StreetTalk: States' Battle Over Biotech Business Begets Brainstorming

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BioPharm International, BioPharm International-03-01-2006, Volume 19, Issue 3

The above statement reflects the opinion of a growing number of US governors and key state lawmakers.

The above statement reflects the opinion of a growing number of US governors and key state lawmakers.

Brian O'Connell

The last few years have seen a big uptick in state investments in biotechnology, with places like New York, Pennsylvania, Florida, and Wisconsin pouring millions into new biotech ventures such as life sciences "campuses," new funding ventures, and added budget outlays for additional academic study of life sciences issues. States will bend over backwards for more biotech business, offering not only financing, but tax breaks, use of state university research labs, and one-on-one face time with top state officials to lure life sciences companies across their state lines. The potential for adding thousands of high-paying jobs doesn't hurt either.

The race for biotech business has helped the US compete globally. In a recent study of biotechnology "hot beds" located across the globe, four of the top five locations were US-based (California, Maryland, New Jersey, and Wisconsin, with Singapore the only non-US locale).

At the Biotechnology Industry Organization's (BIO) annual meeting in Washington, DC, Ernst & Young presented an interesting statistic: the life sciences industry has grown to nearly 1,500 companies in the United States, employing nearly 195,000 workers, with revenues of $33.6 billion in 2002. That is up from a decade ago when the industry employed 79,000 workers in nearly 1,200 US companies with revenues of $8 billion. Public and private financing is at a standstill, however. According to BIO, biotech firms raised $20.1 billion in public and private monies, a bit less than the $20.8 billion raised in 2004.

But with industry growth increasing—the US Bureau of Labor Statistics estimates that life sciences will grow by 13 percent through 2012—and with more college graduates obtaining life sciences degrees, states are are trying to lure biology sciences firms. Question: how are they doing? Anwer: not bad.

  • New York recently funded $800 million towards a new life sciences center.

  • Florida is plowing more than $500 million in a new branch of the Scripps Research Institute, the prestigious academic center that helped make San Diego one of the world's leading biotech cities.

  • Arizona designated $90 million to lure a genomics research center to locate in Phoenix.

  • Pennsylvania has earmarked $2 billion in tobacco settlement funds for life-sciences investment.

  • Missouri is giving state biotech companies $36 million per year from 2007 through 2025.

  • Georgia recently rolled out a $1 billion public-private cancer research initiative.

  • California, through its Proposition 71 initiative, which sets aside $3 billion in state monies for stem-cell research, is offering free rent to life sciences companies in San Diego, along with legal assistance, free meeting facilities, and hotel rooms over the next 10 years.


States with heavy academic credentials, such as Massachusetts, California, and New York lead the pack in state-sponsorship of biotech initiatives. Massachusetts alone expects 150,000 new biotech jobs in the state by 2010. With Harvard, MIT, the University of Massachusetts, and other high profile colleges located in the state, Massachusetts has a leg up over other locales.

There are a few others not far behind. Ohio's Third Frontier Project provides $500 million for biomedical research. Michigan's Life Sciences Corridor has funded $1 billion over 20 years to boost life sciences projects. Indiana's 21st Century Fund has set aside $80 million to the state's life sciences companies. "It is imperative that we help to nurture, create, and attract more life science businesses," says Wisconsin Gov. Jim Doyle. Wisconsin approved an outlay of $250 million in seed money in 2003.

To find the funding to help biosciences firms, state governments are getting ultra creative, scouring for money in every nook and cranny, and relying on tax rebates to generate more financing for companies.

States like Pennsylvania and Arizona are using money culled from the massive tobacco settlement to fund biotech initiatives. Connecticut is using business development credits—(tax breaks, to you and me)—to spur bioscience research. Florida has linked $30 million in funding to three of its state universities, creating Centers of Excellence geared towards attracting biotech firms to its college campuses. Of course, sunny weather and the absence of a state tax isn't a bad incentive either.

But even colder climate states are doing a good job in attracting biopharm talent. New Jersey was one of a handful of states tapped by the life sciences web site Fierce Biotech as among the top five biotech-friendly locales around the world.

The organization also notes that the number of New Jersey biotechnology companies grew from 80 in 1998 to 124 when last officially measured in 2003. That number should grow even higher after a 2006 study on states and biotech firms is completed by Ernst & Young. The state has more than 200,000 biopharm employees and is home to 15 of the world's top 20 biggest biopharm firms.

Number of States Involved in Biotech Initiatives


So why do some states do well when it comes to biotech resources when others do not? As I've pointed out, having a solid economic base, with plenty of highly accredited colleges and universities, a commitment to tax incentives and budgetary outlays for biotech firms, and some old-fashioned creative thinking are high on the list of things states should have in their arsenal if they are to attract life sciences companies.

One other common denominator among states where biotech initiatives are working and working well, are combined public-private partnerships where private sector companies work in conjunction with government officials to create initiatives like Economic Development Councils (EDCS). Over 15,000 such councils are up and running across the US (although not all are geared towards life sciences efforts), according to the Washington-based International Economic Development Council.

EDCs can be a de facto headquarters for biotech firms looking for help, financial and otherwise, from state and local governments. Companies can obtain information and guidance on buying real estate, marketing their products, and where to go for public funding sources. In most cases, EDCs are funded via tax dollars, usually through state-sponsored grants, although some private funding, through non-profit groups, colleges, and charitable foundations are also available.

EDCs are growing especially proficient at providing biosciences firms exactly what they need to set up shop in states like New York and Massachusetts (both of which have substantial biotech EDC efforts). Life sciences companies use EDCs to attract scientists and researchers, help build biotech incubators and, in states like New York, Florida, and North Carolina, build campus-like biotech "parks."

It's high time that states become involved with biotech company recruitment efforts, through EDC's and otherwise. According to BIO, more than 60% of biotech firms are non-US based. Locales like Singapore have proven particularly adept at using tax reform, grants, and a highly knowledgable, but inexpensive work force to lure top life sciences companies.

By taking a decidedly Wall Street approach to life sciences industry efforts, and using creative financing and economic incentives to attract biotech companies to set up shop in their cities and towns, state governments are finally figuring out that to get a lot, you have to give a little.

Celebrity author and business/finance commentator for CNN and Fox News, Brian O'Connell has written for The Wall Street Journal and Newsweek, 79 Radcliffe Drive, Doylestown, PA 18901, 267.880.3144, fax 267.880.1939,