BOSTON — The Massachusetts Biotechnology Council must promote greater collaboration between the state's life-sciences businesses and academic institutions if the Bay State's life-sciences sector is to remain a top-tier biocluster through 2015, a consultant has concluded.
The report, from Deloitte Consulting, said the Council must also help life-sci businesses find capital, equipment discounts, legal advice, trained workers, and clout with state and federal officials.
The report said the more than 600-member Council must especially promote local R&D and innovation by fostering more partnerships between businesses and schools at all levels — activity the consultants said would correct a longtime weakness of Massachusetts' life-sciences cluster.
The report focused on three priorities for the MBC through 2015: fostering collaboration, boosting member services, and stepping up lobbying. The latter is no small concern in a state where the industry last year won $1 billion over 10 years from Gov. Deval Patrick to stem a perceived erosion of the cluster — but where reformers prevailed over drug makers earlier this year after the state decided to restrict how drug makers may market their products to doctors.
The Deloitte recommendations were included in Continued Leadership Through Collaboration: Massachusetts Biotechnology Council’s 2015 Strategic Plan, the executive summary of which was released April 14 at MBC’s annual meeting, held here this week.
MBC president and CEO Robert Coughlin told meeting attendees his group would carry out the strategic plan by naming industry leaders to head follow-up efforts to develop new programs and events intended to address six goals of the strategic plan:
• Promote innovation by facilitating connections among key stakeholders;
• Improve access to short- and long-term capital for companies;
• Provide services to reduce burn rate and enable growth;
• Enhance and accelerate efforts to attract, develop, and retain talent;
• Improve company recruitment and retention efforts; and
• Improve industry representation through collaboration with other organizations.
Would-be leaders, Coughlin said, should e-mail the MBC at [email protected].
“It is about all the players in [Massachusetts'] life-sciences cluster being on the same page when it comes to envisioning our mutual future, and making strategic decisions in lockstep as we strive forward to fulfill that vision,” Coughlin said.
“Our imperative [is] to remain a global leader," he added. "Our motivation to lead is not driven by a desire simply to boast, ‘We’re number one!’ Rather, our motivation is based on a firm conviction that we have the finest assets in the world right here in Massachusetts, the greatest capabilities to fulfill the great promise of biotechnology.
“No region in the country or the world is poised to deliver solutions to unmet medical needs the way that we are here,” Coughlin said.
Long famed for its cluster of universities, academic hospitals, and research institutions — the state has 13 colleges that award life-sciences doctorates — Massachusetts is home to some 240 biotech and pharma businesses employing more than 30,000 people, and 450 medical-device makers.
The Bay State racked up the second-largest amount of National Institutes of Health research grants in 2008 with 4,867 grants totaling $2.237 billion — down from 5,019 grants in 2007 totaling $2.242 billion. It also won the largest amount of NIH grant funds among states that year when measured per capita.
But the success of Massachusetts’ academic institutions, businesses, and research centers allowed most of them to carry on without the extent of collaboration seen in the San Francisco Bay Area and San Diego regions — until the economy began to sputter last fall, Matthew Hudes, US managing principal for Deloitte’s biotechnology practice, told BRN.
[ pagebreak ]
“Part of it is the culture,” Hudes said this week. “People are busy with their jobs. They’re busy with companies that are going like crazy, and they haven’t had the need to spend the time with MBC and other organizations to network as much.
"They don’t have the same situation that you had in San Diego, where if you leave your job at [Eli] Lilly, you relocate your family to San Diego, you go to work for some small company and the molecule fails, you need that network to wind up with another company and move around," he added. "You haven’t needed that here [in Massachusetts] in the past.”
As a result, the whole of Massachusetts’ life-sci cluster did not add up to the sum of its parts, Hudes and a colleague told attendees of the MBC meeting.
MBC, Hudes said, could play the leadership role in life-sci cluster networking that he said BayBio is increasingly playing in the Bay Area — a role he said would likely increase as Roche takes over operations at recently acquired Genentech — and which BIOCOM has played in San Diego.
"Given the asset base that's here, the collaboration is not as much as it could be, and not as impactful as it could be," said Andrew Vaz, national leader for life sciences with Deloitte. Massachusetts has a “great asset base, but there's something culturally in this community, particularly in the academic and business community, that's different from other clusters. And if it's not optimized, you may stagnate in terms of leadership."
While the economic slump has spurred more interest in collaborations, Hudes said that appetite is “not as well developed in Massachusetts as it could be. But it’s not that hard to fix.”
The situation offers a “key opportunity” for action by MBC, he continued. “They can significantly enhance the value of the network. And they can extend the reach of the network. They can’t be the banker, but they can be the conduit for things happening.
“They just need to ask the membership to do more things and participate more, and they will do it. People will spend the time to do the networking,” and MBC knows it must help facilitate that, Hudes said.
