May 1, 2009 (Vol. 29, No. 9)
Experienced Management and VCs and a Serial Entrepreneurial Culture Provide Critical Keys to Success
Boston, San Francisco, San Diego, and Cambridge are on everyone’s list of the top biotech clusters. Medicon Valley, straddling the border of Sweden and Denmark, Switzerland’s BioValley, Seattle, and Paris may be on that list, too, and no wonder. These are areas where biotech thrives. Biotech is so successful at attracting brainpower, related industries, and money to regions that today almost everybody is trying to get into the act.
Obviously, some regions will fare better than others. Many of these clusters have formed because of local political interest. “Consequently, many of the clusters don’t reach critical mass,” notes Willy DeGreef, secretary general, EuropaBio.
There are many great research universities throughout the world, and most regions with a nascent biotech industry have at least one. Good ideas and the scientific capital to bring them to fruition, therefore, are plentiful. It’s the business aspects of growing a biotech cluster that are often most difficult, and that can make the difference between success and mediocrity or even failure. As Glen Giovannetti, global biotech leader at Ernst & Young, points out, “The secret sauce for biotech success is experienced venture capital, experienced management, and a serial entrepreneurial culture.”
GEN talked with a number of biotech industry thought leaders to identify some of the most promising emerging biotech clusters. One point they all made is that it’s nearly impossible to choose the best, and that even the term biotech is hard to define. The term “emerging” had some challenges, too. Nonetheless, here are some of the regions that are capturing their attention.
Belo Horizonte, São Paulo, and Rio de Janeiro are the three leading biotech clusters. Generic manufacturers are currently predominant, but they realize the need for innovative new compounds, according to Sarah Frew, Ph.D., research associate at McLaughlin-Rotman Centre for Global Health at the University Health Network and the University of Toronto.
The biotech sector is dominated by small to medium-sized companies that are focused on agriculture, although some small innovative drug firms exist. Collaborations tend to be with Brazilian universities and with foreign companies, but not with other Brazilian companies, and usually are for services like marketing or for access to information. Private financing remains challenging, and public funds are limited.
Belo Horizonte, in the northern part of the country, is the capital of Minas Gerais, and was Brazil’s first planned city. It has three universities, including the University of Minas Gerais, which is known for its science and technology. The Biominas Foundation also is located in Belo Horizonte. The Foundation has helped 33 biotech companies generate business opportunities since its inception in 1990, and its Incubator of Companies program has introduced 21 start-ups to the market since 1997. Biominas is an active lobbyist for the biotech industry, and its officers have close ties to the government and to the venture capital community.
São Paulo is home to the Butantan Institute, which is one of two vaccine suppliers to the Brazilian Program for National Immunization (PNI), universities, and to Intrials, which claims to be the largest full-service clinical trials research organization in Brazil.
Rio de Janerio has the Oswaldo Cruz Foundation, which plays a major role in developing healthcare products. The Immunobiologicals Technology Institute, known as Biomanguinhos, is the other vaccine supplier to the PNI and is located in Rio.
Both Toronto and Vancouver have good, small companies, but they’re struggling for capital. They have the benefit of government support and strong universities, particularly the University of Toronto, the University of Guelph, and the University of British Columbia. Entrepreneurship skills need to be honed, however.
In the heart of Toronto, the MaRS Center incubates a host of companies within about a mile of five teaching hospitals, the University of Toronto, the provincial parliament, and the financial district. The local government takes a close interest in the Center’s success, and several promising research projects are moving toward commercialization.
Vancouver, on Canada’s west coast, consistently ranks as a fast-growing cluster, attracting more than 90 companies, some with late-stage trials. The University of British Columbia has an active tech-transfer department that has spun out several companies.
The People’s Republic of China has declared the development of a vibrant biotech industry to be one of its top priorities, and several biotech parks have emerged. Shanghai and Beijing are home to the largest groupings of biotech companies, according to Dr. Frew. Both cities boast good universities.
