If you’ve got ambitions to start and build a biotech company that may someday go public, where is the best place to make it happen? Which regional clusters provide the most fertile places where people, scientific ideas, technology, and money come together to build NASDAQ-worthy biotech companies?
This is just one more way of looking at the strength and vitality of regional biotech clusters. A few weeks ago, readers may recall I ranked regional biotech clusters based on how many major league companies they have. That analysis looked at how many life sciences companies are headquartered in each region and have more than $100 million in cash and short-term investments to pursue their ideas.
That’s one way of looking at how much strength a region has. But it left out a whole bunch of small up-and-coming life sciences companies that every region must also have if it’s going to be a vibrant place. Given that 45 life sciences companies have raised $3.9 billion combined from IPOs this year, there are enough data points to look at where all the IPO-caliber companies are coming from. I also sought to measure the relative strength of the companies by looking at how much cash these companies vacuumed up in their IPOs and brought back to their respective communities.
This analysis came out a little differently than the other one. Boston—that place with all the giddy Red Sox fans—came out No. 1 in the ranking of major league life sciences companies, and triumphed again in this analysis. Boston is home to eight of the 45 (18 percent) of the life sciences IPOs this year, and its companies have raised the most money—about $770 million. But all you dejected Yankees fans can cheer up—the New York/northern New Jersey region has pumped out just as many IPOs as Boston this year, with eight. San Diego comes in third with six IPOs completed so far this year, and San Francisco is next with five. It should be noted, however, that San Francisco’s IPOs have collectively raised a lot more money than San Diego’s—$441 million in gross proceeds went to the Bay Area, compared with $362 million for San Diego.
Some readers may wonder about New York/New Jersey, and whether it’s fair to lump those two states together in an integrated region. I have gotten mixed feedback on this. If you break New York and New Jersey into distinctly different clusters, then Boston is the undisputed champion of biotech IPO activity. New York by itself has only produced two biotech IPOs this year and New Jersey has given birth to six.
Still, I’m going to list New York and New Jersey together, because companies there are constantly zipping between the center of investment money in Manhattan, and scientific talent that’s networked between both places.
“There are political borders, but the biotech geography is much different than the political borders,” says Nathan Tinker, executive director of the New York Biotech Association. “If you look at how the companies here interact, it all feeds off New York City. It’s where the money is. Even if the company is headquartered across the river in New Jersey, they come to New York to do their banking, to get employees, to get technology from the big medical schools. It’s all very integrated.”
Interestingly, only five of the 45 biotech IPOs this year come from outside the U.S. Three are from Israel, and two are from Europe. I’ll try to remember that the next time I hear someone say China is about to overtake the U.S. in biotech.
The Tar Heels out there who read Xconomy also shouldn’t get too excited when they review the chart below. North Carolina’s biotech hub is benefitting in this analysis by the inclusion of Quintiles (NYSE: Q), a true outlier. Quintiles raised almost $1 billion in its IPO in May. It’s a contract research firm that’s profitable, has been around a long time, and has nothing in common with any other scrappy little biotech on the list, other than the fact it’s in the life sciences industry. If you remove Quintiles, North Carolina looks more like a middle-of-the-pack producer of IPO-caliber life sciences companies, which seems more realistic.
One last point. There are 15 additional biotech companies that are in line to go public, according to my count of filings with the Securities and Exchange Commission. San Diego and Philadelphia have the most in line, with four apiece, while San Francisco is next with three. Interestingly, Boston only has one more company visible in the queue (Karyopharm Therapeutics) so it could be that Boston’s edge may diminish between now and the end of the year.
With that, here is where the biotech IPO class of 2013 hails from. As always, I welcome your comments and questions at the end of this story, at firstname.lastname@example.org or on Twitter at @ldtimmerman.
|Region||Company Name||Ticker||Gross IPO Proceeds|
|New York/New Jersey||Ophthotech||OPHT||$192.3m|
|San Diego||Ambit Biosciences||AMBI||$83m|
|San Francisco Bay Area||Portola Pharmaceuticals||PTLA||$140.4m|
|Five Prime Therapeutics||FPRX||$71.8|
|United Kingdom||GW Pharmaceuticals||GWPH||$32.6m|
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