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Chicagoland Counties Still the Most Concentrated Region for Drug Makers, Report Finds


A pair of Chicagoland counties straddling the Illinois-Wisconsin border continues to comprise North America's highest concentration of drug developers, as they did earlier this decade — surpassing the San Francisco Bay Area, greater Philadelphia, and several lesser-known areas, according to a recent report.

The report, Milken Institute's North America's High-Tech Economy: The Geography of Knowledge-Based Industries, ranked 393 regions within the US, Canada, and Mexico on their suitability for accommodating businesses in 19 technology specialties, four of them involving the life sciences fully or partially.

In addition to biopharma manufacturing, regions were examined for their concentrations of scientific research and development services, medical and diagnostic labs, and medical equipment manufacturing, all compared with the concentrations of these and other tech industries throughout North America.

Cambridge, Mass., and its suburbs Newton and Framingham topped the list of regions ranked for their scientific R&D, while Burlington, NC, was cited for its presence of medical labs performing analytic and diagnostic services, such as blood and pathology tests. Minneapolis-St. Paul-Burlington, Minn., won the number-one ranking in the category of medical equipment and supplies manufacturing.

When all 19 tech specialties were measured, the San Jose-Sunnyvale-Santa Clara cluster south of San Francisco captured the highest ranking. Next-highest was Washington state's Seattle-Bellevue-Everett region, followed by Cambridge-Newton-Framingham.

Rounding out the overall top 10 were Washington, DC, and its Virginia suburbs of Alexandria and Arlington; Los Angeles and its suburbs of Long Beach and Glendale; Dallas and its suburbs of Irving and Plano; San Diego and its suburbs of Carlsbad and San Marcos; the section of suburban Los Angeles anchored by Santa Ana, Anaheim, and Irvine; New York City and its suburbs stretching from White Plains to Wayne, NJ; and San Francisco and its suburbs of San Mateo and Redwood City.

The Milken Institute based its latest study on data from 2007, compared with data it collected four years earlier. The study and its results were made public June 2 at the 2009 International Association of Science Parks Conference, held in Raleigh, NC.

Ross DeVol, the Milken Institute's director of regional economics, told BioRegion News the report derived its "tech pole" rankings from "a combination of two different factors, employment and wages" — namely the concentration of each tech category in a region, compared with the concentration for all of North America.

The resulting ratios or "location quotient" for employment and wages are factored along with the percentage share of total North American wages and employment in each tech category represented by each region.

The second measure is designed to prevent skewing of the location quotient figures by regions with a handful of large employers, resulting in large LQs but less important to the total presence of a tech category in North America.

"It gives you an adjustment for the relative importance, if you will, of a technology center," DeVol said.

Regions measured by the study, he said, correspond to the US Office of Management and Budget definitions of metropolitan statistical areas, which consist of a core urban area with a population of at least 50,000.

In addition to US regions, the study examined Canadian regions — the Canadian federal government helped fund the report — and Mexican states, since data in that country is not available at the regional level.

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Share and Share Alike?

The study's ranking of pharma and medicine "manufacturing" regions — the category includes the non-manufacturing life-sci jobs of drug makers — was topped by the section of suburban Chicago that includes Illinois' Lake County and Wisconsin's Kenosha County.

The region's number-one score was based in large part on its high shares of total North American industry wages and industry employment — 6.3 percent and 4.6 percent, respectively — as well as its concentration of the industry as measured by wages and jobs being more than 17 times larger than the combined average for the US, Canada, and Mexico, or a location quotient of 17.4.

Milken Institute counted 14,926 biopharma manufacturing jobs in the two-county region in 2007 — down 9 percent from the 16,462 jobs recorded in 2003, when the region also topped the industry list, reflecting the shift of some manufacturing jobs out of the area despite overall regional industry growth, DeVol said. The higher job number brought Lake-Kenosha a slightly higher location quotient of 18.1.

Lake-Kenosha also ranked number three in North America in medical equipment and supplies manufacturing, largely on the strength of anchor employer Baxter, and behind two areas better known for medical device manufacturing, leader Minneapolis-St. Paul-Bloomington, Minn., and southern California's Santa Ana-Anaheim-Irvine region.

In med equipment, Lake-Kenosha recorded 4,639 employees, up nearly 3 percent from 4,520 in 2003. While its share of North American jobs in the category stood at just 1.43 percent, its share in North American wages was 3.39 percent, and its LQ was 5.5. The region's shares grew from 2003, when it reported 1.18 percent and 2.81 percent shares, respectively.

