Looking at the Life Sciences Industry in South CarolinaFeb 01, 2024 10:15AM ● By Donna Isbell Walker
(Photo by Tim Ford/Power Suit Portraits)
In recent years, South Carolina has become a hub of sorts for the life sciences and biotech industries. The Palmetto State has more than 1,000 companies – large and small, established and startup – that are making an impact on the local community and the world at large.
Integrated Media Publishing hosted a roundtable discussion with four of the leaders in the biotech world on Jan. 4, 2024.
Here are excerpts from that conversation, edited for brevity and clarity.
The panelists were:
Scott Pancoast, founder and CEO of Zylo Therapeutics
Herb Dew, CEO of HTI
David Stefanich, founder and CEO of Rymedi
Christopher Hanson, attorney with Nelson Mullins
Integrated Media Publishing Editor David Dykes moderated the discussion.
Q. The life sciences industry has been growing. The annual economic impact on South Carolina exceeds $25.7 billion in economic output. So how has South Carolina become a leader in the industry?
David Stefanich: We've got therapeutic development staffing ability and ability to attract great talent. … We've tripled our workforce in the last 12 months, finished our Series A, and we're able to bring not just a great location, but a great opportunity to grow and diversify their life science careers across the entire state. And that's what we found in the area, the collaboration between different organizations. We continually call each other and if there's great talent that's looking for a new opportunity. I have a Rolodex full of great companies that I'll make that reference to. We're able to keep them in the state and continue to grow our market.
Scott Pancoast: We might be a leader in terms of the growth percentage, but that was from a very low base when you compare. We’re never going to be a Boston or Philly, New York, New Jersey, or Bay Area type. Even North Carolina. North Carolina had a big head start. … It is a business environment in South Carolina that has kind of encouraged new growth of startups, and it's an ecosystem. And we've got to continue to recognize that that is what has boosted the growth of all these startups. It's not just the life science vertical, the software vertical and other verticals as well. SCRA (South Carolina Research Authority) comes to mind – they've been wonderful in providing that kind of initial boost for startups across all sectors. You've got VentureSouth, one of the leading angel (investment) group consortiums in the nation. They're now, I don't know, (in) 15 different cities across four or five different states, and they provide help, provide that next tier of funding for these startups. You've (also) got the South Carolina angel tax credit.
Herb Dew: We work across nine states, HTI does. Last year we placed 35,000 people across the Southeast. We had the highest increase in life sciences placement by an exponential number. I think the state of South Carolina does a great job of connecting industry groups to the schools and the schools being responsive to go ahead and build the programs that are needed to attract more employers here. And I think if we keep doing that, it's an advantage that I see when I compare us to Tennessee and to Georgia and even to North Carolina. That closeness we have between the state government, industry organizations like SCbio, working with Midlands Tech, working with Greenville Tech and making sure the programs are there to go ahead and be able to attract the employees that these new companies … are looking for. Because I think what's happening is they're beginning to flow out of high-cost areas where the cost of labor to make their product is just too much. So, we have an advantage in South Carolina. If we keep tapping that advantage, we're going to continue to have, I think, a real good growth and compete well with North Carolina and Georgia.
Christopher Hanson: You mentioned that we're a small state, but I think that's actually to our advantage. It's a very collaborative community in South Carolina, and people work across the state. So, it's very easy to do day meetings. It's very easy to get together and not be siloed in our respective cities. There’s so much going on in Greenville right now, but at the same time, we're very interactive with Columbia and with Charleston as well on what's going on in the life sciences there. I would also say that what's great for the life sciences companies that are located here is that they can actually get the consultants, the service providers that they need in-state. They don't have to go to the FDA regulatory counsel in Washington, D.C. They don't have to get government contract support in Washington, D.C. They have the whole ecosystem right here in their backyard. … I think our technical college system and our universities, the strength of not just Clemson and USC, but we have so many private universities throughout the state as well that really are dedicated to the life sciences and participating in that overall ecosystem. … It's a very close-knit, and I would say incredibly welcoming community.
Q. At last year’s SCbio annual conference, one speaker said, capital is harder to come by for startups in South Carolina, washing out some of the exuberance here. What can be done to attract investors and create more partnerships in the industry?
