Chemical scientists have tended to view the biotechnology industry in the same way that the Brookings Institution described it in its 2002 report, "Signs of Life: The Growth of Biotechnology Centers in the U.S." The report says the industry is heavily concentrated in nine metropolitan regions across seven states. These nine biotech centers--Boston, Los Angeles, New York City, Philadelphia, Raleigh-Durham, San Diego, San Francisco, Seattle, and Washington-Baltimore--are leaders because they have two elements deemed necessary for industry growth: strong research capacity and the ability to convert research into successful commercial activity.
While describing intense activity on two coasts, the report leaves the impression of little activity in between. But this is changing. There is much more to say about the biotech and life sciences industries in the Midwest. And people in the know are starting to listen.
In April 2003, more than 400 executives, industry leaders, and venture capitalists attended the Biotechnology Industry Organization's (BIO) Mid-America VentureForum, the first nationally sponsored biotechnology venture-capital event in the Midwest. The Mid-America VentureForum showcased 65 seed-, early-, and late-stage biotech companies to 30 private equity firms across the country. The event's success was a clear indicator of the growing biotechnology industry in the Midwest.
Has the Midwest been overlooked as a result of the Brookings report, or has it simply been finding its way? Conversations with seven state biotech trade associations that participated in the Mid-America VentureForum reveal that the answer is a little of both.
"The Midwest is a bit of a late bloomer," Ray Frost, executive director of the Minnesota Biotechnology Industry Organization, admits. "I think the big difference is that Brookings measured success based on the pharmaceutical, or human health, side of biotech, which has been around for 25 to 30 years. There's no question that the East and West Coasts lead there. Where the Midwest will lead is in areas such as agricultural biotech and in the convergence of the medical device and biotech industries," he says.
Doug Getter, executive director of the Iowa Biotechnology Association, concurs: "Brookings took a 'rear-view mirror' approach and looked at what was occurring today as a function of 15 to 25 years ago. From our perspective, we see many opportunities in the Midwest. Technologies are linking the role of agriculture and applications--nutraceuticals, pharmaceuticals, industrial applications, even fuel--which have significant potential. The fields of biotech and life science are so large, with so many niche market opportunities. If you're looking at what has grown in the past, you're leaving the biggest part of the iceberg untouched."
The Midwest has more going for it than crops, livestock, and college athletics. The region is home to industry leaders such as Procter & Gamble, 3M, Medtronic, Dow AgroSciences, Eli Lilly, Abbott Labs, Archer Daniels Midland, and Monsanto. Academic institutions such as Indiana University; Ohio State University; Purdue University; and the Universities of Iowa, Illinois, Michigan, and Minnesota enjoy nationally recognized research programs.
It is also home to the Ames and Argonne National Laboratories, Battelle Memorial Institute, and 12 Department of Agriculture Agricultural Research Service locations. The Mayo Clinic in Rochester, Minn.; the Cleveland Clinic Foundation in Cleveland; and Children's Hospital Research Foundation in Cincinnati illustrate a strong clinical presence in the region.
The major hurdle, though, has been in bringing stakeholders together to work cooperatively in nurturing and building a sustainable biotech community. One difficulty in clearing that hurdle stems, in part, from the tenet of Midwestern culture that it's unseemly to blow your own horn.
"Our approach is different from the East and West Coasts," says Michael D. Witt, executive director of Ann Arbor, Mich.-based MichBio. "There is a closer relationship between the companies and the researchers than in other states, and more quiet, incremental growth. It's much less expensive to grow a company here." The stereotype of the risk-averse Midwesterner doesn't hold, Getter says, because most Midwesterners come from an agricultural background where risk is prevalent. Understanding and working with risk isn't a foreign concept to them.
THE OTHER DIFFICULTY is commercialization: While the Midwest has a significant research base that has attracted a good deal of federal funding, commercializing that research in the form of new companies has been slow, as has the ability to nurture biotech companies. Individual and venture-capital investment have been low, but that is beginning to turn around.
