Pittsburgh: America's Next Biotech Hub

Mike Gee, 02 May 2023

Pittsburgh once produced more steel and iron than all the Axis countries combined. After nearly two centuries, the city is well-positioned to re-enter the world stage as a leader in biotech and bio-manufacturing.

In my last few years of college in Pittsburgh, I started Nucleate Pittsburgh, a non-profit that provides necessary resources for students to commercialize their translational biotech research. After finally creating an institution that connects all the labs, tech-transfer offices, venture capitalists, local hospitals, and startups, I am confident Pittsburgh will become America’s next biotech hub.

Why Pittsburgh?

When asked why somebody should move to Pittsburgh, Pittsburghers nearly always default to celebrating the cheap rent. This is primarily true but overlooks other reasons that make this city well-equipped to become a biotech startup hub.

Universities. Unlike the software industry, biotech startups are typically ‘university spinouts,’ meaning they get started to commercialize a technology developed at a university. Pittsburgh is the home to world-class research universities like The University of Pittsburgh (Pitt) and Carnegie Mellon University (CMU). Last year, Pitt was awarded the third-most NIH funding (a government grant that finances nearly all biotech research at academic institutions), but had disproportionately few startups compared to other schools like Harvard. The tech transfer offices at both institutions have tons of quality research and intellectual property ripe for commercialization but lack the students, professors, and entrepreneurs ambitious enough to turn these inventions into companies.

Hospitals. Biotech companies that develop therapeutics and diagnostics are often required to work with patients. In Pittsburgh, a thriving ecosystem of hospitals and healthcare networks, such as UPMC and Highmark Health, can provide local access to clinicians. There are even specific programs that facilitate this kind of collaboration, like Pittsburgh CREATES, which connects surgical tool manufacturers with surgeons at UPMC.

Lab Space. When I lived in Boston and San Francisco, the most common topic of conversation among early-stage biotech founders was lab space. Not only will our local institutions give you lab space if you decide to spin out a company here, but Pittsburgh has plenty of cheap, vacant lab space. Lab space here will run you $15-$25 NNN per rsf in the outskirts of the city and $55-$65 NNN per rsf if you want to be right next to our institutions in Oakland.

Infrastructure. Pittsburgh’s rich history in steel manufacturing means it has an outstanding number of old factories and warehouses that are slowly being turned into labs and office space. In particular, Hazelwood Green was once a steel mill owned by the LTV Corporation. It is currently undergoing a $250 million renovation led by the Richard King Mellon Foundation and the University of Pittsburgh to transform it into a hub for life science startups.

Housing. The city offers a wide range of housing options at a personal level. There are relatively affordable houses for students and plenty of mansions for the wealthy. Paul Graham, the co-founder of Y Combinator, best explains why.

If a place has always been rich, it's nice but too expensive. If a place has always been poor, it's cheap but grim. But if a place was once rich and then got poor, you can find palaces for cheap. And that's what's bringing people here. When Pittsburgh was rich, a hundred years ago, the people who lived here built big solid buildings.

Public Transport. Public transport in Pittsburgh is underrated. If you live close to a bus stop, I would argue that a car is unnecessary and that an Uber or Lyft can replace the odd trip to somewhere not on the bus line. I will note that public transport is inaccessible to everyone (especially the locals). We will talk about this later.

Why biotech and biomanufacturing?

Biotechnology is a loosely used term to describe technologies that manipulate or understand biology. Some examples might include therapeutics that treat and manage disease or synthetic biology, where we design biology that does not naturally exist in nature. Artificial intelligence (AI) has played a major role in accelerating advances in biotech. Clinical studies and trials are already being conducted on blood tests that use AI to detect cancer and drugs that have been made more efficient and less toxic with AI.

Biomanufacturing is another subfield of biotech that uses biological systems to produce desirable materials. We have seen some incredible advances in this field. Lab-grown meat and fish products are beginning to reach consumers. We are now building airplanes using materials normally only seen in nature like spider silk, to manufacture stronger and lighter materials. And we have even been able to get yeast to produce a cancer drug that has been in shortage for years.

The White House has recognized the future importance of biotech and committed $1 billion to bioindustrial domestic manufacturing infrastructure. Even Pittsburgh is preparing for the biomanufacturing revolution, with significant investment in biomanufacturing facilities in Hazelwood Green and degree programs like the Masters of Automated Science at CMU to pre-emptively fill future labor shortages.

Also, unlike the software industry, where remote work has become the norm, biotech requires physical facilities for labs, storage, and scientists. These physical facilities require upkeep, and workers need transport to their jobs. Biotech creates jobs at all skill levels (scientists, technicians, cleaners, etc.), benefiting everyone in the city.