Other opportunities for MBC, according to the report, include:
• Promoting new startups and technology transfer from universities to businesses. The report suggested evaluating the opportunity for doing so through a new "public-private biotech center."
• Coordinating development of a proactive strategy for recruiting new companies and keeping existing ones in Massachusetts, "to position Massachusetts as a gateway, an international gateway. It's the easiest entry point for European life sciences to the US, but there's a potential for a gateway to India as well," Hudes said.
• Developing more focused industry-investor events — by limiting them, for example, to a specific area of therapy — or funding sources, such as angel investors or disease-specific foundations.
• Expanding availability of professional development programs through the Massachusetts Biotechnology Educational Foundation, or MassBioEd.
• Expanding business services, from videoconferencing to legal advice, and access to industry databases and reports.
• Offering members more discounts on supplies and services.
"This gives the opportunity for Massachusetts to really play the role, not only in leading the nation in biotechnology, in transforming lives, but also in helping to strengthen the local economy," Hudes told attendees.
[ pagebreak ]
Six days before the annual meeting, MBC trumpeted its latest action toward realizing that last opportunity by announcing a $250 million "strategic alliance" in which Fisher Scientific was named a "primary supplier" of lab chemicals, supplies and services in the council's purchasing consortium. According to MBC, that deal has saved members $750,000 on more than $55 million in total sales contracts. Fisher Scientific is a unit of Thermo Fisher Scientific, based in Waltham, Mass.
Deloitte defines the Massachusetts life-sciences cluster as one of three leading “integrated” bio clusters — with academic institutions, venture capital, and a large number of biopharma businesses — akin to those of the San Francisco and San Diego regions. The next-highest tier of integrated bio clusters, according to the consulting firm, consists of Philadelphia, the UK, and Switzerland, all of which were deemed "lagging" because they “exhibit one or more weaknesses in areas such as availability of VC funding, environment for clinical trials, and maturity of the companies when compared to the three leading clusters,” according to the strategic plan’s executive summary.
Deloitte distinguished between integrated bio clusters; four emerging clusters (China, India, Singapore, and Madison, Wisc.) and four established specialized clusters focused on one or two of the criteria. They included Canada (R&D biotech, especially in Toronto and Montreal), Ireland (manufacturing), Baltimore/Washington, DC (clinical trials, contract research organizations) — and North Carolina’s Research Triangle Park, which has capitalized on lower land, labor, tax, and energy costs to be a manufacturing and CRO powerhouse for much of its half-century in existence, which it celebrates this year [BRN, March 23].
“[RTP’s] strength is manufacturing, clinical development, clinical research services, where Massachusetts is much more of an integrated cluster,” Hudes said. “If the environment for manufacturing [in Massachusetts] were to change … you’d have to be able to compete with a state that essentially provides tremendous incentives, [and] that has the wherewithal to provide land, tax relief, and other major things. It’s much, much more challenging in Massachusetts to do that.”
But not impossible, he added, especially if Massachusetts life-sci leaders and officials are ready to fulfill years of promises to extend the industry cluster beyond Boston and Cambridge.
“There are opportunities, but there are some barriers," Hudes said. "If you look at western Massachusetts, you’ve got a lot of the right elements. You’ve got an educated workforce. You’ve got proximity to some of the universities, even some of the universities in New York state,” which has attracted billions of dollars in state and private funding for a growing nanotechnology cluster in and around the state capital of Albany, near Massachusetts' western border.
The main barrier, he and Falk said, is the state’s home-rule planning paradigm, which gives local municipalities the final say over land use decisions. The state has sought to speed up local land use reviews through its Chapter 43D of Massachusetts General Law, which sets 180-day time limits for local board decisions.
Falk cited the approximately 18 months that Genzyme had to wait for local approvals on a $250 million expansion of its Framingham manufacturing plant, which is projected to add 400 to 600 employees to the biotech's 1,600-person workforce in the town.
The ultimate catalyst for that project turned out to be the state — which earmarked $12.9 million for the town toward water and sewer system improvements in the Life Sciences Act of 2008, the $1 billion, 10-year measure signed into law by Gov. Deval Patrick.
The state has not always followed the industry’s wishes. Last month, the state enacted restrictions on how biotech and pharma companies can market their drugs to doctors. Supporters said the rules would eliminate conflicts of interest, while life-sci leaders decried the new law as a sign of hostility to the industry.
“We need to make sure that Massachusetts is not a place that companies decide not to come to because we don’t have the type of sales and marketing practices, or business practices, that allow us to do what we want to do in this state,” Falk said. "The environment in Massachusetts is not as friendly from a business perspective as the environment in some of the other clusters."
[ pagebreak ]
Falk also warned: "If we continue to be the leader in negative public policy that affects how you all do business in Massachusetts, that could create challenges for Massachusetts and its position versus the California clusters, and even potentially some of the clusters that may be moving up."
