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Report Outlines Challenges Massachusetts Must Overcome to Enliven Biotech Sector

Name: Gerald McDougall, partner in charge of PricewaterhouseCoopers’ Health Sciences practice

Massachusetts Gov. Deval Patrick, speaking at BIO’s annual convention in Boston last week, announced a new proposal to spent $1 billion to reinvigorate the state’s biotech industry over the next 10 years [see related story, this issue].
The industry is far from shriveling. Venture capital funding in Massachusetts biotech start-ups grew 43 percent last year over 2005 and now commands the highest share of the state’s total VC activity.
But the Boston-Cambridge region has been lagging behind the national average for biotech clusters. For example, life-science employment in Massachusetts rose only 3.5 percent between 2001 and 2005, compared with 5.9 percent for the industry nationally during the same period; housing costs have grown; 83 percent of CEOs in the state surveyed said their biggest transportation concern was the difficulty of employees getting to work as car and mass-transit commutes grow; the state’s K-12 schools are producing fewer math and science students; and there appears to be a shortage of employees with manufacturing expertise.
Those were among the findings of a report issued a week before Patrick made his BIO announcement. The report was compiled by PricewaterhouseCoopers, the health policy research group New England Healthcare Institute, and the Massachusetts Technology Collaborative, a state agency that promotes development of technology-based industries.
Super Cluster: Ideas, Perspectives and updates from the Massachusetts Life Sciences Industry” was the third report issued by industry and government panels since October 2006 warning of increasing challenges for Massachusetts’ biotech and pharmaceutical sectors. Patrick and other state officials claim the governor’s Life Sciences Industry Initiative is the solution needed to reassure its biotech residents that the state is strongly committed to their success.
BioRegion News this week spoke with Gerald McDougall, a member of the “Super Cluster” report advisory team, about the report’s findings as well as the significance of Patrick’s proposal to improve the industry’s future in Massachusetts.
What is your observation on Gov. Patrick’s Life Sciences Industry Initiative?
I think it’s outstanding for the commonwealth and, for that matter, the industry as a whole. A billion dollars over 10 years is substantial. What’s even more important, not only is the investment in stem cell research promising, in terms of science and technology, but his broader vision, in support of the whole industry.
The report you worked on identified several quality of life issues that require attention, beyond what state government may do.
It is acknowledged that is going to be a long-term issue that’s going to be around. And it’s something that other competitive biotech clusters have as well. But [quality of life] is absolutely a constraint to growth and really needs to be looked at, with some novel approaches.
How will Patrick’s proposal affect California? Would this divert research from California or could it actually result in more research?
I worked on the strategic plan for California. [Patrick’s plan] is really a confirmation of California’s strategy and where California led. But it’s a very strong response that the commonwealth is not going to be passive in this growth industry. It makes the commonwealth competitive with California because of the concentration. The commonwealth is actually investing more in facilities. California has $300 million for facilities, and the Patrick administration is looking at $500 million. On the operating side, which is crucial with the downturn in NIH money, it is very comparable.
I wouldn’t say it’s going to take away resources from California from a competitive standpoint. But at least it will keep the talent that is located in the commonwealth here. And it opens up training opportunities for future scientists, which is so key to the future growth of this industry for Massachusetts.
Is Massachusetts, having created a model for building a bioscience cluster, a victim of its own success?
That’s a good question. Our point in the report is one to embrace and realize the tremendous asset that has been created in Massachusetts. But the commonwealth cannot be complacent. There are many areas around the country, many states, many metropolitan areas, many places around the globe that would love to have the talent pool, the R&D and the economic growth potential that Massachusetts has. They need to continue to nurture it.
Is the competitive concern for Massachusetts because of neighboring states like Pennsylvania, or is it more the West Coast – San Francisco, San Diego?
It’s both. It’s the established clusters. But most every single state and metropolitan area has a life science/economic-development strategy. As space becomes constrained, resources become constrained, and the cost of living increases, it makes the talent pool that much more vulnerable from both established clusters and the non-traditional areas.
How different are the challenges posed by established clusters versus up-and-comers?
In an established bio cluster, you can find another position somewhere relatively easy. Versus when you’re in an area that doesn’t have that critical mass, you bear a greater risk. You have to geographically move. It’s a risk-reward kind of thing. There are a lot of areas – Utah, Phoenix – where cost of living and the infrastructure are much cheaper. But they don’t have that critical mass as well.
Is the concern that up-and-coming clusters will be able to poach much of Massachusetts’ cluster?
Smaller biocluster areas are more flexible. There are ways of establishing relationships in communities that are smaller, that are less complex, that are not as saturated. There are opportunities for the up-and-comers to be more and more attractive. If we were having this conversation 20 years ago, we wouldn’t be thinking about Research Triangle [Park in North Carolina]. Over the last decade or so, they’ve really been getting a lot of traction
How inevitable is erosion of Massachusetts’ biotech cluster?
I don’t think it is. I think it has to continue to be nurtured. Just like San Francisco and New York, and San Diego, there are infrastructure issues – cost of living issues, and the like. Think of the asset, the R&D that Massachusetts has. If they can develop meaty strategies to harness and make it attractive for manufacturing in the biomedical community to stay, I don’t think it has to erode. I think it could grow. It could be a mecca, not only in the US, but in the world, for biomedical science.
How much of a challenge looms from overseas?