How can Pittsburgh become a biotech startup hub?

Let’s start by defining a thriving biotech ecosystem. These ecosystems look different depending on what type of biotech companies tend to cluster in a city. Still, regardless, every successful biotech ecosystem has strong research institutions, thriving biotech companies, and hospitals.

Strong research institutions. Strong research institutions serve two purposes in biotech ecosystems. Firstly, they are often where research that gets commercialized into biotech companies is first born. And second, they provide a talent pool that can be poached to work at local companies.

Biotech Companies. Biotech companies offer a skilled talent pool for new companies, typically requiring less training than university graduates. A critical mass of biotech companies is also essential for job security, as a steady supply of jobs prevents workers from leaving the city when they are laid off.

Hospitals. As mentioned earlier, hospitals in a city are extremely attractive to therapeutic and diagnostic firms where they can test and develop new drugs close to patients.

It is easy to recognize that Pittsburgh already has thriving hospitals and research institutions. We just seem to be missing companies. So how can Pittsburgh bridge this gap and become a biotech hub?

Let's turn our eyes to history. We currently have three internationally recognized biotech hubs in the US: Boston, San Francisco, and San Diego. Before becoming biotech hubs, they all had very strong research institutions. By studying the inflection point of each of these cities, we learn that they all got started in a similar way: scientists starting companies in their own cities.

As these pioneering biotech companies scaled, they inspired other scientists and researchers to start their own companies. Former employees of the successful larger companies eventually leave to found additional startups or work at the new companies. This cycle of new biotech company formation and retention of top talent created momentum for further growth, resulting in thriving local biotech ecosystems.

Boston. Boston is the biotech capital of the world. Like Pittsburgh, Boston has always had world-class academic institutions and hospitals. However, the beginning of the biotech scene in Boston is often credited to Genzyme which was a biotech company founded in 1981 that worked on treatments for rare genetic diseases. Genzyme's founders included George M. Whitesides (at the time, a professor at MIT) and Henry Blair (technician at Tufts Medical School). Out of pure convenience, Genzyme's first office was in an old clothing warehouse adjacent to Tufts Medical School. As Genzyme grew, it recruited local talent from MIT, Harvard, and Tufts Medical School.

San Francisco. Genentech in South San Francisco is credited with putting San Francisco on the map as a biotech hub. Established in 1976 by Robert Swanson (venture capitalist) and Herbert Boyer (professor at UCSF), Genentech commercialized genetic engineering technologies developed by Boyer. Again, the first employees were nearly exclusively recruited from UCSF and Stanford.

San Diego. The genesis of San Diego's thriving biotech ecosystem is also attributed to a company, Hybritech. Hybritech was founded in 1978 by a practicing physician (Ivor Royston) and professor (Howard Birndorf) at UC San Diego and is widely recognized as the first biotech in San Diego. Unlike the foundational biotech companies that came directly from a professor's own research, Hybritech was founded on a patent licensed from a lab in Cambridge, England. It was still set up in San Diego out of convenience to the founders though, and recruited many of its first hires from UC San Diego, Scripps, and the Salk Institute.

In each of these cases, biotech hubs were founded when top-quality researchers collaborated and started successful companies. In Pittsburgh, it seems everyone is waiting and hoping that a big biotech company will just magically move here. I believe that we are waiting for Godot.

The switching costs for biotech firms are incredibly high. Novartis didn’t move its labs from Basel; it bought thriving labs and scientists already in Boston. If a biotech company truly had the resources to move all of its operations to Pittsburgh, why would it choose Pittsburgh in favor of one of the established biotech hubs? Pittsburgh doesn’t have the experienced biotech talent that the other hubs have. Nearly all of our talent is in universities, which are basically inaccessible to outsiders.

Our startups need to come from within: from students and faculty who find it most convenient to start a company in Pittsburgh. They must be ingrained into the university ecosystem so they can readily poach talent, already have an established professional network in Pittsburgh, and, most importantly, call Pittsburgh home. Finding talent from within is way easier than forcing an outsider to find their kids a new school and their spouse a job in one of the limited industries that exist in Pittsburgh.

So, how can we inspire more researchers to commercialize their research?

Education & Professors. Changing culture begins with educating students that entrepreneurship is a possible and fulfilling career path. There is a stark difference between graduate students in Boston and Pittsburgh. Graduate students in Boston engage with the local community. They participate in fellowships with local venture firms and often pursue their graduate studies with the intention of starting a company. Most of this has to do with the city’s resources, which is partly why I started Nucleate Pittsburgh. But this is also partly the fault of a shocking number of closed-minded professors in Pittsburgh who restrict their graduate students to working only on research-related activities.

