Alex Philippidis Senior News Editor Genetic Engineering & Biotechnology News
Massachusetts Life-Sci Center gears up for new governor and end of 10-year bond.
A month after joining CEOs in publicly complaining that the Golden State was tarnished in the eyes of the biopharma industry, the California Healthcare Institute (CHI) has offered an updated—and more positive—assessment of the state’s climate for growing biotech and other life sciences businesses, and their jobs.
The 2015 California Biomedical Industry Report shows California continues to enjoy the nation’s largest life-sci workforce with 270,289 jobs as of 2013—up 1.4% over 2012. A plurality (74,394 jobs or 27.5%) are in a category that combines diagnostics and instruments with medical devices. Next highest category is R&D and testing labs (63,355 jobs or 23.4%), followed by biopharmaceuticals (44,235 jobs or 16.4%), wholesale trade (44,065 jobs or 16.3%), and academic research (40,523 jobs or 15%).
R&D and testing labs grew the fastest year-over-year, up 2.7% from 2012. Next fastest was biopharmaceuticals (up 2.0%), followed by wholesale trade (up 1.2%), academic research, and med device/diagnostics (up just 0.1% each).
While the R&D/testing lab category appears to reflect continued outsourcing by drug developers, Todd E. Gillenwater, CHI’s president and CEO, told GEN the med device/diagnostic category has struggled as venture capital left the sector and the Affordable Care Act imposed an excise tax on medical devices long opposed by industry.
By contrast, biopharma employment has fared better as companies have grown, gone public, and/or launched new R&D programs and products. Last year, 54 biopharma therapeutic, diagnostics, and tools/tech companies went public—a number nearly surpassed in the first half of 2014 alone, when 52 IPOs occurred.
Warming Up to Industry
California’s biopharma industry, Gillenwater asserted, is more confident about growing in the state than three years ago. While the Food and Drug Administration Safety and Innovation Act (FDASIA) of 2012 helped move the FDA toward quicker decisions, he said industry has been pleased with several new laws passed by state lawmakers and enacted by Governor Jerry Brown.
California eliminated for most biomanufacturers duplicative state inspections on top of FDA inspections, except in cases of public health risks. California also overhauled its underperforming Enterprise Zone program with new sales and use tax exemptions for manufacturing and R&D equipment purchased by life-sci companies anywhere in the state, part of Governor Brown’s $750 million Economic Development Initiative.
The state also set aside $3 million for precision medicine research, and another $2 million for seed grants of up to $120,000 toward research on the human brain. The Cal-BRAIN program is intended to complement President Obama’s Brain Research through Advancing Innovative Neurotechnologies (BRAIN) Initiative.
“California, we'll acknowledge, has a reputation as not the most business-friendly state in the nation. But to the credit of Governor Brown and the state legislature, there is an increasing acknowledgement of the fact that just because biotech is born in California, it doesn't have to stay there,” Gillenwater said.
He added that CHI and the industries it represents are also counting on Washington for steady NIH funding after years of yo-yo-budgets and sequestration; continued FDA reforms toward quicker decisions; and reimbursement policies that will encourage new drugs. That last priority will likely bring industry under continued fire from insurers and lawmakers vexed by the up-to-six-figure annual costs of many new treatments.
Yet California continues to outperform most states in life sciences: It leads the nation in NIH grant funds ($3.29 billion through September 29, $3.4 billion expected for all of 2014), venture capital (a projected $3.8 billion this year), and doctoral degree recipients (1,125 in 2012).
“The foundational aspects of what has made California the leader in biomedical research investment and innovation continues to be strong,” Gillenwater said. “While California continues to lead the way, and has been the historic leader, and we are encouraged by some policy moves at the state level as well as the federal level, we can't rest on our laurels. There is significant work to be done.”
“But we’re California,” Gillenwater added, “so we are eternally optimistic.”
