Mitchell Adams
Remarks to Jobs for Massachusetts

Tuesday, November 9, 2004

The Life Sciences Cluster:
Current Challenges, Needs and Opportunities

Thank you for inviting me to speak here. I am truly honored!
(Recognitions)

By most measures, biotechnology is thriving in Massachusetts. The most recent testimony for this came from the Milken Institute in California, which released a study in early October that placed the Commonwealth number one in the nation in its capability to sustain long-term growth in the biopharmaceutical industry.

The strengths the Milken Institute found in Massachusetts biotechnology — in research, new patents and licenses, new venture creation and investment, as well as many other metrics – are strengths that can be identified throughout a larger, interrelated complex of life science industries now thriving in this state. Bio/pharma is probably only the most dramatic example within this complex that includes sectors such as biotechnology, medical instrumentation and supplies, pharmaceuticals, health care services, specialized financing, education, biomedical research, and information technology. Taken together, this activity is not a cluster in the sense we’ve known it before, it’s what we at MTC have described as “the life sciences super-cluster”.

The super cluster over-all and most of its components project high growth and important job opportunities at a time of overall decline or stagnation in employment. By 2010 the biotech industry is projecting that it will double in size - an employment increase to 60,000 jobs in Massachusetts, with an additional 60,000 in indirect jobs.

In a report assessing the competitiveness of Massachusetts Life Sciences in terms of economic performance , Professor Michael Porter of the Harvard Business School reported that Life Sciences wages in the region are among the highest in the United States and are growing steadily. The region’s cluster has generated many recently approved biotech products, and accounts for about 7.5% of the world’s pharmaceutical product pipeline.

Fueling all this growth are two things essentially: proximity to one of the largest and arguably most distinguished centers of healthcare delivery and clinical practice in the country, and an extraordinarily rich and varied intellectual base in the exploding arena of life science research. The explosion in life science research is aided in turn by the convergence of a wide array of technologies, including Information Technologies and nanotechnologies that are now coming to bear on the problems that doctors and life scientists are attempting to solve.

We see these trends in the new dollars invested in research. Our analysis shows the flow of federal research dollars into the state has tilted strongly towards the life sciences in recent years, particularly as the budget of the National Institutes of Health has been doubled by Congress. The largest single philanthropic donations to research in our community, the MIT McGovern Institute for Brain Science and the Harvard-MIT Broad Institute for Genomics Research, are focused on life sciences from a broadly interdisciplinary perspective. Even the Army-funded MIT Institute for Soldier Nanotechnology, one of the single largest nanotechnology investments in the country, is focused in great part on the application of nanoscale technologies to solve the medical and health issues faced by combat soldiers in the field.

As the research pipeline in Massachusetts has tilted towards life science applications, so has the business development pipeline. Last year healthcare technology firms claimed about 40 percent of all venture capital invested in the state, with biotechnology claiming the largest share of any single industry at 31 percent of the total. This year, as the Initial Public Offering market has started to recover, healthcare technology firms are accounting for about two thirds or more of IPOs.

Unfortunately, there are dark clouds on the horizon.

While Massachusetts is one of the world’s leading centers in the field, with activities in almost all areas of Life Sciences and with a rich set of specialized institutions, we are facing a crowded and increasingly competitive field, with many regions in the United States and abroad investing heavily into the Life Sciences.

In a report published early last year, the Brookings Institution found that at least 40 states in the U.S. have adopted some kind of biotechnology economic development strategy.

By way of example: the state of North Carolina has sponsored a center to expedite biotechnology industry expansion in that state for over twenty years. And North Carolina, like a number of other states, has designated a portion of its tobacco litigation settlement proceeds for investment in programs to support the attraction and retention of biotechnology firms. A number of states have reinforced their efforts to support life science research in their home state universities. This list includes California, which has made new investments in the San Diego and San Francisco area universities even in the midst of its recent budget crisis, and Florida, where upwards of $500 million in state and county funds have been pledged in order to bring a satellite campus of the Scripps Institution to Palm Beach County. The most current example is of course the passage of Proposition 71 in California last week, which will provide $3.0 billion for stem cell research for investigators in California.

In the face of this competition, the Commonwealth is responding. Earlier this year the Governor and the Legislature enacted the economic stimulus bill. This legislation has recapitalized the Emerging Technology Fund, allowing the Mass Development Finance Agency to offer favorable financing for biotechnology firms and other technology firms that expand their facilities here. The legislation also created the John Adams Innovation Institute at our organization, and we are now administering $35 million in two funds that will support regional initiatives for technology-based economic development, and competitive proposals from our universities to create new advanced research centers. This investment will apply to competitive proposals across a wide spectrum of sciences and technologies, and although it will not be limited to the life sciences, we expect a significant investment in the life sciences will result. We can already see success. Our first commitment has been a $5 million grant to the UMass Lowell as part of a partnership with Northeastern and the University of New Hampshire for an engineering research center in Nanotechnology manufacturing. The partnership was awarded a $12.4 million NSF grant for the center.

Collaborative Framework

Increasingly bringing about change in highly complex, interrelated systems can only be accomplished by collaborative action. A recent Life Sciences summit convened by the Governor and the presidents of Harvard and MIT was an example of such collaboration, since the summit consisted of over 100 leaders from academia, government and business. Harvard president Larry Summers stressed the importance of three key economic principles for geographically co-located and knowledge-based industries such as the life sciences:

  1. Demonstration of increasing returns to scale. As the number of companies and researchers in a geographic location grows, the possibility of synergy, of spillovers, and of knowledge interchange and sharing increases more than proportionately.
  2. A clear division of labor is important to achieve the highest possible return, both at the individual and at the broader social level. It is very important that activities are executed by a broad range of participants with different incentives and different roles.
  3. The principle of diversification as it applies to scientific endeavors. Diversification reduces the overall risk of a portfolio of activities while allowing for projects to advance in ways that individually would be too risky to undertake.

In the summit, Professor Michael Porter of Harvard Business School argued that while many institutions exist in Massachusetts, they tend to focus narrowly on limited aspects of the cluster. The different segments operate mostly independently and well with their own industry associations: the Massachusetts Biotechnology Council, the Massachusetts Medical Devices Industry Council, Massachusetts Hospital Association, and others. What is missing from our effort to sustain competitiveness and growth is an overarching strategy for the cluster and a structure to develop and implement it. That is, a mechanism for collaborative action.

A collaborative framework for the Life Sciences will address overarching issues that can benefit from cluster wide solutions, engagement of industry leaders and collaboration across sectors. Problems such as: the high cost of doing business in the state; the low adoption rate of cost saving technologies in the health care system; the high cost of housing; legal, financial, and organizational barriers to innovation; the shortage of mid-level professionals, including nurses and technicians; the low percentage of high school students going into scientific and technical fields; and the removal of barriers to performing clinical trials with local institutions.

The presentation, "Advanced Technologies to Lower Health Care Costs and Improve Quality" highlighted the following:

Summary
We are facing a crowded and increasingly competitive field, with many regions in the United States and abroad investing heavily into the Life Sciences. And while many institutions exist in Massachusetts, they tend to focus narrowly on limited aspects of the cluster.

We believe that to insure the long-term competitiveness of the Massachusetts Life Sciences cluster as well as to enhance further our globally recognized capability for innovation and value creation, we must develop mechanisms for collaborative action. If we can do this effectively, we will succeed in harnessing the full potential of our state’s extraordinary “life sciences super cluster”.

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