"I don't have any quarrel with Brookings," Dave Miller, president of the Illinois Biotechnology Industry Organization (iBio), says. "Given the criteria they used, it's a fair report because the criteria tell the story. If you read the attributes of the communities designated as biotech centers and compare them with Chicago, Chicago has more solid attributes than many of those locations identified as biotech centers. The amount of research being conducted between the University of Illinois, Argonne, the University of Chicago, USDA labs, and Northwestern University is generating an enormous amount of discovery and many patents."
In Ohio, says Anthony J. Dennis, president and CEO of Omeris, a nonprofit organization devoted to advancing bioscience, "we didn't see what we had in our own backyard, but we've now begun aggressively digging out. We have a very aggressive state strategy in bioscience. In the past 18 months, we've raised $130 million in biotech, which was matched two-to-one by private funds. Within 300 miles of Columbus, we have virtually the same amount of National Institutes of Health and National Cancer Institute funding as in all of California, but less than 1% of venture capital has been invested in that same region."
Ohio research organizations earned $505 million in NIH funding and nearly $95 million in National Science Foundation funding in 2002. Five institutions--Case Western Reserve University, Ohio State University, the University of Cincinnati, the Cleveland Clinic Foundation, and Cincinnati's Children's Hospital Research Foundation--ranked in the top 90 NIH funding recipients in 2002, according to Omeris.
According to Witt, the University of Michigan's research expenditures for fiscal 2003 rose to nearly $750 million, an increase of 14.3% compared to the previous year. In fiscal 2003, according to the university's office of technology transfer, the university recorded 257 new invention disclosures, 76 new license agreements with corporate partners, and nine new business start-ups, bringing the total number to 36 start-ups launched over the past five years.
The St. Louis, Mo., region is anchored by Monsanto, a leader in the agricultural biotech industry, and Washington University, which is a clinical and applied research center. St. Louis University is home to one of the six federally funded Centers for Vaccine Development, according to Barbara Wilhelm, program director for the Missouri Biotechnology Industry Association.
The University of Missouri, Kansas City, is a member of the Kansas City Area Life Science Initiative, an umbrella organization dedicated to turning the Kansas City region into a life sciences center of excellence. And the St. Joseph, Mo., area has a large concentration of veterinary manufacturers; Boehringer Ingelheim Vetmedica is one of the firms located there. "It was all there," Wilhelm says, "and we're finally marshaling resources and getting them to work together."
According to Wade A. Lange, president and CEO of the Indiana Health Industry Forum, "Indiana's pharmaceutical and medical device sectors are ranked in the top five in terms of U.S. sales and employment, due largely to major players like Eli Lilly, Roche Diagnostics, Zimmer, Biomet, DePuy, Baxter Pharmaceutical Solutions, Pfizer, and smaller support companies. Three of the nation's leading research campuses are Indiana University, Bloomington; Indiana University-Purdue University Indianapolis; and Purdue University. Two of the top three or four analytical chemistry programs in the world are at Indiana and Purdue Universities. Indiana also excels in bioengineering, genomics and proteomics, and nanotechnology.
"The universities here have been aggressive in commercializing technology," Lange says. "There is more incubation space under the roof at Purdue than at any other university in the country, and IU opened its life sciences incubator a year ago." Purdue's Gateways and IU's Advanced Research & Technology Institute are incubation programs that derive from the university's research program, assisting high-tech start-up businesses by providing many of the resources needed to increase the chances of their survival. "Indiana may not become a biotech hub in the classic sense; more likely you're going to see medical devices, drug discovery tools, and health informatics predominate here. We'll probably excel in niches within the life sciences," Lange says.
Getter says that, in Iowa, "most of our growth is in the application of plant and livestock science as well as fermentation. One of Iowa State's strengths is its premier bioinformatics center, which is on par with Stanford. NewLink Genetics, a start-up biopharmaceutical company, evaluated bioinformatics capabilities around the country and used both Iowa State University and Stanford University as the premier bioinformatics centers in the country."
