States spend big in feverish biotech pursuit

Like a contagious virus, biotech fever is sweeping across America, leading states and municipalities to spend millions of dollars courting an industry that has never been profitable and is highly concentrated in just a few areas of the country.

Officials infected with the fever often see visions of high-paying jobs and dramatic impact on economic development - not to mention revolutionary advances in health care and agriculture. And the cure may come only after sufferers have wasted years and millions in taxpayer dollars chasing after the mirage. (See related story Biotech payoff 'more prestige than payroll'.)

That's the skeptic's view of the economic development community's current obsession with biotechnology. Four years ago, just 14 states had targeted biotech as a way to grow their economies. Today, 41 states are chasing the business.

"That says a lot more about the herd instinct of people who do economic development in this country than the economics of biotechnology," says Joseph Cortright, a Portland, Ore.-based economist who co-authored a 2002 Brookings Institute study on biotech.

A decade ago, every region wanted to be the next Silicon Valley, Cortright says. A few years later, dot-coms were all the rage.

"Biotechnology is the latest 'It Girl,' '' says Rob DeRocker, executive vice president of Development Counsellors International, a New York City-based firm that works with economic development organizations around the world.

This girl, however, won't go out with just anybody. She wants someone with leading-edge medical research institutions and deep pockets of venture capital. Only a few places in America, led by California and Massachusetts, now qualify.

Big bets against the odds
That hasn't stopped states like Arizona and Florida from knocking on her door. Arizona is investing $440 million in university research and development facilities to complement its success in recruiting the Translational Genomics Research Institute (TGen).

Arizona officials are confident Phoenix can become a leading biotech hub.

"Why not?" says Micah Miranda, biosciences manager for the Arizona Department of Commerce. "We're not going to be a passive player."

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Cortright says, "the odds there are very strongly against them."

Even with TGen, he says, Phoenix has "just a tiny fraction of the scale" of the medical research needed to become a major biotech player. Last year, Arizona ranked 27th among states in National Institutes of Health contract awards, a leading indicator of medical research spending.

For its part, Florida put together a $500 million package to convince the prestigious California-based Scripps Institute to locate an East Coast branch in West Palm Beach.

Florida, at No. 19 in NIH awards, did better, but it's "still weak on commercialization" of biotech research, Cortight says.

He suspects Scripps' new Florida institute will be "viewed as an outpost" rather than a strong center in its own right.

Ross DeVol, director of regional economics at the Milken Institute, says Florida's recruitment of Scripps is a "bold gamble" based on the "big bang theory" of economic development. Scripps is one of the top biotech research institutes in the world so it "could be an important catalyst" for Florida - but it might "just change things at the margin."

Developing a strong biotech hub takes more than "just plunking a building down," says Walt Plosila, vice president of Battelle Memorial Institute's technology partnership practice. "A lot of this is growing your own rather than recruiting."

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