on average that review time has climbed in the last five years. And so the concern that we would have there is that every month that review time goes up is another month that we don't have products reaching patients they were intended for. So it's very possible that we might ask the federal government to resource the FDA more in terms of people and technology so that we could more effectively process those applications.

Q: What impact do you see the new Congress having on the biotechnology industry?

A: In the next couple of years I think some issues will be brought up to a new level of discussion. One of the great opportunities is that Nancy Pelosi has a tremendous familiarity with the industry. And so in a new way, the industry has a profile with this speaker that it did not have before. To deal with someone in a leadership position that is committed to these solutions is a huge opportunity for us.

Q: One of the industry's hotbeds is stem cell research. Given the ethical and political hurdles, will the potential of this area ever be realized?

A: Yes, but I think we are still a decade or more away from seeing what that potential looks like. Here again, I think California is in such a leadership position, being able to hopefully realize the promise of the stem cell institute (the California Institute for Regenerative Medicine) and that a tremendous amount of work needs to be done at the basic end of the research. And yet, even with that said, there are companies operating today in stem cell sciences that have technologies that may come to fruition much sooner. There are some early signs from a small number of companies that there is strong potential here. So we can only expect to see that grow as the science around stem cells is understood.

Q: How do you feel the biotechnology industry will handle this dramatic shift into commercialization?

A: Because the industry is just now arriving and the products are just coming along, we're about to become what you might call a mature industry for the very first time. Up until now, generally speaking, you could characterize biotech as a research-focused community.

The main thing to remember about the biotech industry in Northern California is that this is just the beginning. What we have seen from 30 years of investment in research is that we have 394 products on the market today that are of Northern California origin, and 400 more that are in stage two and stage three (development). So we can't lose sight of the fact that what it tells us is that it took about 30 years to get the first 400 and it's going to take three to five years total to determine the fate of the next 400.

Q: Do you see us facing a work force crisis where the industry demand is going to significantly outweigh the number of qualified workers available?

A: It's actually possible that we are there now, where we are having a sort of pinch in the work force. As an industry as a whole in Northern California, we have tried to add 6,000 to 8,000 jobs this year, and there are signs that we may have reached the limit of what is locally being produced by schools and colleges here. Part of that challenge is going to be renewal of investment into training programs here. So we need to do an effective job as an industry communicating with the state government about where the investment could and should take place in the education system.

Q: How would you rank the Bay Area among other biotech clusters in the United States?

A: The truth is that there really is no equal to what Northern California is doing at the moment, and our first measure of that is the number of products. When you see 400 products on the market, and 400 more in Phase II and Phase III, that level of success is unparalleled.

Q: As we look ahead to 2007, how do you see the industry developing and what are some of the trends and challenges we can expect?

A: I think we're going to face an access-to-capital challenge in the industry and a product bottleneck that is going to be very expensive and very difficult to move along successfully to patients. The community here has a challenge of capturing the investments that come along in this industry. We have more work trying to figure out the best areas for these companies to grow into, where we'd put them and where the people will come from. I think those are all issues we could realistically address in 2007.

Q: If we were to set up an interview 10 years from now, what do you hope we would be talking about?

A: I would hope we would be talking about some of the new waves of innovation that have hit us. For instance, stem cells is one of the things I hope we would be talking a lot more about, and what the actual processes are in work and how stem cells affect the human body. And I think it would be terrific if 10 years from now we would be talking about the several hundred additions to the ranks of the approved products, and how so many companies have successfully been able to bring those products to patients and how many lives they've saved.

Also, I hope we're past the point 10 years ago about the concerns of the cost of health care and that we've answered that question and that this industry has been part of the answer.