Wet Lab Market and Technical Feasibility Study. for the. Technical Innovation Center at. Hagerstown Community College. Conducted by. SPI USA, Inc.

Transcription

1 dd FINAL REPORT Wet Lab Market and Technical Feasibility Study for the Technical Innovation Center at Hagerstown Community College Conducted by SPI USA, Inc. dddd Your Partner for Innovation USA March 30, 2006

2 EXECUTIVE SUMMARY Wet-lab Market and Technical Feasibility Study for TIC FINAL REPORT SPI USA conducted a wet-lab market and technical feasibility study for the Technical Innovation Center (TIC) at Hagerstown Community College (HCC). The objectives of the feasibility study were to: Assess the local market demand for wet-lab space in Washington County. Advise on the best approach to meet demand for wet-lab space by either renovating existing space or expanding current facilities. Phase 1 of the study focused on assessing demand, which involved collecting data from primary and secondary sources by conducting personal interviews with key stakeholders and reviewing existing literature. Phase 2 focused on analyzing the data collected in Phase 1 and determining the best approach for TIC to meet the demand for wet-lab space. State, county and local support for adding wet-labs at the TIC incubator was assessed in a series of meetings. The Maryland Department of Business & Economic Development (DBED) expressed strong support for this initiative and others aimed at helping to grow the biotechnology and life sciences sectors in the state. Dr. Larry Mahan, who directs DBED s biotechnology group, provided notes on the economic impact of incubator graduates on the state s economy. The Washington County Office of Economic Development indicated that life sciences have been a target sector in their work plans for several years. The City of Hagerstown expressed optimism that the proposed wet-labs would help to attract biomanufacturing and other life science jobs to the area. The Hagerstown Community College is planning to include wet-lab space in at least two of the upcoming building renovations. This move will provide students enrolled in current programs hands on experience that will enhance their value as potential hires in biotechnology and other life sciences companies. There is a strong potential for synergy between the academic programs in the life sciences and similarly focused companies in the TIC incubator. In similar incubator situations, e.g. Frostburg, UMBC, UMCP and FITSI, interactions between incubator companies and the surrounding academic communities have ii

3 taken the form of faculty involvement, student internships and part time jobs for students prior to graduation; many of which have led to full time employment after graduation. Current tenants and recent TIC incubator graduates were engaged in dialogues seeking their need for and interest in securing wet-lab space at the incubator, if some were to become available. Positive responses were unanimous, with one previous tenant stating that his company would consider moving back into the incubator, if wet-labs could be made available. This particular tenant moved out of state and would consider moving back to Hagerstown-Washington County (HGWC) if TIC had wet-lab space. The executive director of the Hagerstown area hospital system said during an interview that the current facilities are already conducting clinical trials of new drug and biopharmaceutical products. The planned expansions would provide even more capacity to conduct clinical trials on newly developed diagnostic and drug candidates. He echoed the feeling that the Hagerstown area is an excellent locale for life sciences development. A number of regional incubators currently offering wet-lab space were surveyed for size, features, equipment, pricing and occupancy rate data. While some respondents were reluctant to reveal all of the requested information, the consensus was a strong and growing demand for wet-lab space, with many incubator clients paying market rates for laboratories. A local Washington County entrepreneur who holds several developable tracts of land expressed strong interest in working with the incubator to encourage development of a life sciences technology park, which would provide attractive commercial space for companies graduating from the TIC incubator program. In every interview with local economic development and business leaders, the common themes of quality of life coupled with reasonable cost of living have emerged. Contrasted to the Rockville - Frederick area, this will become increasingly attractive to entrepreneurs who tire of the daily traffic delays and exorbitant costs of living and working in the congested I- 270 corridor. Hagerstown-Washington County (HGWC) is in a strategic position to cater to bioscience companies. However, initiatives should be taken by the local community college and TIC to iii

4 create the reality that a local workforce with bio skills exists and that adequate facilities with wet-lab space are present to house such biotech companies. Phase 2 of the study considered two options for adding wet-labs: a. Expansion of the TIC s footprint by the addition of new space designed, built and equipped as wet-labs; b. Renovation of existing office space on the third floor of the TIC. Both options offer attractive features, but both also present negative aspects. In balance, the long-term gain in total space and resources for TIC resulting from Option A (Add to Existing TIC Space) makes this the preferred approach - provided that funding can be secured. A conceptual cost estimate for Option A and B is: Option A: (Add to Existing TIC Space) $1,514,645 Option B: (Renovate Existing Office Space) $930,270 Conceptual wet-lab layouts for both Option A and B are also provided in the report Appendix II. These drawings are intended to capture the functional features of each option, and should be refined during the design phase of the project. iv

5 TABLE OF CONTENTS I. CRITICAL MASS...6 II. DEMAND...8 III. SUSTAINABILITY IV. RESOURCE AVAILABILITY V. INCUBATOR MANAGEMENT VI. TECHNICAL ANALYSIS VII. CONCLUSIONS AND RECOMMENDATIONS APPENDIX 1 - TIC Technical Analysis Cost Sheets...38 APPENDIX 2 Conceptual Wet-lab Layouts for Options A and B...41 v

