Santa Cruz County business: Biotech company acquired; Joby lands more Air Force funding

In a move signaling Santa Cruz County’s growing prominence as a hub for innovation, global immunology giant Argenx is acquiring Santa Cruz-based Unnatural Products for up to $1.145 billion. This acquisition, alongside continued funding for Joby Aviation from the U.S. Air Force, underscores the region’s burgeoning biotech and aerospace sectors and their increasing impact on national and international markets.

The Acquisitions and Their Significance

Argenx, a leading global immunology company, announced its intention to acquire Unnatural Products, a Santa Cruz-headquartered firm focused on developing treatments for rare cancers and diseases resistant to traditional therapies. The deal comprises $550 million upfront, with an additional $595 million contingent on achieving specific development and regulatory milestones.

Founded in 2017 by UC Santa Cruz alumni Cameron Pye and Joshua Schwochert, Unnatural Products has gained recognition for its innovative use of macrocyclic peptides – a newer form of medicine designed to be both potent and orally deliverable. Macrocyclic peptides are a newer kind of medicine designed to be as potent as injectable drugs, such as insulin, but simple enough to be swallowed as a pill. Argenx will acquire Unnatural Products for $550 million upfront, plus up to $595 million in contingent value rights tied to development and regulatory goals.

This acquisition is particularly significant for Santa Cruz County, which has been working to cultivate a thriving biotech ecosystem. While the region has long been known for its natural beauty and outdoor recreation opportunities, attracting and retaining high-tech companies has been a key priority for local leaders. The presence of UC Santa Cruz, with its strong science and engineering programs, provides a valuable talent pool for these companies. However, the high cost of living and limited infrastructure have also presented challenges. Argenx’s commitment to keeping Unnatural Products in Santa Cruz demonstrates the region’s appeal despite these hurdles and signals potential for further investment in the local biotech sector. It's likely to spur conversations about infrastructure improvements to support future growth and address concerns about affordable housing for the workforce.

Simultaneously, Joby Aviation, a Santa Cruz-based electric aviation company, has received additional funding from the U.S. Air Force's innovation arm, AFWERX. This brings the military organization’s total commitment to Joby to nearly $37 million. The Air Force’s innovation arm, AFWERX, has provided significant funding to Joby and other companies working in electric aviation technology in recent years as it seeks to transform its operations. Joby recently completed its first autonomous flight across the United States, with a Cessna Caravan equipped with Joby’s software. Joby continues to build on efforts to launch commercial passenger service for its electric air taxis, which are designed to carry a pilot and four passengers at speeds of up to 200 mph.

Joby’s presence in Santa Cruz County is also a significant economic driver, creating jobs and attracting investment. The company's commitment to sustainable aviation aligns with the region's environmental values. However, like any emerging technology, the widespread adoption of electric air taxis raises questions about noise pollution, air traffic management, and safety regulations.

Unnatural Products' Innovation and Impact

Unnatural Products has collaborated closely with pharmaceutical giants like Novartis and Merck, leveraging its AI-based technology to develop next-generation treatments. Their focus on macrocyclic peptides has positioned them as a frontrunner in the biotech industry, further solidified by a $45 million funding round earlier this year, including investments from Argenx and Merck Global Health Innovation fund. The acquisition by Argenx promises to accelerate the development and potential availability of these innovative treatments for patients facing rare and challenging diseases.

Macrocyclic peptides represent a promising new frontier in drug development. Traditional drug delivery often relies on injections, which can be inconvenient and costly. Orally delivered drugs, like pills, offer a more patient-friendly alternative. However, many potent drugs are not suitable for oral administration due to poor absorption or degradation in the digestive system. Macrocyclic peptides are designed to overcome these challenges, offering the potency of injectable drugs with the convenience of oral delivery. This innovation has the potential to significantly improve patient outcomes and reduce healthcare costs.

Community Reactions and Local Context

The acquisitions and funding announcements have generated significant excitement within the Santa Cruz County business community. Local leaders and residents view these developments as a testament to the region's growing reputation as a hub for innovation and technology. However, these changes also bring concerns regarding the potential impact on other local businesses, particularly given Santa Cruz County’s ongoing challenges with a high cost of living and a competitive job market. The recent closure of Straw Hat Pizza in Watsonville, a beloved local institution, serves as a stark reminder of the challenges faced by smaller businesses in the region.

The news of Unnatural Products' acquisition has sparked conversations about the importance of supporting local startups and fostering a vibrant entrepreneurial ecosystem. While large companies can provide significant resources and expertise, it’s crucial to ensure that smaller businesses have access to the capital and mentorship they need to succeed. The Santa Cruz County Chamber of Commerce and other local organizations play a vital role in providing these resources.

Looking Ahead: The Lookout List and Economic Partnerships

The launch of this year’s Lookout List aims to highlight the top businesses and organizations in the region, providing valuable resources for residents and supporting local enterprises. The first categories of winners started rolling out Monday and will continue through next week.

The Monterey Bay Economic Partnership (MBEP) is conducting a search for a new president and CEO to lead the organization into its next chapter, representing an opportunity to shape the region’s economic future. Regional nonprofit MBEP is seeking a new president and CEO to lead its next chapter. Kate Roberts, who served as the organization’s CEO from 2015 to 2021, is currently serving in an interim capacity. She took over from Tahra Goraya, who recently stepped down from the role for personal reasons.

Key Numbers and Recent Developments

Beyond the headline acquisitions, several other developments are shaping the local business landscape. Hotel occupancy rates in Santa Cruz County reached 74.1% in September, up from 67.2% a year earlier, with short-term rental occupancy also increasing significantly. Average daily room rates for both hotels and short-term rentals also rose, reflecting a robust tourism sector. However, September rates dipped slightly from the peak summer months, a typical seasonal trend. The recent opening of RC’s Filipino Asian Market in Capitola is a welcome addition to the community, offering a selection of Asian and Filipino groceries and fostering cultural exchange.

The retirement of Watsonville Airport Director Rayvon Williams after 15 years of service marks the end of an era, as he transitions from a career in aviation following years in the tech industry. His last day will be Dec. 30.

Marcus's Perspective: Navigating Growth and Ensuring Equity

The acquisition of Unnatural Products and the continued support for Joby Aviation represent significant milestones for Santa Cruz County’s biotech and aviation sectors. These developments not only bring substantial economic benefits but also reinforce the city’s reputation as a hub for innovation. However, as these companies expand, it is crucial for the community to engage in thoughtful discussions about the potential impacts on local residents and the environment. While growth can lead to job creation and economic opportunities, it’s vital to consider broader social and environmental implications.

It's imperative that the benefits of this growth are shared equitably across the community. This means investing in affordable housing, supporting workforce development programs, and ensuring that local businesses have access to the resources they need to thrive. Failing to address these issues could exacerbate existing inequalities and create a two-tiered economy, where the benefits of innovation are concentrated in the hands of a few.