Philly’s Biotech Scene Needs More Local Money — Now

Life sciences are having a serious level-up moment in our region. But some observers worry that a recent rush of outside investment could mean our big discoveries won’t stay here.

philly biotech funding

An influx of outside biotech funding could mean our big discoveries won’t stay in Philly. / Illustration by John W. Tomac

Around every corner, the gizmos sound like something cooked up by a mad scientist in the movies: a 24-way-robot-controlled bio-reactor, a “viral positive” room, a flow cytometry lab where human cells suspended in liquid are being struck by lasers to see if they’ll glow fluorescent colors.

The machines aren’t just real — bonus! They’re working on life-changing medicines. But I’m not visiting a hospital or university. I’m getting a tour of a massive suburban building complex.

“It’s like science fiction — like you’re reading a weird novel or some other craziness,” says Audrey Greenberg, co-founder and chief business officer of the Montco-based Center for Breakthrough Medicines, a contract development and manufacturing organization whose facilities I tour one spring afternoon. “It’s the future of medicine, honestly.”

Five years ago, Greenberg and her business partners acquired a one-million-square-foot King of Prussia campus from Glaxo­SmithKline and founded Discovery Labs, which they likened to a WeWork for the life-sciences industry. A year later, members of the ownership group founded CBM, signaling bigger plans. “It occurred to us that the University of Pennsylvania and Children’s Hospital of Philadelphia were discovering life-saving medicines, but there was an 18-to-36-month wait to get those discovered medicines into a manufacturing organization,” Greenberg explains.

Today, CBM is an outsourcing hub for a range of work in the biotech sector that’s related to so-called “living drugs” — medicines, including cell and gene therapies, relying on biological materials that are altered in a lab and introduced into a patient’s body to fight a disease. In 2018, only six living drugs had been approved by the FDA, most for rare genetic diseases. There are now 16, with 15 more expected to be given the market go-ahead by the end of 2023. CBM is one of several companies leasing space on the Discovery Labs campus; others include Penn’s gene therapy program and WuXi Biologics, out of Shanghai.

“All sorts of diseases, even very common diseases, are going to be treated with these kinds of drugs,” says Sue Dillon, the CEO of Aro Biotherapeutics, a Center City company in the sector. “But genetic medicine is a different beast in terms of manufacturing, especially at a scale.”

As its austere lawns and fountains suggest, CBM has become a symbol of the rapid rise of life sciences in our region. It has 400 employees currently and expects to have 2,000 in three years. More than a year ago, CBM closed on a $350 million funding cycle — part of a surge in outside money streaming into the region.

In 2021, New York and Silicon Valley venture capital firms invested $8.4 billion in Philly companies across all sectors. That’s about as much as they put into the region in the previous nine years combined. What’s more, CBM’s recent windfall is indicative of how global investment is intensifying in our region. That $350 million deal was with SK Inc., the second-largest conglomerate in South Korea. It was announced less than three years after our region’s largest venture-backed exit — Spark Therapeutics, the University City company that merged with Swiss pharmaceutical giant Roche for $4.8 billion in 2019.

The outside money suggests to some boosters that life sciences has the momentum to transform our regional economy. But the cash brings anxiety along with optimism. “When companies are sold to an out-of-town buyer, even with promises that they will keep the local headquarters in Philly, over time, the nexus of that company moves toward wherever that out-of-town buyer is headquartered,” says Richard Vague, the venture capitalist and Penn trustee who bankrolled Carl June’s research into cures for cancer using living drugs. “That leaves Philly with some jobs but less intellectual property and fewer high-paying jobs … and less of a multiplier effect.”

Although not everyone thinks the gold rush from outside investors is a bad omen — money is money, right? — Vague speaks to a broader question keeping the sector awake at night: Is Philly positioned to attract and maintain talent in life sciences?

“Companies can come here, manufacture here with a place like CBM, and have their headquarters around here. You never know; maybe they could even be funded here,” Greenberg says near the end of the tour. Opinions vary on how to address the local funding question and ramp up the good vibes in life sciences, but Greenberg doesn’t mince words: “We’ve been importing capital all this time. We need a $10 billion fund that’s Philly-focused.”

Avi Nandi, the chief technology officer at CBM, guides my tour of the 14-building campus. Along the way, he shares fun facts — “HVAC is our biggest carbon contributor” — and offers his take, as a recent transplant, on the local life-sciences ecosystem.