6 I. CRITICAL MASS In general terms, critical mass is the amount necessary to have a significant effect or to achieve a particular result. Economic critical mass describes the tipping point where small companies grow into self-sustaining entities, thereby creating long-lasting jobs. The domino effect which extends from this includes an increased number of supporting businesses, the draw of more investment capital, higher research budgets, an attraction of high-skilled labor and management, increased public revenue for education and healthcare and an improved quality of life overall in the local community. 1 Hagerstown is located just north of Maryland s I-270 biotech corridor, aptly named DNA Valley. Hagerstown is ideally situated to become the focal point for continued growth of the biotech community, based on its proximity to I-270 and to the Food and Drug Administration (60 miles, ~1 hour drive), the National Institutes of Health (60 miles, ~1 hour drive), and the Navy and Army research institutes (30 miles, ~ 40 minutes drive). According to the New Scientist magazine, there are more M.D.s and Ph.D.s per capita in the area surrounding Washington D.C. than anywhere else in the country. Most of the prerequisites for bioscience growth are present in Hagerstown-Washington County, which include: Existing critical mass of biotechnology firms in Maryland within minutes driving distance to Hagerstown-Washington County (HGWC); Available supply of developable land; Proximity of major universities and research centers; Successful TIC incubator; Diverse, capable, local workforce; Supportive local and state government officials. 1 Connect Magazine, July/August 2004 Issue, Section One Reaching Critical Mass in Utah What is Critical Mass, How Have Other States Achieved it and What Does it Mean for Utah? 6

7 The HGWC area could be a perfect home to companies seeking to join the 300-plus biotechnology companies in Maryland. Hagerstown and Washington County city officials are actively involved in attracting bio industry to the area and the community offers a location with a close proximity to education institutions, government and military research institutes. According the Maryland Department of Business and Economic Development, Maryland s biotechnology industry has reached critical mass because more than 300 diverse bioscience companies and federal institutions (in Maryland) provide easy access to innovation, technology transfer and knowledgeable bioscience professionals. HGWC offers the perfect locale to tap into this strength with its productive, available workforce; attractively priced real estate; planned development areas; Enterprise Zones; 1,800-acre Foreign Trade Zone; affordable cost of living; and family-oriented lifestyle that so many highly skilled, well-paid researchers seek. 7

8 II. DEMAND Current State of BioScience in Maryland Maryland has been one of the country s most active states in promoting the biotechnology industry. The result is that Maryland is one of the fastest growing biotech clusters and ranks second in innovation in the United States. Maryland s biopharmaceutical industry is responsible for close to 35,100 jobs in the state. Some 10,700 people are employed directly by the industry in the state. In 2003, the biopharmaceutical industry was responsible for almost $2.8 billion in real output. The federal government along with local and state governments receive a significant gain in tax receipts from this industry. Most of the total gains in personal income taxes derived from Maryland s biopharmaceutical industry were attributable to federal tax revenues ($376.4 million), while the remaining part comprised of state and local tax revenues accounted for $71.5 million of the total personal income tax revenues. The sales of the state s biopharmaceutical products and related consumer purchases accounted for $2.3 million in sales tax revenues, while the state s biopharmaceutical companies produced $94.8 million in corporate income taxes. Maryland has made major strides over several years to help establish the State as a leader in high technology including biotechnology. Maryland has invested in several areas including: 2 BioScience R&D Facilities In 2003, the State of Maryland approved a $50 million expansion of the University of Maryland Biotechnology Institute s Center for Advanced Research in Biotechnology (CARB). Research Programs The University of Maryland Biotechnology Institute is the only Maryland institution with a legislative mandate to drive economic development of biotechnology-related industries. 2 Laboratories of Innovation: State Bioscience Initiatives 2004, Battelle Technology Partnershipship Practice and SSTI, June

9 UMBI includes five centers: 1) Center for Advanced Research in Biotechnology 2) Center for Biosystems Research 3) Center for Marine Biotechnology 4) Medical Biotechnology Center and 5) Institute of Human Virology. Outstanding research programs in biotechnology are also offered at other campuses of the University System of Maryland such as University of Maryland College Park, University of Maryland Baltimore County and at Johns Hopkins University. Academic/Industrial Interactions o The Maryland Industrial Partnerships (MIPS) program provides matching funds for university-based research projects that help companies develop new products. o The Maryland Technology Development Corporation (TEDCO) is a state-sponsored institution whose mission is to create and sustain business throughout the State of Maryland through development, commercialization and deployment of technology. o The University Technology Development Fund (UTDF) helps universities conduct commercial feasibility research on very early-stage technologies. o The Federal Laboratory Partnership Program (FLPP) subsidizes companies that wish to do pre-commercial development or testing at one of Maryland s federal laboratories. o The Maryland Technology Transfer Fund (MTTF) provides seed funding for companies that engage in technology development and transfer collaboration with universities and federal laboratories in Maryland. Research Parks o The Shady Grove Life Sciences Center is a 300 acre research park located on Maryland s I-270 technology corridor. The Center was developed exclusively for biotechnology and life sciences companies. 9

