Cities, States Court Biotech Industry

Jul. 3–PHILADELPHIA — As evening arrived, Austria brought out its ballroom dancers. Puerto Rico carted in a rum bar and band. Florida flaunted a cheese platter and its governor, Jeb Bush.

And Maryland relied on fluorescent martinis and kitsch — yellow, floppy Frisbees reading “Maryland: Where Bioscience is Contagious!” along with a grab bag full of faux viruses and plush, stuffed crabs. What crabs and viruses had to do with one another, no one was asking.

The organizers had spent all day on their feet, game faces on, trying to attract attention to their particular corners of the sprawling conference room in Philadelphia, where the BIO 2005 Annual International Convention was wrapping up last month.

The biotech industry’s annual conference, in its 13th year, used to be led by scientists and segmented by austere and technical company displays. But now, it is led by economic developers and segmented by geographic regions as governments across the world pursue biotechnology — the science of manipulating systems at the molecular level — as the next big economic catch.

Never mind the industry’s checkered history. While its research and treatments are touted as the bridge to curing disease, the business side lost $5.3 billion globally last year alone. Still, with heavy industry years ago shifting to Asia and elsewhere, the dot-com boom having failed to generate the jobs once envisioned, and tourism in an uncertain stage after the Sept. 11 attacks, cities, states and nations see biotech as the next best promised land for economic development.

“It’s the new economy,” said Lawrence C. Mahan, director of the bioscience business strategy at Maryland’s Department of Business and Economic Development. “Every place is looking to see what assets they have to help them find their niche in the biotech industry.”

Over the last four years, the number of states claiming a biotech focus has tripled, to 40 from 14. Regions within states are battling for biotech business. And foreign countries are trying to catch up to — and surpass — America’s 30-year hold on the industry. Some analysts say overseas leaders are emerging, particularly Japan, India and China. Competition for stem cell business is ramping up from Sweden and Singapore, which have fewer restrictions on the research.

Areas that can be real players in biotech have several “common denominators,” experts say: academia, a cluster of companies, available and qualified work force and ample infrastructure. Most studies identify the key U.S. regions as California, Massachusetts, North Carolina and Maryland — with its biotech-laden Interstate 270 corridor in Montgomery County and its proximity to the nation’s capital and federal agencies such as the National Institutes of Health and the U.S. Food and Drug Administration.

Other areas may be chasing clouds, some experts contend.

“The train has left the station on biotech,” Mark Heesen, president of the National Venture Capital Association, said at a recent biotech meeting at the University of Maryland. “The winners are already chosen.”

The term “biotechnology” was coined in 1919 by a Hungarian engineer, who used it to describe the mingling of biology and technology. But many point to the 1976 creation of a California DNA company, Genentech Inc., as the birth of the industry. It wasn’t until the late 1990s that the science began to captivate government and business leaders as public and private factions raced to map the human genetic code.

Media coverage of the quest helped more than double the collective value of the industry practically overnight — to $354 billion in 2000 from $138 billion in 1999, according to the Biotechnology Industry Organization in Washington.

But the bottom dropped out of the genome industry after investors realized there was little money to be made quickly. Private financing plummeted to $10 billion in 2002 from $38 billion just two years earlier.

By then, governments had begun to pick up some of the slack, fueled by security concerns following the terrorist attacks of Sept. 11, 2001. Spending from the Department of Health and Human Services, for example, increased nearly 14-fold in the last four years to $4 billion from $271 million, according to Ernst & Young. Last year’s Bioshield Act also allocated $5.6 billion for bio products that could fight pathogens such as anthrax.

Unlike automobile manufacturing, which many states chased as an instant job fix through the 1980s, or information technology, the “it” business of the 1990s, biotechnology is more plodding and uncertain. It often takes a dozen years to bring a drug to market, and hundreds of millions of dollars. Even the country’s biggest biotech companies — such as Gaithersburg’s MedImmune Inc., maker of the FluMist spray and Synagis, a treatment for respiratory infection in infants — are not turning a regular profit.

“It’s riskier but the payoff is even higher. We’re talking about feeding the world and future generations, curing diseases,” Gov. Robert L. Ehrlich Jr. said in a telephone interview. “We’re talking about lengthier and higher quality lives.”

But at the recent conference, many were talking about jobs. While biotech companies may not be bringing home the bacon for years to come — Ernst & Young estimated last month that public biotechnology companies would not reach “aggregate profitability” until 2008 — they’re still staffed with tax-paying workers.

Baltimore has two biotechnology parks under development — one sponsored by the University of Maryland, Baltimore and the other by Johns Hopkins. The two complexes are expected to add more than 8,500 jobs to the city, many of them highly-skilled and highly paid. “Our great hope for the future,” Ehrlich called them.

In West Baltimore’s Poppleton, where the University of Maryland, Baltimore is finishing up work on its first of six biotech-devoted buildings, signs of change are already evident. Vacant lots are filled with construction workers and equipment, and some residents of the neighborhood are employed in side businesses, such as cooking for the crews.

“It’s about wealth creation,” said Richard G. Overmoyer, deputy secretary for technology investment with the Pennsylvania Department of Community and Economic Development.

As he spoke, outside on the streets of Philadelphia, an estimated $37 million flowed into the city’s economy from the four-day conference. By day three of the event — a Tuesday — Overmoyer had held two dozen meetings with companies interested in moving to Pennsylvania, he said.

Of the 125 companies that the Keystone state counts as biotech or pharmaceutical businesses, only two of them are profitable. But “bioscience-related” businesses there employ more than 80,000 people.

Such numbers helped attract 30 international areas and 32 American states and regions to set up booths at the conference. Nearly 19,000 people attended from 56 countries and all 50 United States. But the displays and the cocktail parties weren’t the real selling pitch. That belonged to the incentive packages — similar to attempts to woo industries in the past.

Pennsylvania has committed $2 billion of its tobacco settlement funds to “bioscience enterprises.” New Jersey was the first to publicly fund a Stem Cell Institute. Delaware has built a 40-acre research park. Idaho offers infrastructure.

“It’s the whole technology revolution. We’re getting our share,” said Julie Howard, a business development consultant within the Idaho Commerce and Labor Department. “You have to be in the game.”

Howard recognized her state was not on a level playing field with others. Idaho had spent $9,000 — split among six groups — on its booth, which featured some literature and backdrop signs. Comparatively, Maryland spent about $300,000 to be there, and Pennsylvania kicked in $500,000.

“We’re here looking to see how we can grow our sector. It’s exploration for us to be here,” Howard said. “We’re trying to define our opportunity.”

Arizona hired a consultant to do that for them after Sept. 11. The sun-kissed state had long relied on tourism dollars from golf and resorts, but the attacks threw travel in a quick freeze. Arizona’s diverse population, with a concentration of older citizens, Hispanic people and Native Americans, was considered a rich area for clinical testing and pushed the state toward biotech. It had also considered branching into aerospace manufacturing.

“There was really a need to find another economic development driver for the area,” said Jon W. McGarity, a biotechnology consultant based in Scottsdale, Ariz. “Biotech seemed to be a natural.”

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