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Life sciences: fuel for growth
Soaring medical-products companies
make their best Globe 100 showing ever
Boston Globe | May 17, 2005
By Christopher Rowland
It was a very good Globe 100 year for Massachusetts life sciences companies.
Boston Scientific Corp. of Natick, a maker of heart stents, became the top-ranked public company in Massachusetts, piling up $2.1 billion more sales last year than it did in 2003. A record four of the top 10 Globe 100 companies come from various sectors of the life-science world.
But while it may have been a great year, it's not clear that 2004 was The Year -- the turning point when what is widely called the ''super cluster" of biotechnology, medical-device, and pharmaceutical companies finally steps into its much-anticipated role as economic messiah for the Bay State.
''We all hope that it's just a question of time," said Zvi Rozen, deputy director of the John Adams Innovation Institute at the Massachusetts Technology Collaborative, a quasi-public state agency that promotes high-tech growth.
As FleetBoston Financial Corp. and Gillette Co. come under out-of-state ownership, Boston Scientific looks well on its way to becoming a replacement corporate pillar for Massachusetts.
But the most you can say about its three other top-10 colleagues in this year's Globe 100 is that they are explosively growing, but still extremely small. Their combined revenues last year didn't reach $140 million.
All three rely heavily on baby boomers shuffling into old age. Palomar Medical Technologies Inc. of Burlington, at sixth place, manufactures cosmetic machines that doctors use to remove wrinkles and liver spots.
Anika Therapeutics Inc. of Woburn, ranking seventh, sells an injectable lubricant that eases the pain of osteoarthritis.
And Clinical Data Inc. of Newton, at number nine, sells small-scale medical testing machines to doctors who want to take advantage of revised federal health insurance rules by offering patients medical tests in their own offices instead of sending samples to laboratories.
Notably absent from the top 10 are the biotechnology companies that hire legions of scientists in aggressive pursuit of cures for cancer, diabetes, obesity, Alzheimer's disease, and other ailments.
These companies have relatively few marketed products. And they account for seven of the 10 biggest net losses posted by Globe 100 companies last year.
The reasons have remained unchanged for a decade. Biotechnology companies face a chronically tough time getting products to market because of the high costs and complexities of experimental clinical trials, said Noubar Afeyan, chief executive and cofounder of Flagship Ventures, a Cambridge venture capital firm. ''Time and cost involved in drug development continues to grow," Afeyan said.
With lower regulatory hurdles, a development track for a medical device may be three to five years, compared to 10 or 15 for a new biotechnology drug.
Palomar didn't even make the Globe 100 last year before roaring into sixth place this year. It enjoyed 50 percent revenue growth in 2004. Not only dermatologists and plastic surgeons, but general physicians interested in offering minor elective procedures -- at free-market rates, with no managed-care hassles -- snapped up its lasers for zapping blemishes and removing unwanted hair.
Palomar chief executive Joseph Caruso is optimistic that strong growth can continue. ''If you look at the general drivers in society today," said Caruso, ''looking and feeling good is right up there."
State leaders' interest in nurturing the life sciences as an economic engine has become ever more urgent following the collapse of the computer industry that dominated the local landscape into the 1990s, the fizzle of the once-promising telecommunications sector after 2001, and the Fleet, Gillette, and John Hancock Financial Services Inc. takeovers.
''The next 30 or 40 years in this local economy are going to be driven by how well we handle the healthcare and life sciences opportunity," predicts Bob Davis, a venture capitalist with Highland Capital Partners Inc. in Lexington. ''We have an amazing opportunity today that we may -- or may not -- capture."
For all their promise, sectors such as biotech and medical devices have yet to become big Bay State employers. As of the end of 2003, the most recent tally made by the Massachusetts Technology Collaborative, those two and related industries they grouped under ''healthcare technology" employed just 26,200 people -- half as many as computer and communications gear, and just one-fifth as many as software and financial services.
To some industry leaders, the Globe 100 gives short shrift to life sciences' overall vibrancy and economic impact here. Peter Feinstein, managing director at BioVentures Investors in Cambridge, noted that Massachusetts companies attracted $1.6 billion in research grants from the National Institutes of Health in 2004. That doesn't show up in rankings that emphasize how well companies did selling services and products.
Likewise, companies excluded from the Globe 100 because they don't make headquarters in the state are making big impacts here.
Novartis AG moved its research headquarters from Switzerland to Cambridge in 2003 and is well on its way to employing 1,000 scientists and support staff. Merck & Co. Inc., also eager to cozy up to the region's heavyweight academics and biotech pioneers, opened a research laboratory in Boston and plans to employ 400. AstraZeneca Pharmaceuticals LP built a major facility on Route 128 in Waltham and employs about 400 people there researching treatments for cancer and other diseases.
''There's a huge amount of money coming into the state," Feinstein said.
Paul F. Levy, chief executive of Boston's Beth Israel Deaconess Medical Center, agreed that Globe 100 companies are just one important element of creating a healthy, strong life sciences community that also includes universities, hospitals, research facilities, branch offices of multinationals, and all of the spinoffs and service companies they sustain.
''It's not accidental that you see a concentration of activity," Levy said. ''We have an agglomeration of institutions and talent that people around the world would die to have. We need to be playing to our strength."