'Perhaps The Opportunity Is Gone': DFW's Life Sciences Market Is Emerging, But Some Say Domination Is Unlikely

Venture capital has begun to flow into Dallas-Fort Worth’s life sciences market, but some experts say a lack of executive talent could prevent the region from ever being on par with the Bostons and San Franciscos of the world.

Categorized by JLL in April 2021 as an emerging market, DFW celebrated a pivotal milestone with the March opening of Pegasus Park, a 23-acre biotech campus. Its inaugural tenant, life sciences coworking concept BioLabs, debuted its first noncoastal location in the park, signaling another major win for the region.

“No doubt about it, the accelerator took place with the creation of Pegasus Park,” said Tom Luce, CEO of biotech initiatives at Lyda Hill Philanthropies, one of the developers behind the park. “The opening in March and planning of that over the last couple of years really gave a boost to the entire market.”

The Metroplex has some advantages over its coastal competitors, including its business-friendly policies and relatively low cost of living. The region has historically been dominated by pharmaceutical, optical and medical device manufacturing businesses, with a total of 1,167 establishments and close to 27,000 jobs, according to estimates from the Dallas Regional Chamber.

But where it has failed to compete is in attracting the kind of big-name player that would catalyze more activity in the region, said Hua Tu, chief technology officer for MEDNA Scientific Inc., a biotech company based in Irving. 

“The most important factor is top talent,” he said. “Do you have the Steve Jobs here? Do you have the Elon Musk here? You can have a bunch of technical people, but technical people don’t put companies together.”

Labor pool growth in secondary life sciences markets — which include DFW — increased by 16% between 2016 and 2021, according to a new report from Cushman & Wakefield. This bodes well for real estate growth, but Tu said keeping postgrads local is not enough to catalyze the industry — the Metroplex needs a bigger pool of executive talent to truly level up.

“You need people with experience,” he said. “I didn’t start my first company until I spent 11 years at Amgen. From my perspective, a fresh Ph.D. is a trainee at best — you can’t count on them to start companies.”

Regional universities have invested billions into research in recent years, but many of the companies that grew from those endeavors ended up elsewhere. The presence of incubators like Biolabs equips researchers with the lab space needed to do proof-of-concept testing locally, Site Director Gabby Everett said.

“Previously, companies that were spinning out of UT Southwestern or any of the major universities had to decide what's next for them … they had to go someplace else,” she said. “They had to go to the coasts, they had to go to Boston, they had to go to San Francisco. Now they can come to their own backyard.”

North Texas has managed to nab some big names, including pharmaceutical distributor McKesson Corp., which moved its headquarters from California to Irving in 2019. But it has also seen several homegrown companies, including Peloton Therapeutics and Instill Bio, leave the Metroplex in search of more robust ecosystems and better access to venture capital. 

One of the goals of Pegasus Park is to encourage more investment in life sciences. Despite a wealth of available capital in DFW, Luce said biotech and life sciences are often passed over in favor of other areas, such as industrial real estate. 

“We’ve got the capital, but what has been lacking is experienced investors in the area,” he said. “Bio-life sciences requires patient capital — it’s high-risk, high-reward capital. But Texas invests in oil and gas all the time, and that’s high-risk, high-reward as well.”

Between 2020 and 2021, $86.3B was invested into North American biotech companies, surpassing the combined total between 2016 and 2019 of $82.3B, according to Cushman & Wakefield. The top markets for life sciences venture capital investment in 2021 were the same as the year prior — Boston, San Francisco Bay Area, San Diego and New York City — accounting for $41.3B, per the data.

Investment in North Texas life sciences is showing improvement year-over-year but still pales in comparison to coastal figures. Between January and March 2021, companies in the region attracted $310M, up 376% from the same period a year prior, according to the Dallas Morning News. At the midpoint of last year, Irving-based Caris Life Sciences received $830M in private equity backing. 

One Dallas-based private equity firm ramping up its investment in life sciences is real estate fund manager Velocis. Co-founder and partner Mike Lewis said the pandemic put a spotlight on the importance of biotech, and he expects investment volume to take off as a result.

“Each one of the sectors that apply to the categories of medical or life science has a pretty respectable growth rate, and I really just don’t see that declining because there’s such a need,” he said. “We expect this to be a nice piece of our portfolio in the future.” 

Today, Tu said it's a no-brainer for entrepreneurs to set up shop in Boston or San Francisco, but there are plenty of upsides to DFW that could bring them here. Rather than relying on economic development directors and real estate executives to form a convincing narrative, local biotech executives need to do a better job of shedding light on those benefits, he added. 

“It’s one thing for people to talk about how great Dallas is, but let’s put that into a strategy,” Tu said. “You can test that strategy by pitching to the entrepreneurs in Boston and saying, ‘This is the story of Dallas, would you come?’”

Tu remains bullish on DFW — he himself opened a third location of his former company, LakePharma Inc., in Irving in 2019. But he scoffs at the notion that the Metroplex is on its way to becoming the next biotech hub. Instead of trying to one-up the well-established premier markets, he said the region should broaden its focus from biotech to health tech in general.

“The biotech hubs of the world or of this nation have kind of already been taken — perhaps the opportunity is gone,” he said. “Let’s be clear: We are not going to be Boston. That’s not going to happen.”