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Life-Sci Shops, Local Economy Boosted by Philly’s University City Science Center

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By Alex Philippidis

Philadelphia's University City Science Center has graduated more than 350 businesses in its nearly half century of operation — but of the half that have survived, exactly 60 percent remain in the City of Brotherly Love or 10 nearby counties, according to a study released this week.

Of the 93 surviving science center graduate companies within Greater Philadelphia, over one third, or 36 of them, are biotech, biotech research, bioinformatics, biomedical, biomedical services, pharmaceutical manufacturing, medical laboratory, or medical device concerns.

When they moved into the Science Center, those 36 companies employed a combined 120 individuals. Today, that number has swelled to 5,437. More than half those jobs have been created by one company — Centocor, which employs 3,000 people and is headquartered in Horsham, Pa.

The life-sci firms and other employers that have moved out of the Science Center but that remain in the region currently employ a combined 15,512 people; another 174 people work at the science center's 37 resident businesses and nonprofits within its incubator, resulting in a total regional count of 15,686 jobs.

Those jobs generate $42.5 million in state income taxes and $22 million in Philadelphia city wage taxes each year; and contribute $2.6 billion in direct annual economic activity, according to University City Science Center: An Engine of Economic Growth for Greater Philadelphia.

The report, prepared for the science center by the Economy League of Greater Philadelphia, can be read here. An executive summary is available here.

The study, the first of its kind for the Science Center, also found that each job maintained by a Science Center graduate helped support 1.68 additional jobs, which in turn resulted in 26,335 indirect jobs. All told, the Science Center is directly or indirectly responsible for 42,021 jobs and $9.4 billion in total economic activity in the Greater Philadelphia region.

That multiplier effect is said to be much higher for life-sciences companies, which account for 5.91 additional jobs, according to the IMPLAN input-output modeling system used for the study.

The difference in multiplier numbers reflects the fact that Science Center companies are startups and that not all are in the life sciences, Philip Hopkins, vice president and director of research with Select Greater Philadelphia, told BioRegion News.

Biotech was joined by pharmaceutical manufacturing and organic and chemical manufacturing as science specialties with high multipliers, according to IMPLAN. One reason for this is that life-sci and manufacturing employees earn above-average wages.

Another reason is that the life-sci and manufacturing sectors in the region are "very well-established [with] very well-developed supply chains and backward linkages, where a lot of what they need is within the region,” Hopkins said. “So whatever goods and services they need to purchase to produce what they sell, they can buy locally."

The study relied on data that was compiled and interpreted by Select Greater Philadelphia, a group that promotes job attraction and retention efforts in Philly and 10 surrounding counties in Pennsylvania, New Jersey, and Delaware.

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Suburban Migration

Philadelphia's suburbs are the location of choice for the region's life-sci employers with 23 of the 36 based in six counties surrounding the city. The remaining 13 are based in the city itself. The suburban companies and not-for-profit institutions employed 4,141 people as of February 2009, compared with the 1,296 who worked for employers in Philadelphia, according to the study. The Philly figure includes 800 jobs at the bioinformatics unit of Thomson Reuters, formerly Astrolabe Analytica.

Of the suburbs with life-sci employers having graduated from the science center, Pennsylvania's Montgomery County accounted for nearly 89 percent of the jobs with 3,677, almost all of them concentrated in two companies: 3,000 at Johnson & Johnson subsidiary Centocor and 475 at medical device maker CardioNet of Conshohocken, Pa. The next-largest life-sci suburbs, in descending order, are:

• Delaware County, Pa. — Five employers with a total 67 jobs, led by Genovo with 22 jobs, then pharma manufacturer Poly Medix with 16, followed by Kibow Biotech with 12, Chaperone technologies with nine, and Gentis with eight.

• Chester County, Pa. — Three employers, 116 jobs paced by pharma manufacturer Morphotek with 105 jobs; followed by Novaflora with 10 jobs, and Advanced Plasmids with one;

• Bucks County, Pa., two employers, 257 jobs paced by 3-D Pharmaceuticals with 253 jobs, followed by biomedical instrument manufacturer UGM Medical Systems, with four jobs;

• New Castle County, Del., two employers: Aqumen Biopharmaceuticals, 15 jobs; International Health Products, a biomedical research concern with two jobs; and

• Mercer County, NJ, a single science center graduate employer, the Philadelphia Association for Clinical Trials with seven jobs.

Hopkins said the preference by most life-sci companies for suburban sites reflects in part their desire to locate closer to where their employees live, as well as to areas with office campuses and a proximity to the region's pharma and biotech giants, many of which maintain operations outside Philadelphia. In addition to Centocor and its parent J&J, they include AstraZeneca, Cephalon, GlaxoSmithKline, Sanofi-Aventis, Shire, Wyeth, and Merck.

