The battle for biotech rages on

When Germany-based specialty chemicals company Evonik chose Birmingham, Alabama for its first global innovation centre for R&D, the location may have seemed off the grid compared to top US biotech locations Boston, San Francisco and San Diego. Yet company officials were attracted to the fact Alabama has more than 800 bioscience companies, and Birmingham is home to the University of Alabama, a major hub for biotech research and innovation.

It is a trend many biotech companies are embracing. Glen T Giovannetti, EY global biotechnology leader, says site selection, especially for established commercial stage companies, is increasingly based on business decisions. “Assuming the headquarters is not moving, companies normally establish new locations to get closer to important growth markets or to obtain cost advantages for activities such as manufacturing,” he says.

Local expertise

This is why in May, US-based Provident ProtonCare, a division of Provident Resources Group, announced its decision to develop an $85m advanced proton therapy centre in Baton Rouge, Louisiana. “We chose to make this substantial investment in Louisiana and the Baton Rouge region due to the outstanding cancer care being provided by the health providers in Greater Baton Rouge,” says chief executive Steve Hicks.

Likewise, Swiss pharmaceutical and biotech company Lonza announced plans last year to expand substantially the facility it was constructing outside Houston, Texas. This was to accommodate increased demand for cutting-edge biotech therapies. Houston is home to 130-plus hospitals, health clinics and research facilities.

Meanwhile, the Kansas City Animal Health Corridor between Kansas and Missouri is attracting companies from around the world. Jinyu-technology Co, the largest animal vaccine company in China, recently announced plans to open facilities in Manhattan, Kansas. Jurox Pty and Parnell (both of Australia), Virbac of France and Simcro of New Zealand have also located within the area.

“Since its establishment in 2006, we’ve seen about $1bn in investment and about 300 companies locate to the corridor,” says Kimberly Young, president of Kansas City Animal Health Corridor.

Big business

Undoubtably, biotech is big business. In 2015, Global Market Insights reported the value of the global biotechnology market at $330.3bn and expects values to exceed $775.2bn with a 9.9% compound annual growth rate from 2016 to 2024. North America dominated the revenue share in 2015 with more than $127.4bn.

“Today, the US market for biotech has never been stronger,” says EY’s Mr Giovannetti. “But for early-stage companies, access to capital, talent and experienced leaders and employees remains a constant issue.”

Most early-stage R&D companies are formed and located in ‘clusters’, with strong academic institutions doing cutting-edge science, strong healthcare institutions for clinical trials, experienced venture capital investors and significant venture capital investment, and experienced management teams.

These are reasons Applied Genetic Technologies Corporation (AGTC), a developer of ocular gene therapies, is thriving in Gainesville, Florida. Today, AGTC is expanding to larger facilities with help from a $1bn deal with global biotech giant Biogen. “AGTC, which grew out of the University of Florida Sid Martin Biotechnology Institute, is the first [such] company to actually go public,” says Staci-Ann Bertrand, director of industry development at the Gainesville Area Chamber of Commerce.

The institute, which opened in 1995, is one of the first bio-business incubators in the US. “Our programme is now known as one of the most experienced biotech incubators in the industry,” says Merrie Shaw, assistant director at the Sid Martin Biotechnology Institute.

Biotech companies benefit particularly from research and talent coming out of the University of Florida and Santa Fe College. “These provide the backbone of health development [through] R&D in the region,” says Ms Bertrand.

European base 

Europe remains a strong region for biotech, with Cambridge in the UK being a leading centre. There are concerns, however, over the impact that the UK leaving the EU might have on biotech investments, most notably crossborder capital flows and trade. “The Brexit situation will need to unfold before we know what the implications are,” says Mr Giovannetti.

Belgium’s Wallonia region boasts long-standing experience in the life sciences field, with groundbreaking research coming out of the University of Liege and the companies established on the Liege-Charleroi axis.

Switzerland is also considered to be one of continent’s strongest biotech locations, given its education and research environment for highly skilled workers, its liberal business environment, and access to venture capital. Liv Minder, director of investment promotion at Switzerland Global Enterprise, says the Swiss parliament has asked the government to develop proposals to establish a ‘future fund’, which would involve “pension funds investing venture capital in promising sectors of the economy, including biotech”.

Although venture capital is limited in Denmark, the country has a strong advantage in technology transfer, which “mimics the US system when it comes to university patent rights”, according to Jannik Grodt Schmidt, investment manager at Invest in Denmark.

The Medicon Valley, a bi-national cluster spanning the Oresund region of eastern Denmark and southern Sweden, is home to 350 biotech, medtech and pharma companies with local R&D facilities and four world-leading life science universities. Novo Nordisk, LEO Pharma, Baxter Gambro and Lundbeck are among the major companies located there.

“Many smaller innovative start-ups continue to energise the area,” says Mr Schmidt. “Copenhagen and southern Sweden have a lot of companies that have developed rapidly over the past 10 years.”

Talent recruitment is challenging in Denmark, as it is worldwide, particularly with the country's current 4% unemployment rate. Yet, Mr Schmidt says, Denmark attracts impressive biotech talent. Medicon Valley’s website reports that the region attracts 90% of Scandinavian life science graduates, has 6000 doctoral students, and employs 40,000 people in life sciences.

Asia opportunities

Asia is also keen on biotech. “China has made significant strides in the formation and funding of early-stage companies,” says Mr Giovannetti. “The country had larger venture capital rounds and initial public offerings than Europe in 2016 and [has had] several significant IPOs. This growth has been partially catalysed by the government’s investment in biomedical research over the past five years.” Chinese companies have attracted the interest of companies in the West, with Celgene Corporationof the US recently entering into a strategic collaboration with China’s BeiGene.

Meanwhile, South Korea’s ministry of science, ICT and future planning, its ministry of trade, industry and energy, and other local agencies have also been investing millions of dollars to expand the country’s biotech sector, which hit a record 443 start-ups in 2016. Playing a key role are Seoul National University and Korea Research Institute of Bioscience and Biotechnology.

“South Korea has the fifth largest R&D spend [in the world], behind the US, China, Japan and Germany,” says Junghee Lim, head manager and executive managing director of Intervest Co’s investment division. “South Korea has a good clinical trials environment and is experiencing rapid venture capital investment, overtaking the US in 2014 and 2016.”

Notably, Seoul-headquartered Hanmi Pharmaceuticals recently signed major agreements with Sanofi, Eli Lilly, and Johnson & Johnson to develop drugs to combat diabetes, cancer and obesity.