Regional Trends in Bioinnovation Investment - Pharmaceutical Executive

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Regional Trends in Bioinnovation Investment

Pharmaceutical Executive


The Cambridge Model

This success story begins with the universities and AMCs in the region, specifically MIT, Harvard University, Whitehead Institute, Tufts University, Boston University, University of Massachusetts, and their associated medical schools, medical centers and business schools. Among these institutions, MIT stands out with a vision of entrepreneurialism that was far ahead of its time. Specifically, MIT encouraged faculty to create start-ups and to collaborate with industry partners. Its Office of Technology Licensing has achieved some impressive metrics, with nearly $150 million in revenue, 16 start-ups and 199 US patents. More important, companies founded by MIT alumni employ 3.3 million people and generate revenues of approximately $2.2 billion annually. Some 6,900 MIT alumni firms are headquartered in Massachusetts and generate $164 billion in annual revenue within the state.

With MIT as the standard-bearer, neighboring institutions are moving toward relatively low-friction strategies that facilitate more bioinnovation. There is a critical mass of top-tier academic institutions in the Boston region that offer experience, talent, IP and vision that can turn invention into value. Resources derived from here are supporting critical research at a time when NIH funding is declining. Approximately 20% of MIT's overall research budget is derived from corporate partnerships, a figure far in excess of most peer institutions.

With this academic legacy as a stimulus, large multinational companies like Novartis and Sanofi, began locating their US research headquarters in Boston, Cambridge and surrounding suburbs. In addition, there are substantial home-grown successes, such as Biogen (now Biogen-Idec), Genzyme (now a wholly-owned subsidiary of Sanofi), Millennium (acquired by Takeda in 2008), Vertex, and Alkermes.

This influx of established companies and crop of new university-based start-ups requires vast amounts of capital. Of the 14 most active VCs worldwide in the biotech space, four are located in the Boston area, six in the Bay Area and two in New York; the remaining three are in Europe. The four VCs in the Boston Area—Third Rock Ventures, Atlas Ventures, MPM Capital (based in the Bay Area and in Boston) and SR One—have raised a total of $745M to invest in mainly local ventures. Interestingly, however, of the top ten VC deals in 2012 in terms of dollar value, only one company, Bluebird Bio, was in the Boston area, while seven were in California, reinforcing the regional bias inherent in VC investing. This is important, because once a region dominates on access to capital, it creates a positive feedback loop where dollars continue to flow into ventures led by known managers with strong track records of facilitating lucrative VC exits.

A final element in the Cambridge story is proactive government. The state of Massachusetts, through its fiscal policies and life sciences initiatives, has created a positive business environment for the industry. An example is the 10-year, $1-billion Life Sciences Initiative enacted in 2008. As part of this initiative, the Massachusetts Life Sciences Center (MLSC) was created to implement the program. Its goals are to strengthen the state's role as the international leader in life sciences, create high-skill/high-paying jobs, attract investment dollars and support innovation and entrepreneurship.

The MLSC is structured around a diverse Board of Directors and Scientific Advisory Board charged with allocating a $500 million capital fund, a $250 million tax incentive program and a $250 million investment fund. As of February 2013, $359 million has been committed and used to leverage $1.03 billion in matching investments. Funds provide direct support for research, new investigators, recruitment of top talent to universities, industry/academic research collaborations, start-up capital to early-stage companies, and capital investment for infrastructure support. MLSC has made 77 awards totaling $56 million in tax relief to companies, who have pledged, in turn, to add 2,800 new jobs to the existing 80,000 life sciences jobs in the state. Outside the MLSC program, the state and local authorities have invested in a land use policy that includes new, open corporate space design, common green space, high-quality public transport, mixed residential/corporate neighborhoods, and use of the Boston area waterfront that fosters business collaboration.


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