The North Star. There are an uncountable number of towering biotech startup buildings in South San Francisco and Boston that students aspire to own one day. In contrast, many of Pittsburgh’s buildings are owned by UPMC, which does not represent the same entrepreneurial spirit of Silicon Graphics or Microsoft (back in the early days). As one of our Nucleate Pittsburgh advisors, Liam, points out, we need a ‘north star’ in Pittsburgh. A startup that has chosen Pittsburgh as its headquarters is the place where talented young engineers and scientists aspire to work from around the world.

Jobs & Competition. When Pittsburghers lose their biotech jobs, they are often on the job market for months because there are fewer jobs than in other cities. Another problem that many Pittsburghers have spoken to me about are non-compete agreements.

Non-compete agreements are agreements that employees sign that prevent them from working with competitors within a predetermined geographical radius for a fixed period of time, normally six months to two years. Some jobs, particularly in biotech, are so specific that an industry-wide non-compete agreement can prevent individuals from finding work. For this very reason, states like California have banned this practice. IP can be protected in other forms, like non-disclosure agreements.

The City of Pittsburgh should consider following this practice if they wish to keep competitive workers in the city.

University Culture. Our universities are insular. They don’t have a culture where students are encouraged to build relationships with people in other cities, join communities outside their university, and develop a unique worldview. Instead, students are often swept away by big consulting and high-frequency trading firms before they have an opportunity to truly think about what they want to do. Don’t get me wrong, these institutions have brilliant minds, but one often can’t help but think about what these students wanted to do before they were enticed by high salaries and ‘prestige’ among their peers.

Founder Culture. Pittsburgh is too insular. Out of convenience, many founders will only try to raise money from investors in Pittsburgh. A couple of great investors here will join you on the front-lines. They often have the domain expertise to facilitate meaningful connections, can advise on strategy, and will think about you in their spare time. Most venture capitalists here, though, will act like private equity firms and just trade equity in exchange for money. Most are not well-connected outside of the midwest. This may be beneficial to a later-stage company that just needs additional capital to say, build factories. However, for an early-stage company, a bad investor will do more harm than good. We need more founders to think beyond the city when raising capital.

How can Pittsburgh do this sustainably?

As Pittsburgh prepares itself to undergo rapid economic growth, we need to learn from the mistakes of previous cities like San Francisco and ensure that all members of our community are prepared to make the most of new opportunities.

Accessible Public Transport. Many locals from Pittsburgh and surrounding suburbs seem to be satisfied with Pittsburgh’s public resources, particularly libraries, museums, galleries, and schools. While the public transport in Pittsburgh is effective among cities with dense populations, such as those around the universities, it does not effectively serve underserved communities further out from the city.

For example, Lincoln-Lemington-Belmar (LLB) is a hilly neighborhood adjacent to Highland Park. It is a food dessert, with corner stores and Family Dollar being the only places to get food. Buses only run close to a few suburban homes and many residents, like much of Pittsburgh, depend on public transport to get around. This ultimately forces many residents to walk arduous hills on cracked pavement to access fresh food. Should there be another boom in jobs in Pittsburgh, how are residents in underserved neighborhoods like LLB supposed to compete with workers in better-served neighborhoods with cars?

I acknowledge that there is much more to be done than improving public transport in Pittsburgh’s underserved communities, but public transport has little additional physical infrastructure (just bus stops) and can be implemented immediately. This will be essential to ensure all Pittsburghers have access to the growing number of jobs and all of Pittsburgh’s public resources.

Affordable housing. While rent here is certainly cheaper relative to established biotech hubs, Pittsburgh still suffers from a serious shortage of affordable housing. From Pittsburgh's population of 300,000, there are 84,398 extremely low income renter households (earning <30% of their area's median income) but only 40,812 affordable and available rental homes (2019).

Insufficient affordable housing forces our residents to make difficult decisions, forcing them to choose between essentials like insurance coverage or living close to career opportunities.

I’m optimistic that by investing in our people and community, Pittsburgh can learn from the missteps of other biotech hubs that were unable to prepare for such rapid economic growth. If we can equip our residents with the knowledge and resources to create and actively participate in new opportunities, we can pave a sustainable path forward where every Pittsburgher can share in the city’s progress.

It has already begun.

New top-quality biotech companies are already choosing Pittsburgh as their headquarters and convincing students to stay. Scientists are getting more excited about solving real-world problems with their research. Bold new organizations like Nucleate Pittsburgh will connect our world-class institutions and change the culture of our universities.

The industry is fundamentally capital-intensive and regulation-heavy, but the foundations have been laid for Pittsburgh to take the world stage once again, just as it did nearly two hundred years ago.