Marcos Bretón

Marcos Breton: Should Silicon Valley be worried about Sacramento’s charms?

Mayor Kevin Johnson’s last State of the City address

The mayor gave his last State of the City address to a packed auditorium at the Crest Theatre, January 27, 2016.
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The mayor gave his last State of the City address to a packed auditorium at the Crest Theatre, January 27, 2016.

If a Chinese biomedical firm chose to locate its new U.S. headquarters in Silicon Valley with a goal of hiring 250 employees in two years, it would hardly be news.

But in Sacramento, where the economy is still fragile and where high-end jobs remain too scarce, it is. That’s why Mayor Kevin Johnson recently bounded out of his chair and hugged Chris Yu, CEO of Shanghai-based AnPac Bio-Medical Co., after Yu told Johnson that he was bringing his early-cancer screening and detection technology firm to Sacramento.

“In China, people don’t hug each other (when closing a business deal),” said Yu, 57, while laughing heartily.

A physicist by trade, Yu had been looking at Silicon Valley to set up shop, hire employees and start the process of gaining FDA approval for his technology – machines designed to analyze simple blood samples and identify different cancers in their early stages.

Yu knew almost nothing about Sacramento except that the state Capitol was here. “And I had heard about the Gold Rush, but I didn’t know much else Sacramento or what it was about,” he said.

Johnson led a group of business leaders and CEOs from four locally based medical groups that steered Yu away from Silicon Valley and to Sacramento. They pitched Sacramento as a gracious place that was far less expensive than Silicon Valley. They touted Sacramento as the region with a built-in potential employee pool featuring graduates from UC Davis, Sacramento State and Los Rios community colleges. They demonstrated how major hospital groups – Dignity Health, Sutter Health, Kaiser Permanente and UC Davis – were eager to support cancer research.

Soon, Yu was sitting courtside at a Kings game with Johnson. And on Jan. 28, Yu was in his conservative gray suit, smiling and sharing the stage with Johnson, as the band Hip Service belted out pop tunes at the conclusion of Johnson’s eighth and last State of the City address. Johnson had saved the news about AnPac’s move to Sacramento for near the end of an emotional address in front of a packed and cheering house at the Crest Theatre.

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In contrast to the reception Yu might have gotten in Silicon Valley, Johnson framed the arrival of Yu’s company as a watershed moment for Sacramento. “We can’t just be a city for basketball fans, government officials and tech giants,” Johnson said. “We also have to be a city for families, college students and young professionals.”

Yu will be looking to hire engineers and scientists out of Sacramento-area universities to grow his company in the United States. Eventually, the goal would be to establish a research and development operation that would hire even more local talent.

He hopes to take his company public with an IPO by the end of 2017. The success of that IPO hinges on a blood test that could become part of a normal screening during a physical, if his technology is approved by the FDA. The approval process could take up to two years. If all goes according to plan, Yu would be at the forefront of cancer innovation.

The holy grail of cancer research is developing more methods to detect cancers in their early stages. That gives patients a greater fighting chance of survival and maintaining quality of life. Also, current imaging methods, such as mammograms, can be expensive.

Yu is banking on gaining approval of a blood test that would cost a few hundred dollars. “It would be a blood test similar to when you have your cholesterol tested. It’s just 2 (cubic centimeters) of blood,” Yu said.

Ideally, Yu’s machine would analyze a patient’s blood and detect where the cancer is located in the body. He said his test looks for tiny signals from cancer cells that might be too faint for current tests to detect.

Yu’s test isn’t meant to supplant colonoscopies, mammograms or other tests. But “it would be a tool that (medical groups) could use,” he said.

Yu’s business model is based on his test becoming accepted by hospitals and used on patients during physicals and routine screenings.

As a young man growing up in Shanghai, Yu dreamed of becoming a doctor. There were many in his family, including his mother, who was a pediatrician. But he switched his focus to physics and was quite happy with his choice until he grew older and felt the tug of mortality.

“I started to think that I wanted to work on something worthwhile,” Yu said. “If you ask any scientist today, cancer detection is one of the top five problems that scientists want to solve.”

He teamed with a relative who was a doctor to form his company. His secret sauce is the algorithms they developed to find cancer markers in blood.

Yu hired Sacramento-based Drisha Leggitt to run business development for his company in the United States. A cancer survivor, Leggitt was the first person to steer Yu toward Sacramento.

“Cancer should not be a death sentence,” Leggitt said. “People are scared of cancer because it’s often a death sentence. With our technology, cancer can (be reduced to being) a challenge for people. But they can go on living.”

That’s a bold statement but perhaps an expected one from someone invested personally and professionally in the success of AnPac.

Still, the idea of a significant cancer breakthrough coming out of Sacramento is a thrilling one, but emotions should be tempered for now. Yu’s product is only at the clinical trial stage.

Meanwhile, Sacramento is at a similar stage in its work to expand its business community. Along with AnPac, Johnson announced that Flippbox, a cloud storage firm, is moving to Sacramento from Florida with a plan of hiring 25 employees this year and 75 more by 2017.

AnPac is in talks to move into a large building at 33rd and C streets. As The Bee’s Ryan Lillis reported: “Flippbox Chief Executive Randy Hucks said his company is buying the historic Eastern Star building at 27th and K streets in midtown for $3.9 million. Flippbox plans to spend an additional $600,000 renovating the building, which dates to 1928.”

In addition, Johnson is proposing the city invest $2 million in 500 Startups, the venture capital firm run by entrepreneur Dave McClure. In turn, McClure’s group would invest in 10 companies here. And Johnson also proposed that the city invest $1 million in a new “innovation fund” to promote business in Sacramento.

These would all be modest numbers for larger cities in California. But they constitute a paradigm shift for the capital city. “Five years ago, you never would have seen that in Sacramento,” said James Beckwith, president and CEO of Five Star Bank.

Johnson’s hope – which is shared with others – is that his announcements at the State of the City will mark the beginning of a new business climate in Sacramento. It’s why Yu is in Sacramento, and it’s why his arrival is significant news for this region.

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