In discussing Lake-Kenosha, the institute cited the headquarters presence of regional anchor life-sci employer Abbott Laboratories, which is based in Abbott Park, Ill. Abbott employs 12,284 people there, according to business information website, part of a global workforce the company says is "more than 72,000 employees."

Abbott and Baxter are two of six life-sciences giants to be based in Lake County. Others include Abbott spinout Hospira, Danish-owned H. Lundbeck — which in March completed its acquisition of Ovation Pharmaceuticals from private equity firm GTCR for up to $900 million — and the North American headquarters of Japan's two largest drug manufacturers, Astellas Pharma and Takeda Pharmaceutical.

Takeda's presence in Deerfield is likely to grow, as it is relocating its global development headquarters from Osaka, Japan, to its campus there [BRN, April 6].

"There's just a real strong, biopharma-savvy workforce in the Lake County area. You come in, and you're guaranteed of having veteran managers and scientists who kind of know the ropes of the [US Food and Drug Administration] approval process, and marketing, and sales," David Miller, president/CEO of the Illinois Biotechnology Industry Organization, or iBIO, told BRN earlier this week.

He said companies in Lake County come to enjoy the suburban county's availability of land and quality of life, as well as its lower cost than — but relatively close proximity to — Chicago and its Chicago O'Hare International Airport. According to data from the Illinois Association of Realtors, the median price for a single family house in Lake County stood at $197,750 in the first quarter, 22 percent below the county's $271,000 median recorded a year earlier, and 6 percent higher than the Chicago metro area's $185,750 median, which is just 11 percent off from the year-ago quarter.

Among those residents over the years have been numerous executives with experience at legacy pharma giant GD Searle, now part of Pfizer, and Abbott. One Abbott veteran, Ed Fiorentino, teamed up with GCTR in March to launch Actient Pharmaceuticals, a Deerfield business focusing on acquiring and operating specialty pharmaceutical companies and their products. Another former Baxter executive, Wilbur (Bill) Gantz, had been Ovation's executive chairman until the company's sale to Lundbeck.

"There's also a tremendous locational advantage that Chicago represents. It's just probably the easiest place in the world to get to or from anyplace else in the world on one hop," Miller said. "That's critically important, because most of the breakthroughs in science these days, and most of the marketing of biotech and pharmaceutical drugs, as well as devices, occurs across state and international boundaries. So this access to markets is really a critical concern for these companies."

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Chicago — which is set to host next year's international convention of the Biotechnology Industry Organization — and nearby suburbs within Cook County hold another attraction for biopharma companies, namely proximity to five medical schools. They include Northwestern University's Feinberg School of Medicine, Loyola University's Stritch School of Medicine, Rush University Medical College, the University of Chicago's Pritzker School of Medicine, and the publicly funded University of Illinois at Chicago College of Medicine.

Strong as the schools and pharma giants have proven as life-science anchors, Miller said, Lake County's challenge in growing the industry going forward will be to retain and nurture more of the startups launched by executives of those companies and others.

"There is [a presence of startups], but it's smaller than it ought to be. Where the state has done a great job is leveraging the advantages of the Chicago area to attract big and mid-size companies. It has also done a great job in the case of mid-size companies being a good home for private equity investors and executives," in part by offering economic subsidies for worker training, Miller said. "Where the state has not yet done as well as it should is in the growth and retention of small startups."

The reason, he said, is because Illinois tax incentives lag behind those of many neighboring states, especially Wisconsin. iBIO has sought to redress that in part by advocating for the Emerging Technology Industries Act, or Senate Bill 1522. The measure would set aside $25 million in grants and tax credits to help biotech, pharmaceutical, and medical-device startups commercialize new technologies, as well as other to other tech industries, including alternative energy, or so-called "clean," technologies, and the state's fast-growing nanotech sector.

While SB 1522 passed the Senate by 54-0, and picked up 33 House of Representatives sponsors, the bill has stalled in the House after Speaker Michael Madigan balked at its inclusion of tax credits. Gov. Pat Quinn has offered to support the bill if the state can find revenue to pay for the tax credits.

Miller noted that life-sci companies expanding in Lake County have often come as a result of carrying out collaborations with companies already in the county — as happened with Takeda, which had teamed up with Abbott in 1977 on a joint drug-development venture that both parties agreed to end last year, TAP Pharmaceutical Products; the companies divided TAP's assets among themselves.