Stefanich: I will say people are surprised by what we do offer here, as well as the diversification not just of the workforce, as well as the companies, but also the supporting infrastructure.
Pancoast: It is a bit of an issue, but it is
improving. … We mentioned the draw of Greenville and South Carolina was strong
enough to pull in a fellow named Cliff Holtkamp, whose fund is called
Cultivation Capital, and that was a good thing. Again, we haven't mentioned
just the wonderful state of South Carolina in terms of its weather. The traffic
isn't too bad, at least compared to a lot of these places like Atlanta, Boston,
L.A., San Diego, the Bay Area. We have mild winters, we have four seasons. …
Those things do help. But we do need more attraction of that capital to get
these later rounds. I'm talking about startups now. So, there's two ways to
develop the business, right, startups, and then attracting established
companies and divisions to South Carolina. ... We've come a long way, but we
still have some ways to go.
Hanson: I want to echo something that Scott said earlier as well, about the political infrastructure in the state. The life sciences industry is incredibly well supported by the governor and the lieutenant governor, as well as our U. S. senators. And their acknowledgement of the growth of this industry and their emphasis on making this a business-friendly state is so important. And we're seeing that right now that not all states are creating atmospheres like that. And that's why you're seeing folks relocate to South Carolina.
Dew: I can't speak to the venture capital aspect of that, but I can say that over the last two or three years … the amount of life sciences companies that have begun to look at us as a legitimate place to land as an established business has gone up a lot. And so, I would say over the last two years, probably a third of the time, I'm dealing with a company that's a life sciences company that's looking at the state and looking at all the things that we have to offer as a state, and we're winning a lot of those now. … I think we're positioning ourselves well to be successful there.
Q. Now, each of you just mentioned other states, and
then there was a recent announcement that the US Department of Commerce's
National Institute of Standards and Technology awarded nearly $3 million to 15
small businesses in nine states under the Small Business Innovation research
program. No South Carolina firms were mentioned. We've talked about New York,
New York, North Carolina, California, Texas, but then places like Arizona,
Rhode island and Virginia. What does that say about South Carolina?
Pancoast: There's a whole universe of grants, federal grants, which trump the state level grants by a huge, you know, that is fairly small in the overall scheme of things. And I did a little bit of research on NIH (National Institutes of Health) grants. So, NIH probably, I don't know what the budget is for grants, but it's in the tens of billions of dollars per year of grants. … Massachusetts is far and away the No. 1 grant recipient on a per capita basis. So, it's 1,040 per million residents. No. 2 is 400. That's New York. We are 127. … That puts us right in the middle. Again, my guess is 20 years ago, we were in the latter third of this type of analysis. So, we're getting there. But our competition, Tennessee, is well above us. North Carolina is way above us. Alabama and Georgia are a little bit ahead of us, but we're on the even keel with Texas and Kentucky and Louisiana. We are ahead of Florida, Mississippi and Arkansas. So we're kind of in the middle of our competition, our competition being, I think, the other Southeastern states. … But (for) a lot of the companies, this is how they start. They start with an idea from a university or research hospital or medical center with a grant, and then from a grant they get a phase two grant, which is usually a million and a half or so … to advance the project, and then someone decides to start a business. And it's no small wonder that Boston is the life science capital of the world by far, and they're well ahead of this.
Stefanich: SCbio has a very tight relationship with MassBio. Kendalle (Burlin O'Connell) and her team, who's the CEO of MassBio, have come down and helped SCbio really start adopting best in class practices. And in two ways it's manifesting itself. There's an Edge program now where the participants in MassBio actually have a channel by which they can bring their goods to the population, and there's a way for a percentage of revenue to help build the organization. SCbio has actually adopted the same Edge program. Thermo Fisher is now selling through SCbio to the Nephrons of the world. … The second thing we're doing is we just set up an incubator program that MassBio has done several times. They're helping us.
Hanson: I would say that, again, one of our strengths is the ecosystem, where you can consider South Carolina to be a one-stop shop. And recently we had Everglade Consulting set up shop in Charleston, South Carolina, and they help companies apply for government funding, government contracts, and then help with compliance. … This is a rather new addition to the ecosystem, (but) I think it's only going to increase the visibility that we'll see in South Carolina. Companies doing more in the government contracting space, getting more government grants, government funding. This is a very rich opportunity, and again, that you can find these sorts of experts right in your backyard in South Carolina, and you don't have to pay DC rates for your consultants and your attorneys.
