A few of the key findings, as noted by Mitch Horowitz, VP of Battelle’s Technology Partnership Practice:
• The U.S. bioscience industry continues to far outperform all other sectors in terms of job growth. Three of the four sectors—agricultural feedstock and chemicals, medical devices and equipment, and research testing and medical labs—grew even during 2009, the first year of our current recession. The only sector that did not was drugs and pharmaceuticals, which shed more than 2% of its jobs in 2009.
• The full impact of the biosciences goes well beyond immediate employment figures. There is a multiplier effect: For every 1 new bioscience job created, Horowitz said, another 5.8 jobs are created with it.
• Bio’s growth is widespread across the entire U.S. Nearly all states have at least one biotech subsector that is thriving and outpaces the average growth for that sector.
States and regions that are succeeding have several things in common, Horowitz said: They are: implementing new programs to build R&D capacity and advance commercialization of research discoveries; addressing the need for early-stage capital; enacting tax policies that are supportive of the bioscience industry.
Everyone wants biotech and it's easy to get caught up in the fervor. While the Battelle report is full of encouraging numbers—of how bio is making a difference in people’s lives and states’ economies—there are a few disturbing numbers and trends that are raised—especially the recent struggles of the drugs and pharmaceutical sector.
Of the 383 firms that were tracked in the drugs and pharmaceutical sector, a staggering 285 reported negative net income for the year 2009. This is dramatically worse than the other three biotech sectors, which in general reported about equal numbers of companies reporting positive and negative net incomes.
The Battelle/BIO report explains the situation as follows: “While drugs and pharmaceuticals account for 78 percent of the entire bioscience industry’s net income, it also accounts for two-thirds of the firms with a negative net income . . . Many of the negative net-income firms in this subsector are much more aligned with the traditional R&D firm than they are with a pharmaceutical firm in that many had revenues at or near $0.” That is, a lot of the struggling companies are startups that forsake short-term profits for the chance to hit it big in the long-term.
Horowitz also cautioned not to read too much into the drug and pharma sector numbers. “There’s a lot of convergence with the other sectors” that belies the negative aspect of one sector's figures. There’s plenty of overlap between drugs and devices, and drugs and research testing, for instance. Horowitz also correctly reminded that one year does not make an important trend. “It’s a marathon, not a sprint,” he said. “The story is about the ecosystem of the biosciences,” and if you focus on individual numbers you may miss the big picture view.
Still, just about every state and metropolitan area in the U.S. (and the world) has committed itself to running the marathon. They’ve vowed to support the growth of biotech within their region, realizing its immense potential (the multiplier) but also afraid to miss the boat. Do they have any choice when every neighboring metropolis or state is investing heavily in bio?
One audience member questioned whether the “volumeless, endless capability for biotech” would ever dissipate. Said Horowitz, “I don’t see in the next ten years any slowdown in the growth.”
Said an audience member who chimed in: “We’re decades away from peaking in this industry . . ..the opportunity is in our hands to screw it up, but if we can steer clear of that, we have so much potential and opportunity ahead.”
Granted. But as one audience member from St. Louis noted, how can we ever really know what the return on investment is when we go to our legislators and lobby for favorable tax incentives and venture capital support for new biotech companies?
That’s the crux of the issue. Sure, biotech’s ROI is there. But of the many companies that succeed will be many more that flame out and fail. “The fragile nature of many of our companies is always there,” Horowitz later said. “That says to me, that no matter how well we’ve done, there’s more to be done and we always feel on the brink.”
And if companies can fail, surely cities, states, and regions can fail as well. With so many geographic players in the biotech game, many of them will find that their dollars and resources have been carelessly and painfully misspent.
One of the themes of the BIO show this week will be the need to better quantify how biotech helps local and regional economies, and how local authorities can invest wisely in biotech to minimize the risk of getting no return for their efforts.
--Paul Thomas