NOTABLY ABSENT from the Brookings analysis, thus adding to the perception that the Midwest is lagging, is the medical device industry, one area where the region stands out. Minnesota ranks second only to California in the industry, employing more than 23,000 people, according to the Minnesota Department of Employment & Economic Development. The top manufacturers are Medtronic, 3M, Guidant Corp., Boston Scientific, and St. Jude Medical Inc. There are 520 Food & Drug Administration-approved medical device establishments currently in Minnesota, and about 2,500 medical device patents were registered to Minnesota companies between 1997 and 2001, according to the state's Department of Employment & Economic Development. Minnesota is also home to "Medical Alley," a 350-mile-long corridor in Minnesota that is the location of thousands of companies and institutions in the medical field.
Perhaps the state's biggest booster is Stephen N. Oesterle, a senior vice president at Medtronic, who spent a decade in San Francisco and Boston before moving to Minnesota in 2002. In a 2003 interview with Minnesota Public Radio, Oesterle said that advances in cell, gene, and protein therapy won't help without a way to deliver those therapies, and that is where the medical device companies enter the picture. He believes that the large device companies in the state can attract small biotech companies and that, because medical device companies are profitable, they have the cash flow to invest in new technology. Medtronic itself testifies to this: It acquired four companies in 2002 and made acquisitions totaling nearly $13.9 billion between 1996 and 2002.
In Ohio, 186 companies manufacture products or provide services related to the medical device industry, and several medical device category leaders call it home. Cincinnati-based Ethicon Endo-Surgery, a division of Johnson & Johnson, is the market share leader in both the endoscopic and traditional surgical devices markets, according to Omeris. Invacare in Cleveland bills itself as the industry leader in the $6 billion market for home medical products, manufacturing and distributing the world's broadest product offering to approximately 15,000 independent home medical equipment providers. Mentor-based Steris is a world leader in medical sterilization, disinfection, and decontamination, with annual sales of $865 million. Cardinal Health, Dublin, is the biggest health care corporation in the state and is a member of the Fortune 25, according to Omeris.
"Devices tend to fit with the Midwest, the place where cars were made and steel was poured," Omeris' Dennis says. "The University of Akron is home to the world's leading polymer science department, and then there's the Liquid Crystal Institute at Kent State University. There is a lot of infrastructure here to support medical devices."
Central Indiana has a reputation for amateur sports, so sports-centered life sciences is one area targeted for growth, according to BioCrossroads, a public-private network dedicated to enhancing the life sciences industry in central Indiana. This industry combines the state's expertise in sports medicine and training with Indiana's orthopedics and medical devices industry and academic assets like Ball State University's Human Performance Lab to capitalize on a growing market in this area that exceeds $71 billion annually, according to BioCrossroads.
The one area where the Midwest needs to improve is in the formation of start-ups. Miller comments that the Brookings rankings "can be motivational, in fact, because those really are the weak muscles that all the states are taking steps to improve. Look at it this way," he says, "it is easier for these top-tier research entities to generate new companies than to establish the multi-billion-dollar research center that the Midwest institutions collectively represent."
RECOGNIZING these weaknesses has become a strength. All of the states have programs to grow their biotechnology businesses and offer a supportive public policy structure. For example, Michigan, Missouri, and Ohio have allocated money from the national settlement with tobacco companies to help fund biotechnology initiatives.
Other support strategies to boost biotech business include consortia, funds, and incubators. Tax policies and financial incentives also help build business. According to Getter, Iowa has had a tax credit for R&D expenditures for about 10 years. In 2003, an investment pool providing $500 million over seven years was established, with a focus on life sciences, information technology, and advanced manufacturing. The goal is to provide a vehicle to develop entry-level companies and to make other firms aware of the strengths and opportunities in Iowa. "It's a fairly significant allocation to the universities in their core strengths," he says. "Plant and livestock, pharmaceuticals, and medical applications--the political environment is very supportive," Getter says.