10 o The University of Maryland, Baltimore (UMB) is developing a BioPark on eight acres of land adjacent to its campus in West Baltimore. The first building has 120,000 square feet of flexible lab and office space and is fully tenanted. o The East Baltimore Life Science and Technology Park is being developed by a nonprofit organization formed to redevelop 80 acres surrounding Johns Hopkins University. o The East County Center for Science and Technology is a public and private partnership between Montgomery County, the Washington Suburban Sanitary Commission and Republic Properties Corporation. The park will be modeled after the Shady Grove Life Sciences Center in Rockville and will include laboratory and biotech manufacturing facilities, a technology business incubator, a higher education facility, a telecommuter building, build-to-suite sites and a daycare center. o The University of Maryland Baltimore County bwtech@umbc is a 41- acre research and technology community being developed by commercial real estate firms in collaboration with the University of Maryland, Baltimore County (UMBC). bwtech@umbc has a total development capacity of up to 330,000 square feet of office and laboratory space. The park will ultimately comprise five new state-of-the-art buildings occupied by research and technology firms. The firms have access to university expertise, students, technology, programs and facilities. o Frostburg State University (FSU) has designated a portion of the 40,000 square-foot Tawes Hall building for an incubator designed to build the county s base of technology-related businesses. The incubator has five tenants with several others expected to move in during Twenty-five percent of the building is being used for the incubator of which 50% is for wet-lab clients. With Tawes Hall scheduled for demolition in 2009, the University hopes to grow the incubator over the next four years, with the incubated companies graduating into new buildings in a campus technology 10

11 park called About 75% 80% of the first building at is expected to be wet-lab space. Business Development Services The State of Maryland, through the Department of Business and Economic Development (DBED) has both formal and informal business development services available for Maryland-based companies. Bio Workforce Development A large number of Maryland institutions of higher education including community colleges have programs that support development of a bioscience workforce. They include the following: o Allegany College of Maryland offers a certificate in medical lab technology that applies to biotechnology labs. o Montgomery College offers an associate s degree or certificate in biotechnology. o Community College of Baltimore County offers an associate of arts degree or certificate in biotechnology. o Baltimore City Community College offers an associate of arts degree or certificate in biotechnology. o Frederick Community College offers an associate of arts degree in bioscience laboratory technology. o Howard Community College offers an associate of arts degree or certificate in biomedical engineering. o The BioTechnical Institute of Maryland (BTI), Inc. trains post-high school graduates for entry-level positions in biotechnology. 11

12 o University System of Maryland campuses offer undergraduate and graduate degrees in neuroscience, biological science, chemical and biochemical engineering and chemistry and biochemistry. Venture Funding Through the Maryland Venture Fund, the state has provided investment in private venture capital limited partnerships, with the understanding that each partnership will make its best efforts to invest in Maryland high-technology start-ups. Regional Incubator Experience Maryland is home to a network of incubators, several of which are focused on biotechnology and life science companies. In total, these incubators included more than 50,000 square feet of laboratory space. They include the following: The Alpha Center, a nonprofit, private biotechnology-focused incubator owned by Johns Hopkins University and the Hopkins Health System, includes 18,000 square feet of wet-lab space. Association for Entrepreneurial Science is a privately operated, 48,000 square-foot incubator that includes wet-lab space. It is operated by the nonprofit Biomedical Research Institute. Maryland Technology Advancement Program (TAP) at the University of Maryland College Park, the state s oldest incubator, has more than 15,000 square feet of wet-lab space. UMBI Medical Biotechnology Center has 1,700 to 2,000 square feet of lab space and focuses on biomedical and pharmaceutical areas. Technology Development Center (MTDC) in Montgomery County is operated by the Maryland High Technology Council and includes 24 wet-labs. Montgomery County is expected to open an additional incubator in early 2006 and four other within the next two years. 12

13 University of Maryland Baltimore County includes 45,000 square feet of wet-lab space. The is considering within the next five years to build a 60,000 square-foot wet-lab and office building. Frederick Innovative Technology Center, Inc. (FITCI) includes 4,500 square feet of wet-lab space with six companies currently operating in the incubator that require wet-lab space. FITCI is expected to build a new 50,000 square-foot facility within the next five years that will include additional wet-lab space. NeoTech incubator in Howard County has preliminary plans calling for an incubator twice as big as the current 20,000 square-foot facility. The current incubator does not have wet-lab space. Enrollment at the current incubator has nearly doubled in a year, from 10 to 19 companies. According to a study entitled Maryland Incubator Impact Analysis conducted in 2000 by RESI Research and Consulting, incubators in Maryland have had a positive impact on Maryland s economy in terms of employment, output, personal income and taxes. The six Maryland incubators considered in the study were TAP, TIC, techcenter@umbc, MTDC, the Emerging Technology Center (ETC) and NeoTech. In terms of employment, the six Maryland incubators had a total economic impact ranging from roughly 2,200 to 6,800 jobs paying over $36,000/year on average. The bulk of direct employments were concentrated in the biotechnology and information technology sectors. In terms of output and taxes, incubator firms generated between $184 and $530 million dollars in gross state product and between $31 and $96 million dollars in taxes in In regards to personal income generated from current incubator firms, personal income ranged from $15 to $49 million. The corresponding personal income range for graduate incubator firms fell between $73 and $225 million. In addition, internal research information shared by Dr. Larry Mahan (DBED) revealed supportive data regarding Maryland incubators. The information provided below are estimates but should give a reasonable view to date. 13

