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

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.

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  1. 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

  2. Roadmap • Introduction to Biotech Industry • Key Findings • Detailed Results • Lessons

  3. 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

  4. 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

  5. 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

  6. 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

  7. 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

  8. NIH Grants Patents Venture Capital R&D Partnerships Startup Firms Established Firms Two Pillars of Biotech Development Research Commercialization

  9. 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

  10. Research Dispersing Top 9 Centers Share 1980s 1990s NIH$ 63% 59% Patents 71% 68%

  11. 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

  12. NIH Funding Research Grants, 2000 (Millions) 3rd

  13. Biotech Related Patents Patents Awarded, 1990-1999 5th

  14. Venture Capital Investment, 1995-2001 (Millions) 9th

  15. R&D Alliances Value of R&D Alliances, 1996-2001 (Millions) 6th

  16. Biotech Startups New Biotech Firms Started Since 1990 6th

  17. Established Biotech Companies Firms with 100 or more employees 4th

  18. 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

  19. 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

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

  21. 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

  22. 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

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

  24. Outlook for the “Bottom 42” • Biotech strategies are • Expensive • Risky • Time-consuming

  25. 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

  26. 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?

  27. 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

  28. www.brookings.edu/urban/

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