A panel of Georgia state legislators is halfway through examining what more the state should do to draw more life sciences companies and develop a top-tier cluster — a goal the industry’s statewide trade group restated last week at a daylong “summit” meeting.
The House-Senate Committee on Georgia’s Bioeconomic Development plans to issue its answers in a report due Dec. 31 to legislative leaders, then follow up early next year with any legislation recommended by the report.
The bioeconomic development committee’s next hearing on Oct. 16 will explore the state’s strengths and challenges in medicine and drug manufacturing, with a hearing on medical devices set for next month. The panel has already held hearings about the potential for boosting the state’s bioagriculture and biofuels sectors.
In December, speakers from all four months of hearings will meet with Byrd’s panel for a “bioeconomy summit” meeting. Its purpose, bioeconomic committee chair Charlice Byrd said in an interview, is “for us to sit down and talk about what kind of final report I will present to the legislature.
“It’s an objective of mine to lay out a long-term strategic plan for the state of Georgia, so Georgia can be the next Research Triangle, as opposed to Florida or South Carolina,” Byrd (R-Woodstock) told BioRegion News.
“I want the legislators to become aware of what the bioeconomy means for the state of Georgia in terms of job creation and bringing in new businesses, as well as retaining existing businesses that are already in Georgia,” Byrd said. “I don’t want them to flow from someplace else and go down to Florida. I want them to stop and find Georgia the greatest state to live and work and play.”
Florida has especially worried Georgia officials and life science leaders. Georgia’s neighbor to the south has joined its local communities in pouring millions of dollars into subsidies to attract anchor employers into a biotech cluster the state began crafting from scratch under former governor Jeb Bush, a Republican, and continued under his Democratic successor, current Gov. Charlie Crist. Over the past month, the German-based Max Planck Society and California entrepreneur-philanthropist Alfred Mann have hopped on the Florida biotech bandwagon, while the Burnham Institute for Medical Research broke ground Oct. 3 on an $80 million research center set to open in December 2008 and create at least 190 jobs (See related story, this issue).
Georgia, by contrast, has been slow to target its economic incentives to the life sciences industry, and does not offer as many targeted incentives as other states. For example, biotech and pharma companies are among the “research and development industries” eligible for the state’s job tax credit program, but businesses “engaged in manufacturing, warehousing and distribution” can also qualify. Processing, telecommunications, and tourism employers are also eligible, but not retailers.
Capital, Labor Challenges
The state’s menu of government incentives and their availability to life science employers were among challenges to the industry cited in a report released Oct. 3 by the University of Georgia’s Selig Center for Economic Growth, part of the Terry College of Business, and the state’s biotech industry group GeorgiaBio at its annual meeting, held at the Georgia World Congress Center in Atlanta.
The report, “Shaping Infinity: The Georgia Life Science Industry Analysis 2007” reflects a survey of executives from 70 life sciences companies statewide, as well as information from 69 other companies gleaned from public sources, and data from another 20 companies pulled from a similar study released last year.
Among challenges the state faces, according to the report:
- Access to capital – 31 of 61 survey respondents (51 percent) viewed capital access as a weakness of Georgia’s life sciences effort; only eight (13 percent) called it a strength.
- Access to government incentives – 23 of the 61 respondents (38 percent) viewed government financial support as a weakness, versus 14 (23 percent) who deemed it a strength. A plurality, 24 respondents, was neutral (39 percent).
- A scarcity of qualified technicians and managers – A key reason why only 43 companies said they planned to add jobs in the coming year, and create only 357 new positions, a 2.3 percent job gain. The 43 represented 72 percent of the 60 companies that answered the survey question, with the other 17 saying they would keep their number of jobs steady and none saying they would cut jobs.
“The need for managers and technical personnel, combined with a perceived inadequate supply of those workers in the state, means that prospective new hires could command higher salaries. It also exposes a potential weakness, however, which in this highly competitive environment may put Georgia at a disadvantage with firms seeking to relocate,” the report concluded.
Charles Craig, president of GaBio, told BioRegion News in an interview that the managerial shortage reflected the state’s smaller critical mass of life sciences businesses compared with leaders such as the San Francisco Bay Area; Boston-Cambridge, Mass.; and the San Diego region. He cited several schools that have beefed up managerial programs geared to the life sciences – such as the University of Georgia’s certificate programs for clinical trials research and regulatory affairs, two key areas of specialization for future managers.
He said the perception of inadequate access to capital existed most strongly among startups.
“There’s a lack of capital to support early-stage companies,” Craig said. “But the situation is getting better. There’s no question about that.
“Life science industry people have said, and a lot of government people now recognize, that they have to do a lot more to be competitive with states like Florida and North Carolina, not to mention other states like Massachusetts and New Jersey and Pennsylvania and Wisconsin and Connecticut, the state of Washington and California, which is a special case,” Craig added. “These and other states have been more aggressive in allocating public funds to help support life science industry growth.”
He cited Georgia’s establishment of an $8 million seed fund for life science ventures, as well as optimism that additional capital for the industry was likely to emerge as a result of the bioeconomy committee’s work.