14 There are 7 bio company incubators in Maryland. The estimated number of bio companies that have gone through Maryland incubators from is ~ companies. The number of incubator graduates to date (minimum estimate) is 71 (~59%). The number of graduates currently still in business in MD is 46 (~64%). The number of incubator companies purchased by other companies is 8. The number incubator graduates that moved out of state are 1. The estimated total number of successful graduates is 55 (~77.5%). The number of graduated companies failing is 16. Specific data are not available but an analysis of the data contained in TEDCO s Founders of Maryland Bioscience and Medical Instrument Companies, 2002 indicated that approximately 100 start-up companies have been formed by researchers and faculty associated with the NIH (41), Johns Hopkins University (41) and the University System of Maryland (22) since Maryland Bioscience Workforce Statistics Maryland ranks first among the states in the percentage of professional and technical workers (24%) in the workforce. 3 According to the Department of Labor Statistics about 7 out of 10 jobs in Maryland s bioscience cluster can be found in four individual/combined county Workforce Areas Montgomery County, Mid Maryland Area, Susquehanna Region and Baltimore City. Western Maryland accounts for only 0.2% of the Maryland bioscience cluster, but Montgomery and Frederick 3 Source: U.S. Department of Labor, Bureau of Labor Statistics, data for

15 County combined make-up nearly 40% of Maryland s bioscience workforce. It can be expected that over the next several years, due to an increase of cost of living and business operation (i.e. high lease rates and overhead costs) in Montgomery and Frederick County there will be a gradual migration by both residents and companies into HGWC, where the cost of real estate both residential and commercial is still affordable. Additionally, according to the Department of Labor Statistics, between 2001 and 2003, there has been an increase of 1,285 bioscience jobs in Montgomery County, 168 bioscience jobs in Frederick and only 8 bioscience jobs in Western-Maryland. HGWC possesses all of the needed elements to capture the expansion of the biosciences including growth -affordable land, supportive local leadership and a willing workforce. However, what will be needed to meet the expansion into HGWC are available wet-labs in the TIC incubator (and in commercial sites) and expanded training capacity at Hagerstown Community College. According to the Maryland Strategic Marketing Group, Frederick's MedImmune Inc. and British-owned BP Solar Manufacturing are expected to bring 300 or more scientists and engineers to Frederick County. In addition, the Maryland Strategic Marketing Group estimates at least 2,300 new high-paying lab jobs will come to Frederick County because Fort Detrick's role in the war on terror will continue to grow. Biotechnology companies will migrate there to better service the federal contracts tied to research at the new biodefense campus, a 200-acre project scheduled for a 2013 completion. 4 Bioscience Growth in Neighboring Counties The growth of bioscience in neighboring counties such as Frederick and Montgomery can be attributed to a number of different factors. The number of bioscience firms in Frederick County grew to 61 in 2005 representing a 34% increase over Many new and expanding biotechnology companies choose Frederick County and Montgomery County as their preferred business location for the following reasons 5 : 4 Baltimore Sun, March 3 rd, 2006, Frederick County gets popular, pricey 5 Frederick County and Montgomery County Offices of Economic Development websites 15

16 An excellent transportation system for local & international travel; A highly skilled and educated labor force; Proximity to leading medical research laboratory for the U.S. Biological Defense Research Program at USAMRIID; 50% of the most cited biomedical scientists in the world are located in Maryland; of those, 40% are affiliated with the National Cancer Institute in Frederick; No business personal property tax (Frederick); Excellent state and local job training resources; Competitive tax structure; Fast track permitting assistance; Montgomery County is globally known as a headquarters center for genomic research and bioinformatics organizations, including Human Genome Sciences, Celera, and Gene Logic, so there is a particular cache associated with locating a bio company in the County. The County has also developed the Shady Grove Life Sciences Center, a 300-acre R&D Park that includes healthcare facilities, office and lab space, university campuses, and a technology incubator. The Shady Grove Life Sciences Center is the centerpiece for the I-270 Technology Corridor which is home to most of the biotech organizations in Montgomery County. Current Demand for Wet-labs at TIC Historically, Hagerstown-Washington County has been considered a manufacturing area and to some extent, that industry has either dissolved, restructured or relocated. In 1994, when the Technical Innovation Center began operation, its original building plans included a light manufacturing suite and standard office space. However, no wet-lab space was incorporated into the building layout and design. Over the past several years, as biotechnology and life sciences have become a more prominent industry, there has been an upsurge of bioscience start-up companies in nearby counties such as Frederick and Montgomery. Unfortunately, Hagerstown-Washington 16

