HomeMy WebLinkAbout1994/08/23 Item 8
COUNCIL AGENDA STATEMENT
SUBMITTED BY:
Item g
Meeting Date 8/23/94
Resolution / 7 J,...2:J Accepting the Feasibility Study regarding a shared
biotechnical pilot manufacturing facility; authorizing payment to Nielsen Capital
Group, Inc.; and authorizing the Mayor and Mayor-Elect to sign a Letter of
Support for BioShare (\l
Director of Community Development f:JI'
City Manage~ ~~ (4/5ths Vote: Yes_No_KJ
ITEM TITLE:
REVIEWED BY:
BACKGROUND:
On February 4, 1994 Council approved an agreement with Nielsen Capital Group, Inc. for the preparation
of a feasibility study regarding a contract biotech pilot manufacturing facility within the new High
TechlBiotech Zone at the Eastlake Business Center. The study was intended to analyze the High
TechlBiotech Task Force's recommendation that the City act as a catalyst to the development of this type
of operation/facility in order to "seed" the Zone for tenant companies as well as "spin-off" full
manufacturing plants. The Study was approved in the amount of $18,500, with 50% to be paid up front
by Eastlake and the other 50% to be paid upon acceptance by the City.
RECOMMENDATION: That the Council accept the Feasibility Study regarding a contract biotech pilot
manufacturing facility; authorize final payment of $9,250 to Nielsen Capital Group, Inc.; and authorize
the Mayor and Mayor-Elect to sign the attached Letter of Support for BioShare (Attachment A).
BOARDS/COMMISSIONS RECOMMENDATION: Not applicable.
DISCUSSION:
Need for a Contract Pilot Manufacturing Facilitv/Business
The San Diego area currently is home to numerous biotech pharmaceutical R&D firms. Only 2-3 have
moved into pilot manufacturing at this time. However, it is anticipated that many R&D firms will be
moving into pilot manufacturing and ultimately full manufacturing in the next 3-10 years. A contract
pilot manufacturing facility could potentially meet the needs of biotech pharmaceuticals going into Phase
I and Phase II clinical trials (pilot manufacturing). Current options are limited to the development by
individual companies of dedicated (stand-alone) pilot manufacturing plants, which is extremelv costly, or
"outsourcing", i.e. leasing pilot manufacturing space from traditional pharmaceutical companies (who
typically take a chunk of the ownership) or from foreign "contract" facilities This preliminary study was
done to determine the feasibility of developing a facility at Eastlake that could be leased out ("contracted")
to save companies moving from R&D to pilot manufacturing from having to go into real estate
development, just to have to leave the pilot plant after a year or so and build another full, scaled-up
manufacturing facility. The Feasibility Study was to evaluate market demand, the proposed scope of
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Meeting Date 8/23/94
operations and services, alternative forms of organization and governance, and roles for the City and for
Eastlake, and to make preliminary recommendations regarding how the City should proceed.
Studv Findings
The study concludes that a two-suite "process development and bacterial fermentation" contract production
facility (with expansion potential) is conceptually feasible. All biotechnology companies must conduct
clinical trials before bringing products to market. Highly regulated and specialized facilities are needed
for such production; however, at the present time such resources have to be purpose-built, typically at
great expense. Critics argue that such large cash outlays are directly associated with the volatility
experienced in the biotechnology capital markets.
Currently, the domestic biotechnology industry consists of more than 1200 compames who have
approximately 270 products in various stages of clinical trials. This supports the premise that the
biotechnology industry is just now maturing to a point where demand to support a contract manufacturing
facility will be sufficient.
The West Coast is an ideal location for such a facility due to the fact that California is home to about
one-half of the nation's biotechnology companies. The Chula Vista location would allow access and
coordination to occur between the client companies' operations and the contract facility. Excellent
transportation by air and overland as well as the facility being in the same time zone as facilities currently
in operation in California, Oregon and Washington will be important to the productivity of such a
coordination effort.
Several key factors to the successful implementation ofthis project include, but are not limited to: a good
business plan, an uninterruptable supply of water, special-purpose centralized utilities, timely entitlements,
an experienced management team, attraction of financing, being first to market, expertise in essential
technical areas, and necessary features of the physical plant itself. The study finds that a BioShare-like
facility is "fundamental to the establishment of biotech manufacturing businesses in the High TechlBiotech
Zone", and that "the window of opportunity exists now and may close should a competing facility
be announced elsewhere in the Western United States."
Formation of BioShare CoroorationlLetter of Support
Nielsen Capital Group, Inc., its sub-consultants, Mr. John Tedesco of Amylin Pharmaceuticals and Mr.