“Shanghai is the new center of business and commerce in China, rivaling Hong Kong,” according to Zhu Shen, Ph.D., CEO of BioForesight. The Shanghai Zhangjiang Hi-tech Park, located in the Pudong New Area, is home to more than 3,600 companies focused on life sciences, software, and information technology. Of those, more than 250 are life sciences companies, employing a total of 20,000 life sciences professionals. About half the Park revenues are from life sciences, Dr. Shen adds.
The Zhangjiang Drug Valley, as that park is nicknamed, has developed 17 square kilometers of the 25 square kilometers within the park. Companies include 7 of the top 10 big pharma companies and more than 110 indigenous CRO or outsourcing firms, novel drug discovery firms, contract manufacturers, and others. Nearby organizations include the Shanghai Institute for Biological Sciences, and Shanghai University of Traditional Chinese Medicine.
About 80 kilometers west, “Suzhou BioBay is hungrier and more aggressive, and focuses on early-stage and innovative companies,” Dr. Shen says. “Government officials at Suzhou BioBay and at Suzhou Industrial Park tend to be younger, energetic, and well-versed in English and Western-style business operations.” The parks are known for consistent policies, pro-business mentalities, and large private funding networks.
Beijing is home to numerous government agencies and savvy entrepreneurs who know how to work with government. The Beijing Zhong-guan-cum Life Science Park is one of China’s older biotech parks, Genzyme and Bayer Schering both have announced plans to develop R&D centers there. The Institute of Biotechnology, Beijing Normal University, Peking University, Beijing University, and other universities are located here.
Although China in general has some cost advantages, thought leaders say they still hear concerns about intellectual property “which is getting better,” Giovanneti points out. As yet the companies and universities are doing discovery research, and clinical trials, but the industry hasn’t yet moved into late-stage research.
“There’s been a lot of activity here in public/private partnerships for biotech parks,” Giovannetti says. Overall, the region is still strong in generics, but some innovative companies are coming out of Genome Valley, about 20 miles from Hyderabad, and also from Bangalore. Within the next two to three years, India expects to have about 27 biotech parks, according to Ernst & Young.
ICICI Knowledge Park was founded in 2000 on 200 acres of land. It currently is 100% occupied, with 80,000 square feet of wet labs and about 1,400 employees onsite, according to the just-released Ernst & Young study, “Biotechnology Clusters in India”. Genome Valley also includes the Shapoorji Pallonji Biotech Park with modular wet labs, pilot plants, a business incubation center, and business support facilities. Its 140-acre phase I site is operational, and the phase II site is expected to be completed by 2015.
Hyderabad is dominated by the generics industry but has some biotech companies that are working on innovative drugs. CROs, including GVK Biosciences, are growing, spanning the gap between discovery and development. Strengths include the University of Hyderabad, which has a strong private partnership culture.
Biocon anchors the biotech industry in Bangalore. Spin-offs Syngene and Clinigene also are there, as well as the Indian Institute of Science and the Institute for Bioinformatics and Biotech. In addition, “the Biocon CEO has been a driving force for biotechnology in India,” Dr. Frew says.
“India released a biotech strategic plan last year,” Dr. Frew adds. The plan aims to streamline a confusing and bureaucratic regulatory process and, she says, “signals a willingness to work together.” The downsides to India, as well as any other developing country, Dr. Frew says, are that “tech transfer is a huge barrier,” and capital is in short supply.
Lille capitalizes on ties to Lille University, where Louis Pasteur developed the purification process now known as pasteurization. The Pas de Calais area around Lille has some 800 healthcare and biotech companies. The Eurasante Bio-business Park, based in Lille, currently has about 30 biotech firms employing some 3,700 people. It is growing quickly because of its proximity to major universities, seven hospitals, the Pasteur Institute, and other international institutions. The region has a well-developed infrastructure to support life science research and development.
Tokyo’s biotech cluster is patterned after the bionetworks in Chiba, Yokohama, and Tsukuba. Tokyo has a large concentration of companies focused on monoclonal research and also on stem cell research.
