Western promises

Access to the capital markets of the US has always been a key attraction for Europe's biotech businesses. As little as 2 years ago, the tens of millions of dollars required to see, for example, cancer drugs carried through to clinical trials could realistically only be provided by American investors. Many European biotech companies consider their science to be first class, but previously have willingly conceded the US financial markets to be superior.

The life sciences business in the US, even in the current financial turmoil, continues to be of such significant economic potential that more than 42 states and regions have identified it as a targeted industry. Millions and, in some instances, billions of dollars are being spent on recruitment of global skills, research programmes, infrastructure and investment incentives.

According to the Technology, Talent and Capital: State Bioscience Initiatives 2008 report, US direct employment in the biosciences exceeds 1.3 million, and with indirect and induced employment this value rises to 7.5 million jobs. In the drugs and pharmaceutical sector, jobs are concentrated within 10 states, accounting for 75% of all jobs in the bioscience sector alone.

Additional indicators of growth in the US are:

• Bioscience R&D expenditure totalled $29 million in 2006, representing more than 60% of all US academic R&D.

• Venture capital investments reached $11.6 billion in 2007.

• Academic R&D grew 37% during 2002–2006.

• In 2006 higher education establishments awarded 143000 students with bioscience-related degrees.

• In excess of 82000 related patents were granted during 2002–2007.

California leads the field in total academic bioscience R&D spending, with a total of $4008809, but the districts of Columbia and Maryland lead on a spend per capita basis of $306.82 and $234.50, respectively. With regard to employment, California is again way ahead, accounting for more than twice the bioscience occupational employment than the next highest state, Pennsylvania. It also dominates the other states, accounting for more than 40% of all bioscience venture capital invested in the period 2002–2007. However, on a per capita basis, Massachusetts exceeds California by more than $500 per million head of population.

Positive as this may seem, as early as April this year, Dow Jones VentureSource was reporting an overall decline in investment in the first quarter of 2008 in healthcare. The majority of the lag was in the biopharmaceuticals arena, which saw only 59 deals completed and $771 million invested in the quarter — a 59% decline from the $1.89 billion invested last year.

In what appears a somewhat prophetic statement, Jessica Canning, Director of Global Research for Dow Jones VentureSource, said: "The healthcare industry may be the first to show signs that the broader public markets may be affecting venture investment, Initial Public Offerings (IPOs) are normally the preferred exit for venture-backed biotech companies. However, healthcare is a highly cyclical market and our analysis shows that the current drop in biotech funding is not because of the overall pullback, but more a result of there simply being fewer large-sized deals. In fact, of the top 20 deals in the first quarter, only two were healthcare deals. During the last couple of years, healthcare has accounted for closer to half of the top deals each quarter."

Who is moved Stateside?

Attracting business

The biotechnology business is driven by networks, partnerships and contacts between companies, investors, researchers and others. Building these networks is an essential factor for success, but there are other key ingredients that attract business:

• Universities, which are engaged and have active leadership.

• An entrepreneurial culture with networks across sectors and industry.

• Available capital for the entire business cycle.

• Discretionary federal or other R&D funding.

• A skilled workforce.

• Access to specialized equipment and facilities.

• Supportive business, tax and regulatory policies;

• Tenacity and a long-term perspective.

Looking forward

The biotechnology sector in the US remains a major driver in its economy, as demonstrated by the biotech clusters such as Northern California, which is by far the largest with more than 900 companies with 90000 employees, creating in excess of 6000 new jobs in the past 12 months.

As the following profiles will demonstrate, America's states and regions are becoming increasingly sophisticated in their understanding of the industry, and are implementing policies and programmes to support its growth.

A challenge for state policy makers will be to continue to invest in light of decreased federal funding and huge fiscal pressures facing governments as the US economy continues to weaken and global financial anxiety increases.

Pamela Brook Contributing Editor, Pharmaceutical Technology Europe.