Aron Stern of Protein Polymer Technologies, and others, including Nielsen Construction Company and
its affiliates, are in the process of forming a California corporation called "BioShare" to establish and fund
the proposed contract manufacturing business in the City's High TechIBiotech Zone. They have requested
that the City approve the attached Letter of Support indicating the City's intent to cooperate with
"Bioshare" in order to achieve certain goals (see Attachment A). The stated goals are consistent with the
City's High TechlBiotech Zone program, and by supporting this proposal, the City is recognizing not only
the talent and expertise brought to the BioShare project, but also the keen time sensitivity of the proposal.
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Meeting Date 8/23/94
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The City Attorney has reviewed the letter and finds it to be acceptable. He has also drafted a related
letter to Mr. Carlin clarifying the fact that the City is not committing to any specific obligations at this
time or to compensate BioShare for any future work (see Attachment B).
FISCAL IMPACT: The Feasibility Study contract is for a total of$18,500. Eastlake has paid the initial
50% or $9,250. Council is requested to authorize the $9,250 balance to be paid from the previously
encumbered FY 1993/94 Economic Development budget (Account 100-261-5201). Approval of the Letter
of Support will require significant staff time to assist with the items delineated, but no direct cost will
be incurred by the City. In the event that any of the items referenced are determined to have a direct fiscal
impact to the City, each such item would be brought forward to Council for advance approval.
ATTACHMENTS (2) . ~~\)
Attachment A - Letter of Support datcd 8/9/94 <CO ~~..... .
Attachment B - City Attorney letter dated Si{(6 ).
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RESOLUTION
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RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA ACCEPTING
THE FEASIBILITY STUDY REGARDING A SHARED BIOTECHNICAL PILOT
MANUFACTURING FACILITY, AUTHORIZING PAYMENT TO NIELSEN CAPITAL
GROUP, INC., AND AUTHORIZING THE MAYOR AND MAYOR-ELECT TO SIGN A
LETTER OF SUPPORT FOR BIOSHARE
WHEREAS, on February 4, 1994 the City Council approved an agreement with
Nielsen Capital Group, Inc., for the preparation of a Feasibility Study regarding a contract
biotech pilot manufacturing facility within the new High Tech/Biotech Zone at the EastLake
Business Center; and
WHEREAS, the Study analyzed the High Tech/BioTech Task Force's recommendation
that the City act as a catalyst to the development of this type of operation/facility in order to
"seed" the Zone for tenant companies as well as "spin-off" full manufacturing plans; and
WHEREAS, Nielsen Capital Group, Inc. has completed the Feasibility Study which
concluded that a two-suite "process development and bacterial fermentation" contract
production facility (with expansion potential) is conceptually feasible; and
WHEREAS, Nielsen Construction Company and its affiliates are in the process of
forming a California corporation called "BioShare" to establish and fund the proposed contract
manufacturing business in the City of Chula Vista's High Tech/BioTech Zone and have
requested a Letter of Support indicating the City's intent to cooperate in order to achieve
certain goals which are consistent with the High Tech/BioTech Zone Program; and
WHEREAS, the City Attorney has reviewed the Letter and finds it to be acceptable
and has prepared a letter to Nielsen Capital Group, Inc., clarifying the fact the City is not
committing to any specific obligations at this time or to compensate BioShare for any future
work.
NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF CHULA VISTA does hereby
find, order, determine and resolve:
1. That the City Council accepts the Feasibility Study regarding a shared
biotechnical pilot manufacturing facility prepared by Nielsen Capital Group, Inc.
2. That the City Council hereby authorizes payment to Nielsen Capital Group, Inc.,
for its portion of the Feasibility Study.
3. That the City Council hereby authorizes the Mayor and Mayor-Elect to sign the
Letter of Support for BioShare as submitted to Council for approval.
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Ai 0 ED AS Tf FO
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(Bruce M. Boogaard
City Attorney
BY:
PRESENTED BY:
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Chris Salomone
Community Development Director
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ATTACHMENT "A"
OFFICE OF THE MAYOR
TIM NADER
ON OF
-CHULA VISTA
August 9, 1994
Mr. Bruce Carlin
BioShare
clo Nielsen Capital Group, Inc.