Universities in the city include the University of Tokyo and the Tokyo Institute of Technology, which both have graduate-level biotechnology programs. Tokyo University of Science and a long list of other schools also contribute to the scientific acumen of the city, as does its strong IT industry. The three cities comprising the Tokyo Bay Biotech cluster are close by.
In 2006, Silico Research Limited ranked Rehovot as number eight in its list of the top non-U.S. biotech clusters, citing its work in monoclonals. About 20 kilometers from Tel Aviv, Rehovot is home to the 250-acre Tamar Science Park, the Weizmann Institute of Science, as well as Hebrew University’s Faculty of Agriculture. Rehovot, which is known as Israel’s science city, has a higher than average population of university-educated citizens.
Israel has more than 900 life sciences companies. Of those, 55% are devoted to medical devices, and about 21% are focused on biotechnology. Pharmaceuticals constitute another 12% of the market, according to ILSI. Most of the pharmaceutical companies are engaged in generics, but 25% are developing new chemical entities. The country is entrepreneurial, and companies are spinning off from the universities in Tel Aviv and Jerusalem. About 14% are at clinical stage.
The Biopolis at the One-North corporate park has attracted some of the world’s leading researchers and also persuaded many R&D and manufacturing companies to locate facilities there. The hope is that those activities will spur local entrepreneurs. Like many emerging regions, it still needs a vibrant venture capital community. Biopolis is near the National University of Singapore and the National University Hospital.
Phase one includes seven buildings—two for the private sector and five for public institutions. Phase two, completed in 2006, brought total research space to 222,000 square meters (about 2.4 million square feet).
Biopolis is home to the Agency of Science, Technology, and Research (A*STAR), which leads the country’s scientific research and development efforts for the Ministry of Trade and Industry.
Home to many top biotech clusters, nearly every state is hoping to become a player in the biotech field. Thought leaders like Florida’s chances. Several leading institutes are located in the state including the Burnham Institute for Medical Research, Scripps Florida, SRI International, and the Torrey Pines Institute for Molecular Studies.
Also, East Coast researchers often are familiar with Florida, so attracting senior researchers as full-time residents isn’t difficult. The Innovation Incentive Fund, however, was slashed at the end of fiscal 2008. The additional challenge is to grow companies through spin-offs from these and other institutions.
Colorado also has strong potential, with continued high levels of state funding for start-up companies and research intuitions. Precommercialization funding grants are capped at $250 million for companies from a five-year, $26.5 million program. Additional funding also is available. Clusters are forming in Denver and Boulder, but the nascent firms tend to be acquired by larger companies before reaching maturity.
Also Worth a Look
In the U.S., additional emerging cluster contenders include Madison, Wisconsin; Orange County, California; and Houston, Texas. Madison is home to the University of Wisconsin, which has a strong life sciences program, and the region has a specialized job concentration in pharmaceuticals; medical devices; agricultural feedstocks, chemicals, and research; and testing and medical laboratories, according to BIO.
Orange County is known for its medical devices, but increasingly is adding biotech to its list of strengths, according to Tim Ingersoll at BioCom. Houston has more than 120 biotech organizations and is home to St. Luke’s Episcopal Hospital, a prominent neuroscience center.
Australia has more than 400 companies, mostly clustered in Sydney and Melbourne. Major contributions are coming out of the University of Queensland and other universities. Like many regions, it had been hit hard by the economic downturn and many sources of government funding have disappeared.
Malaysia has a growing bioinformatics sector, and industry experts say several companies there have gained funding recently from a leading U.S. capital fund. The government favors growing the biotech industry, so the industry is gaining traction.
In Europe, Barcelona, Ghent, and Montpelier, France, are benefitting from significant government interest and proximity to leading universities. And Scotland, whose biocluster is composed of more than 620 life science companies, is one of the continent’s largest and fastest-growing life science clusters—generating more than $4.4 billion (£3 billion) annually.