Friday, May 04, 2007

Where Biotech?

Biotech's big industry trade group, BIO, is convening in Boston this weekend & that means lots of dough to various media and advertising groups. The radio ads claim 20K biotech leaders will be here. One very visible consequence are billboards around town urging biotech companies to relocate to Las Vegas.

Even without the convention, there are regular TV and radio spots with Jeff Daniels urging life science companies to relocate to Michigan. Rhode Island has made specific attempts to schmooze companies to head south (alas for them, their biggest success, Alpha-Beta, moved just prior to clinical trial failure and company going bust).

The Nevada ads tout 'No Taxes', ignoring the fact that biotechs generally don't pay taxes -- because you have to make money to pay taxes, an extreme rarity in biotech. Actually, I'd bet the cost structure for Nevada is probably lower across the board -- cheaper electricity, lower heating costs (but higher cooling -- perhaps a wash?), certainly cheaper housing. Yet biotech is clearly strongly clustered. Are there any biotechs in Nevada?

I'm not trying to knock Nevada, or Michigan, or anywhere else. It's just the secret to getting biotechs to grow is elusive. A lot of the genomics companies started near big genome centers -- but why didn't Oklahoma reap companies from the center there? Big research universities are important -- but many big research universities do not have a garden of biotech in their neighborhood. Why is our local biotech largely in urban areas, whereas in Pennsylvania it seems to be entirely suburban -- even where I grew up (a region named for the 24th letter of the alphabet) has a cluster of biotechs. Why is non-Cambridge biotech around here largely west of town, whereas similar regions to the north and south have little to none: Worcester MA has a number of companies, but similarly distant Providence RI or southern NH very few. Why in the midwest is it easy to name companies headquartered near U Wisconsin, but not U Illinois?

I don't have the answer, and I suspect each region has a different answer. The U Mass Medical Center in Worcester may have pulled companies out that way, whereas Philadelphia area doesn't have a major academic research environment just outside the city.

One thought, and one which won't make happy the politicians trying to seed their own biotech clusters: what you need to get lots of new biotech is to have some old biotech. When companies grow and grow, they slowly shed talented people who often stay in the same region but start new ventures. And when companies crash-and-burn, a lot of people are looking for new opportunities. At the old shop we had large cohorts of persons previously at Biogen or Genetics Institute or Genome Therapeutics, and each time those companies went through convulsions a few more came on. Now, of course, every company in Cambridge is riddled with ex-Millennium hands, and many who learned the ropes of business there have gone on to start small companies. In addition to a bunch of folks I knew in my old life, my new shop has other clusters of former employers.

In the forest, when the elements topple an old tree the opportunity for new trees is created. The old roots may sprout new shoots, more sunlight comes in, and most of all the rotten log returns its resources to the surrounding soil. The analogy, like all analogies, is imperfect, but it's the same in biotech. The marketplace's creative destruction is a powerful force, but in order for it to create it needs something to destroy. States and localities wishing they had more biotech companies should continue their efforts, but temper their expectations, as those that gots gets and those that ain't gots gets slowly.

1 comment:

Unknown said...

Now this is a rather interesting question, that others have pondered in different industries. You might be interested in the following Paul Graham essays:

Of course Paul Graham can tend towards being annoying, and these essays specifically reference tech companies and startups in Silicon Valley, but the factors he cites do have relevance to biotech IMHO.

Maybe another factor is simply that biotech grows largely out of academia where business insight is not really taught.