Could Massachusetts lose its edge in life sciences?
It’s difficult to pinpoint the year when Massachusetts emerged as the undisputed global hub for life sciences.
Some harken back to 2002 when Swiss drug maker Novartis snubbed its European scientists and moved its global research headquarters to Cambridge. Others point to 2011 when French pharmaceutical giant Sanofi plunked down $20.1 billion for Cambridge biotech Genzyme and a front-row seat in the thriving biomedical game park of Kendall Square. By the time 2014 drew to a close — with Baxter International, GE Healthcare, and Shire all scrambling to set up shop or expand here — just about every player in the biosciences industry worldwide seemingly had concluded they had to be here.
Today, the Commonwealth boasts more than 600 life sciences companies and research organizations employing roughly 60,000 people and a combined payroll topping $7 billion annually, according to the Massachusetts Biotechnology Council. In recent years, Massachusetts has drawn more than 20 percent of all venture capital outlays for biotechs nationally.
But the recent cutbacks in biopharma research positions locally are beginning to raise doubts that this domination can last forever: In March, AstraZeneca PLC and Merck & Co. announced plans to trim about 200 employees from facilities in Lexington and Waltham, respectively. Sanofi SA and Pfizer are also cutting jobs. Earlier this month, GlaxoSmithKline PLC said it would move 250 positions from its Cambridge vaccine lab to a research-and-development complex in Rockville, Md.
And for some long-time New Englanders, for whom ingenuity and resilience coexist with an ingrained fatalism, anxiety about losing a defining business is never far from the surface. Because it has happened before.
In the 1970s, Massachusetts was crowned heavyweight champion of another industry: The minicomputer boom put Route 128 on the map as “America’s Technology Highway.” By the time leading local companies like Digital Equipment and Wang Laboratories recognized the threat from the fledgling personal computer sector, it already was too late.
“When you’re at the top, there’s only one way to go,” said Mark Williams, finance and economics professor at the Boston University School of Management. “Back in the 1980s, our costs increased and the competition did it better, and we lost a major industry. Right now we do it best in biotech, but we don’t have a lock on science or a lock on intellectual capital. We need a good dose of paranoia.”
Of course, it was ultimately bad business decisions that did in firms like Digital and Wang, not policy ones. And no one is predicting the end of Boston’s life-sciences boom just yet. The threats aren’t entirely far-fetched, however: appealing tax incentives from other states, even other countries; a lack of funding for research; superstar academic talent lured away. As Williams suggests — and reams of academic papers on disruptive theory tell us — it’s never too early to start planning for the worst case scenario.
Fear of losing Boston’s edge is what keeps Bob Coughlin up at night.
“If you think back, we had all the ingredients to be the leaders in that [computing] space,” Coughlin, president of the Massachusetts Biotechnology Council, said. “Then we lost it. Today we have all the advantages in the life sciences, with the Big Pharma companies joining all the biotech startups we have here. But other states and other countries want these same companies. The question becomes, ‘How do we keep them here?’ ”
Many of the land mines Coughlin seeks to avoid are outlined in his council’s Impact 2020 report, issued last year. It warns, among other things, that government cuts to basic research funding could dry up development of new therapies, that mounting pressure to make health care more affordable could squeeze the profits of drug developers, and that states from North Carolina to California — and countries in Europe and Asia — are working overtime to steal our advantage. “We need to see who’s catching up to us,” Williams says.
China, for one, has spent hundreds of billions to promote biomedical innovation, among other things building up the world’s largest genetic research center outside Hong Kong over the past decade. Its investment has come at a time when research grants from the National Institutes of Health and other US agencies have declined, along with venture capital outlays for early-stage biotech and medical technology startups.
“We’ve got a good 10 years” to enjoy the current life sciences boom in Massachusetts, suggested Howard Anderson, senior lecturer at Harvard Business School and a former entrepreneur and venture capitalist. “At a certain point, companies might want to move research to China where you can get PhDs for a tenth of the price. All our native industries left here years ago — shoes, woolens, manufacturing. The only natural advantage we have are the Yankee brains and the brains that come here. Our challenge is we have to keep them here.”