Just as the states are looking at economic development strategies, and also you have to factor in the escalating cost of, and access to, healthcare, I think the globe has those same issues. You look in Singapore, you look at India. They all have aggressive strategies in the making right now to grow out this sector. It is to be determined how it all plays out.
Do they necessarily wind up poaching from Massachusetts, or will that have to be more homegrown growth?
I think a homegrown strategy is necessary for the sustainability of biomedical community. But in order to accelerate that, you’re going to need leaders and you’re going to need recognition in the industry. So there are some talented scientists that have gone to Singapore, for example, where funding is very lucrative. That’s something to keep a close eye [on]. Now with California and New York stepping up and supporting stem cell research, for example, that could become the beginning of a very competitive environment in that particular field.
What did the CEOs you talked to say the biotech industry needs the most from the state government?
To continue to be supportive of the industry – be nimble, whether that be putting tax incentive packages for companies to relocate, manufacturing R&D to continue to invest in the vibrancy of the academic research and development. That creates the future talent pool for these companies. It wasn’t anything specific. I believe 75 percent of the respondents were very supportive of some sort of bond financing from the state back into biomedical R&D, along the lines of what California did for stem cells, put investment in with the flattening of the NIH budget.
You mentioned NIH. That goes beyond the borders of the state. How would the state be best able to deal with that? A better lobbyist in Washington? A different way of arguing its case before Congress?
They need to look at the funding opportunities for tax credits, to create incentives, to get funding into the R&D, and in particular into the discovery side of research. Other states are looking at doing that. Florida is doing a tremendous investment into biomedical research. … I would think if there was ever a time for the admin to put appropriate resources and incentives into this industry, it’s now.
How much more tinkering with regulations does Massachusetts need?
Due to the size of the state, the state needs to be nimble. What we saw with Bristol-Myers Squibb, that’s a great example of speed. [Bristol-Myers Squibb is constructing a $750-million first-phase biologics-manufacturing plant in Devers after winning approvals in 48 days]. Speed is incredibly important. The nimbleness and the speed that the state can move, I think that is essential.
Maryland is moving to create a single life-sciences authority. How useful would that be for Massachusetts?
I think it’s a great idea to explore. I‘ve worked with international companies looking to relocate in the States. I think they’ve done a lot better job. I think the community has come together. Some of the groups we did this [report] with have done a real good job of improving that, but you can’t improve enough. You need to have a retention [strategy], an organic growth strategy, and you have to have a recruitment strategy. And all of those [strategies] need to be as sophisticated as your global competition’s are. It’s just essential that that [job attraction] process not be bureaucratic, and if it is not located in one group, at least it’s coordinated. And make it as efficient as possible. It is essential.
Massachusetts is a home-rule state, with local governments traditionally holding sway over land-use decisions. How much will that impede the state’s effort to create a more nimble biotech cluster?
Massachusetts has to not get caught up in its history. We’re talking about an industry that is about unmet clinical needs and about therapies and the like to bring to the bedside. You cannot slow that down, for business, for society and everything else. If there are barriers historically, they’ve got to be broken down. It’s a small enough state.
And the industry is important enough – accounting for one in six jobs. A 43-percent increase in VC funding in 2006. Patents have tripled since 2001. Those are incredible positive indicators of growth. And policy and coordination need to be established, particularly in downstream manufacturing. Around the Boston area, and to some degree Worcester, they have great concentration of R&D. As that R&D matures, there’s going to be plenty of manufacturing. That raises a whole other level of competitiveness nationally and globally.
How important is manufacturing to the future of biotech in Massachusetts? And what are the challenges manufacturing faces?
I think it’s essential to future economic growth. … The labor cost and the like offshore are difficult to compete with. The one silver lining is the biologic side of this industry, and the complexity of the devices and diagnostics and therapeutics that are going to evolve over the next five, 10, 15 years are going to increase in complexity. One would think the physical proximity to the R&D side would be very beneficial. For mature clusters, there is an opportunity there in R&D.
Talk about the importance of housing and taxes. Massachusetts is a high-cost area to live and do business in. Have any solutions emerged?
As someone who just moved here, I can appreciate that. I don’t think there’s any silver bullet. These are areas that need to continue to be addressed. The one thing I’d say is that most of the mature bio clusters have the same issues – Manhattan, San Francisco, San Diego. I think tax credit and the like, there’s a lot of housing just outside of the towns that needs to be looked at. That’s something that needs to continue to be pressed upon. There’s no doubt it’s an issue. But I don’t think as of yet there’s been any novel silver bullet on that one. But I don’t think anybody else has one either.
The report cited transportation and education – two areas long perceived as strengths for Massachusetts -- as challenges to the future growth of the state’s biotech cluster. What are the key issues involved?
The gridlock, if you will. If you’re in Longwood, it’s tough to get to Cambridge and Boston, and the urban Worcester area. All sorts of mass transit options should be explored to make it more efficient on the transportation side. And on the education side, what many of the prominent scientists and physicians were pointing out is that you need to catch kids early on, to really get them interested in and passionate about science. That can’t start early enough. The K-12 system needs to continue to be a focal point, because that’s the future of this industry.
What are the next steps to be?
Each one of these groups, like the Massachusetts Technology Collaboration, has areas of focus. New England Health Institute is looking on the policy side. We will continue to work with these groups and multiple stakeholders to work together to come up with strategies and solutions to some of these issues, and keep in the forefront of this administration the importance of this industry to the commonwealth and its future growth.