It all began in l976 when biochemist Herbert Boyer teamed up with venture capitalist Robert Swanson. Confident there would be a market for products from recombinant DNA, they founded San Francisco’s Genentech. From those roots, the biotechnology industry has blossomed like a biblical mustard seed. Though born on the West Coast, biotech has for over a decade claimed the Garden State as its primary hub. Exactly how big and how fast this young giant is growing was recently tracked by business service firm Ernst & Young (www.ey.com).

To provide a statistical overview for this scientific celebratory year, the Biotech Council of New Jersey hired Ernst & Young to survey the state’s bioscience companies. Big pharma were excluded, as were most manufacturers of medical devices. Thirty percent of all companies with biotech presences in the state replied.

When the results were tallied, two major facts kept cropping up. If the Garden State is the nation’s hub, Middlesex/Mercer is biotech’s hub of the hub. And secondly, whether seeking an investment opportunity, a career, or an entrepreneurial forum, one would be hard pressed to find an industry with a better success rate than biotech.

The industry holds its Biotech 2006 Conference on Monday and Tuesday, October 16 and 17, beginning 7:30 a.m. at Loews Philadelphia Hotel. Cost for workshops only: $650; for full sessions $1175. Visit www.biotech2006.org. Sponsored by the Biotech Council of New Jersey (www.biotechnj.org) and Pennsylvania Bio (www.pennsylvaniabio.org) the event hosts over 1,000 CEOs of biotech companies, as well as scores of experts on a variety of panels.

President of the Trenton-based Biotech Council of New Jersey since its l993 founding, Debbie Hart has analyzed results of the survey and provides a business person’s interpretation. A native of Hamilton, Hart attended the College of New Jersey, Class of l981, and a master’s in public affairs from Syracuse University. It was while working for a Lawrenceville real estate firm that she first became aware of the biotech industry, observing that companies in the industry were gobbling up central New Jersey office space.

For the last 13 years Hart has helped guide the explosive growth of this industry. In addition to the statistics, she calls on her own experience to help profile the bioscience field as it stands in 2006.

BioTech belt. Whether measured by capital or numbers, the Garden State’s biotech facilities continue to break records. Last year New Jersey’s private biotech companies boasted a total revenue of $2 billion, while publicly traded companies pulled in $1.5 billion — up 73 percent from last year.

With 834 facilities, New Jersey has the highest number of biotech facilities in the country. Not surprisingly, most of these are located in the dense belt running northeast from Mercer County (165 facilities), through Middlesex County (250 facilities), and up into Bergen County (116 facilities).

The new biotech entrepreneur of 2005 had an unusual amount of company. New Jersey hosted 226 biotech startups this year; up from 121 in 2003 and 80 in l998. On the other end, all of the life science companies grossing more than $100 million had been in existence for at least 10 years.

At every level, biotechs expressed trust in talent over funding. Last year 5,824 New Jersey residents worked in the state’s publicly held biotech firms — an almost 20 percent rise in three years. Almost all of these firms had experienced cuts in grant funding and predicted tighter funding in the next year. Yet despite this predicted fall-off in funding, 85 percent of companies surveyed envisioned hiring new employees next year, with 13 being the average estimated staff addition. Throw enough expertise at the problem and it will solve itself, they seem to be saying.

Focus in the field. The largest and still most popular field of biotech remains oncology, occupying one third of all biotech studies. Part of this popularity may be due to the breadth of the field, since tumors, after all, are symptomatic of a wealth of diseases. Infectious diseases (22 percent) and drug delivery (20 percent) stood out as the other major players.

The number of companies developing autoimmune solutions dropped appreciably from 21 to 11 percent since the 2002 survey, while cardiovascular studies and diabetes remained stable at 11 and 9 percent.

Why New Jersey? The primary reason Hart gives for the Garden State’s biotech popularity is history. “Alabama, Tennessee, every state wants a piece of the biotech pie,” she says, “but companies are going to settle in an area that already has proven itself capable. New Jersey has been biotech successful longer than anyone.”

The skilled labor pool is prime, said 89 percent of respondents. Meanwhile, 80 percent praised the state’s scientific community. More than half praised the state government as providing a “supportive environment.” (The state program allowing sale of net operating losses won particular praise.) Interestingly, however, fewer than half had good words for the state’s venture capitalists.

“Of course, you cannot deny the proximity of big pharma,” notes Hart. Where better to engineer a collaboration or to promote a biotech as a tempting acquisition?

Cash flow realities. Yet with all this rosy growth and hiring, life science industries are not always happy about their bottom lines. High tech equipment and highly trained staff frequently boost operating costs far above investor comfort levels. Last year nearly half New Jersey’s public biotechs spent more than $5 million on research and development. Three years ago only one-third invested to that mark.

Interestingly, barely one-third of incoming cash flow came from product sales last year. The remainder came from grants, private placement, and venture capital. But since the 2000 biotech bubble burst federal grant monies have been vastly reduced.

As for the future, Hart sees the entire industry’s merger madness settling down. Ernst & Young’s survey estimates a vast reduction in the number of biotech firms by 2010. Hart makes an analogy to the American auto industry, which in l890 had more than 1,000 car manufacturers, and by the mid l920s had shrunk to fewer than 40.

New companies, however, will continue to spring up and either serve the big pharmas as outsourcers, or handle the newest research and products. Early stage development funding, Hart predicts, will continue to dry up, with increasing capital available for later stages.

“The whole industry will necessarily become more product driven,” she says. You can see it already.” It is merely a sign that central new Jersey’s young biotech industry is growing up. The training wheels of grants and gifts are being taken off, and now biotech must ride on out into the product-driven world of business on its own merits. After a few wobbles, she should do just fine.

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