Up until two years ago, Nandi was living in North Carolina and working on genetic medicines for Novartis. He describes the headquarters where he worked as “basically built by the government.” Before opening the location in North Carolina, Novartis received both a contract from the federal government to defray half the costs of the billion-dollar facility and local real-estate incentives. It’s the type of luring that goes on — for individual talent and for firms — in life sciences these days.

But I’m surprised incentives aren’t what Nandi mentions first. “In North Carolina, land is cheap,” he says at the start of the tour. “Boston says it’s the best in research and academics; Silicon Valley, of course, has the money. What is Philly’s identity?”

You’ll often hear boosters of life sciences in our region tout the fact that Philly is the birthplace of cell and gene therapy, which is one subfield of life sciences, itself a subfield of health care. It’s a very Philly thing to do: try to woo out-of-towners by playing up our history. But it’s not a narrative that emphasizes our competitive advantages or active culture of success.

“Philadelphia across the board tends to be a little too humble with what they’re doing,” says Heather Steinman, a senior vice president at University City biomedical research facility the Wistar Institute. “People don’t always know what’s going on.”

Those people should know that beyond the influx of capital, there are a lot of positive signs in the region. Steinman points to the accelerating pace of “tech transfer” here — research discoveries spinning out from university labs and becoming stand-alone companies. (Penn paces the country in revenue generated from tech transfer.) Our angel investor network is strong and growing. Philly also has a unique track record of collaborations, like the state-of-the-art Gene Therapy Innovation Center currently being built by Spark (now part of Roche) on Drexel’s campus. “When international investors come here, they get it,” says Steinman. “You can pull together the city, the Chamber of Commerce, the state, and a regional research institute to talk about life sciences, and that can happen overnight. Where else does that happen?”

Still, Steinman acknowledges that Philly could be better at telling its story, including to itself: “We already have our hub, but Philadelphia doesn’t really view it that way yet.”

One executive tells me the city should fly flags with the faces of renowned local scientists on Broad Street, alongside those featuring Jalen Hurts, to usher in a culture around life sciences. A different executive has suggested that Governor Shapiro and Mayor Kenney should greet investors and prospective CEOs at the airport. Sue Dillon of Aro Biotherapeutics thinks the industry could benefit from reframing its relationship with the community. “The local industry at large is trying to speak to the population in terms of new medicines, like the revolutionary cell therapies in cancer research,” she says. “I don’t think that’s enough. It’s got to be about jobs, good jobs.”

The life-sciences economy isn’t an issue, or even a term, that exists yet in the minds of most residents, but it’s increasingly on the radar of elected officials. One of the city’s mayoral hopefuls, former City Councilmember Derek Green, recently toured Budd Bioworks, a biotech manufacturing facility that opened in a dormant industrial space in Hunting Park that in its long, storied history made car and train parts and military helmets for World War I. In the plant’s conversion, Green sees hope for bringing back the middle-class manufacturing jobs that were staples of the surrounding neighborhood in the ’50s and ’60s. “If you live in Nicetown or Tioga, right around there, a person can start a family and buy a home all by working in the same way their grandfather did,” Green tells me in a phone interview.

Green agrees that the public sector needs to be more proactive in stimulating the industry. While he points to creative tweaks to the tax code that could incentivize lab space or manufacturing facilities, for the most part, he punts the issue to state-level policymakers. “Cities and states are leaning into the assets they have and what they are known for, making strategic investments around those things,” Green says. “With life sciences, especially in cell and gene therapy, we have the opportunity to do that.”

Since 2008, Massachusetts has committed $1.5 billion from a fund to grow its life sciences ecosystem. That money, raised through a combination of taxes and bonds, has primarily reached early-stage companies — one incentive to keep them local. While the public funding is a drop in the bucket for Boston, it would represent a seismic change here. Our state’s closest equivalents, the PA Life Sciences Greenhouse Initiative and the Ben Franklin Technology Development Authority (which focuses on all tech, not just life sciences), have war chests totaling a meager $45 million, according to a recent Brookings report. 

“We can’t compete with that,” says Chris Molineaux, president of Life Sciences PA, the trade group for the state’s life-­sciences organizations. “A big-picture, visionary funding plan — that’s what we need.”

