Scottsdale is becoming the premier Valley location for biotech

Michael Finsterwald was looking for something new. He had already started and sold his first company, and was eager to capitalize on some research and innovations he had been exploring.

Two years ago, he created Array Therapeutic and is now developing a product to help people who have lost circulation in their feet.

It’s a small operation — three employees — headquartered in the Scottsdale Airpark and Finsterwald is funding the venture himself.

It is just one example of the small, highly specialized biotech companies working behind the scenes in Scottsdale. They develop drugs, manufacture health devices and do research, filling unique niches that larger companies are unable to reach.

“They may not be highly visible, since they tend to be smaller firms, but the aggregate is pretty significant,” said David Roderique, general manager of Scottsdale’s economic vitality department. “A large chunk of our economic base is focused on the biomedical arena.”

According to the city’s 2006 Economic Trends report, five of the top 10 companies looking to relocate or expand in Scottsdale were in the biotech industry.

Since then, two more biotech companies have approached the city about moving here, however, Roderique said deals aren’t yet in place.

In the State of the City address earlier this month, Mayor Mary Manross announced plans to help the Mayo Clinic construct another facility in the research campus on Shea Boulevard, creating room for even more firms to move in.

The presence of institutions like Mayo and Scottsdale Healthcare is key to drawing the smaller biotech companies that make up the fabric of the industry, said Katherine Hutton Raby, Scottsdale economic development manager.

“These institutions are the magnet, and all these little companies are the steel,” she said.

A STEP ON THE PATH

When drug development firm InNexus was looking for room to expand, Scottsdale seemed like the place with the best mix, said CEO Jeff Morhet.

The firm had forged a relationship with Mayo, and the Valley was rich with other research institutions: Arizona State University, the Translational Genomics Research Institute (TGen) and Banner Health hospitals.

InNexus secured a spot on the Mayo research campus and opened in December. Morhet is working on filling positions — probably about 30 employees — but he said there should be scientists working in the labs as soon as April.

“In biotech there’s a lot of opportunity to go where you want,” he said. “If you always want a job, biotech is the way to go.”

As a drug development company, InNexus works on one of the last stages necessary to “turn science into medicine,” Morhet said.

It is one of the last stops before a product is sent to the U.S. Food and Drug Administration for approval to begin human testing.

This kind of specialized work represents a shift in the industry, Morhet said.

In the past, large pharmaceutical companies thought they could handle everything from research to drug development to marketing, said Morhet, who got his start at Baxter and Merck pharmaceuticals.

Now, there is more focus on sales and partnerships with the smaller, more nimble biotech companies, he said.

“Biotech is fast, creative, entrepreneurial and passionate,” Morhet said.

LOCAL RELATIONSHIPS

With studies going on in labs all over the world, ImmuneRegen Biosciences could’ve opened its headquarters anywhere, said CEO Michael Wilhelm.

“But from a living standpoint, we are happy to live here,” he said.

ImmuneRegen, headquartered in Scottsdale, is dedicated to the research and development of drugs that fight the effects of bioterrorism, such as radiation exposure and chemical warfare.

It opened in Scottsdale in 2002, and recently announced a collaboration with TGen to treat the effects of radiation therapy in cancer patients.

Wilhelm said his first conversation with TGen happened by accident at the FBR Open.

“TGen was a perfect fit, and the local relationship makes it easier,” Wilhelm said.

Hutton Raby said physical proximity between companies is starting to hold more weight.

“Those smaller companies need to be close to those guys at larger institutions for support, for information and for partnerships,” she said. “They can have a partnership with someone in Columbus, Ohio but a lot of times it’s more convenient to be at their back door.”

SKILLED WORK FORCE

As a medical device firm that opened 10 years ago, St. Jude Medical both pioneered and watched the growth of bioindustry in Scottsdale.

“As other businesses grow in the area, obviously there is a larger talent pool,” said John Davis, plant manager. “That means more competition for us, but that’s OK. It makes us strive harder to be an employer of choice.”

St. Jude first moved to Scottsdale to take advantage of the community college system, Davis said.

The company employs a lot of highly skilled engineers, but also many people who have technical knowledge and require less schooling, he said.

The company employs about 400 people, which is small compared with the 11,000 working for St. Jude worldwide.

It also fulfills a very specific need for the parent company — creating the electrical components of the pacemakers assembled at a different plant.

“These people work with sophisticated robots and automated equipment. It’s not just crank the machine and let it go,” Davis said. “We fill the niche of individuals who are capable and passionate and dedicated to quality.”

FUTURE OF GROWTH

Although the Mayo Clinic eventually will provide more research space and there is potential at SkySong, Scottsdale won’t be building any wet labs, Hutton Raby said.

The labs, which have specialized systems including water, are required for some kinds of research. But it’s just too expensive for most — costing between $300 and $600 per square foot.

A typical office building costs around $100 per square foot, Roderique said.

“If they need wet lab space, depending on how advanced that is, it may not be a Scottsdale location,” she said.

The future of the city’s biotech industry is connected with the small firms.

“There are a lot of small companies with high-paying jobs, research grants and money pouring into the community,” Roderique said. “In general, I’d say that’s a very important, growing aspect of our economy.”