As a fellow midwesterner, I agree. It might make sense if the requirement was to move to a bio-rich region (such as San Diego or Boston), but the bay doesn't seem like the place to be for a lab.
I agree, and if they were required to move, it would take more than the 3 month batch to prepare items for movement. Why not just leave in their location?
YC's "move to the bay area" requirement makes sense for software startups, but less so for bio (at least for most of the good ideas).