17 County has not witnessed much activity resulting from the bioscience developments in Frederick or Montgomery counties. Over the past several years, Mr. Chris Marschner, Director of TIC, has received between 3 and 5 inquiries per year from individuals (i.e. scientists, researchers) and firms requesting wet-labs to conduct research and/or establish their start-up company. A very small portion of this demand has been accommodated over the years through the use of an HCC chemistry lab located in the adjacent Advanced Training Center building. One of the main messages given by the inquirers to Mr. Marschner was the scarcity of available and affordable incubator wet-lab space in Maryland. This need could be met, in part, by increased availability of wet-lab space at incubators such as TIC. According to an article entitled Biotech Companies leave Montgomery published in the Washington Times on May 12, 2005, Montgomery County is having trouble holding on to its place as a biotechnology mecca as high real estate prices push small companies out of the market. The proximity of the I-270 Technology Corridor to the nation's capital and the National Institutes of Health (NIH) makes it a hot spot for biotech companies seeking government contracts, but also an expensive place to do business. Companies such as BioBrite and Orchid BioSciences have left the county due to the increase in lease costs. In suburban Maryland, top-quality office lease prices have increased about 38 percent in the past 10 years. The cost of leases is taking on greater importance for biotech companies as the competition to attract them increases among states. Montgomery County ranks 16th in costs among 50 of the top North American and European biotechnology centers, according to a 2004 study by the Princeton, N.J., consulting firm the Boyd Co. Inc. During the course of the feasibility study, current and recent TIC incubator graduates were engaged in dialogues seeking their need for and interest in securing wet-lab space at the incubator, if some were to become available. Positive responses were unanimous with one former tenant from BioLink LLC, who moved out of state due to the lack of available wetlab space, stating that his company would consider moving back into the area if wet-labs could be made available. This potential client would require at least 1000 square feet of wetlab space. 17

18 In addition, a current TIC company, Data Driven Decisions, indicated that as the company grows, they will require wet-labs for various chemical experiments that involve handling acids and salts. Availability of wet-labs will be a deciding factor in where the company relocates. This tenant would require at least square feet of wet-lab space. TIC is proposing to add about 3500 square feet of wet-lab space to the incubator. The combined wet-lab space requested by BioLink LLC and Data Drive Decisions is nearly half of the proposed 3500 square feet, thus clearly supporting the notion that the demand for wet-lab space exists and that TIC s wet-labs will be filled quickly with tenants. Over the next 5-10 years there is expected to be a migration out of Frederick and Montgomery County by residents and companies due to several factors including the increasing cost of living and increasing lease costs. Frederick and Montgomery County have large private-public sector projects that will ultimately attract bio companies to the region. Many may choose Hagerstown-Washington County as the ideal business location. For example, there are significant plans to expand the Fort Detrick facilities over the next couple of years, which will include a National Interagency Biodefense Campus, which will employee hundreds of new scientists and support personnel. Around 40-50% of the expected new employees are likely to reside in the HGWC area. An additional factor that could contribute to the demand for wet-lab space at TIC is the large pharmaceutical manufacturing industry in Pennsylvania. Although there are no data to support this speculation, there is a possibility that scientists will be interested in carrying out research at least on a part-time basis in addition to their manufacturing activities. Regional Economic Growth Trends The Hagerstown -Martinsburg (HMA) area consists of Washington County, Maryland, and Berkeley and Morgan Counties, West Virginia. The HMA labor force currently consists of 115,900 people, 4.4 percent more than in Significant levels of in-and-out commutes have a large impact on the area s available workforce. Within the HMA and the surrounding area, the pattern of commuting tends to be from the northwest to the southeast. Many residents in Franklin County, Pennsylvania, and Berkeley and Morgan Counties work in Washington County, particularly in the Hagerstown area, while a number of residents in 18

19 Berkeley County work in Jefferson County, West Virginia, Northern Virginia, or the D.C. suburbs. 6 As the center of economic activity in the HMA, Washington County accounts for approximately two-thirds of all jobs, a rate that has remained relatively constant for more than a decade. Agriculture, manufacturing, education and health care, and trade, transportation, and utilities are the major employment sectors in the region. According to the 2002 Census of Agriculture, 224,505 acres of land were designated for farming in the HMA, a 1.1 percent decline from the 1997 level. Using the market value of agricultural products sold as a basis of information, Washington County is oriented more toward livestock production, while the West Virginia counties specialize more in crop production. 7 Given Washington County s historical presence in agriculture and livestock, the Technical Innovation Center could be an ideal location for agro-bio start-up companies. Commercial Development Mr. Jack Young, a local entrepreneur and investor in Washington County, who holds several developable tracts of land expressed strong interest in working with the incubator to encourage development of a life sciences technology park, which would provide attractive commercial space for companies growing out of the TIC incubator program. Washington County Hospital The executive director of the Hagerstown area hospital system, Mr. James Hamill, said during an interview that the current facilities are already conducting between 12 and 15 Phase 2 and 3 clinical trials of new drug and biopharmaceutical products. He echoed the feeling that the Hagerstown area is an excellent locale for life sciences development. There is currently no research being conducted by doctors at the Hospital, but it was also echoed during the interview that available wet-lab space at TIC could help spawn independent research conducted by doctors. 6 Analysis of the Hagerstown-Maryland, Martinsburg-West Virginia Housing Market As of April 1, Analysis of the Hagerstown-Maryland, Martinsburg-West Virginia Housing Market As of April 1,

