Corrections or additions?
This article by Barbara Fox was prepared for the February 19, 2003 edition of U.S. 1 Newspaper. All rights reserved.
Life in the Fast Lane
In the doom and gloom of New Jersey’s budget woes,
one of the few bright spots seemed to be the concentration of pharmaceutical
and biotech companies in the state. Now that industry’s long-term
viability is being questioned.
“New Jersey’s life science innovation cluster is one of the brightest
stars in our state’s economy,” says Governor James E. McGreevey.
“But other states are catching up, and the time has come for us
to shift the cluster into high gear for the new century.”
He points to Prosperity New Jersey’s new Life Science Cluster Initiative,
which commissioned a study by Michael E. Porter, a Harvard University
expert on strategy and competitiveness. Porter presented the results
of the $250,000 study on Friday, February 14, at a public meeting
of Prosperity new Jersey, the public/private partnership headed by
Adam Pechter. Nearly 100 public officials and industry representatives
gathered in Princeton University’s Whig Hall to hear the results of
the study that was supported by the Biotechnology Council of New Jersey
(www.newjerseybiotech.org) and the Healthcare Institute of New Jersey
(www.hinj.org), which represents the state’s large pharmaceutical
companies.
Porter, who graduated from Princeton University’s engineering school
in 1969, guided the Massachusetts-based Monitor Group in this study,
which included statistical analysis and indepth interviews with more
than 130 people last fall. Porter contributed his services pro bono.
The study is available online (www.state.nj.us/prosperity).
Life science jobs are important to New Jersey. Of the one third of
“tradable” jobs (jobs that aren’t based on geographical location,
jobs that could be snatched away by other states) life science has
the fifth largest number here — 71,873 workers in 2000. They represent
6.5 percent of total “traded” employment, a percent that is
almost three times the national average. The only industries with
larger percentages are business services (190,814 jobs), financial
services (135,882), distribution (109,772), and hospitality and tourism
(95,076). Information technology, for instance, has 17,887 jobs and
is in 15th place.
Citing Germany’s cluster of high performance auto companies and Boston’s
hotbed of mutual fund firms, Porter says that clusters of companies
in a particular industry generate energy, vitality, and competition.
In this way, New Jersey’s critical mass of pharmaceutical and biotech
firms has contributed to the state’s economic health.
But Porter sounds the alarm. “Life sciences is a strong cluster,
but it is not growing,” says Porter. He shows that this category
ranks ninth in jobs gained from 1990 to 2000 (5,403 jobs) compared
with information technology (which is fifth in growth). “Jobs
have been created on the research side, but we are losing jobs on
the manufacturing side,” says Porter.
When two major pharmaceuticals — Merck and Novartis — chose
Massachusetts over New Jersey to establish big facilities, officials
began to think of them as the canaries in the coal mine. “We’re
not in crisis mode,” Porter emphasizes, “but the life sciences
economy that is good today lacks dynamism to shape the future. We
have significant challenges.”