P.O. Box 83848
San Diego, CA 92138-3848
Reference:
The City of Chula Vista's Support for BioShare
Dear Mr. Carlin:
In April of this year, the City of Chula Vista retained your services, as the principal of Nielsen Capital
Group, Inc., to advise the City regarding the feasibility of a shared or contract manufacturing facility for
the biotechnology industry. This facility would be located in the City's High Tech/Biotech Zone. Your
Feasibility Study report has been received and accepted by the City, and we understand from your research
that the proposed BioShare business appears to be feasible. Furthermore, you have indicated that you and
your sub-consultants and others, including Nielsen Construction Company and its affiliates, are in the process
of forming a California corporation called BioShare to establish and fund the proposed contract
manufacturing business in the City's High Tech/Biotech Zone.
We are pleased to inform you that the City Council has directed the undersigned to inform you, the other
co-founders of BioShare and your potential investors, clients and tenants that the City is in full support of
your efforts. In particular, pending our review of your business plan, the City intends to cooperate with
BioShare's efforts in order to achieve the following goals:
· To arrange for an uninterrupted supply of water to the contract manufacturing facility
and proximate dedicated biotech manufacturing facilities ("the Project") at reasonable
utility rates.
· To help arrange for specialized sewage treatroent and water reclamation facilities for
the Project.
· To arrange for the donation of approximately 6 acres of properly zoned and fully-
entitled land, by Eastlake Development Company, to BioShare for its use in
establishing the contract manufacturing business.
· To secure reservations from biotechnology company clients and sponsors for the
BioShare facility and services.
r.5
276 FOURTH AVENUE/CHULA VISTA. CALIFORNIA 919101(619) 691-5044
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BioShare
August 9, 1994
Page 2
· To gain financial and other support for BioShare from investors and State and Federal
government officials.
· To establish terms for an exclusive Agreement between BioShare and the City,
whereby the City would exclusively support, and not compete with, BioShare's
efforts to establish the BioShare contract manufacturing business within the City's
High Tech/Biotech Zone at the Eastlake Business Center, and BioShare would agree
to develop the project in accordance with City approved plans.
The City of Chula Vista looks forward to working closely with you and your associates to establish tl1is
remarkable business opportunity in our community.
Sincerely,
Tim Nader
Mayor
Shirley Horton
Mayor-Elect
TN:SHfCDfmd
[(MD)c:\wp51\document\38.94(rev. August 10, 1994)1
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CITY OF CHULA VISTA
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ATTACHMENT "B"
ON OF
CHUlA VISTA
COMMUNITY DEVELOPMENT DEPARTMENT
August 17, 1994
Mr. Bruce Carlin
Nielsen Capital Group, Inc.
P.O. Box 83848
San Diego, CA 92138-3848
Dear Mr. Carlin:
On August 9, 1994, Mayor Nader and Mayor-Elect Horton wrote to you to express the City's
continuing strong support of your efforts to develop a BioShare contract biotech pilot manufacturing
facility/business. As you know, however, many of the significant terms of the City's ongoing
relationship with BioShare remain undetermined. Accordingly, the purpose of this letter is to clarify
the extent of the City's legal commitment to BioShare at this time with respect to the development of
the BioShare project.
While the City fully intends to cooperate with BioShare to work towards the goals outlined in the
August 9, 1994 letter, the City at this point in time has undertaken no specific duties or obligations
to BioShare to compensate BioShare for any continuing work in its development of the project or to
otherwise work towards the achievement of such goals other than the good faith obligation to 1) take
all reasonable measures mutually agreed upon by the City and BioShare to achieve such goals; and 2)
to meet and confer with BioShare and Eastlake on an ongoing basis in order to attempt to finalize the
terms of the formal agreements necessary to fully implement the BioShare project. Such agreements
will include, among others, the terms for providing uninterrupted water to the facility, the terms for the
provision of specialized sewage treatment and water reclamation facilities, the terms for the donation
of 6 acres of land to the project and the terms upon which the City would enter into an exclusive
arrangement with BioShare for the development of the project. The City retains its sole and unfettered
discretion in determining whether or not to approve any or all of such agreements.
Based upon the above understanding, the August 9 letter should not be submitted to any prospective
tenants, lenders or investors as evidence of the City's final commitment on any of these matters. In
the event that the letter is so submitted, BioShare and its principals shall be obligated to indemnify and
hold the City harmless from and against any and all third party claims against the City arising from such
submittal. If the terms of this letter are agreeable to you please execute the enclosed copy, where
indicated, and return to my attention.
Sincerely,
Bruce M. Boogaard
City Attorney
Approved and Agreed:
Bruce Carlin
IMDIC:IWP51IDDCUMENTI39.941
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276 FOURTH AVE/CHULA VISTA. CALIFORNIA 91910/(619) 691 5047