When Coppell’s ZS Pharma went public last year with a $100 million stock offering, it was hailed as a milestone moment, the first IPO for a Texas biotech startup in more than a decade. In a year’s time, the stock price doubled, boosting the company’s value well above $1 billion. Investors are betting that the FDA will approve the company’s debut drug, ZS-9, designed to battle hyperkalemia and control dangerously high potassium levels. If all goes as planned, the drug will be on the market sometime next year.
But ZS Pharma, launched out of the Tech Fort Worth business incubator with funding from the state’s Emerging Technology Fund, is no longer a Texas company. Earlier this year, it quietly shifted its corporate headquarters to northern California.
ZS Pharma’s story depicts both the promise and the challenge of growing a biotech industry in North Texas. New technologies are fueling a biotech boom nationwide, with development underway on drugs targeting diseases such as cancer and Alzheimer’s. According to a recent report by EY, U.S. biotech companies raised a record $54.3 billion in capital last year and generated nearly $15 billion in profits.
The industry, with its well-paying jobs, is concentrated in San Francisco and Boston. But North Texas, known more as the home to oil titans and major airlines, has its share. According to Kay Tieman, co-founder of BioNorthTX, a new regional nonprofit trade association dedicated to supporting and promoting the industry, there are more than 200 life science (biotech, medical device, R&D, manufacturing) companies in North Texas, and around 1,200 regional firms engaged in the industry overall. “I think we’re kind of a sleeping giant,” she says.
Money and scientific research are critical ingredients for nurturing biotech companies, and North Texas has both. The region boasts strong academic institutions like UT Southwestern in Dallas and the UNT Health Science Center in Fort Worth, Tieman says, as well as rich investment resources from angel networks to private equity to individual wealth.
And there are some big players. At eye-care giant Alcon Labs, the region’s biggest pharma company with about 5,000 employees at its Fort Worth campus, President and Global Head Jeff George is pushing innovation. Last year, in a novel collaboration, the Novartis unit formed a venture with Google to develop a “smart” contact lens with the ability to monitor glucose levels for diabetics. Prototypes are in the early stage of development.
A mix of money, science, and connections helped make ZS Pharma a major success story. Co-founders Al Guillem and Jeff Keyser previously worked in Fort Worth for Adams Laboratories, the maker of Mucinex. They were lured back from Indiana to launch ZS Pharma by one of their old competitors—Darlene Boudreaux, former head of generic drugmaker PharmaFab who’s now executive director at Tech Fort Worth. “I’m not sure how much love there was between us at the time, but we knew she was now at an incubator and it was good to have a pharma executive we could work with,” Guillem recalled during a speech in Fort Worth.
Through Tech Fort Worth, ZS Pharma gained access to labs at UNTHSC, where initial animal studies were done. Boudreaux’s staff helped land the state grant, which laid the groundwork for more studies and the eventual IPO.
So why the move to Redwood City, California? Once again, connections.
Robert Alexander, the company’s CEO, says it was a “purely pragmatic decision.” A former executive with Alta Partners, a venture capital firm that invested in ZS Pharma, he joined the company in 2013 and started building the executive team. As he tapped into his broad network of contacts in San Francisco, he decided to set up shop out there.
“So many of these companies are in the Bay Area,” he said in a telephone interview. “There are more people to choose from.”
Coppell remains the best place for the manufacturing operation, however. ZS Pharma has about 80 employees in Coppell under Guillem’s direction, and the workforce will likely grow to 125 within 18 to 24 months.
“That type of facility is much more economical to build in the Dallas-Fort Worth area,” Alexander says, citing lower costs and its proximity to DFW International Airport.
So even without the headquarters, ZS Pharma remains a big positive in North Texas. And this is how you build a biotech industry—one company at a time.