August 5th, 2008
San Francisco Office Update: Pfizer takes 100,000 square feet in Mission Bay
Mission Bay, long reported to be struggling to achieve the biotech tenant base it had been seeking, had a big day as Pfizer has decided to move a major portion of their employee base into the San Francisco Submarket, and take 100,000 square feet with options on more.
This is exciting news for all involved in the deal, and comes as fantastic news as well to people like me that had no involvement at all. The success of Mission Bay is key to the coming together of Southern San Francisco and I look forward to the day when the entirety of the neighborhood is built, as I anticipate it will be a new hub of retail, office, and residential to rival any in the City.
The plan in place for continued growth reminds me a bit of what San Diego has done with the neighborhood surrounding Petco Park, home of the Padres. They have created a seemless transition from hotel property to convention center to restaurants to living spaces. If the developers can stick with the vision and complete the 4th Street retail corridor heading into Mission Bay, and make great use of Seawall Lot 337, they will be giving our great City a gift that will lend justification to try a similar effort at Hunters Point.
A well written article by Ron Leuty of the San Francisco Business Times is contained below, and an excellent take on the residential neighborhood can be found at www.socketsite.com.
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Pfizer Inc., the world’s largest drugmaker, is coming to San Francisco’s Mission Bay.
The company will move about 100 employees — including the headquarters of its new Biotherapeutics and Bioinnovation Center — into a new structure in San Francisco’s growing Mission Bay biotech development.
The move is a coup for San Francisco since Pfizer is staking so much of its future on the Biotherapeutics and Bioinnovation Center, or BBC, headed by biotech industry veteran Corey Goodman.
Pfizer leaders and San Francisco Mayor Gavin Newsom plan to make the move official with an event at 2:15 p.m. today at the site on the east side of Third Street at Mission Bay Boulevard South. The location is across the street from the Mission Bay campus of the University of California, San Francisco.
Pfizer agreed Friday to a long-term lease of essentially the entire five-story, 105,000-square-foot west wing of Alexandria Real Estate Equities Inc.’s planned office/laboratory complex at 455 Mission Bay Blvd. South. The only space Pfizer won’t have in the wing is about 5,000 square feet of ground-floor retail.
Pfizer also has an option for 50,000 square feet in the complex’s 105,000-square-foot east wing.
Pfizer will move to the complex starting in early 2010, according to a company spokeswoman.
The foundations for the structures are under construction and Pfizer has ordered steel for the project, the shell of which will be built by BNBuilders Inc. of San Mateo.
The Mission Bay building will house the BBC, the biotech-like unit Pfizer created last fall with the hiring of Goodman, and staff from Rinat Neuroscience, the South San Francisco company that Pfizer bought in 2006.
“Pfizer’s decision to locate their Biotherapeutics and Bioinnovation Center in Mission Bay is a significant win for San Francisco and is a clear indication that Mission Bay is one of the nation’s premier life science centers,” San Francisco Mayor Gavin Newsom said in a prepared statement.
“San Francisco offers companies like Pfizer a world-class urban innovation district, anchored by the nation’s preeminent biomedical university and unparalleled opportunities for collaboration and access to the very best talent that the United States and the world have to offer.”
San Francisco’s gain, however, is a loss for South San Francisco, where the BBC and Rinat have been based in a 106,000-square-foot facility on East Grand Avenue.
New neighbor
Pfizer’s arrival at Mission Bay would deepen the biotech footprint in the 303-acre district, which until a decade ago was a landfill, Southern Pacific rail yard and warehouse wasteland.
Merck & Co. has 66,000 square feet at 1700 Owens St., another five-story Alexandria property. FibroGen Inc. later this year will begin moving from South San Francisco into half of Shorenstein Properties’ 430,000-square-foot complex at 16th and Illinois streets — just south of Pfizer’s future home — with an option to lease the remainder.
Mission Bay also is home to a handful of smaller biotech companies, biotech-focused venture capital firms and the headquarters for biotech pioneer Bill Rutter’s portfolio of companies — at 1700 Owens — as well as the J. David Gladstone Institutes and UCSF.
Other ready-to-lease projects include the 175,000-square-foot expansion of China Basin at 185 Berry St. by McCarthy Cook & Co. and RREEF, and CB Richard Ellis Investors’ 300,000 square feet at 500 Terry François Blvd.
Alexandria itself is constructing the six-story, 157,929-square-foot 1500 Owens and plans to build the 10-story, 246,148-square-foot 1600 Owens. On its so-called North Campus, Alexandria plans the Pfizer building, plus a 10-story, 200,000-square-foot tower at 1455 Third and a six-story, 220,000-square-foot project at 1515 Third.
Tuning in the BBC
New York-based Pfizer is counting on the BBC as a long-term source of new drugs and technologies to deepen its portfolio, and Goodman’s job is to look further downstream than Pfizer traditionally has done.
