Bioscience clusters: Too many or room for more?

26 Feb Bioscience clusters: Too many or room for more?

Ten months after the BIO 2006 International Conference in Chicago, the Illinois Biotech Industry Organization (IBIO) held its own annual event. After all the excitement and energy coming from 20,000 attendees and visitors coming from 62 countries last April, the IBIO meeting was quiet in comparison.
Although there were more than 400 people in attendance and speakers included Bob Parkinson, chairman and CEO of Baxter, Rob Fraley, chief technology officer for Monsanto, and Mark Booth, president of Takeda Pharmaceuticals North America, I would like to see a real ramp-up in attendance to 700 to 1,000 people. The exhibit area seemed a little sparse!
Last summer, I attended the BIO-West conference in Denver, which topped 1,000 attendees and serves a life science community of over 350 companies. Denver is the life science hub of the Rocky Mountain States (much as Chicago is at the core of the Midwestern states), but companies from Utah, Montana, and Nebraska were present at BIO-West.
In the IBIO event, there was one company from Madison, Wis., and another from Cincinnati, Ohio presenting (in addition to Monsanto from St. Louis), but I still would like to see a more robust Midwest event. Perhaps the fall BIO MidAmerica meeting in Milwaukee will fill that bill.
Strength in clusters
This topic leads me into the subject of today’s article: the building of a bioscience cluster! In the Feb. 15, 2007 edition of Genetic Engineering News, there is an interesting review of the key ingredients necessary to have a successful world-class bioscience cluster. These nine essential ingredients, ranked in order of priority, are:
1. Proximity to a world-class research science center: Proximity to these centers has financial benefits as these institutions receive substantial government funding, as well as private-sector funding for both basic and translational research. Additionally, key intellectual property, around which companies are formed, is found here.
2. Access to talent: This point is linked to the previous one as these world-class research centers (academic institutions) are the source of scientific founders for companies, and many of their post-docs and grad students migrate to the companies they have started.
3. Access to funding: All of the companies need continual access to funding, and a spectrum of financing companies – from angels to seed VCs to later-stage VCs – is critical.
4. Quality-of-life factors: Education (primary and secondary) plays an important role as well as affordable housing. Another key factor which has risen in importance is cultural activity.
5. Appropriate, adaptable, and affordable lab and office space: A variety of different types of buildings and space with rental price points to accommodate the full range of companies is critical. Whereas wet-lab space is the predominant factor here, commercial office space to meet the needs of all types of bioscience companies also is important.
6. Entrepreneurial environment: Serial entrepreneur is the key word here, and the number of these in the cluster is important to have a sustainable cluster. I would add here that a tolerance for failure is also equally important. In the Midwest, we tend to castigate failure, whereas on the West Coast this is a badge of honor.
7. Availability of support service providers: As many parts of drug development are now handled by numerous contract research and manufacturing organizations, the presence of these companies in the cluster is a critical factor.
8. Access to patients and markets: Ethnically diverse areas provide large patient populations to accelerate proper patient enrollment and recruitment, and help shorten what can be long lead times.
9. Favorable incentives and tax treatment: It is not only the menu of government (state and municipal) incentives that are potentially available to local bioscience companies here, but the time period it takes to obtain such incentives and the level of complication. Additionally, state compliance and registration laws are another factor. Surprisingly, this is the least important factor in the above list.
Rating clusters
The article does not attempt to rate clusters. If we were to attempt to rate San Francisco, habitually the number one bioscience cluster, it would rate high in all categories except perhaps numbers 4 and 5. Although there is probably more than 14 to 18 million square feet of wet lab space in the Bay Area, it’s hardly affordable.
In fact, San Francisco is so expensive that most rents are quoted at a monthly price as opposed to the yearly rate, as is the case in the rest of the U.S. So when you hear a rent of $5 to $7 per square foot, just remember that this is monthly, not annually (the annual rate would be $60 to $84 per square foot). Likewise, the cost of residential real estate is so high that it can also frighten off persons from other parts of the U.S.