In February, I sit down for a cup of coffee with Vague, a longtime observer and booster of life sciences. He describes with boyish enthusiasm the latest mRNA trials coming out of local labs but expresses dismay at how China has surpassed the U.S. in cancer trials involving CAR-T cells — a technology patented by doctors right here. “The city needs to collectively have a dream,” Vague tells me with a sense of urgency. “Raising capital has not been the issue. The equity becoming owned by someone whose headquarters is somewhere else is the concern.”

To improve the situation, Vague doesn’t look north to Massachusetts, but to his home state of Texas. Over the past decade, the Lone Star State has created a robust infrastructure to support companies and researchers in the medical world, increasing the likelihood they’ll stay and planting a flag for the public to rally around. In 2007, Texans passed a public referendum allowing the state legislature to create what’s become the Cancer Prevention and Research Institute. CPRIT, as it’s better known, is essentially a public venture fund that invests in start-ups in a narrow field — cancer prevention. And those companies must reside within the state. CPRIT has doled out close to $3 billion in grants, resulting in the permanent creation of more than 136,000 direct and indirect jobs, according to its reports. That all unfolded in a state with a reputation for resisting government programs.

“Raising capital has not been the issue. The equity becoming owned by someone whose headquarters is somewhere else is the concern.”

CPRIT has bolstered discoveries, job creation, and Texas’s reputation as a global hub of cancer research. Steinman, for one, says she knows multiple Philly-based biotech start-ups that have decamped to Texas specifically for that funding opportunity. “Who would have thought that we’re up against losing companies to go to Texas? I never would’ve thought about that 10 years ago,” she says. “If we have more resources available, we can change that. You can make it specific to what we need in Philly or Pennsylvania. I think there are lots of creative ways to ensure that we’re not slowing down on our innovation. It would be an incentive to ensure that people don’t leave the region.”

Molineaux of Life Sciences PA says it’s an uphill battle with Harrisburg’s elected officials. Most of the state’s life-sciences employers are in its urban centers — mainly in Philly and ­Pittsburgh — meaning most of the legislature still needs convincing. There has been recent momentum, including $123 million added to the state’s tech-backing funds at the tail end of the Wolf administration. “That was a good sign, but we’re not satisfied,” says Molineaux. “A priority of ours is to get the Shapiro administration to drive an innovation fund for the Commonwealth.”

But it might be even more vital to the ecosystem to help companies farther down the road. “Our biggest challenge [as a region] is going from that early seed stage, layering in that venture capital that’s going to get that company to the next level,” says Steinman. More to the point, the challenge is attracting the right VCs, those who view Philly as a thriving ecosystem in its own right rather than as a farm team for Silicon Valley or Boston. “Can we create conditions so that VCs treat here more like home?” she asks.

Essentially, the ecosystem needs that $10 billion fund Greenberg talks about — or a company with a market cap that size — to open the door to mergers and acquisitions that will pose less of a risk of relocations. “We need a company that is based in Philly to buy some of those start-ups as they get traction,” Vague says.

Steinman says pharmaceutical companies with a presence in the region — they include GSK, Merck and Johnson & Johnson — often step in as those buyers. “There are very few companies that are going to stay here from the beginning all the way up through becoming the next Amgen or Genentech,” she says, referring to two of biotech’s biggest success stories. “They’re going to be bought by another pharmaceutical partner — but those partners are already in our backyard. They’re here.”

At the same time, our region also knows to be leery. About a decade ago, we saw large employers like Cigna, Sunoco and Dow Chemical move out of Center City. Before that, in the 1970s, the Budd Company — the auto-parts manufacturer whose facilities have been converted into biotech space­ — moved its headquarters to Michigan to be closer to the nexus of American carmakers. There are no guarantees when it comes to maintaining ties with Philly.

So, what kind of company would evolve into a buyer of start-ups and remain headquartered here? It’s possible some major pharmaceutical company or multi-national investment bank is lured to Center City in the years to come, although our recent track record suggests that’s unlikely.

“More likely is that one of these start-ups does so well that it generates a lot of cash flow, profits and capital of its own — and/or gets a massive stock price,” Vague tells me in an email, “and thus is in a position to acquire other companies.”

In other words, before it can become a bigger pond, maybe Philly needs that one big fish. “The day that happens,” says Vague, “will be an extraordinary day for this city.”


Published as “Who’s Bankrolling Our Biotech?” in the May 2023 issue of Philadelphia magazine.