The Indiana 21st Century Research & Technology Fund was created in 1999 to stimulate the process of developing and commercializing advanced technologies in Indiana. The fund is set up to provide $37.5 million per year in awards. It emphasizes creating academic-commercial collaboration with the goal of bringing exciting new ideas closer to market. "What's happening," Lange says, "is a shift to interdisciplinary work because the fund emphasizes multiple institutions working together. It's not uncommon to see two or three universities and a number of commercial operations involved; already, a number of businesses have been created from projects financed by the fund."
The Midwest is also attracting overseas business from countries such as Japan, Israel, and Germany. Ohio, for example, has more divisions of Japanese companies than any other state, according to Dennis of Omeris. In June 2003, Omeris hosted a symposium with the Japan External Trade Organization to develop potential business and research linkages. Similarly, the U.S. headquarters of two of Japan's top pharmaceutical companies, Takeda Pharmaceuticals and Fujisawa Healthcare, are located in Illinois. According to iBio's Miller, both stayed in the Chicago area for the same reasons: the low cost of doing business in the Midwest, a stable and educated workforce, and access to markets internationally through O'Hare and Midway Airports.
The concentration of universities that produce both world-class research and highly skilled technical workers means the Midwest is well positioned to further the growth of the biotech industry. The Midwest also offers a strong community college system whose programs focus on the needs of local employers. In Missouri, for example, the St. Louis Community College, Florissant Valley, developed a biotechnology program to meet the needs of entry-level workers and has actively participated in developing the St. Louis "BioBelt" brand, referring to the multistate region with St. Louis at the hub.
Iowa has an extensive network of community colleges, some of which have specialized programs, according to Getter. "Indian Hills Community College in Ottumwa has a strong fermentation curriculum. Graduates of the program are employed by several of the major fermentation companies in the area, including Cargill and Archer Daniels Midland. Likewise, Des Moines Community College has a strong laboratory technician program, and their graduates have no difficulty finding attractive job opportunities," he says.
In terms of educating the next generation, Case Western Reserve University, Ohio State University, and the University of Cincinnati are nationally recognized, but Ohio, too, has an excellent community college system, Dennis says. "In the 1960s and 1970s, Gov. James Rhodes declared that everyone would be within a 20-minute drive of a college education, and the state has created precisely that system. There is a huge network of academic institutions widely distributed throughout the state."
The Ohio Third Frontier Network is part of the Third Frontier Project, a multi-billion-dollar effort to attract and retain biotech companies in the state. More than 1,600 miles of fiber-optic cable connects business and universities to promote and facilitate collaborative research not just statewide but nationally and internationally as well.
The Midwest offers many quality-of-life advantages in addition to a robust industrial and academic environment: affordable housing, good public school systems, and a relatively lower cost of living than cities like Boston or San Francisco. "As we succeed in our efforts to identify and publicize what is going on, there will be an influx of people who want the better quality of life and will come back from the coasts," iBio's Miller says.
The biotech industry holds tremendous promise for the Midwest. The state biotech associations realize this is a long-term commitment: Their biggest opportunities and challenges lie in publicizing what is going on in their respective states. The long-term commitment also means there will be many opportunities for those chemical scientists who are seeking to advance their careers in biotech. In the end, a key strategy to building biotech in the Midwest will be based on harnessing each state's strengths, rather than recreating the hubs that exist in Boston or San Diego.
"This is the basic premise for the states working in the Midwest," Getter says. "Our philosophy is one where we have to build on the intellectual property that is unique to us. What I'm doing isn't necessarily the same thing that is being tracked in Illinois, Michigan, Missouri, or Indiana."
"Strategies are based on the future, on opportunity," Dennis says. For instance, "which states and regions can best apply technology coming off the shelf? One of the most fundamentally positive things we can do for Ohio is not try to emulate California or Boston, but become ground zero to apply that technology for commercialization."