The East and the West
Healthy competition driving progress
Two complementary approaches have driven the US to its leading position in the global life sciences space. The first one, the "East Coast mindset", continues to roam from the benches of Harvard and Northeastern University to the labs in Cambridge: innovators make a discovery, pass the reins to a VC firm, and publish their studies back in the lab. The second one, the founder-led and tech-inspired model seen across California, implies pitching VCs, but ultimately running the business. More than ever, in 2022 entrepreneurs from both coasts have multiplied interactions with investors, developed collaboration with academia, and leveraged state-led funds to continue to bolster innovation.
The East Coast: Massachusetts, New Jersey and Pennsylvania
Massachusetts, home to 18 of the 20 largest global pharma firms, again ranked as a top place among life sciences regions globally in 2022. For the past 15 years, the work done by pharma firms, state authorities, and non-profits to develop the industry has been nothing short of outstanding. Since passing the Massachusetts Life Sciences Initiative in 2008, biopharma employment has almost doubled in the state, with a 96.5% total growth. Surfing on that trend, employment grew by 13% in 2022, with the life sciences industry now employing over 106,000 people. Pharma giants Takeda, Sanofi and Pfizer were the top three employers in the state in 2022, according to figures from MassBio.
Firms in Massachusetts have R&D running through their veins, and this will likely remain what pumps capital into their ventures in the year ahead. The state remains the top NIH-funded state per capita, with US$3.3 billion, while firms in the Boston area received 26% of all VC investment nationally. Massachusetts headquartered firms make up 16% of the US drug development pipeline. Newly promoted MassBio CEO and president Kendalle O’Connell detailed the state’s growth path: “We have seen unprecedented levels of venture capital investment coming into Massachusetts headquartered companies, with nearly US$9 billion of VC investment in 2022 and US$13.6 billion in 2021. In 2022, lab and manufacturing space in Massachusetts totaled approximately 55 million square feet, with 15 million square feet coming online in 2021 alone.”
A key component of Massachusetts’ success has undoubtedly been the unique focus put on funding higher education and research institutes. In 2021, Harvard, Northeastern University and the Broad Institute were three of the 15 institutions that received a total of US$1.42 billion in NIH funding. Tim Jarrett, who leads the Life Lab at Harvard Innovation Labs, detailed this fruitful environment: “There is an extraordinary density of universities and academic institutions with great interconnectivity among them. This culture of collaboration and idea-sharing allows for an environment of proliferative innovation and faster advancement of science.”
A 12-minute drive away from Harvard Innovation Labs, the College of Sciences, represented by Dean Hazel Sive, was deemed the “innovation capital of academia” by the latter, who also praised how the state’s collaborative climate eases the process from discovery to commercialization: “The high concentration of universities in Massachusetts has led to a significant number of innovations that eventually turn into products.”
In 1886, J&J relocated its lotion and bandage factory to New Brunswick, NJ. This move sparked the genesis of what has since been the greatest concentration of life sciences companies in the US. Today, with close to 4,500 pharma establishments, New Jersey retains its title of ‘medicine chest of the world’. “In 2022 alone, companies with a footprint in New Jersey were responsible for nearly 50% of all new FDA approvals,” stated BioNJ president and CEO Debbie Hart.
A key piece of the biopharmaceutical East Coast corridor, New Jersey is now aiming to be reckoned as a force within the innovation segment of the industry. Funding programs by the New Jersey Commission on Science, Innovation, and Technology sparked further early-stage activity, and moves by several giants in 2022 highlighted the investment attractiveness of the “Garden State”: PTC Therapeutics, Insmed and Gilead all broke ground at new facilities last year.
Pennsylvania continues to lead the East Coast’s efforts in terms of research, testing, and medical laboratory capabilities. Besides being the national leader in clinical trials, the Greater Philadelphia area also ranks amongst the top 10 life sciences markets in the US and is home to 15 major health systems.
