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JUNE 13, 2002 NEWS ANALYSIS So, You Want to Be a Biotech Hotbed? The competition is getting ever-stiffer, as cities and states wave everything from funding and tax breaks to beaches to lure startups
At Michigan's booth, state representatives took digital photos of passersby and superimposed them onto scenic Michigan backdrops, featuring such local attractions as golf courses and wild deer. Maryland boasted of being home to the nation's highest concentration of biological-science PhDs. Hawaii advertised...Hawaii, what else? But the islands offer more than paradise on earth says Elizabeth Corbin, a development manager for Hawaii's Business & Economic Development Dept. The University of Hawaii in Honolulu is building a 345,000-square-foot biotech research center, and the state can offer not only generous tax incentives but "one of the highest percentages of endemic species in the world," to companies searching for the basis for new drugs. "IT'S DEMONIC." Hawaii is just 1 of 41 states with active plans under way to develop biotech clusters, according to a recent study by the Battelle Memorial Institute and the State Science & Technology Institute. Billions in state and private funding are being poured into the cause. Michigan is setting aside $50 million a year (totaling $1 billion over 20 years) from its $8.2 billion settlement with tobacco companies to develop the Michigan Life Sciences Corridor. Last year, Texas appropriated $800 million for its biotech efforts, including $20 million to establish the Southeast Texas Biotech Park in Houston. And in Tennessee, Pitt Hyde, founder of car parts and repair chain AutoZone, donated $40 million toward the building of the Memphis Biotech Cluster. "So many cities and states are trying to do this -- it's demonic," laughs Rohit Shukla, CEO of the Larta think-tank in Los Angeles, another biotech wannabe. "It's the flavor of the month." Funding, tax incentives, and even great beaches won't be enough to turn just any region into a biotech powerhouse rivaling current leaders Boston, San Francisco, and San Diego. To succeed, wannabe clusters must have three vital ingredients. They need local universities with strong science curriculums that teach students how to turn discoveries into products. They must recruit venture capitalists into the community who are committed to finding and commercializing local breakthroughs. And finally, they have to develop networking groups designed to bring together businesspeople, academics, and VCs. THE TRICKY PARTS. "The research part, which a lot of communities have, is necessary but not sufficient," says Joseph Cortright, author of a new Brookings Institution study on biotech clusters. "The commercialization is the hard part." Indeed, good scientists are a dime a dozen. It's the people who can hand-hold them through such challenges as raising capital and negotiating the tricky federal Food & Drug Administration approval process that are hard to find. Those talented individuals are already heavily clustered in the major biotech hubs. According to the Battelle study, only three states -- Michigan, Ohio, and Pennsylvania -- have set aside funding specifically to foster commercialization of scientific discoveries. In Michigan, which has provided seed funding and networking groups to bring together scientists and businesspeople, the effort is already paying off: 22 new biotechs launched there in 2001, triple the number the state spawned in 2000. Still, "California is a long way ahead," admitted David Oakes, life-sciences brand manager for the Michigan Economic Development Corp., as he watched BIO attendees line up to have their photos taken at Michigan's booth. "BIG IMPACT." One of the biggest challenges facing biotech wannabes is fostering local venture capital. Without it, the best discoveries will inevitably end up leaving the state. Ivor Royston, co-founder of Forward Ventures in San Diego and founder of the city's first biotech, Hybritech, says he often looks for opportunities outside of San Diego but rarely funds them unless they agree to move. He recently convinced a biotech entrepreneur in Pittsburgh to move his company to San Diego. "VCs have a big impact on where companies develop," he says. No doubt Pennsylvania will step up its efforts to keep future biotech discoveries in the state. As will Alabama, Florida, Missouri, and the countless other regions racing to build the Silicon Valley of biotech. Few will succeed, and those that do will have to be persistent. "It takes 10 to 20 years for a biotech industry to fully mature," says Walt Plosila, vice-president for public technology management at Battelle Memorial Institute. And once it does mature, "it must be maintained," he says, with ongoing government resources and champions. Hence the fourth vital ingredient for building a healthy biotech cluster: patience.  By Arlene Weintraub in Los Angeles, with Catherine Arnst in Toronto Edited by Douglas Harbrecht Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | JUNE |
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