New Brookings Report Outlines Key Requirements for Building Biotech Cluster; Top Nine Regions Have Formidable Lead

6/11/2002

From: Kimberly Gibson of the Brookings Institution, 202-797-6414 (office), or 202-607-5499 (mobile), e-mail: kgibson@brookings.edu

WASHINGTON, June 11 -- A new report from the Brookings Institution Center on Urban and Metropolitan Policy examines the location and concentration of the biotechnology industry around the United States and outlines the key conditions and resources necessary for regions to nurture its development.

The report, "Signs of Life: The Growth of Biotechnology Centers in the U.S.," (available at http://www.brookings.edu/urban) by Joseph Cortright and Heike Mayer of Portland State University, uses several indicators to examine the biotechnology activities of the 51 largest metropolitan areas, groups the regions by their biotech presence, and explains the factors that contribute to their biotech standing. The authors find that:

-- The biotechnology industry is concentrated within nine of the nation's 51 largest metropolitan areas. Accounting for three-fourths of the nation's largest biotechnology firms, these nine areas also contain three-fourths of the biotech firms formed within the past decade. These regions include Boston, San Francisco, San Diego, Philadelphia, New York, Raleigh-Durham, Seattle, Los Angeles and Washington, D.C.-Baltimore.

-- These nine biotech regions are leaders because of their strong research capacity and their ability to convert research into successful commercial activity. Most biotech firms operate at a loss, spending large amounts on research and development for several years in advance of earning any sales revenue. Critical to the development of a biotechnology industry is not only the availability of pre-commercial medical research, but also the continuing private-sector investment in product development. This crucial private investment has become more concentrated in these leading biotech centers in the past decade.

-- None of the other 42 largest metropolitan areas has developed a significant concentration of biotechnology activity. These other 42 metros can be divided into three groups: those that only have strong research capacity, those that have moderate levels of activity and those that have no significant biotech presence.

-- Development of a successful biotechnology cluster requires a significant amount of time, investment and ongoing commitment of resources. It often takes a decade or more to develop biotechnology-based products. In fact, one in 1,000 patented innovations produces a successful commercial product. These odds, coupled with the time necessary to secure regulatory approval for products, mean that metropolitan areas seeking to develop a biotech industry must invest significant time and resources.

-- Although growing rapidly, the biotechnology sector is still a small portion of most metropolitan economies. To date, even successful biotechnology clusters have produced only modest returns to their regional economies. Nationally, the best estimates suggest that fewer than 200,000 people work for biotech firms.

"This report sends a cautionary note to many metropolitan areas that are making 'biotech' the economic development strategy of the moment," said Bruce Katz, director of the Brookings Urban Center. "The bottom line is that not all metropolitan areas have what it takes to build a major biotech cluster."

The biotechnology industry has become a fast-growing sector of the U.S. economy and a focal point of many local, regional, and state economic development strategies. The report's findings cast a realistic light on the development of the industry and will prove useful to regions across the country trying to grow their biotechnology sector.