Amylin rumored to be closing shop, San Diego hoping for the “dandelion effect”
Word on the street is that Bristol Myers Squibb will be shuttering Amylin Pharmaceuticals in the coming year. Like so many biotechnology companies before, the sale of a local San Diego company to a large pharmaceutical company may be the end of the road for Amylin. This would not be good news, and it would have a ripple effect throughout the region. But is there a possible silver lining?
Hybritech to Lilly
Many of our greatest life science entrepreneurial ventures spawned out of San Diego’s first biotech start-up, Hybritech, founded in the late 1970’s and acquired by Lilly in 1986. The team who built Hybritech thrived in a casual, entrepreneurial environment and when Lilly tried to transplant their “big pharma” culture, many of those executives left to start up and invest in their next ventures. Companies such as Idec Pharmaceuticals, Ligand, Dura, Gensia, Neurocrine Biosciences, Pyxis, Viagene, Gen-Probe, Nanogen, Genoptix, Tandem Diabetes, and 150 others were founded by Hybritech alumni. The cycle continues with companies such as Idec which was acquired by Biogen, relocated from San Diego to Boston, and provided yet more seeds of the next great San Diego start-ups.
To a certain extent, this pattern is inevitable in San Diego. We are a hot-bed of innovation and discovery, laden with brilliant scientists and entrepreneurs, and a well established research community including The Scripps Research Institute, the Sanford-Burnham Medical Research Institute, UCSD and the Salk Institute for Biological Studies that are constantly spawning new ideas that can be spun out into companies. Call it the “high-value-add” phase of company growth. And when the company moves to manufacturing on more than a pilot scale, San Diego is going to struggle to remain economically competitive. There are employment centers elsewhere with more workers, lower utilities cost, cheaper land, better and more reliable water, and less governmental regulation. San Diego’s solution has always been to simply grow more successful companies. Maybe that’s our destiny – to be a “groom to acquire” town.
Another 500 Job Seekers?
Two immediate and direct effects of an Amylin departure would be on employment and commercial real estate. San Diego’s building economic recovery doesn’t need another wave of job seekers added to the mix, but that sounds like what it is going to get. While at Hughes Marino we see our client companies starting to grow and hire again, it would take considerable time to absorb another 500 jobs.
The Coming Flood of Vacant Space
Commercial real estate in the UTC submarket will be hard hit. Specifically, Eastgate Technology Park along the Towne Centre Drive corridor, which is already anticipating a coming glut of approximately 400,000 square feet to be vacated by LPL Financial in 2014 when LPL moves out of seven buildings into their new 408,000 square foot high rise under construction next to the US Bank building at La Jolla Commons. Also in Eastgate Technology Park, Lockheed Martin is vacating 120,000 square feet, CoStar is vacating 42,000 sf, Celegene moved out of 86,000 sf, and Qualcomm just dumped 60,000 for consolidation closer to their Sorrento Mesa headquarters. Not to mention the 200,000 square feet of space that Illumina is offering for sublease because they relocated into the former Biogen Idec campus 10 years before their leases expire. Now add in another 500,000 square feet of Amylin space in the same submarket, and we are going to have a tidal wave of available office and flex space that will likely take 3-5 years to absorb. This is actually great news for San Diego tenants, as landlords generally, and the Irvine Company in particular, will need to get very aggressive in pursuing any and all leasing opportunities with our tenant clients to work off that excess vacancy.
The Dandelion Effect
The real silver lining is that wonderful dandelion analogy. When we talk about San Diego continuing to start and grow our next generation of great biotech companies, let us remember where many of these companies come from—situations just like this where all of that talent locked up at a big company like Amylin, becomes unleashed to start the next round of innovation. Is it possible that a corporate plundering of Amylin by Bristol Myers Squibb would act like a stiff breeze, knocking apart the dandelion, and spreading around the individual dandelion seeds into the neighboring soil, ready to spawn and grow?
We say yes, this is exactly what would happen. In fact, we are already working with one company that was formed by former Amylin executives, and we know there are more to come. Silver lining? You bet. The fact that our clients will enjoy lower lease rates and better real estate transactions in UTC as the landlords scramble to overcome this sudden vacancy glut? That’s just icing on the cake.