Specifically, Goodman’s direct charge from Pfizer CEO Jeff Kindler is to look at emerging technologies like RNA interference, or RNAi, and new ways of delivering vaccines.
Nailing down a BBC home could prove a shot in the arm for Pfizer as the world’s best-selling drug — the cholesterol pill Lipitor — opens to generic competition in 2011.
Pfizer has five biotherapeutic products that account for $1.4 billion in revenue per year, Goodman told analysts earlier this year. The company’s pipeline includes 86 biotherapeutics — including monoclonal antibodies, vaccines and nucleic acids — with 26 of those in preclinical or clinical development, Goodman said.
“Now that’s a great pipeline, but neither Martin (Mackay, Pfizer president of global research and development) nor I are satisfied with it, because if we’re going to be a top-tier leader, we have to do even better,” Goodman said.
Eventually, Goodman said, as much as 25 percent of Pfizer’s pipeline could be in biotherapeutics, and one in five drugs on the market would be a biotherapeutic.
Biotherapeutics are large molecules like proteins and antibodies that are more complex than smaller chemical molecules, the traditional focus of pharmaceutical companies like Pfizer.
In trying to blend its pharmaceutical and biotech mindsets, Pfizer has struggled to find its footing under Kindler, who took over for Hank McKinnell in July 2006. The company’s stock price, which had fallen under McKinnell, has leveled off.
Yet Pfizer’s planned successor for Lipitor failed clinical testing in late 2006, smoking-cessation drug Chantix faced safety issues and a melanoma drug failed in a late-stage clinical trial earlier this year.
What’s more, Pfizer last fall suddenly dumped the poor-selling inhaled insulin drug Exubera.
Enter scientist-entrepreneur Goodman, who reports directly to Kindler. Goodman has 26 years of neurobiology research and teaching experience combined at UCSF, UC Berkeley and Stanford University. Plus, he helped start and lead Exelixis Inc. and Renovis Inc. of South San Francisco.
Biotech formula
Pfizer and other Big Pharma companies are trying to switch from a longtime emphasis on blockbuster drugs, said Michael Schuppenhauer of Silver Hill Partners LLC, a biotech consulting firm in Half Moon Bay.
That’s easier said than done, he said, because Big Pharma culture is less entrepreneurial than biotechs and is tied to cumbersome corporate structures.
“What Corey does is nice, but will it bear fruit in 10 years?” Schuppenhauer said. “And Kindler may be asked, ‘Why are you buying all these things with no value contribution for the bottom line?’” Yet a high-profile Bay Area home for the BBC would match up well with Pfizer’s goal of having Goodman’s unit link with innovative academic centers as well as cutting-edge biotechs to move promising technologies and drugs to market relatively quickly.
Pfizer and UCSF in June concluded a three-year, $9.5 million agreement designed to speed drug discovery and development between the company and QB3, the California Institute for Quantitative Biosciences, that is based within three blocks of Pfizer’s new Mission Bay home.
The deal includes scientists at QB3 sites at UC Berkeley and UC Santa Cruz. Rinat, which integrates protein engineering and biology to tackle projects ranging from oncology, neurology and metabolic diseases to ophthalmology, inflammation and pain, was the first company Pfizer put under the BBC’s banner.
Subsequent acquisitions under Goodman have kept to the formula: small, entrepreneurial and decentralized units of 50 to 150 people.
Those acquisitions include CovX Research LLC of La Jolla, which has developed a technology that could make dosing more precise and perhaps mean that a drug needs to be taken only once a week or once a month, and Coley Pharmaceutical Group in Wellesley, Mass., which is developing a cancer vaccine.
Pfizer also has a number of partnerships with Bay Area companies, including a licensing agreement with Fremont RNAi therapeutics company Quark Pharmaceuticals Inc.
Pfizer in May also cut a research funding and equity deal with Five Prime Therapeutics Inc., which is based in the Gladstone Institutes building on the other side of the UCSF campus at Mission Bay.
Pfizer spends about $7.5 billion annually on research and development. Under Kindler, Pfizer has sped up decision making — whether that’s for good or bad remains to be seen. But Goodman’s hiring and the dumping of Exubera, developed by Nektar Therapeutics Inc. of San Carlos, were signals to Wall Street that Pfizer would jump on trends and abandon poor-performing projects more quickly.
At the same time, Kindler has focused Pfizer’s drug development work on smaller disease-based units, cut costs by closing R&D units in Michigan, Japan and France as well as manufacturing sites in Brooklyn and Omaha — part of some 14,000 job reductions overall.
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If there is anything I can do to help you as a Tenant Representative in the commercial real estate world, please do not hesitate to get in touch with me.
Thanks for visiting,
Tom Poser, Jones Lang LaSalle, San Francisco
www.sanfranciscotenantrep.com
