U.S. Biotech Clusters Are Losing Their Anchor Tenants, and It Hurts
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grow on trees—they need to learn somewhere. And great people want to work alongside other great people.
“You don’t really learn biopharma at Harvard Business School or Stanford Business School. You probably don’t learn it at Pfizer either,” Salehizadeh says.
Chris Rivera, the president of the Washington Biotechnology & Biomedical Association, built his biotech career learning from Henri Termeer at Genzyme. It paved the way for him to become CEO of a Bay Area biotech company, Hyperion Therapeutics, and now the regional biotech trade association leader in Seattle. One thing he picked up in his years working in all three regions is that a great biotech hub needs an anchor.
“Having a good, stable recognizable brand name company is very, very important to a region,” he says.
While Rivera contends that regional clusters do need an anchor, he also says that stability, training, and human capital can come from branch operations of Big Pharma companies. Seattle, for instance, gets some strength and stability now from having regional R&D operations for Amgen, Bristol-Myers Squibb, Novo Nordisk, and Gilead Sciences.
“It’s important to have multinationals set up shop in your backyard,” Rivera says. “They’ll import talent directly into your region, and some of them may spin out and decide to start their own companies later on.” He adds that these stable players help provide a diversified employment base, which is important when a local biotech company recruits someone to the region, and needs to find a place where a trailing spouse can advance his or her career as well.
Fair enough. But as I said to Rivera, it’s easy for some revolving-door Big Pharma CEO a continent away to whack a regional branch as part of some global cost-cutting move. Merck has done that with various West Coast operations in all three major biotech hubs—San Francisco, Seattle, and San Diego—over the last 10 years. I don’t believe these regions should count on Big Pharma, with all its myriad R&D problems and shifting priorities, to be the pillars of local biotech prosperity and innovation.
When you look at what’s happening globally, I get even more worried about the prospects for the regional biotech clusters. The Big Pharma companies are losing billions of dollars in revenues every year as they lose patent protection on their aging blockbusters, and the only way they can come up with enough innovative new products is to acquire more.
As Salehizadeh tallied up recently, Big Pharma is sitting on $350 billion in cash, and it needs to use some of that to buy smaller companies. That might be good for investors, and it can be good at times for a region when it frees up a few talented entrepreneurs to pursue the next exciting thing.
But when you look at these transactions through a regional lens, the story is a lot more grim. Jobs are usually lost when these deals happen. The best emerging biotech companies with growth potential—companies like Onyx, BioMarin, Seattle Genetics, Vertex, Regeneron—these are the next companies in the Big Pharma crosshairs. Will they stay independent and grow into regional anchor tenants? Or will they feel pressure from shareholders to take the Big Pharma money and run?
I hope they all stay independent, even though I know there’s little chance of that happening. As someone who lives in Seattle, I hope Seattle Genetics grows up into a profitable anchor, rewards its shareholders with consistent growth, employs 1,000 people or more, and becomes like our region’s Genzyme.
But I have to admit, one of my nightmares is that I wake up on a Monday morning with a press release in my inbox that says something like “Seattle Genetics has been acquired for $6 billion, a 95 percent premium over its previous day’s closing stock price.” If that happens, all would not be lost for Seattle. We would still have great research. But we’d no longer have an anchor biotech company. It would be a deep and profound loss to the place I live. I hope that day never comes.