In order to do just that, Massachusetts has stolen a page from California’s Silicon Valley, which pioneered a culture of open doors, nonstop networking, and collaboration. The Commonwealth has given birth to an expanding ecosystem of incubators, research scientists, entrepreneurs, financiers, and Big Pharma stalwarts that are constantly talking to each other, sharing ideas, and working together to bring medicines to market.
With that in mind, many of the players consciously strive to be inclusive, rejecting the “siloed” mentality often attributed to the blindsided technology giants of the minicomputer era. In her 1998 book “Regional Advantage,” Annalee Saxenian, a Massachusetts native who now teaches at the University of California in Berkeley, argued that Route 128 was held back by a culture of independence and self-sufficiency while Silicon Valley developed a system that was decentralized and cooperative, ideal for the coming age of personal computing and the Internet.
“The more that we insist on being open-minded and creative and collaborative, that’s going to help us continue our leadership in life sciences,” said Daphne Zohar, founder and managing partner of PureTech, a Boston research and venture capital firm that nurtures a dozen health care startups. “Our community tends to be a small network where people know each other. So being open to others is important, reaching out and welcoming people from other disciplines. Food companies like Nestle and tech companies like Google are moving into health care, and we have to engage them.”
Another concern for some in the industry is the fate of the Massachusetts Life Sciences Center, an agency set up to implement the life sciences initiative championed by former governor Deval Patrick, which aimed to invest $1 billion over a decade. While supporters credit the center with helping to fuel the industry’s growth through tax breaks and other incentives for biotech and medical devices businesses that create jobs here, critics have maintained that its impact has been minimal. The Baker administration, while pledging its commitment to life sciences, is weighing a plan to consolidate the center with economic development agencies that back high-tech, clean energy, and other innovation sectors.
Some say the local life sciences industry may prove more stable — and more broadly adaptable — than its minicomputer forebear of a generation ago. They cite, among other things, the durability of the world-class universities and academic medical centers that have made Massachusetts the largest per-capita recipient of NIH grants. Such institutions have been a magnet for entrepreneurs who license their discoveries, pharmaceutical giants that partner with biotechnology startups, and venture capital firms that bankroll early-stage drug discovery businesses.
“I’m personally very optimistic that this cluster is going to be around for a long time.” said Bob Langer, institute professor at the Massachusetts Institute of Technology, who has helped start about 30 companies and whose lab is renowned as a life sciences engine. “If you look at the enormous number of biotech and medical device companies, once you have that mass, I don’t think it’s going to go away. In fact I think it’s going to get bigger, because people at those companies will spin off other companies.”
Plus, regardless of what state business and government officials do to engage newcomers, many outside biopharma and medical technology companies feel they have to be here to keep up with the latest trends and work with leading scientists in cutting-edge fields ranging from gene silencing to cancer immunotherapy.
Being in Massachusetts “is a key pillar of our global operations, our global strategy,” said Belen Garijo, chief executive of the health care group at German drug maker Merck Serono, which recently closed a research lab in Switzerland and is now expanding its cancer drug research program at its Billerica research center.
“There is a presence of biotechnology activity here,” Garijo said on a visit to Boston in March, speaking for many European and Asian drug makers that have planted their flags across Massachusetts. “There are numerous universities that are a source of talent for our company and give us the ability to align with multiple stakeholders. This is an important hub.”
But, some worry that the continuing migration of pharmaceutical companies, whether from overseas or from New Jersey and Connecticut, could have the unintended consequence of stifling the innovation that has drawn them. They point to a quickening pace of mergers that have brought homegrown biotechs such as Genzyme and Cubist into the fold of drug giants. Such takeovers too often are followed by layoffs, research cuts, and a defection of key employees.
“At the moment, you have a conveyor belt from academia right through to Big Pharma that is very robust,” said consultant Jonathan Gertler, founder and managing partner of Back Bay Life Science Advisors. “If you have so much acquisition and so much consolidation, and then rationalization of expense and rationalization of people, you could end up with less diversity in our system. And that could be bad for us.”
Few think this scenario has already happened or will happen any time soon. But given the region’s history and rapid fall of the minicomputer sector, it may be another reason to keep industry leaders up at night.
Robert Weisman covers life sciences at the Globe. Follow him on Twitter @GlobeRobW.