Merck is in process of acquiring another big pharma company, Schering-Plough, for $41 billion. That and other planned consolidations announced over the past year by pharma and biotech giants, he said, is expected to have a mixed effect on the number of regional life sciences jobs: While the consolidations result in layoffs, many of those who lose their jobs will launch their own startup companies and consultancies.

Another key to the concentration of suburban life-sci companies, Hopkins said, is their desire to do business with less overhead than is required in Philadelphia. For instance, Philadelphia's wage tax — 3.93 percent for city residents, 3.5 percent for non-residents working in the city — prompted Avid Radiopharmaceuticals, a Science Center resident company, to consider a suburban move.

It eventually decided to stay in the Science Center, moving from the 5,000 square feet it had been leasing at the Center’s Port Business Incubator at 3624 Market St., into 16,000 square feet of office and lab space at the Center’s newest building, the 155,000-square foot 3711 Market St. [BRN, Aug. 14].

"The city has certain business tax structures and wage tax structures that tend to make the suburbs attractive for a number of reasons. That's been the case in Philadelphia from time eternity,” Stephen Tang, president and CEO of the science center, told BRN. “But we're picking up on some of the trends that other cities have had — San Francisco and Boston in particular — where they've been able to retain biotech companies as they've grown. That's what we're trying to do more of, certainly. There are a lot of attractive reasons why companies start in the city, and we're trying to look for more reasons for them to stay."

Indeed, all businesses based in Philadelphia benefited earlier this year when the city lowered its wage tax from 3.98 percent for city residents and 3.5392 percent for non-resident workers.

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And Philadelphia, especially the Science Center, has its own advantages for life-sci companies beyond costs, among them its proximity to research centers and universities that serve as sources of new technologies.

"Being in the science center and being literally across the street from [the University of] Penn[sylvania] and Drexel [University], and the large concentration of scientists that you have either going to school there or working there certainly, I think, was an advantage to startup companies,” said Hopkins. “It's easily accessible; you literally can walk from those universities to the Science Center."

The Science Center has also been trying to woo life-sci shops by addressing two longstanding industry needs that have long been met by bioclusters in Boston/Cambridge, Mass., and the Bay Area: matching investment dollars with entrepreneurs wih a penchant for community building.

In April, the Science Center joined with 10 institutions to launch the first round of the QED program, which aims to stoke commercialization of technologies discovered regionally by awarding one-year grants worth up to $200,000 to each of three winning institutions from among 10 in Greater Philadelphia.

QED was launched with $1.2 million in start-up capital: $1 million from the Science Center itself and $200,000 from regional economic-development engine Ben Franklin Technology Partners [See sister newsletter Biotech Transfer Week, April 15; and BRN, Feb. 9].

Tang told BRN QED is in the process of selecting its first three awardees for its first round of funding, set to take place in October. The center will add “anywhere from six to 10 additional" institutions to the second funding round, to be kicked off during the fourth quarter, joining 10 institutions already in the program.

Tang would not identify the institutions pending formal confirmations of agreements to join QED, but did say "they're primarily drawn from our shareholder base" of 32 institutions, as are "eight or nine" of the first-round institutions.

As for Quorum, a 4,000-square-foot space within the science center's newest building, the 155,000-square-foot 3711 Market St., has been turned into a "clubhouse," or site for formal and informal meetings between researchers, venture capitalists, entrepreneurs, and other life-sci professionals.

The clubhouse was the site of the second annual DreamIt Ventures program, a three-month summer effort that drew more than 30 IT entrepreneurs; and will host the region's Deloitte Fast 50 event on Oct. 22.

Also, the center launched "iQuorum" online communities via LinkedIn and Twitter, and is co-sponsoring through its Satellite Quorum program regional life-sci and tech events, including Biotech 2009, held by Pennsylvania Bio and New Jersey industry group BioNJ.

Tang highlighted one particular finding of the report: the center's 45-percent survival rate among graduates was consistent with a study by the US Bureau of Labor Statistics that found a 44.4 percent survival rate between 1998 and 2002 — a period that included the peak of the dot-com and early-genomics booms and busts, a mild recession, and 9/11.

The study is the first of its kind for the Science Center, and will be updated periodically, though the center has not decided how often that would be, Tang told BRN.

Tang said the study was in the works before the threat of state spending cuts to several economic development programs emerged this spring — part of a continuing stalemate between Democratic Gov. Edward Rendell and Republican legislative leaders that has left Pennsylvania the only state without an approved budget this fiscal year [BRN, Sept. 11].

"It was mainly driven by the fact that we had a qualitative sense that the science center was contributing on a regional basis, but not a quantitative sense," Tang said. "For what we want to do, to contribute to the region's economic development, it was necessary for us to do this."

"In spite of economic circumstances, my hope is that we're still making a contribution to the region," he added.

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