Likewise, Boston and Massachusetts would rate high in almost all categories except number nine because the state hardly goes out of its way to make it particularly attractive to locate there.
While I will not rank our Midwest bioscience hubs (nor did the article), I would love to hear my readers’ comments and thoughts!
Another very recent article, “Priority: Where New Ideas Flourish,” was published in the March edition of Inc. magazine. It chronicles the results of a new report from the Information Technology and Innovation Foundation, a Washington think-tank that assessed all 50 states and 26 different areas related to innovation.
The top 10 states in this assessment were:
Rank/State, Score
1. Massachusetts, 96.1
2. New Jersey, 86.4
3. Maryland, 85.0
4. Washington, 84.6
5. California, 82.9
6. Connecticut, 81.8
7. Delaware, 79.6
8. Virginia, 79.5
9. Colorado, 78.3
10. New York, 77.4
Surprisingly, California was not the leading state: Massachusetts was! None of the Midwest states made the top 10. Let’s see how the Midwest fared:
11. Minnesota, 75.3
16. Illinois, 68.4
19. Michigan, 64.7
29. Ohio, 57.8
30. Wisconsin, 55.9
31. Indiana, 55.8
35. Missouri, 53.5
38. Iowa, 51.8
Although the Midwest had three states in the top 20, the other four Midwest states ranked particularly low.
So what was included in the assessment in order to achieve a ranking? Researchers looked at the following:
• “Knowledge” jobs, including the level of education of the state labor pool (this area received the highest weight).
• Economic dynamics of the state: the number of start-up and fast-growing companies.
• State’s capacity for innovation expressed through R&D spending, venture capital investments, and patent filings.
• State’s digital infrastructure.
• State’s access to global markets.
Other assessment areas, complementing the above, were:
• Percentage of the population forming businesses.
• Number of patents per thousand workers.
• Workforce education level composite score.
• Scientists and engineers as a share of the workforce.
• Percentage of the population that is online.
• Jobs at “gazelle” companies as a share of total employment.
• High-tech jobs as a share of total employment.
No superstars
So what do these two different assessments mean for the Midwest and its life science communities? Well, the reality is we continue to have several growing bioscience clusters in the Midwest, including Chicago/Champaign-Urbana, Minneapolis, St. Louis, Cleveland/Columbus, and Madison/Milwaukee.
The problem is that none of these bioscience clusters are “superclusters” like San Francisco, San Diego, Boston, Research Triangle, and even Seattle. If we added up, all these Midwest mini-clusters together, we would definitely have a “supercluster,” but we haven’t yet reached the critical mass that Maryland (Baltimore and Montgomery County) and the Greater Denver Metropolitan area (including Boulder, Ft. Collins, and Colorado Springs) is quickly approaching.
Another key question is: do we already have too many clusters? If the bioscience business were only about drugs, I would probably say we have enough, but once again the reality of biotechnology is that it is beginning to mainstream into society. The industry is finding new applications beyond drugs, such as medical devices, diagnostics, renewable fuels and energy, environment, nanotechnology, and other industrial applications such as plastics.
Different recipe
So my bottom-line assessment is that there is room for more bioscience clusters. However they will be different from the existing ones, and as a result, they will contain companies with a different growth pattern and lifecycle than drug companies, as well as different financing needs. The measuring stick for these companies may not be the same as for the traditional drug-based biotech companies. There will be some common denominators: good science coming out of great research centers, intellectual property, and serial entrepreneurs, etc.
The Midwest challenge, then, is not to mirror the development of the traditional bioscience clusters, but it must pay attention to the key common ingredients to make it happen.
See you soon!
Previous articles by Michael Rosen
• Michael Rosen: The deconstruction of “Big Pharma”
• Michael Rosen: The 10 biggest events shaping biotech in 2006
• Michael Rosen: A Midwest small-cap, life-science surprise package
• Michael Rosen: 2006: A mixed blessing for Midwest life science companies
• Michael Rosen: 2006: A great biotech financing year, unless you were going public!