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September 2010

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From Site Selection magazine, September 2010

An Expert Offers Advice to Communities

When Biotech Location, Location, Location, Isn’t About Real Estate

Principal, The PONT Group, Inc.
Shirar O'Connor

s regions compete for investment from biotechnology companies in the high-stakes life sciences industry, the first thing to remember is that a location or "place marketing" approach is not the one to take with this knowledge intensive industry. 

It is important to understand their unique challenges, where the linkages are between your community and their business models. How can your community's resources offer them solutions and a compelling reason for investing in your economy?

The biotech industry is facing shrinking product pipelines, uncertain capital markets, increasing regulation, growing pricing pressures, increasing competition for acquisitions, and changes in global health-care systems. Like many other industries, they are maneuvering in a changing regulatory environment and looking to accomplish more with less.

Large biotech firms are evaluating business models from other industries and are adopting new partnership models. Many are implementing a portfolio approach to their research and development activities and are moving away from centralized R&D operations to smaller, geographically dispersed teams with greater autonomy. They are reinvesting in people and talent pipelines and engaging in more university partnerships. Biotech companies are looking for integrated industry networks and a variety in R&D disciplines so their research teams are not limited in their scope.  

Global Business Models

Research and development in the biotech industry is highly internationalized. They have one objective, and that is to exploit the scientific knowledge produced in specific research organizations. Their expansion decisions are driven by the proximity of their knowledge sources.   

What can best be described as a hub-and-spoke approach, biotech companies are reaching farther and deeper into previously untapped markets to identify research teams undertaking notable work and frontier research. From an economic development perspective, one of the best things a region can do is become familiar with the research teams operating in their regional universities and communities and build lines of communication with research leaders and small and mid-sized companies operating locally. From the company's perspective, the information would be a welcomed value — add to the site selection proposition and may highlight additional partnerships or opportunities beyond the company's original interest.

Research and development activities across all industries, not only biotechnology, require that companies are able to put together the best teams for the jobs, drawing from a global talent pool. Ease of securing visas and immigration status for individuals integral to the research process will also be important in determining where new operations are located. Folded into the immigration factor are quality-of-life considerations for the "imported" talent — the companies have to convince the talent to relocate and stay.

Quick Wins

The competition for biotechnology projects is extensive and global. The likelihood of a community securing a biotech investment is small, so this sector does not present many 'low hanging fruit' opportunities. Despite rapid growth in the sector, the biotech industry represents a proportionally small percentage of projects. Making up for their lack in numbers and difficulty of acquisition, biotech companies contribute key resources and sustainable economic value to the communities they locate it. They are valuable projects that contribute to the knowledge base and innovation quotient of local economies.

The value of these projects has not gone unnoticed. Many national and regional economies are positioning themselves as Bioeconomies. In a Brookings Institution survey of over 100 U.S. economic development agencies, over 83 percent of respondents included biotechnology as one of their top two target industries, yet there are only nine significant biotech clusters in the United States. It is a sector that remains an aspiration for many, but the economic contribution of the industry is widely recognized and pursued.

The business drivers of the sector are complex, and the "must have" attributes a region or community requires to attract the projects are diverse. For communities to have a chance at winning a biotech project, their propositions and assets must be world-class or specific and pioneering.  

Who Has Done it Well

Some of the countries and communities competing on a global scale include Cape Town, South Africa and Israel. In North America some of the top bioclusters are found in Québec, Philadelphia, Minneapolis, and San Diego. In Europe, the UK, Germany and Switzerland top the list with several significant clusters in each country. In Asia, India, Singapore and Japan continue to attract significant investment. They have achieved success because they created academic and business environments that foster innovation. Countries like the United Kingdom have implemented policy platforms that support innovation and offer generous R&D tax credits. These nations and communities have created environments that foster discovery and support success. 

These biotech clusters have brought in technology transfer experts and teams to work with companies to facilitate commercialization. They have worked to lower the companies' cost of doing business. They have poured immense resources into developing biotech research and business environments that meet all of the criteria of an expanding life-sciences company. Their success has come with hefty price tags and a commitment from government to realize their plans.  

As with all things, times are changing. Several "legacy" markets of the biotech industry such as Boston are starting to see an exodus of biotech investment due largely to the industry's efforts to reduce operating costs. Once considered an "invincible" biotech market, cities like Boston are weathering the side effects of the changing operating environment of the biotech industry. The U.S. "Top Nine" will most likely see the operations of their biotech companies shrink and relocate to smaller markets. The optimization of the industry is in full swing.

Expert Advice

Truly understanding the industry and issues facing biotech companies is important to improving a community's competitive position and ability to attract a biotech project. Increasingly, economic development agencies are hiring industry experts to interact with companies with complex operating environments. These experts help identify potential investment targets and communicate effectively with them. For communities with strong biotech propositions, a biotechnology expert would be a strategic hire and offer a significant strategic advantage over the competition.

"One of the most important factors for biotech companies is finding someone that speaks their language and understands their business," said site selection expert Andreas Dressler, managing director of Berlin, Germany-based Terrain. "This gives them the reassurance that the location will provide support that really reflects their needs, such as access to specific skills or local partners, help with finding the right lab space and access to financing for their specific R&D activities.

"Unfortunately, many economic development agencies don't 'get' biotechnology because it is such a complex field," added Dressler. "As a result, many biotech companies end up bypassing the economic development agency and implementing the investment on their own or with other local partners such as a university."

Decision Drivers

The factors driving biotech expansions feature many of the traditional investment criteria any company would consider when entering a new market such as infrastructure, cost of doing business, and quality of life.

  • The second tier of criteria includes slightly more specific requirements such as:
  • Access to external knowledge sources.
  • Existing knowledge clusters with potential for related partnerships.
  • Intellectual property protection.
  • Regulatory environment.
  • Access to capital.
  • Cost-reducing factors such as tax credits and incentives.
  • Integrated industry sectors.
  • Entrepreneurial environment.
  • Commercialization infrastructure.
  • Ease of securing visas and immigration status.

Most of the factors influencing biotech investment are general, but there are a few unique considerations which will ultimately determine where a project will land. The unique criteria these companies evaluate are:

  • Specific pockets of research.
  • Acquisition targets.

The biotech sector isn't the "build it and they will come" industry it once was. The rationale for investment is much more specific and niche. Determining investment factors could be as micro as revolutionary research being conducted by one individual or driven by a strategic decision to acquire a company. Regardless of the rationale, communities looking to attract biotech companies have to be familiar with their regional assets and take stock of all their resources related to the sector. To be competitive, economic promotion agencies should hire or enlist the help of sector experts to help them identify relevant targets and engage in dialogue with the targets. By differentiating your community and being prepared, you stand a better chance of making the short list and competing effectively to win a biotech project.


Shirar O'Connor is a principal at the New York-based PONT Group. Specializing in economic development, The PONT Group integrates the disciplines of public relations, marketing, and the digital environment into communications programs that create leads and build positive perception for states, countries, regions, and cities. Visit 


– Knowledge access and location decisions in biotechnology: the spatial dimension of social networks – Margarida Fontes

– Ernst & Young Global Biotechnology Center

 Brookings Institution: Signs of Life

– OECD-The Bioeconomy to 2030

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