BIO 2005
Philadelphia Hosts Biotech's Biggest show

Chasing biotech dollars in Phila.
At a conference here, officials trying to lure jobs target a still-struggling industry.

By Bob Fernandez, Inquirer Staff Writer
Philadelphia Inquirer
June 19, 2005

In November 1972, professors Stanley Cohen and Herbert Boyer brainstormed at a conference in Hawaii and came up with the basic idea behind biotechnology, the science of manipulating genetic material in cells to cure diseases.

Today, with the Internet bubble a thing of the past and manufacturing losing millions of jobs, economic development officials in 40 states are zeroing in on biotech and biosciences to generate high-wage jobs. The fever has even spread around the globe, with the Czech Republic, France, and Taiwan among the many courting biotech.

This zeal, and a healthy dose of hype, will be on display as the Biotechnology Industry Organization 2005 Annual International Convention (BIO 2005) kicks off today in Philadelphia - and 18,000 people descend on the Convention Center to discuss the business of biotech.

BIO 2005 is the industry's annual four-day meeting for biotech chieftains, financiers and others. Thousands of protesters also have geared up for the event.

But the main business for many will be economic development, and a big question is whether there is enough biotech business for all who seek it. Thirty states have reserved display pavilions on the Convention Center floor to pitch their regions as biotech hotbeds, and 47 states are sending representatives. The governors of New Jersey, Pennsylvania and Delaware are expected to take advantage of the fact that their states are already home to some of the biggest drug companies in the world.

Officials in the Philadelphia region say BIO 2005 could be more important than the Republican National Convention in 2000 because it will give local biotech companies, health-care research centers, and development officials a chance to show their stuff to the industry.

In medicine, biotechnology has led to promising new drugs to treat cancer and other diseases. In agriculture, biotechnology has helped create genetically modified crops that make farming more productive. In both, it has led to controversy, whether it is over embryonic stem cell research or changes to natural foods.

Two established biotech companies are located in the area - Cephalon Inc., which is based in Frazer, and Centocor Inc., based in Horsham - as well as about 100 start-up biotechs. Pennsylvania has earmarked $2 billion from its tobacco settlement for subsidies and incentives for biotech, drug and health-care companies.

But the tri-state region has plenty of competition. Robin Roberts, executive vice president at the Greater Oklahoma City Chamber, said she would tout lab space in her area "as good as Johns Hopkins" University in Baltimore at half the cost. "We are looking for partners and investment - the whole enchilada," she said.

In one of the biggest efforts to jump-start biotech, Florida is offering $770 million in taxpayer incentives to persuade California's Scripps Research Institute to open a biomedical research facility in a rural part of Palm Beach County. "We are obviously not the only state going after this initiative, but we are putting our resources where our goals are," said Diana Robinson, president of BioFlorida.

About 100 Florida business, development and university officials plan to attend BIO 2005, with the state's governor, Jeb Bush, scheduled to make an appearance on Tuesday.

Some fear that the enthusiasm over biotech has gotten ahead of reality, with too many people chasing a finite number of companies, many of which may never earn profits.

After almost 30 years, the biotechnology industry is still comparatively small, concentrated in about a dozen metropolitan areas, losing billions of dollars a year, and facing increasing safety scrutiny by the government.

"People have to be realistic. Three-fourths of the metropolitan areas in this country are not going to be biotech centers," said Ross C. DeVol, director of regional economics at the Milken Institute in Santa Monica, Calif.

DeVol estimates that biotech and related employment will grow 30 percent over the next 10 years. But he has heard estimates that the industry will grow 400 percent to 500 percent in that period.

"I'm not sure what people are talking about," DeVol said, adding that some estimates seem like "science fiction."

Various studies show that that a narrowly defined biotechnology industry has about 1,500 independent research and development companies that employ 115,000 to 120,000 people. That's roughly the same number that work in the health-care industry in Philadelphia.

A broader "biosciences" definition that includes the biotech efforts of large pharmaceutical companies and other industry categories puts nationwide employment between 415,000 and 900,000.

While there are success stories like Genentech, with $4.6 billion in revenue and $785 million in profits in 2004, the biotechnology industry still gushes red ink.

Biotechnology companies, most of which are still developing new drugs, accumulated losses of $17 billion in the last three years and aren't expected to earn a profit as a group until 2009 or 2010, according to a research report this month by Ernst & Young.

Michael S. Hildreth, director of Ernst & Young's Americas Biotechnology Practice in Palo Alto, Calif., said that if the Food and Drug Administration tightens regulations on drug approvals and makes companies do more rigorous clinical testing, FDA approvals for biotech drugs could slow. That would "push out profitability... quite substantially," Hildreth said.

But when economic development officials hear of biotech success in places like San Diego and Raleigh-Durham, N.C., they want a piece of the action. Joseph Cortright, a Portland, Ore.-based economist, said the biotechnology industry is prone to coagulate in areas where it already exists, rather than fragment across the United States.

A big attraction for economic-development officials is the high pay that comes with many biotech jobs. Walter Plosila, vice president at the contract research group the Battelle Institute, said the average annual pay in biosciences was $62,000, compared with a national average of $35,000.

Plosila warns that it's neither easy nor cheap to build a regional biotechnology industry. He says that to make it work, a region needs big medical centers or health-care research organizations, a skilled life-sciences workforce, entrepreneurs, a collaborative culture between companies and researchers, venture capital, patience, and a specialty.

The Philadelphia area has large drug companies, such as Merck and GlaxoSmithKline, and medical research institutions such as the University of Pennsylvania and Fox Chase. But experts say the area's academic research centers have not been as successful as those on the West Coast in developing technology that can be commercialized. Nor does the region have as a strong a culture of venture-capital start-ups.

William B. Neaves, president and chief executive officer of the Stowers Institute for Medical Research in Kansas City, Mo., thinks the naysayers are wrong. "This will be the growth industry of the 21st century," he said. "We are just seeing the tip of the iceberg" of the potential of biotechnology drugs.