Craig has studied the state’s life sciences industry for years, dating back to his days as author and editor of Ernst & Young’s annual global biotech reports earlier this decade, and before that as director of publications for the Biotechnology Industry Organization.
E&Y figures show three early-stage businesses in Georgia receiving a combined $5.37 million in venture capital during the first half of this year. Last year two Georgia companies received a combined $8.6 million, and the amount of capital has fluctuated wildly in recent years: five companies winning $82.2 million in 2005, $26.75 million by a single winner in 2004, $21.8 million by three companies in 2003, $62 million for two companies in 2002 and no capital in 2001.
By contrast, the first half of 2007 saw Florida racking up a combined $70.75 million in two VC deals.
Georgia has sought to address the issue in part by fostering creation of several university efforts for seed- and early-stage life sciences companies. They include:
- EmTech Bio, the commercial R&D center formed by Georgia Tech, Emory University, the Georgia Research Alliance and ATDC.
- Georgia State University’s CollabTech, which offers startup biotechs access to scientific know-how.
- The University of Georgia’s Georgia BioBusiness Center and the Center for Applied Genetic Technologies, designed to provide access to research and technology and collaboration opportunities between UG and tenant companies including Abeome, AviGenics, BresaGen, ProLinia and rPeptide.
In 2005 under Gov. Sonny Perdue, a Republican, the state teamed up with the Medical College of Georgia’s Life Sciences Business Development Center to establish a Life Sciences Innovation Center in Augusta, Ga., an incubator that provides mentoring, scientific equipment and wet labs, as well as opportunities for teaming up with universities and other businesses on research work.
“The governor told me, ‘If you’re going to do this [bioeconomy] committee, I want you to come up with one answer: Why am I funding new incubator companies, and shortly thereafter they pack up and they leave the state of Georgia?’”
While the state has several programs for startups, Byrd said, they have struggled to keep companies that have outgrown their incubators from staying in the state.
“The governor told me, ‘If you’re going to do this [bioeconomy] committee, I want you to come up with one answer: Why am I funding new incubator companies, and shortly thereafter they pack up and they leave the state of Georgia?’” Byrd said.
Job Growth Slowing
GaBio’s report also outlined what it termed several strengths of Georgia’s life science industry. One is the state’s concentration of life sciences anchors capable of spinning off new technologies into viable new businesses – from universities and their research centers, to the headquarters of the Centers for Disease Control and Prevention in Atlanta.
Other strengths, the report found, were the pipeline of 297 products under development by the state’s life sciences companies, 211 of them requiring approval from the US Food and Drug Administration; a supply of research scientists that meet the needs of existing life science companies; as well as Georgia’s concentration of those business – 269 as of last year, up from the 252 companies found when GaBio studied the state’s biopharma industry for the first time last year. The 269 companies are projected to bring a total $6.9 billion in Georgia-generated sales this year.
Between 2001 and 2006, the life sciences industry showed the sharpest increase in jobs of any industry statewide, 11.3 percent compared with 4 percent for all industries. But between 2005 and 2006, the industry’s jobs growth slowed to just 1.2 percent, increasing from 15,237 to 15,283 jobs statewide.
The slowdown reflected job losses last year in the state’s manufacturing sub-sectors of surgical and medical instruments, surgical appliances and supplies, and electro-medical apparatus due to competition from cheaper manufacturers, often overseas. The combined number of jobs in those sectors, 3,386, was 4 percent below the number in 2001, according to the report. But because five new manufacturers were established last year, the report offered the optimistic forecast that “future employment gains probably are forthcoming.”
Performing better were the medical and diagnostic lab category, the largest of Georgia’s life science sectors, up 0.5 percent, from 5,118 to 5,144 jobs; the pharmaceutical-medicine manufacturing category, which recorded a 1.2 percent job gain, from 3,232 to 3,271 jobs, in 2006; and life sciences R&D, the industry’s best performing sub-sector with a 5.3 percent job gain, from 1,947 to 2,051 jobs.
“There already is a fairly well-developed industry here, but the potential is so much more. By showing everyone what that potential is, I think the climate will change,” Craig said.
Average annual salaries in the life sciences last year, according to the report, ranged from $44,946 for medical-diagnostic lab jobs to $88,408 for pharma-medicine manufacturing. With an average of $61,507 last year, life sciences salaries are on average 52 percent higher than the state average for all industries of $40,371. And the life science average rose 6.6 percent between 2005 and 2006, more than doubling the average annual salary for all industries of 3.2 percent over 2005’s $39,089.
Hence, said Craig and Byrd, the state’s interest in growing its biotech sector, not to mention the past two years of studies released by GaBio and the Selig Center.
One area for action, the two agreed, was developing the state’s nascent biofuels segment into a life sciences mainstay as large as pharmaceuticals and medical devices are now. Craig noted a biofuels industry could build on agriculture and food processing being the state’s two largest industries at present, while Byrd cited the fact Georgia has 24 million acres of wooded land as well as research programs showing promise in cellulosic ethanol research.
“There have been a few studies of the bioeconomy over the years, so I had made the decision that my committee was going to become more of an action committee,” Byrd said. “[Georgia’s life sciences sector] has been studied to death. It’s now time to do something about it so that Georgia can aggressively move into the 21st century bioeconomy.”