MASSACHUSETTS: Center Urges Continued State Role
Massachusetts’ effort to draw biopharma businesses and their jobs began in 2006 when then-governor Mitt Romney created a $10 million state-funded, quasi-independent agency. The Massachusetts Life Sciences Center (MLSC) expanded under Romney’s Democratic successor, current Governor Deval Patrick, to the 10-year Life Sciences Initiative funded by $1 billion in bonds.
MLSC will see its third governor next month when Charlie Baker, a Republican, is sworn into office. And it will be under Baker that the life-sci center’s future is determined once time runs out on the decade-long initiative in 2018.
The Center hopes to establish a positive relationship with Baker through a dialogue expected between now and his January 8 swearing-in.
“We look forward to being good partners with the new administration, and working collaboratively as part of the state’s overall economic development strategy,” MLSC spokesman Angus McQuilken told GEN. “We'll be working with the transition team to share information about the Center's work thus far, how our programs work, and the return on investment we have seen.”
In June, MLSC joined state officials in trumpeting a report showing that between 2006 and 2012, job sectors targeted by the Center added 11,377 direct jobs, and a total 30,451 jobs when indirect and induced jobs are counted. Those sectors grew a total 17.5%, compared with 1.4% for total employment, according to the report by Northeastern University’s Dukakis Center for Urban & Regional Policy.
That same month, the nonpartisan but fiscally conservative Pioneer Institute for Public Policy Research released a gloomier report. It found that between 571 and 3,024 direct biotech jobs can be said to have been created between 2009 and Q3 2013, depending on which definitions for industry jobs from past reports were used.
Pioneer called for a “Super” R&D tax credit for qualified research expenses greater than 150% of average expenses over the previous three years; and a state version of the federal Alternative Simplified R&D Credit, which for startups would equal 6% of current-year qualified research expenses.
Baker, a former executive director of Pioneer, has said he only favors tax credits that are short-term, and can be linked directly to job creation and economic benefits.
That link exists, he said, with the incentives offered by the MLSC: “I support the existing incentives to invest in this cutting-edge industry, because in this case, the investment can be linked directly to job creation and economic benefit,” Baker told The Boston Globe earlier this year.
Life sciences appears to be an exception to Baker’s overall aversion to boosting specific industries (“State government should avoid trying to pick winners and losers,” he told the Globe) and support for broad-based tax reductions. These include exemptions for all businesses with less than $500,000 in annual net income from the corporate income tax; elimination of the state inventory tax; and creation of tax-free development zones or “Gateway Cities” in ailing industrial communities.
Since the summer, the Center has joined numerous biopharmas in announcing relocations or expansions in Massachusetts. Among the largest:
- Baxter International’s BioScience business said September 29 it chose Cambridge, MA, for the research center to be created for eventual biopharma spinout Baxalta. Some 400 jobs will be based there.
- GE Healthcare will open in the spring a new U.S. headquarters for its U.S. East Coast operations at a new $21 million office-lab facility in Marlborough. The company said August 20 it will expand a 77-person workforce to more than 500, of which 220 jobs will be new to the state, when it relocates its U.S. HQ from Piscataway, NJ.
- Shire said November 19 it will relocate more than 500 jobs and its U.S. headquarters from Chesterbrook, PA (Wayne, PA address), to Lexington, MA in phases starting in the first quarter of 2015, and ending by the first quarter of 2016.
MLSC has directly spent or committed more than $539 million through its array of grants, loans and tax incentives, leveraging more than $1.76 billion in third-party, mostly private investment, the Center stated in its annual report for the 2014 state fiscal year, ending June 30.
Building on those numbers will the be job of whoever the Center names to succeed its departing president and CEO, the Patrick-appointed Susan Windham-Bannister, Ph.D. The board has said it will name a successor by year's end; its final meeting of 2014 is set for December 17.
‘The major accomplishment of the Life Sciences Initiative has been that Massachusetts over the past six years has gone from being a well-recognized leader in the life sciences to being the recognized global leader in the field,” McQuilken said. “It's vitally important that we stay the course, through the final four years of the current initiative, and beyond.”