Another policy challenge for the industry was on display at the MBC annual meeting. In closing remarks, Patrick urged the life-sci industry’s corporate giants to resolve their differences with leaders of International Brotherhood of Electrical Workers Local 103 of Dorchester. Other unions invited the leaders of unions seeking to bar non-union contractors from the construction of new life-sci facilities across Massachusetts [BRN, March 2].
Falk noted that MBC is set to promote greater local support for biotech, pharma, and medical device-development plans starting later this year by announcing its first designations of municipalities capable of accommodating growing life-sci companies as “BioReady Communities,” a campaign MBC was originally set to launch last fall [BRN, Nov. 3, 2008].
MBC now plans to release the first set of BioReady Communities ratings on April 30.
”They’re going to be creating, hopefully, some competitive exercise between the towns to say, ‘We need to beef up our infrastructure, to be able to attract companies that are going to want to come to Massachusetts, or companies that are here and want to build manufacturing. We aren’t saying, ignore manufacturing. But it’s going to be a town-by-town issue that’s going to have to be addressed,” Falk said. “The state doesn’t have the ability to just give land way, or to make things happen for companies.”
As a result, Hudes added, “Large-scale manufacturing, I think, is going to be a challenge for that reason. But I do think that for areas like pilot manufacturing, clinical [trial-scale] manufacturing, I think there is definitely opportunity, because those things don’t work well halfway around the world. They work much better close to where the science is.”
Deloitte's Vaz cited one example of a successful niche manufacturer in Massachusetts: Formatech, an Andover-based provider of clinical trial supplies and services that include aseptic fill/finish and freeze-drying or lyophilization to the scale needed by drug makers carrying out clinical tests.
Last month, privately held Formatech announced it had increased its aseptic fill and finish capacity for lyophilized drug products by adding a second GMP lyophilizer, the Virtis Benchmark 3000, capable of supporting production runs of up to 13,000 vials per campaign. The unit's installation and validation was completed last December.
The consultants said Massachusetts privately held companies, and their publicly held counterparts, face a growing challenge of raising and holding onto capital. Of 90 private companies surveyed by Deloitte, more than one-third seek to raise funds this year — around the same as in 2008, but above the 25 percent recorded in 2007.
Among the Bay State's 83 public life sciences companies, 49 percent said they have a year of cash on hand, and 55 percent, two years.
That range, according to the report, is in line with three of the five other clusters studied:
• San Francisco: 51 percent said they face the risk of running out of cash within a year; 56 percent within two years.
• San Diego: 46 percent within one year; 56 percent within two years.
• Philadelphia: 42 percent within one year; 50 percent within two years.
[ pagebreak ]
North Carolina enjoyed the lowest percentages, with a steady 36 percent saying they had a year of cash on hand, a figure that held steady for two years' cash.
The highest percentage of cash-starved public life-sci companies was Maryland, where 71 percent reported they were at risk for running out of cash in a year; 76 percent in two years.
Hudes said Maryland's showing reflected in part that state’s struggle to generate large numbers of new startups to replace those that have left the state on their own or because they were acquired by out-of-state buyers. “There hasn’t been the supply of healthy companies into there."
Other factors, he said, were the smaller amounts of venture capital invested in Maryland firms compared with those of top-tier clusters — something he said could change, but not quickly, as NIH funding begins to increase after several flat years — and the large presence in Maryland of government agencies, especially the NIH and the US Food and Drug Administration.
Maryland life sciences leaders expect their state's biocluster to fare better in future years, due to the $1.3 billion, 10-year BIO 2020 package of life-sci incentives advanced by Gov. Martin O'Malley. But state budget shortfalls — like the more than $1.1 billion gap for this fiscal year and next — have prompted O'Malley to hold back on some of the bio spending planned a year ago. In the just-approved $32.3 billion state budget for the fiscal year starting July 1, Maryland lawmakers preserved the $6 million Biotechnology Investment Incentive Tax Credit program against a planned $2 million cut. But legislative leaders trimmed $3 million from the state's stem cell research funding program, shrinking it to $15.4 million from $18.4 million in FY '09.
The Deloitte report based its findings on a "vision" session with life sciences industry leaders and other stakeholders held Jan. 8, as well as interviews with 48 of those stakeholders.
The report cited figures from PricewaterhouseCoopers' second volume of Super Cluster: Ideas, Perspectives, and Trends Shaping the Global Impact of the Massachusetts Life Sciences Industry, released last year and available with registration, showing a total 77,247 employees for the Massachusetts life-sci sector. While biotech accounted for 20,909 employees, an even larger number (23,467) work for medical device makers; the rest hold wholesale trade, pharmaceutical, medical/testing lab, and teaching hospital positions.
Using figures compiled by Deloitte and MBC, the report estimated that Massachusetts has almost twice as many med device companies (450) as biotech and pharma businesses (240).