Lake County also draws commuters to the life-sci companies who arrive there from their homes over the state line in Wisconsin's Kenosha County.

Kenosha County itself lacks the concentration of life sciences employers seen elsewhere in Wisconsin — especially in the Dairy State's top two clusters, in the Madison and Milwaukee regions. Deven McGlenn, a board member of the Wisconsin life-sci industry association BioForward, and CEO of Madison-based monoclonal antibody manufacturer NeoClone, noted that Kenosha, Wis., is home to University of Wisconsin-Parkside, which offers an undergraduate degree in molecular biology and bioinformatics, as well as one in more general biological sciences, plus a masters degree in applied molecular biology.

Despite its showing on the pharma/med manufacturing and med equipment lists, Lake-Kenosha's overall high-tech ranking fell from 42 in 2003 to 49 in 2007, according to the new study.

After Lake-Kenosha, the rest of the top 10 in pharma/medicine manufacturing consisted of Newark, NJ/Union, Pa.; Edison, NJ; Indianapolis, the southern California region of Oxnard-Thousand Oaks-Ventura; Toronto; and Norwich-New London, Conn. The complete chart of rankings and statistics is available here.

As for med equipment, regions ranked 4-10 in that category include Glens Fall, NY; Bloomington, Ind.; Salt Lake City; New Haven-Milford, Conn.; Rochester, NY; Kalamazoo-Portage, Mich.; and Indianapolis.

Kalamazoo-Portage's showing in med devices improved — it finished 11th in 2003 — despite a slight dip in jobs during that timeframe to 1,912 from 1,996. Its share of North American wages in the category stayed almost unchanged, dipping from 0.97 to 0.9. But its North American share of total wages actually inched up, from 0.52 to 0.59 percent.

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In Milken's 1999 study, America's High-Tech Economy: Growth, Development and Risks for Metropolitan Areas, Kalamazoo did not place in the top 10 for medical devices, but was number-two in "drugs, real output," reflecting the presence back then of pharma giant Upjohn shortly before it was acquired by Pharmacia, itself gobbled by Pfizer, which cut back its operations there in recent years.

"Many former Upjohn, Pharmacia, and Pfizer employees decided that they weren’t going to relocate, and they stayed there," creating a wave of biotech and medical device startups, DeVol noted. "It's an uncommon story in the Midwest. They were able to keep a lot of the talent, and those people have started new companies. There have been some successes, but there's a long way to go."

In scientific R&D, the rest of the top 10 after Cambridge-Newton-Framingham were San Diego-Carlsbad-San Marcos, Washington-Arlington-Alexandria, the Maryland communities of Bethesda, Gaithersburg, and Frederick; Albuquerque, NM; San Jose-Sunnyvale-Santa Clara; Durham, NC; Philadelphia; San Francisco-San Mateo-Redwood City; and Boulder, Colo.

Durham, NC, showed the fastest job growth in scientific R&D services since 2003 among the top 10 metro areas in the category, given the growth of GlaxoSmithKline and other life sci companies within the Research Triangle Park, the report stated.

In medical laboratories, Burlington was joined on the top 10 by Florida's Fort Lauderdale-Pompano Beach-Deerfield Beach region; Santa Ana-Anaheim-Irvine; Los Angeles-Long Beach-Glendale; Toronto; Philadelphia; the Missouri and Kansas cities named Kansas City; New York City and its suburbs of White Plains, NY, and Wayne, NJ; the western Florida communities of Tampa-St. Petersburg-Clearwater; and the Arizona region that includes Phoenix, Mesa, and Scottsdale.

The fastest growing metro area among the top 10 on the medical lab list was Toronto, which placed at number five, with 6,900 jobs and an industry concentration nearly double that of North America as a whole — up from 4,200 jobs and an LQ of 1.3 in 2003, good enough to place at number 15 that year. Toronto enjoyed a 2.56 share of North American wages and a 1.9 percent share of employment in 2007, up from 1.36 percent and 1.3 percent, respectively, in 2003.

DeVol said Toronto has benefited from more startups in the life sciences and other technologies, as well as improved access to venture capital. "This is a community that really has a lot of assets in terms of the universities, and they have really improved their commercialization efforts, and are trying to leverage the talent that they have there. They haven't done so in the past. But they certainly are focused on it now, and see the university as an engine of economic growth. Companies are there because they want to get access to that research."

Milken Institute hopes to update its data "on a more regular basis in the future," DeVol told BRN, but has yet to decide when the next North America High Tech study will come out.

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