Alexandria Real Estate Equities (ARE) executive chairman & founder Joel S. Marcus, joined by Whitney Snider, MD, vice president of science and technology for Alexandria Venture Investments, the venture capital arm of ARE, recently sat down with GEN Edge for an exclusive interview. The pair discussed the transformative impact of artificial intelligence (AI) on biopharma and on Alexandria in Part I.
In Part II of this interview, Marcus discusses Takeda Pharmaceutical’s recent decision to renew its lease and expand its space in Cambridge, MA; his perspective on Massachusetts’ proposed $1 billion extension of the Commonwealth’s bonding authority and tax credits to support life sciences industry growth; and Alexandria’s perspective on where biopharma will grow in New York City given its recent sell-off of a property in Long Island City, Queens.
This interview has been lightly edited for length and clarity.
GEN Edge: Alexandria recently announced an early renewal and expansion lease agreement with Takeda Pharma in Cambridge, MA. Why was Takeda pursuing an early renewal? And how did Alexandria help keep the company in Kendall Square?
Joel Marcus: Takeda is one of the top 15 pharmaceutical companies in the world, headquartered in Tokyo. Japanese companies have long-term thinking. They have made a decision, both in the past and now, to keep Cambridge as their worldwide R&D center.
As part of that plan, they came to us six years early and asked us, would we be amenable to tying down their current space in the Alexandria campus at Kendall Square, 222,925 square feet, for a decade beyond the end of the current term, which takes it through 2040. This is unusual in a sense, but this is a Japanese pharma company wanting to ensure they’re in the world’s number one market for collaboration, certainly for recruitment and retention of the best scientists, and life science workforce, in the world. That was their strategic decision. And then they felt this building was particularly suited. They inherited this building through the acquisition of Ariad Pharmaceuticals and their oncology portfolio [in 2017 for $5.2 billion].
At the end of this lease—it was a 15-year lease that started in 2015—we re-set the rent at a higher rent than the natural ending rent in 2030. It’s then escalated for the next decade, and we end up with a very strong leasing stat as a consequence. And they get, essentially, the right to stay in their home through the year 2040. So, it’s a pretty big decision by them, and a wonderful outcome for us.
GEN Edge: Speaking of the leading market in Cambridge, Massachusetts Gov. Maura Healey (D) came out earlier this month with a proposed renewal of the Commonwealth’s life science initiative—an additional $1 billion in bonding and tax credits. How effective is that going to be in light of the two other such programs going back to 2008?
Marcus: I think anything is helpful. In all the markets, though, where the money really is needed—[I’m] in New York right now, and this is a great example—city and state money is better spent not so much on infrastructure tax credits, because private industry will bring the infrastructure. And remember, at the early stage, tax credits don’t do any good because you don’t have taxable profits.
The better use of city and state and other supportive money is to go into the founding and funding of early-stage companies so they can grow, hire a workforce, set up a base, and scale. So that’s always my criticism of governmental policy. It should be much more focused on supporting the companies. Tax credits just aren’t relevant for small companies, and infrastructure really isn’t needed, because the private sector is there to provide that.
GEN Edge: In Long Island City, Queens, Alexandria sold one of its properties (30-15 48th Avenue) to an entity of Cine Magic. Alexandria still owns a second property in Long Island City (30-02 48th Avenue). Why sell off one property? Is Alexandria rethinking the prospects of biotech in Long Island City?
Marcus: We were very hopeful when we bought our current site. And then the site we sold to Cine Magic. We were hopeful that Long Island City would turn out to be just a real boom opportunity. We bought those sites in the days just before Amazon announced they were going to Long Island City. Now we didn’t have any inside information, but our timing turned out to be really good.
But then, some of the political people in Long Island City, and some of the leadership who have been pretty negative on business expansion, killed the Amazon opportunity. Then you combine that with COVID-19, and it put Long Island City into a major economic reversal. We just haven’t seen the demand that we were hoping for, and that’s why we decided to recycle the capital in that one building. We still have one building that we’re in the process of tenanting. It has been very slow and painful, but we’re going to see it through.
GEN Edge: Does the West Side of Manhattan, as some developers believe—or the East Side, where Alexandria has its Alexandria Center® for Life Science campus—seem more appealing in terms of New York City biotech activity?
Marcus: I think the East Side Medical Corridor, where we have the first and only commercial life science campus, is still the heart of the ecosystem. There are a number of buildings around, but no real campus. The challenge in New York has been, during and post-COVID-19, is, one, continuing high state and city taxes. That has been a challenge for people to scale in the city. It isn’t a lack of infrastructure.
What’s really missing here, although we’ve made a huge dent—we’re the largest investor in New York biotech companies—there still has not been the kind of venture capital effort at the early stage here. It’s come a long way over the last decade, but it still pales in comparison to the Bay area, San Diego, or Boston, and that’s probably the most needed. If I was to say to the city, to the state, what’s most needed in New York, it would be risk capital for early-stage companies.
GEN Edge: Alexandria Real Estate Equities recently celebrated its 30th anniversary and its 25th as a publicly traded real estate investment trust. How is Alexandria looking to move forward in life sciences? And how will AI help shape that?
Marcus: I think if you ask people who are medical doctors and scientists by training, they’d say we’re still in the early days of innovation. The new advances—AI is just one example—the new modalities, whether it be cell therapy, gene therapy, the whole revolution in mRNA, and many other blockbuster technologies that are starting to emerge, give the industry great hopes for continued innovation.
The other side of that is, we need to be wary of political games that are being played by some in Washington. Sometimes it’s on the left, sometimes it’s on the right. This effort to try to get Medicare to fix drug prices for Medicare patients [the Inflation Reduction Act, criticized by industry leaders since its enactment in 2022 by President Joe Biden], I think at the end of the day will mean that there’ll be less innovative and novel drugs that are addressing the Medicare patient market.
We need to not fix prices or try to control prices. What we need to do, if you want to really impact pricing is, let the manufacturer deal directly with the end user and cut out the middleman right now. The middleman in the pharmaceutical industry is mostly PBMs [pharmacy benefit managers] and other entities that are taking 40–60% of the price of drugs. Imagine if we could eliminate that. You wouldn’t have to create a negative environment for drug discovery. So that’s what we’re hoping for.
GEN Edge: This is an election year. How much are PBMs and other issues affecting biopharma long-term concerns that will have to await the outcome of the election?
Marcus: The good news is there’s likely to be a split. The Republicans are likely to take the Senate. The Democrats are likely to recapture the House. Split government is usually the best government, because it’s balanced. That’s what we’re hoping for.
But what we need is people in Congress—it doesn’t matter what party—who are willing and committed to protect the innovation of this nation in the biomedical industry, which is the foremost industry in the world here, and not play around with governmental interference and go after the middlemen who are sapping the profits, the savings to the end user patient, and the ability to get a fair return on long term investment by the drug manufacturers and discoverers.
Interested in reading Part I of this exclusive interview? Find it here at “Lab Space Giant Alexandria Real Estate Navigates AI’s Impact on Biopharma“.
