Biotech 2003

Fusing Science, Technology, and Business Development

What state has the 4th best biotech economy in the nation (according to the Brookings Institution and Ernst & Young's The Global Biotechnology Report 2002)?

If you answer North Carolina, you'd be right.

According to Brookings¹, nine regions in the U.S. "account for more than three-fifths of all NIH spending on research, and for slightly less than two-thirds of all biotechnology-related patents." North Carolina, because of its "above-average levels of biotechnology research activity and biotechnology commercialization," ranked fourth in the study.

The Brookings report goes on to call North Carolina a "biotech challenger" to the positions held by the three top-placeholders (Boston, San Francisco, and San Diego), remarking that the state has seen "rapid growth in commercial biotechnology in the past decade . . . [and has] been particularly successful in generating new firms and in securing venture capital and research contracts with pharmaceutical firms." The report estimates that North Carolina has garnered around $400 million in venture capital over the last ten years, resulting in approximately 46 new firms.

Overall, the leading regions "account for eight of every nine dollars in venture capital for biopharmaceuticals and for 95 percent of the dollars in research alliances." North Carolina, along with the other eight centers, "has about nine times as much biotech research activity and about twenty times as much biotech commercialization activity [as the other forty-two largest metropolitan areas]."

The Brookings report concludes that a prerequisite to becoming a leader in biotech commercialization is "the presence of at least some level of medical research." Clearly, with Duke, UNC, NC State, and their respective medical centers all in the heart of North Carolina, the region is rich with world-class medical research.

Another requirement is "the flow of venture capital to new biotechnology businesses." Our capital in-flow has significantly increased year over year during the last several financial quarters, and at a growth rate that surpasses those of our closest rivals. We also have the "critical mass" of a high number of biotech firms, workers, and investors all in one place, which the Brookings report has observed is the "cluster of activity" needed to attract money and talent.

Finally, while Brookings doesn't necessarily cite a favorable business climate as one of the critical success factors for a successful biotech cluster, other economic success studies do. And North Carolina is awash in strong, supporting biotech entities that contribute to developing an environment crucial to a flourishing biotech economy, including such institutions as the North Carolina Biotechnology Center, the Research Triangle Institute, the North Carolina Genomics and Bioinformatics Consortium, the North Carolina Biosciences Organization, Duke University, the University of North Carolina at Chapel Hill, North Carolina State University, MCNC, and a number of non-governmental organizations (NCBIO, The Piedmont Entrepreneurs Network, and the Council for Entrepreneurial Development).

Ernst & Young's Beyond Borders: The Global Biotechnology Report 2002² ranks twelve states as "Top Biotechnology States," with North Carolina again positioned in the top third, placing fourth out of the fifty United States based on the number of biotech companies. The report goes on to say that biotech stocks, while facing "volatility" throughout 2001, "ended the year holding onto their valuations . . . [and] were up about 40% on average, while the S & P 500 [and] the Nasdaq . . . were all down significantly." Why? The report suspects that investors are attracted to biotech for its high-growth potential, and also because they believe in the potential of biotech's "underlying technologies."

The report indicates that its top twelve biotech states are flourishing because their "companies are expanding to become self-sustaining, independent enterprises . . . [either] integrating vertically to become full-fledged drug developers and marketers; or integrating horizontally, assembling a suite of . . . technologies to become an essential provider of research tools and a sought-after collaborator." With its "essential research tools," in the form of 46+ biotech companies-drug developers, marketers, and technology-builders all-and three of the best university research centers in the country, the nearly half a billion dollars in venture financing North Carolina has earned over the past decade has secured for the state a top place in the "sought-after collaborator" category.

To read the two reports cited herein, visit www.brook.edu/dybdocroot/es/urban/publications/biotech.pdf to read the Brookings Institution report, or to www.ey.com/beyondborders for Ernst & Young's.

¹ The Brookings Institution: Signs of Life: The Growth of Biotechnology Centers in the U.S. pages 11-12, 33-34.

² Ernst & Young: Beyond Borders: The Global Biotechnology Report 2002 pages 48, 50, 60-61.

Conference Co-chairs:
Gary Pace, Hutchison & Mason PLLC
Brent Keating, RBC Centura

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