Bioinnovation has been a key driver of US economic development, with notable examples of success in California's Bay Area
and the Boston/Cambridge nexus in Massachusetts. Over the past two decades, hundreds of thousands of jobs have been created
through start-up companies and the large multinational anchor companies that attract ancillary support services, including
venture capital. Today, many other jurisdictions—both in the United States and abroad—are seeking to replicate this productive
ecosystem to support their own economic growth.
It is thus timely to ask: How have these regions become so successful in this space? What factors contribute to their dominant
strategic position? What lessons can be applied to help other regions grow their bioinnovation assets? Noting the mutual benefits
that pharma companies, academia and government obtain from these successful precedents, we identify the necessary foundations
for a strong biotech ecosystem and explore a potential strategy blueprint using Philadelphia and the state of Pennsylvania
as a case study.
The seeds of growth in bionnovation are rooted in four stakeholders: Academic medical and research centers (AMCs); biotech
and pharma companies; investors, including VCs; and local, state and federal government institutions. Each of these stakeholders
has dramatically different priorities and goals (see Figure 1).
Figure 1: Overlap of stakeholder missions
Maximizing the value of these relationships depends on identifying the areas where goals and mission align. While it may appear
that the areas of overlap are small, they carry transformative potential. Breaking down silos that thwart the ecosystem of
innovation is thus critical to success. For example, AMCs' mission is typically focused on excellence in research, teaching
and patient care. But another key part of their mission is to translate basic medical breakthroughs, which are largely funded
by public money through institutions like the National Institutes of Health (NIH), into improvements in medical care. These
improvements are usually commercialized by the private sector, generating revenue growth and more jobs. Likewise, while VCs
are focused primarily on return on investment to their limited partners, that investment remains a viable avenue to achieve
substantial investment multiples. Since 2008, average multiples for VC-backed private biotech companies via M&A transactions
have been increasing, while the biotechnology IPO market is starting to open up again. Ten IPOs were listed in the first five
months of 2013, the largest number in nearly a decade.
While pharma and biotech firms must focus on shareholder return, there is often a paucity of internal assets to leverage this
goal. So this, too, requires an effort to engage with other stakeholders through pre-competitive collaborations with AMCs
that provide access to potential new pipeline assets. Finally, for governments, bioinnovation carries a multiplier effect
by adding to the tax base and creating jobs through innovation-friendly urban infrastructure. The evidence shows that an interactive
matrix supporting innovation has become mandatory for top-line growth in sectors vital to 21st century competitiveness.