20 In addition, the Johns Hopkins University School of Public Health developed a research site in Hagerstown nearly 30 years ago, which serves as a repository for clinical samples. The repository has kept specimens of thousands of people to study diseases such as cancer rates through generations of families. Hi-Tech Start-ups in Washington County According to Alice Growden at the Washington County Small Business Development Center, over the past 6 years, 13 hi-tech clients were seen out of 490 clients (or about 3%). According to SBDC records and protocol, the term hi-tech is a broad and does not have subcategories divided out such as biotech. The low rate of hi-tech startups could be a result of the lack of facilities available for start-ups in the area. HGWC has not seen a great deal of high technology start-ups or established companies move into the area. Equipping the TIC incubator with wet-lab space could help catalyze the migration of hi-tech companies in biotech and other life sciences to the area. III. SUSTAINABILITY TIC Incubator Overview The Technical Innovation Center is a full service business incubator. It provides technical, business development and location opportunities to existing and potential businesses and encourages industrial and technical innovation and commercialization. The TIC helps startup manufacturers and technology-oriented firms survive and thrive during their critical first years. The TIC provides value-added resources, which include: Management development training and counseling. Business and marketing planning (using internal staff and external consultants). Operational Planning. SBIR development assistance. HR assistance (policy making and recruitment). Prototype development. 20

21 Market / technology assessments. Preparation for financing sources (equity or debt). Management seminars. Legal assistance using MD IP Resource Center or private attorneys. Amenities such as copiers, computers, faxes, clerical help, Broadband Internet, library facilities etc. Sustainability of TIC With the addition of wet-lab space, it is expected that TIC would witness some increases in utility costs in the near term. Additional demands on personnel time and expertise would also ensue. There would also be equipment replacement and repair costs at some time in the future. From an operations point of view, all TIC funding is currently self generated. TIC does receive a small amount of money (about 3% of its budget) from TEDCO for specifically defined incubation activities. Given the strong demand for wet-lab space, TIC should set wet-lab pricing at a rate high enough to cover all short term marginal costs and to offset equipment depreciation. TIC should charge wet-lab tenants a competitive rate for wet-lab space ranging from $20-23 per square-foot. Compared to neighboring incubators charging in the upper twenties to thirty dollars per square-foot, the TIC should strategically advertise itself as a cost effective location for new bioscience start-ups. Wet-labs would have no effect on pricing of non wet-lab space, however the base monthly fee for all tenants should increase to help offset and recapture higher energy costs and fundamental infrastructure requirements. The TIC should also consider an escalating charge per square-foot for every year the wet-lab tenant remains in the TIC incubator. It is expected that actual demand for the wet-lab space by new firms will drive the escalation prices. The escalator price should be high enough eventually to cause the firm to identify other space in the area and release space for new incoming tenants. 21

22 Another aspect TIC should explore is to own equity in incubator clients, which is not currently being done. This is a common practice among neighboring incubators such as techcenter@umbc and the Technology Advancement Program at College Park. Hagerstown Community College does not have licensing departments to work out the legal details, but this could be outsourced to capable law firms. TIC s goal is to have between 5 and 8 bioscience related firms graduate from the incubator over the next 5 years that were attracted to the incubator because of available wet lab space. IV. RESOURCE AVAILABILITY Local Government Initiatives Local economic development initiatives and outlook for biosciences in Hagerstown- Washington County are positive. The Hagerstown-Washington County Economic Development Commission (HWEDC) is very supportive of TIC s expansion into wet-lab space. Although having no internal marketing plan to promote more bioscience in Hagerstown, the HWEDC does have an internal strategy to network with biotechnology leaders to help promote and attract bio industry to the area. HWEDC has actively been attending local bio conferences and conventions (i.e. BIO), networking within Maryland bio trade organizations (i.e. MDBio), communicating with state government departments (i.e. DBED) and research institutes (i.e. Fort Detrick) and dialoguing with local educational institutions to develop bio related curricula (i.e. Hagerstown Community College). In addition, Washington County has a special enterprise zoning designation for office, research and technology businesses. Washington County is also one of only two counties in Maryland to offer tax credits to tech business Montgomery is the other. Local Infrastructure for Initial and Future Growth Hagerstown is located in west central Maryland, bounded by Pennsylvania, Virginia, and West Virginia; extending east to South Mountain, south to the merging of the Shenandoah and Potomac rivers, north to the Mason-Dixon Line, and west to Sideling Hill Creek. Hagerstown-Washington County is located 70 miles west of Baltimore, MD and Washington, DC with Interstates 70 and 81 intersecting in Hagerstown. 22

