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Signs of Life The Growth of Biotechnology Centers in the U.S. Joseph Cortright Heike Mayer. The Brookings Institution Center on Urban and Metropolitan Policy  June 2002. Roadmap. Introduction to Biotech Industry Key Findings Detailed Results Lessons. Trends in Economic Development.

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signs of life the growth of biotechnology centers in the u s

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

roadmap
Roadmap
  • Introduction to Biotech Industry
  • Key Findings
  • Detailed Results
  • Lessons
trends in economic development
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
definitions methods
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
industry segmentation
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
biotech basics
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
nine metros dominate
Nine Metros Dominate

Seattle

Boston

New York

Philadelphia

San Francisco

Pharmaceutical Centers

Biotech Leaders

Biotech Challengers

Why these nine?

Special Cases

Washington-

Los Angeles

Research Triangle Park

San Diego

two pillars of biotech development
NIH Grants

Patents

Venture Capital

R&D Partnerships

Startup Firms

Established Firms

Two Pillars of Biotech Development

Research

Commercialization

leaders vs the pack
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

R&D Alliances 1,089 11

New Firms 35 2.3

Large Firms 24 1.5

_________

Biotech VC Firms 47 4

research dispersing
Research Dispersing

Top 9 Centers Share

1980s 1990s

NIH$ 63% 59%

Patents 71% 68%

commercialization concentrating
Commercialization Concentrating

Top 9 Centers Share

1980s 1990s

Venture Capital* 81% 86%

R&D Alliances* 89% 96%

New Firms 61% 77%

*Base data from early to mid-1990s

nih funding
NIH Funding

Research Grants, 2000 (Millions)

3rd

biotech related patents
Biotech Related Patents

Patents Awarded, 1990-1999

5th

venture capital
Venture Capital

Investment, 1995-2001 (Millions)

9th

r d alliances
R&D Alliances

Value of R&D Alliances, 1996-2001 (Millions)

6th

biotech startups
Biotech Startups

New Biotech Firms Started Since 1990

6th

established biotech companies
Established Biotech Companies

Firms with 100 or more employees

4th

washington baltimore cluster
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
washington baltimore report card
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 R&D alliances with big Pharma
    • Heavily concentrated in Rockville-Gaithersburg
four lessons
Four Lessons
  • Biotech tends to cluster
  • Leaders have an edge
  • Entrepreneurship & venture capital are key
  • Outlook for biotech-led economic development
biotech tends to cluster
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
leaders have an edge
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
entrepreneurship is key
Entrepreneurship is Key
  • Research base is necessary but not sufficient
  • Commercialization Assets
    • Entrepreneurial researchers
    • Industry-relevant talent
      • Technical
      • Managerial
    • Venture capital--surprisingly localized
outlook for the bottom 42
Outlook for the “Bottom 42”
  • Biotech strategies are
    • Expensive
    • Risky
    • Time-consuming
modest payoffs so far
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
a flawed analogy
A flawed analogy?
  • Is biotech the next big thing?
  • Real breakthroughs and benefits, but:
    • No “Moore’s Law” for biotech
    • Not progressively less expensive than preceding generations of projects
  • More like nuclear power?
conclusions
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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