Signs of Life The Growth of Biotechnology Centers in the U'S'

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Signs of LifeThe Growth of Biotechnology
Centers in the U.S.
Joseph Cortright Heike Mayer
The Brookings Institution Center on Urban and
Metropolitan Policy ? June 2002
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Roadmap

• Introduction to Biotech Industry
• Key Findings
• Detailed Results
• Lessons

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Trends in Economic Development

• The Next Silicon Valley

• Battle for the Dot.Coms

• Biotech NBT (The Next Big Thing)
• 83 of local development agenciesplace bio among
  their top two priorities
• 41 States have biotech programs

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Definitions Methods

• Biotechnology
• Firms using genetic and cellular techniques
• Biomedicine diagnostic/therapeutic
• Industry-developed definitions data
• Top 51 Metropolitan Areas
• Census-defined CMSA/PMSA list

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Industry Segmentation

• Pharmaceuticals
• Very large, global firms
• Top ten average 15 billion sales
• Assets are products, distribution, manufacturing
  expertise
• Very Profitable

• Biotechnology
• Small, mostly single establishment firms
• Top ten average 700 million sales
• Principal assets are people, research and future
  potential
• Lose Money

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Biotech Basics

• 25,000 NIH-funded research projects
• 5,000 biomedical patents
• 400-500 drugs in development
• 100 drugs on or near market
• 10 products account for nearly all sales

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Nine Metros Dominate
Seattle
Boston
New York Philadelphia
San Francisco
Biotech Leaders
Pharmaceutical Centers
Biotech Challengers
Special Cases
Why these nine?
Washington-
Los Angeles
Research Triangle Park
San Diego
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Two Pillars of Biotech Development

• NIH Grants
• Patents
• Venture Capital
• RD Partnerships
• Startup Firms
• Established Firms

Research
Commercialization
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Leaders vs. the Pack
Average Levels of Activity
Top 9 Bottom Metric
Centers 42 NIH (millions) 812
104 Patents 2,641 263 Venture
Capital 957 27 RD Alliances 1,089
11 New Firms 35 2.3 Large Firms
24 1.5 _________ Biotech VC Firms
47 4
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Research Dispersing
Top 9 Centers Share
1980s 1990s NIH
63 59 Patents 71 68
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Commercialization Concentrating
Top 9 Centers Share
1980s 1990s Venture Capital
81 86 RD Alliances 89 96 New
Firms 61 77 Base data
from early to mid-1990s
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NIH Funding
Research Grants, 2000 (Millions)
3rd
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Biotech Related Patents
Patents Awarded, 1990-1999
5th
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Venture Capital
Investment, 1995-2001 (Millions)
9th
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RD Alliances
Value of RD Alliances, 1996-2001 (Millions)
6th
16
Biotech Startups
New Biotech Firms Started Since 1990
6th
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Established Biotech Companies
Firms with 100 or more employees
4th
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Washington/Baltimore Cluster

• Research Assets
• Johns Hopkins, National Institutes of Health
• Cadre of Biotech Firms
• Human Genome Sciences, Celera, Med-Immune,
  Alpharma, Genvec, Neurologic, Macrogenics
• Dozens of others in biotech related fields
• BIO National Industry Association

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Washington/Baltimore Report Card

• Clearly among the top 9
• Very strong in research
• High levels of NIH funding
• High volume of patents
• Not as strong in commercialization
• 85 million in venture capital
• 17 million in RD alliances with big Pharma
• Heavily concentrated in Rockville-Gaithersburg

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Four Lessons

• Biotech tends to cluster
• Leaders have an edge
• Entrepreneurship venture capital are key
• Outlook for biotech-led economic development

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Biotech Tends to Cluster

• Talent is drawn to where firms are firms form
  where talent is
• Powerful business advantages from agglomerations
• A case of QWERTYnomics
• Lock-in to particular arrangements

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Leaders have an Edge

• Falling (further) behind the Leaders
• Biotech is concentrated and growing moreso
• Leaders are
• 5 to 10x bigger than followers in research and
• 30 to 100x bigger than followers in
  commercialization

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Entrepreneurship is Key

• Research base is necessary but not sufficient
• Commercialization Assets
• Entrepreneurial researchers
• Industry-relevant talent
• Technical
• Managerial
• Venture capital--surprisingly localized

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Little Change in NIH Funding
2000 Funding
1970 Funding
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Outlook for the Bottom 42

• Biotech strategies are
• Expensive
• Risky
• Time-consuming

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Modest payoffs, so far

• No biotech firm is among 25 largest private
  employers in a metro
• Biotech averages about 3.5 of manufacturing
  employment in 9 leading centers
• Most biotech firms stay small successful firms
  sell or license to big Pharma

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A flawed analogy?

• Is biotech the next big thing?
• Real breakthroughs and benefits, but
• No Moores Law for biotech
• Not progressively less expensive than preceding
  generations of projects
• More like nuclear power?

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Conclusions

• Place still matters, even in a quintessential
  knowledge industry
• Not just research, but the ability to turn ideas
  into businesses
• The power of clustering provides decisive
  business advantages

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www.brookings.edu/urban/
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Intra-Metropolitan Clustering