Where Med Device Fits Into the Life-Sciences Puzzle

Hundley: “There are some big med-devices players in the market now, and it will be telling to see where they end up.”

SAN DIEGO—With approximately 300 companies and 12,000 employees in the medical-device field here, the segment is vibrant in San Diego, CBRE ‘s life-sciences expert John Hundley tells GlobeSt.com. According to a recent market report from the firm, medical-device investment led all industry types in Q1 with $95 million in VC investment, the most since Q2 2009, which was also the last time it exceeded biotech investment in San Diego. In addition, San Diego represented 18.7% of all medical-device deals in the US in Q1. We spoke exclusively with Hundley about where these companies are located, the type of space they need and how they fit into the life-sciences puzzle here. GlobeSt.com: How much of the San Diego market does medical devices cover? Hundley: The med-device segment is vibrant in San Diego. There are approximately 300 companies and 12,000 employees. The market comprises companies of all stages; we have notable mature companies like NuVasive and ResMed , middle-market companies like Dexcom as well as earlier-stage innovative leaders like Sea Spine and Viacyte . From my research and knowledge of the market, I believe the segment occupies between 5.5 million square feet and 6.5 million square feet. GlobeSt.com: Where are these companies located? Hundley: Relative to geographic location, med-device companies are scattered. Quantitatively, according to our stats, approximately 40% of leased square footage in large (10,000-square-foot-plus) medical-device deals are in Sorrento Mesa, followed by 20% in Carlsbad, 9% in Scripps Ranch, 9% in Vista and 5% in Torrey Pines. San Diego also has some large owner/user med-device companies like ResMed with 230,000 square feet in Kearny Mesa. Site selection is being driven by a variety of factors, but in most instances location is intimately linked to business strategy and the function of the particular site. Companies may make location decisions based on centrality to their labor pool, economic incentives, real estate economics, CEO and the executive-team residences as well as proximity to hospitals where their devices are being utilized in surgical procedures. In an increasingly tight industrial and R&D market like ours is in now, a company may be forced to make those decisions purely on availability. We take pride in helping a client proactively connect their business strategy to real estate so that the latter results in a true 360-degree business advantage. There are some big med-devices players in the market now, and it will be telling to see where they end up. GlobeSt.com: What type of space do they need in terms of size, amenities, etc.? Hundley: Med-device companies need a combination of different types of spaces. For example, they will need office space, R&D lab space, clean-room space, manufacturing and warehouse/distribution space. How they strategically aggregate or bifurcate their real estate strategy around these different functions is unique to each company, and in most instances subject to the maturity of the company. By way of example, Dexcom is a very innovative company that we track closely, and they have all of those functions here in Sorrento Mesa. They recently bifurcated a manufacturing function to help expedite their scale up in support of their rapid growth. GlobeSt.com: Anything else our readers should know about this sector? Hundley: I am fascinated by, and I think readers should pay attention to, the companies that are crossing over and bringing together a biologic therapy together with a device. Two very different companies doing very innovative cool stuff are NuVasive and ViaCyte. NuVasive is not only innovating around minimally invasive surgical products, but it is also integrating biologics to speed regeneration (and building a portfolio of biologics to do so). Viacyte is aiming at a cure for Type 1 diabetes, and it is utilizing an implantable device with an integrated, multi-step, stem-cell therapy. Both companies are at different stages in the life cycle of their companies, both are crossing over and integrating biologics, both are innovating and both are doing very meaningful work with a crystal-clear focus on the improvement of patients’ lives. This is cool stuff.