23 Cost of Living /Quality of Life The Hagerstown area quality of life is exceptional with a mix of historic neighborhoods (with many homes dating back to the 19th century) and new, easily accessible developments. The average commute for those working in the region is less than 30 minutes. Although most of Maryland s biotech firms are located in Frederick and Montgomery counties it is expected that over the next 5-10 years, there will be a migration out of those counties towards Hagerstown-Washington County due to factors involving cost of living and quality of life. The 2000 Census data reported median family income in Washington County to be $48,962. This figure represents an annual average increase of 4.1 percent from 1990 values of $34,614. As of the 2004 fiscal year, HUD estimated the median family income for Washington County to be $54, In Washington County, living costs are equal to or below the national average and range from 1% to 27% less than at other Northeast cities. Drive-time Analysis According to 2000 Census data, roughly 20,000 people commute into Hagerstown daily to work and 16,000 commute from Hagerstown to work in neighboring counties. About 2,355 people drive from Washington County to Montgomery County and 7,000 people drive from Washington County to Frederick County. Also, Washington County's central mid-atlantic location is readily accessible from many major cities on the East Coast, the Midwest and the South. 8 8 Analysis of the Hagerstown-Maryland, Martinsburg-West Virginia Housing Market As of April 1,

24 Highway Distances from Hagerstown, Maryland Drive Time Analayis City Miles Baltimore 72 Boston 449 Chicago 609 New York 243 Norfolk 252 Philadelphia 165 Pittsburg 156 Richmond 176 Washington D.C

25 According to data received from the Economic Development Commission in Hagerstown, roughly 2,098 people with bio skills live within 40 minutes of Hagerstown and 8,268 people with bio skills live within 60 minutes of Hagerstown. Housing Costs Based on anticipated economic and demographic conditions in the Hagerstown-Martinsburg area, estimates indicate a demand for approximately 6,600 new home sales units (2,200 per year) during the next 3 years, with nearly all this demand occurring in Washington and Berkeley Counties. According to Metropolitan Regional Information Systems, Inc. (MRIS), the average prices for homes (both new and existing) sold in Washington County in 2003 was $170,685. Prices in nearby Maryland counties averaged between $235,687 and $362,997 in 2003 Education The University System of Maryland at Hagerstown (USMH), located in historic downtown Hagerstown, offers a variety of undergraduate and graduate degree programs through academic programs from Frostburg State University (FSU), University of Maryland, Baltimore (UMB), and the University of Maryland University College (UMUC). Students may also continue their studies at the master s level. Although USMH is not currently offering degrees in the sciences, it does offer related Bachelors and graduate degree programs in information technology, engineering and business, which interplay with careers in life sciences and biosciences. Hagerstown Community College is planning to include wet-lab space in at least two of the upcoming building renovations. This move will provide students enrolled in current programs hands on experience that will enhance their value as potential hires in biotechnology and other life sciences companies. There is a strong potential for synergy between the academic programs in the life sciences and similarly focused companies in the TIC incubator. In similar incubator situations, e.g. Frostburg, UMBC, UMCP and FITSI, interactions between incubator companies and the surrounding academic communities have taken the form of faculty involvement, student internships and part time jobs for students prior to graduation; many of which have led to full time employment after graduation. It 25

26 would be beneficial for the Hagerstown Community College to offer students a more focused biotech program. Future Developments at Fort Detrick Fort Detrick, a US Army Garrison, serves four cabinet-level departments: Defense, Agriculture, Health and Human Services, and Homeland Security. For over 30 years, the principal focus has been biomedical research and development for the protection of military and public health conducted by collocated agencies. Although they have separate and distinct missions, these agencies recognize the mutual benefit of a general framework to facilitate the coordination and synchronization of planning, management, and scientific interaction in areas of mutual interest at Fort Detrick. A National Interagency Biodefense Campus (NIBC) is being planned at Fort Detrick as a result of Executive Branch and Congressional direction that addresses leveraging and expanding key competencies to achieve productive and efficient interagency cooperation in support of Homeland Security Biodefense. Approximately 200 acres in the main area of Fort Detrick have been identified for the NIBC facilities and infrastructure

27 Existing US Army Medical Research Institute of Infectious Diseases (USAMRIID) and US Department of Agriculture (USDA) facilities are currently located within the planned campus area. The NIBC will grow in phases as partner facilities are constructed adjacent to existing facilities and common areas: National Institute of Allergy and Infectious Diseases (NIAID) - The Integrated Research Facility (IRF) is being designed for approximately 170 to 200 personnel in 148,000 GSF of Biosafety Level (BSL)-3 and -4 laboratory space and administrative space. Construction is projected to be completed by early Department of Homeland Security (DHS) - The National Biodefense Analysis and Countermeasures Center (NBACC) Facility is being designed for approximately 120 personnel in 160,000 GSF of BSL-2, -3, and -4 laboratory space and administrative space. Construction is projected to be completed June U.S. Army Medical Research Institute of Infectious Diseases (USAMRIID) - Planning is ongoing for recapitalization and expansion in two stages of construction. Stage 1 is estimated to result in 675,000 GSF of BSL-2, -3, and -4 laboratory space and administrative space. Design is projected to begin in USDA Agricultural Research Service, Foreign Disease-Weed Science Research Unit (FDWSRU) - Recapitalization of BSL-3 plant pathogen containment facility is in the planning/programming phase. Integrated Research Facility (IRF) National Biodefense Analysis and Countermeasures Center (NBACC) According to the Fort Detrick Business Development Office, between now and 2008, about 320 new scientists and researchers will be employed at the NIBC by the National Institute of Allergy and Infections Diseases lab and the National Biodefense Analysis and Countermeasures Center. Additional labs will be built on the NIBC campus in the next several years, which will require additional staff such as researchers and scientists. 27