Q. The life sciences industry in South Carolina, like many industries here, has a workforce dilemma. Is there an urgency to build and retain talent? And if so, what can be done to create those strategies and build connections between industry and educational institutions to elevate the workforce.
Dew: It's a great question. I think it's the thing
across, really, our whole country that we're dealing with (is a) labor
shortage. What's interesting is I was looking at the stats here in South
Carolina. I think we've grown 42 percent over the last three years. In the life
sciences space, the average wage in South Carolina is 47, 48, 49,000 (dollars).
In the life sciences space, it's 78, 79, 80,000. … I think what we have to do
is we have to keep working on connecting high schools to tech schools or four-year
colleges to employers. And I think there's a lot of good work being done there.
I think we're still behind automotive and some of the other industries that
have been established here for a while. … I think we're the most nimble state
in the Southeast, South Carolina is. I think we're so well connected. Government,
counties, economic development, the tech schools, the industry. And then I
think what we have to do is just continue to build on that, because I think
that's going to be the issue. The labor shortage. I mean, we have a 3.6 percent
unemployment rate, participation down 10 percent. So, we have an effective
unemployment rate right now of 3, probably 3.1. And so for us to attract new
companies into the area, we're going to have to be able to show them we can get
the labor you need and understand that when you begin getting into the life
sciences space, attention to detail, understanding documentation, understanding
FDA regulations and how important that is, that's going to be part of our
training. … I think we've started that, but I think we still have a lot of work
to do there in the state.
Q. How far behind do you think it is?
Dew: You know, I think we probably have a year and a half, two years. I mean, if you look at Massachusetts, we're way behind, but if you start looking at North Carolina, Georgia, some of those states, I think we're not far behind. And I think we're far more nimble than those states. I mean, I do a lot of work in all those states I just mentioned, and South Carolina by far is the best about being able to just adjust and put a program in place and run at it.
Stefanich: A great point. The shift of the economic vision of what the state is. Yes. Rymedi had a discussion with GDAC on economic impact. (I said) 32 hires in a tech company has a greater economic impact than the same 32 hires in a manufacturing company. No question, understanding that an equivalent unit is not an equivalent unit when it comes to placing individuals right for us. We've also found the changing of the way individuals that want to come work in the life science industry. In the old days, it was, I'm a slave to many, a master of none. Now you're a master of many, not limited by one. So, for myself, I have a degree in chemistry, software engineering, and that's why I can be running a life science company. … In Greenville, my challenge is turnover. It takes me six, nine months to get an employee up to speed in a very complex ecosystem that we have.
Hanson: South Carolina, we also have to have a very diverse workforce. We don't want to just be life sciences manufacturing. We also want to be life sciences research and development headquarters. We have wonderful technical colleges, again, as I said earlier, that through SCbio programs that have been sponsored, such as Nephron, they're preparing the workforce for those manufacturing jobs. But you also have programs out of Clemson and at USC that are really focused more on the regulatory, the quality, the (research and development) aspects that you need for life sciences companies. And so there's new master's programs at Clemson, for example, that train students for regulatory type jobs in the life sciences industry. And we need that sort of specialized knowledge, specialized talent in the state if we want to be more than just manufacturing here.
Pancoast: And we have found that sometimes, especially in the higher levels of the organization, there is not a ready and available pool of talent in the Greenville area, nor in the South Carolina area. When you're talking about drug development expertise, those people are mostly in the Research Triangle (of North Carolina), Boston and California. The good news is I have been seven out of seven in attracting people from out of state because of what South Carolina offers. And it's the mountains, it's the ocean, it's the great lakes, it's the great weather, and the lower cost of living. So that's something else that needs to be kept in mind. We have to keep doing it till we eventually have our own pool of talent available here.
Q. What one thing do you wish, from your perspective, that the public and or private sectors should have done differently?
Dew: One of the things I hear all the time when a
company's looking at South Carolina is they're concerned about bioengineers or
chemists or some higher-level disciplines. And I think if we could go ahead and
have an institution that would really take the lead, I think. I was looking at
a study the other day that our highest level MUSC is like 58th in
the country. So, we don't have anybody in the top 50 developing some of that
talent that we need to be on the R&D side. So I would say maybe that is
that we really make an investment here in the state to get some of the higher-level
people trained and educated and out the door, that would be attractive to these
guys, rather than us always having to go out and sort of cherry-pick people
from another region and bring them down here to South Carolina.