Cost of living. New Jersey is a notoriously expensiveplace to do business, says Porter. “If somebody outside the statecan make something, they can make it cheaper. That’s why our capacityfor innovation is so important to our prosperity.”New Jersey should base future success on productivity, he believes.”California is a high cost place to make wine, but it has thehighest productivity per acre of land. Our path to success is notto cut costs but to raise value with more innovative methods —and be a moving target for Thailand and Korea.”Low patent growth . The state has always been strong inthe number of new patents it turns out, but from 1998 to 2001 it showeda startling slow-down. Now it is last in the nation in the growthin number of life science patents compared to life science jobs.d>Insufficient university research This ties inboth with what Porter perceives to be a patent deficit and Merck’smove to Massachusetts. There, three of the top four life science patentorsare institutions — Massachusetts General Hospital, MIT, and Harvard.But here, the top four patentors are corporations. “We must takethis seriously,” says Porter, “because Merck and Novartiswant to be part of the new model.”Porter advocates basic structural change. “We will haveto change the way various parts of the life sciences community worktogether.” In the old economy, government took care of roads andschools, universities devoted themselves to basic knowledge, and businessesdid business. “Now we need new institutions for collaborationto help connect the dots,” says Porter.Long established pharmas such as Johnson & Johnson, Squibb, Pfizer,and Merck pioneered in New Jersey, but now this early history couldbe a disadvantage. “Under the new model, companies collaboratewith universities and medical schools.”A prominent subtext to Porter’s report was its support for McGreevey’scontroversial initiative to revamp the state university system asproposed by P. Roy Vagilos, former CEO of Merck. Vagilos was prominentlyseated in the front row next to Richard McCormick, the new presidentof Rutgers University, and former governor Brendon Byrne. When PrincetonUniversity President Shirley Tilghman opened the meeting and acknowledgedthe guests, she pointed out that she had known Vagilos when he wasstill in academe, and she endorsed his ideas. McCormick chimed inhis approval as well.Insufficient technology transfer , which impedes the flowof technology from academic institutions to industry. “We willhave to change the way various parts of the life sciences communitywork together,” says Porter.Low growth in start-up establishment . Porter said he heardrepeated complaints from entrepreneurs that they did not get enoughhelp from government, that they did not think government was on theirside.Insufficient funding . Most of the venture capital firmsin this state invest out of state. Porter thinks the state shouldoffer incentives for investments in life science start-ups.Another subtext of Porter’s report — that investments from thestate’s pension fund could help New Jersey-based companies prosper— received little support from the head table. Nevertheless, thetrade group representatives used the meeting as a lobbying opportunity,pointing out that the pension funds had done poorly with portfoliosbased on out of state companies, and that this is one of very fewstates that does not invest even a fraction of its pension moniesat home. Donald Drakeman, CEO of Medarex, advocates putting some ofNew Jersey’s pension funds into state-based venture capital fundsthat could funnel the money into start-ups.The irony of the report’s timing was that the governor had justreleased a bare bones budget eliminating virtually all the incentivesfor encouraging innovation (research grants through the New JerseyCommission on Science and Technology) and attracting business (BusinessEmployment Incentive Programs and tax transfer programs).”We have to cut back on the very programs that were actually valued,but we can and must have long-term plans,” says Porter, and hepoints out that some remedies can be accomplished inexpensively.Put pressure on Washington so that New Jersey labs geta better share of grants from the National Institutes of Health.Get existing organizations to do a better job at linkingR&D efforts between universities, industry, and government.Get the private sector to sponsor university internshipsand externships.Encourage startups by coordinate the help available. “thereis not a good set of institutions for helping start-ups here in NewJersey,” says Porter. “Start-ups feel lowly and left out.”Encourage manufacturing by easing red tape and makingit easier to move here and expand here. “We have high regulatoryhurdlers for real estate, compared to North Carolina, and time ismoney,” says Porter.Create incentives that aren’t delivered until a businessis self sufficient.Create confidence. “Industry needs to be confidentenough about the future so that it will make an investment here.”At the February 14 meeting, the governor focused on a programthat did escape his budget cuts. He decried the fact that most NewJersey cancer patients go to New York or Philadelphia for what theyperceive to be the best treatment, and he wants to recoup more ofthose healthcare dollars by emphasizing cancer research. “Despitea $5 billion deficit, says McGreevey, “we will continue our investmentin cancer research to create a critical mass of research and to attractclinical trials.””New Jersey has strategic resources that are the envy of otherstates,” says McGreevey, “but this report demonstrates weare not exploiting our healthcare resources. “Although we cannotinvest all the dollars now is the time to plan for when the dollarsbecome available.”— Barbara FoxProsperity New Jersey, 20 West State Street, Box820, Trenton 08625-0828. Adam Pechter, president and CEO. 609-292-3685;fax, 609-984-4920. Home page: www.state.nj.us/prosperity.Next StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