28 Three new high-security biodefense labs promise to bring thousands of professionals to Fort Detrick's new $1.2 billion National Interagency Biodefense Campus. The labs will phase in about 2,000 jobs during the next 10 to 15 years, said base spokesman Christian Devine. 10 It has been estimated that 40-50% of the total new Fort Detrick workforce is expected to come to Washington County. Workforce Training The Western Maryland Consortium provides a wide range of workforce development services for jobseekers and employers. Employer services include referral of applicants, customized training, financial aid for on-the-job training, recruitment, and screening assistance. Services are generally provided at no cost to employers. Through the Maryland Industrial Training Partnership and the Partnership for Workforce Quality Program, the State of Maryland s staff works directly with business, reviews operational plans, and designs or identifies appropriate training. Companies have complete control over the programs and can modify or extend program design. Matching grants are available for skill upgrade training. V. INCUBATOR MANAGEMENT TIC has been directed and managed by Mr. Chris Marschner since In that time, 29 incubator companies have graduated from TIC. Most have located in the Hagerstown- Washington County area. The distribution of TIC graduated companies is as follows: 8 technology services, 3 software development, 3 information technology, 1 telecommunications, 9 manufacturing, 1 biotechnology and 4 other. Of the 29 graduated companies, 78% were still operating as of January Currently TIC has an occupancy rate of 94% with 16 companies located in the TIC building. Most of the current incubator companies operate in industries such as technology services, software development, telecommunications and manufacturing. The TIC is charging tenants 10 Baltimore Sun, March 3 rd, 2006, Frederick County gets popular, pricey 28

29 a below market price of $13 per square foot for office space and $8 per square foot for the manufacturing floor. In terms of management prioritization between tenants, a majority, 50% of Mr. Chris Marschner s time is spent on company specific issues while the remaining 50% is spread among broader incubator projects and facilities management and marketing. The TIC conducts semi-annual surveys of its current and graduated companies to collect data on company developments (i.e. new employment, funding, desired services etc.). If the TIC developed wet-lab space and bioscience companies occupied the incubator, the TIC would consider hiring a sciences intern student for basic housekeeping of the wet-labs. Any unique additional support services bioscience companies might desire such as FDA regulatory guidance would be outsourced until sufficient demand justified providing those services in-house by employing additional staff. To attract tenants, a bioscience incubator will need to provide: Affordable wet-lab space and equipment; Furnished office space with flexible leases; Assistance and support in business development, strategic planning, financing, FDA regulatory assistance, and product commercialization; Introductions to business resources, including financial institutions, investment capital, accounting and legal services, and vendors offering discounts to tenants; Educational programs, including seminars, conferences and one-on-one mentoring; Opportunities for networking and collaboration with other businesses and potential joint venture partners; The tenants within the incubator benefit from the synergy and interaction with like-minded entrepreneurs. The concentration of emerging biotech firms in a single location will attract the attention of larger companies and investment capital, which is often difficult for start-up firms to do individually. 29

30 In addition to the knowledge and experience needed to manage an economic development business incubation program, the manager of an incubator seeking to attract and nurture life sciences companies, including those in biomedical, biopharmaceutical and biotechnology areas will need specific knowledge to address topics within these disciplines. A basic understanding of the science and engineering practiced in the development of life sciences products (and services) will enable the incubator manager to screen applicants and work with companies admitted to the incubator. Knowledge of the business trends in the life sciences arena will assist the incubator manager as he works with clients on an on-going basis. A two-tiered approach to acquiring this knowledge is suggested. First, the TIC should consider forming a scientific / technical advisory committee with representation from the life sciences areas. Second, TIC should consider supporting the continuing professional development of its manager through membership in local chapters of relevant professional societies and attendance at targeted training opportunities and networking events. These approaches will provide the TIC manager with access to the required knowledge currently available via committee members while he builds personal knowledge and experience. VI. TECHNICAL ANALYSIS Addition vs. Renovation This study considered two options for adding wet-labs: a) expansion of the TIC s footprint by the addition of new space designed, built and equipped as wet-labs; and b) renovation of existing office space on the third floor of the TIC. The drawings included in this section are intended to capture the functional features of each option, and should be refined during the design phase of the project. Both options offer attractive features, but both also present negative aspects. Option A: Add to Existing TIC Space Positive Features: Adds to total client space available at TIC Increases number of potential clients served 30