Perhaps Pennsylvania’s greatest strength is its talent pool. In an industry plagued by talent shortages, the state continues to attract scientists that lead the development of cell and gene therapies, for instance. With rents lower than the established hubs of the East and the West, the “Keystone State” offers appealing prospects for life science companies.
The Pennsylvania Biotechnology Center (PABC) attracts interest from other states, as about 45% of firms in their B+Labs come from the outside. The Center continues to spin out success stories: Capstan Therapeutics made a US$165 million raise in 2022, Aprea Therapeutics made a reverse IPO, and PABC was awarded a US$5 million NIH grant to boost its support to the life sciences ecosystem. Speaking about the grant, president and CEO Louis Kassa expressed: “I would love to see this grant continuing to propel the Greater Philadelphia region into the top five life sciences clusters,” adding: “We have many good variables going for us in Greater Philadelphia – it is affordable, we have 88 universities and colleges within 50 miles, and our biggest strength is our talent.”
Motivated governments, coupled with top academic institutions and expert innovators mean the East Coast is in good shape to maintain its leading global status. The region is also primely located next to New York, home to many VCs, hedge funds and financial institutions. With expenses remaining too high for most early-stage biotechs and institutions in the Big Apple, the peripheral areas will continue to benefit from that centralized investment.
“Early-stage firms that are looking to test their product without having to do a high volume of capital investment need Cleanroom on Demand providers. As we continue to expand, we realize that Boston, North Carolina, San Diego, and San Francisco are all hotbeds in that segment.”
Michael Khavinson, Managing Partner and CEO, Azzur Group
The West Coast: California Dreaming
California outperforms the US – and many countries – across a wide range of industries. Between the Bay Area, Orange County, San Diego and Los Angeles, the life sciences industry in the ‘Golden State’ continues to surf on the Pacific waves of investment brought about by the pandemic: Investment in life sciences reached record levels in 2021, as VC investment, NIH, and NSF funding alone topped US$22 billion in 2021. Today, California is home to 3,766 biotechs and biopharmaceutical companies, and for several years now, has remained the national leader in NIH funding. Speaking of the impact of the life sciences industry on California’s economy, Joe Panetta, president and CEO of Biocom California, detailed: “The life sciences industry has close to a US$400 billion economic impact on California and creates more than 400,000 direct jobs. Many states are extremely aggressive in bringing biotech into their regions, but nobody has the engine of innovation and the depth and breadth of life sciences workforce, talent, and experience that we have here in California.”
California hosts multiple life sciences clusters across the value chain and its influence is felt around the world. Biocom California has an office in Tokyo, and in the past years signed memoranda of cooperation with biotech clusters in the UK, France, Sweden and Australia. Joe Panetta believes it is the state’s responsibility to capitalize on the state’s assets to shine on the global stage.
The relationship between incubators, academia and freshly graduated entrepreneurs is what makes the Californian ecosystem the epicenter for global innovation. Data from Statista shows that a total of 5,892 doctorates were awarded in California in 2021, with Texas in second place only accounting for 4,118. David Schaffer, executive director of QB3, a state-funded non-profit that promotes biosciences entrepreneurship across UC Berkeley, UC San Francisco, and UC Santa Cruz, currently supports early-stage firms composed of Ph.Ds notably, developing small molecule, protein, gene, and genome editing, and cellular therapeutics. Building from the ground up, Schaffer wants to go beyond the three universities part of QB3 to help spread knowledge of how to build incubator programs to help technology transition. Particularly with universities in the north of the state, he unveiled: “Conversations have started, and there are definite synergies, particularly in the therapeutics space with cell and gene therapies.”
In conclusion, despite the growth of several hubs countrywide, the East and the West Coast will likely remain the epicenters of the life sciences industry in the US in the coming years. Access to talent, to infrastructure, and established pharma legislations make these hubs attractive for investors increasingly keen on de-risking all aspects of projects. Across the country, it is however clearer than ever that potentially life-saving discoveries should not be constrained to the ivory towers of academia, but rather be supported through public-private collaboration.
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