15 Sep The Impact of Biotech Globalization in the Midwest
CHICAGO – For those of you who think biotechnology is just some passing fad (particularly in the Midwest), get ready because biotech is big business and it’s here to stay. More than that, it’s a global business.
Perhaps the group that best tracks the growth of biotech around the globe is the audit firm Ernst & Young (sorry, KPMG and Deloitte & Touche, but even though guys are heavily involved in biotech as well, Ernst & Young really puts out the best information on the biotech sector and what’s happening around the world).
Anybody who attended the annual BIO meeting last June in Washington, D.C. knows that this is a global business just by the number of country representatives attending. Chicago and the Midwest will certainly know this is a global business when BIO 2006 comes to Chicago (along with 25,000 to 30,000 people).
According to Ernst & Young’s annual report on biotechnology, there are almost 4,400 biotech companies around the globe with 2002 revenues of $41.4 billion, a total R&D investment of $22 billion, net losses of $12.5 billion and almost 200,000 employees. A good part of biotech is obviously in the U.S., but let’s take a look at the globalization of biotech:
Interestingly enough, the U.S. as a region no longer has the most number of companies. Europe is currently leading the way in total biotech companies.
Even the Asia Pacific area has grown substantially with two key centers: Australia and Japan. Of course, our neighbor to the north, Canada, has a significant concentration mostly in three clusters: Toronto, Montreal and Vancouver. Of the 613 publicly traded biotech companies, the U.S. clearly leads the way with 318 companies or 52 percent of the total.
This is logical as the U.S. has three public equity markets where a biotech company could list: the Nasdaq National Market, the Nasdaq Small Cap Market and the Amex. In Europe, there is the alternative market to the London Stock Exchange and newer markets in Switzerland, France, etc. The European Nasdaq has gone out of business and the German Neuer Market has likewise stopped functioning.
Though smaller country market listings are possible in Sweden or Denmark, there really is no Pan-European market. In Canada, biotech companies have two possibilities for public listing: the Toronto Stock Exchange and the Vancouver Stock Exchange. In Asia, the main equity markets are Japan (where the first Japanese companies have begun to list) and Australia. There is a small market in New Zealand.
In terms of biotech industry employment, the U.S. clearly leads the way with almost three quarters of all employees. Most companies in the rest of the world are earlier in development and are smaller companies.
The total number of biotech companies grew only 2 percent in 2002 versus the prior year. This demonstrates how the difficulties in raising money have slowed down the rate of start-ups. In fact, the number of public companies actually decreased by 3 percent.
The lion’s share of revenue and R&D investment is in the U.S.
Remember that the U.S. pharmaceutical market represents more than 40 percent of the world market. Also remember that biotechnology has had the most time to grow and be nurtured in the U.S. (as well as receive funding from both VC groups and the public equity markets).
The development of VCs in Europe and Japan were almost non-existent in the early days of biotech and have only really grown in Europe during the last 10 years and in Japan within the last five years. In future years, I’m sure we will see further breakouts with “Asia Pacific” (particularly in India and China).
The Impact of Biotech Globalization in the Midwest
The opening of biotech bilateral regional corridors between different parts of the world has already commenced with the east and west coasts of the U.S. some 10 to 15 years ago (particularly between the U.K. and Europe). During this period, the Midwest was ignored as a “biotech wasteland”. The recent surge in biotech activities (including the commercialization of university research) in the Midwest has attracted the attention of numerous groups.
As I have noted several times this year, the Japanese have taken particular interest in Midwest biotechnology and last week was the culmination of 18 months of meetings sponsored by JETRO (Japanese Economic Trade Organization) throughout the Midwest, which ended with the Midwest Biotech Summit that was held at the Chicago Hilton.
More than 400 people attended this all-day event including the governor of Minnesota (he made presentations not once but three times). If the governor of Minnesota made it to Chicago to exalt and support the efforts of our Midwest biotech community, where was our own Illinois governor (and for that matter our mayor)?
Nevertheless, the Japanese have to be applauded for serving as a catalyst to bringing together all elements of the Midwest – including Big Pharma, food companies, universities, research institutions, biotech companies and thought leaders – and melding it all with their Japanese counterparts.
The fun continues in the Kansai region later in October with a weeklong series of biotech meetings. It appears that at least 40 to 50 people from the Midwest will attend these meetings.
The Japanese aren’t the only ones getting into the act. The Germans (via “Invest in Germany”) are coming to Chicago and St. Louis during the last week of October. On Oct. 30, IBIO is putting on an event at the University of Chicago’s Gleacher Center called “Breakfast with German Life Science,” which will feature German Big Pharma, German biotech, German VCs and the German government.
After the U.S. and Canada, Germany has the third-largest number of biotech companies (it’s approaching almost 400).
Recently, the Chicago Tribune featured an article about a German life science start-up called BRAINLab that had set up U.S. headquarters in Chicago. This company uses proprietary software to map the brain together with MRI and X-ray equipment to allow surgeons to look at the brain in three dimensions and in real time to more accurately visualize tumors for extraction or other necessary delicate surgery.
These international collaborations with various parts of the world are good for the Midwest biotech community since our companies need to be educated on developing their products not just for the U.S market but for very large and profitable international markets, too. Additionally, these international groups are helping to galvanize our Midwest biotech community particularly in advance of BIO 2006 in Chicago.
See you next week!
Michael S. Rosen is the vice chairman of human health at the Illinois Biotechnology Industry Organization (IBIO). He can be reached at email@example.com. This article has been syndicated on the Wisconsin Technology Network courtesy of ePrairie, a user-driven business and technology news community distributed via the Web, the wireless Web and free daily e-mail newsletters. They can be found at www.eprairie.com.