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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
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."
place to do business, says Porter. "If somebody outside the state
can make something, they can make it cheaper. That’s why our capacity
for 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 the
highest productivity per acre of land. Our path to success is not
to cut costs but to raise value with more innovative methods —
and be a moving target for Thailand and Korea."
the number of new patents it turns out, but from 1998 to 2001 it showed
a startling slow-down. Now it is last in the nation in the growth
in number of life science patents compared to life science jobs.
<d>Insufficient university research This ties in
both with what Porter perceives to be a patent deficit and Merck’s
move to Massachusetts. There, three of the top four life science patentors
are institutions — Massachusetts General Hospital, MIT, and Harvard.
But here, the top four patentors are corporations. "We must take
this seriously," says Porter, "because Merck and Novartis
want to be part of the new model."
to change the way various parts of the life sciences community work
together." In the old economy, government took care of roads and
schools, universities devoted themselves to basic knowledge, and businesses
did business. "Now we need new institutions for collaboration
to 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 could
be a disadvantage. "Under the new model, companies collaborate
with universities and medical schools."
A prominent subtext to Porter’s report was its support for McGreevey’s
controversial initiative to revamp the state university system as
proposed by P. Roy Vagilos, former CEO of Merck. Vagilos was prominently
seated in the front row next to Richard McCormick, the new president
of Rutgers University, and former governor Brendon Byrne. When Princeton
University President Shirley Tilghman opened the meeting and acknowledged
the guests, she pointed out that she had known Vagilos when he was
still in academe, and she endorsed his ideas. McCormick chimed in
his approval as well.
of technology from academic institutions to industry. "We will
have to change the way various parts of the life sciences community
work together," says Porter.
repeated complaints from entrepreneurs that they did not get enough
help from government, that they did not think government was on their
in this state invest out of state. Porter thinks the state should
offer incentives for investments in life science start-ups.
Another subtext of Porter’s report — that investments from the
state’s pension fund could help New Jersey-based companies prosper
— received little support from the head table. Nevertheless, the
trade group representatives used the meeting as a lobbying opportunity,
pointing out that the pension funds had done poorly with portfolios
based on out of state companies, and that this is one of very few
states that does not invest even a fraction of its pension monies
at home. Donald Drakeman, CEO of Medarex, advocates putting some of
New Jersey’s pension funds into state-based venture capital funds
that could funnel the money into start-ups.
released a bare bones budget eliminating virtually all the incentives
for encouraging innovation (research grants through the New Jersey
Commission on Science and Technology) and attracting business (Business
Employment 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 he
points out that some remedies can be accomplished inexpensively.
a better share of grants from the National Institutes of Health.
R&D efforts between universities, industry, and government.
is not a good set of institutions for helping start-ups here in New
Jersey," says Porter. "Start-ups feel lowly and left out."
it easier to move here and expand here. "We have high regulatory
hurdlers for real estate, compared to North Carolina, and time is
money," says Porter.
is self sufficient.
enough about the future so that it will make an investment here."
that did escape his budget cuts. He decried the fact that most New
Jersey cancer patients go to New York or Philadelphia for what they
perceive to be the best treatment, and he wants to recoup more of
those healthcare dollars by emphasizing cancer research. "Despite
a $5 billion deficit, says McGreevey, "we will continue our investment
in cancer research to create a critical mass of research and to attract
"New Jersey has strategic resources that are the envy of other
states," says McGreevey, "but this report demonstrates we
are not exploiting our healthcare resources. "Although we cannot
invest all the dollars now is the time to plan for when the dollars
— Barbara Fox
820, Trenton 08625-0828. Adam Pechter, president and CEO. 609-292-3685;
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