So I would say maybe an investment in higher education to go ahead and really focus on this the way we did with automotive back about six or seven years ago or 10 years ago.
Pancoast: Yeah, I'm not sure I have a great answer to this. I can nitpick the angel tax credit, and I am doing that in cooperation with SCRA because it's not executed well. It's a great idea, but it's up to 35 percent. An investor doesn't like uncertainty, and some years it's 19 percent, some years it's 35 percent. So, make it a fixed number, 25 percent, and over time you'll be equal, but it'll be a known number. I think the state should not lose sight of where they are with respect to our close competitors, North Carolina and Georgia and Tennessee, in the tax rate. Our state tax rate is now starting to look a little bit high because some of these other governors and state legislatures have lowered their taxes in our surrounding states. So, we're now, believe it or not, on the high end with respect to the state tax rate, which caps, I think, at 6 percent.
Stefanich: Understanding where the economic development and where the revenue base is going to be in the future and around the corner, start it now. Start understanding where those things are. … Without an economic base and a business climate to support it, the growth will stagnate because you can only take a destination so far. … I'd love for some of the economic development individuals that are driving things throughout the state, realizing what we are today is great. What we want to be tomorrow, maybe the message has to change.
Q. This has been a great discussion, and I'd like to end with each of you giving a wrap up of where you would like to see South Carolina in the next five to 10 years. What you think is achievable.
Dew: I would like to see a continuation of the communication and the blending across all the parties that make us successful keeping South Carolina low tax and open to new business. I think having the communication between the legislature and the economic development groups, as well as sort of the industry sectors that speak for the various industries. So, I think if we just stay nimble and communicate well, I think we have a lot to sell in South Carolina for companies looking at us.
Pancoast: I agree. It's been a nice trajectory, and I think it's important to realize what were the root causes of the trajectory upwards. There's always a balancing of infrastructure and traffic and all that type of thing that happens, sometimes at the federal level, sometimes state level, sometimes at the local level. I would caution, I've seen this in cities everywhere I've lived … whenever there's an explosion of sorts, it's a slow-motion explosion, but of population. Local governments want to control pricing. Think of affordability. I hear that all the time from our local government. I don't believe governments should intervene into things like pricing. … But you can't have it both ways. You can't have what I think is the most charming city in the United States called Greenville and try to control the pricing. And if you do that, you'll end up with unintended consequences. So, I would caution all of our politicians to take Econ 101 and learn that you can't control pricing.
Stefanich: From our perspective, we believe that we moved the company here. South Carolina is uniquely positioned to become a center of excellence in life science, and that's a very broad umbrella. The research capabilities that are available and being developed in South Carolina can be that center of excellence across the Southeast. … It's more than just, I want to come see Greenville mimic it. I want to know how we're building a life science community. And I also encourage the state many times, it's not about how do we become (Research Triangle), how do we become Boston. Let them be them. Know what we do, be us. And the collaborative ecosystem, the research, the bioengineering programs coming out of our universities, they're second to none.
Hanson: I moved here 2½ years ago, and I'm
exceedingly encouraged at the pace of growth of life sciences. As Scott
mentioned earlier, there is a fast trajectory of the life sciences. We started
small, but we're quickly growing. And what I'm most encouraged by is that,
again, it's not just manufacturing. We're seeing companies move their
headquarters here. We're seeing R&D jobs stay in South Carolina. And that
is going to be incredibly important to see the life sciences actually thrive
here. One prediction that I think for the next five to 10 years for life
sciences is, I do think that it's going to continue to unify rural and urban
counties in the state. And that's something that I am very encouraged that
SCbio puts a very important emphasis on, that this isn't just the four counties
with the four largest populations in the state. This is an entire state
approach. … It's bringing everyone together. And whether that's hosting a
conference on health facilities throughout the state or trying to locate new manufacturing
facilities in a more rural county and provide a base of employment there, I
think that the life sciences industry is truly unifying the state, and that
urban-rural divide of health disparities and economic opportunities, I hope
will continue to shrink.