Massachusetts’ Competitive Position in Life Sciences:Where Do We Stand?
Professor Michael E. PorterInstitute for Strategy and Competitiveness
Harvard Business School
Massachusetts Life Sciences Summit12 September 2003
This presentation is composed of excerpts from reports and presentations created by the Boston Consulting Group, Professor Alan Clayton-Matthews, the Howell Group of Boston, the Massachusetts Biotechnology Council, MassMedic, the Massachusetts Medical Device Industry Council, the Massachusetts Technology Collaborative, the Milken Institute, the Monitor Company Group, Professor Michael E. Porter and the New England Healthcare Institute. See Sources.
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Situation Facing Massachusetts
Massachusetts is one of the world’s leading centers in Life Sciences, but the State is facing a crowded and increasingly competitive field
The Life Sciences cluster encompasses a wide range of products and services, including medical devices, pharmaceutical products, research and testing, and health care delivery
Massachusetts has a rich set of institutions in the field, but each tends to be narrowly focused on one aspect of the cluster
There has been no overarching strategy for the cluster and no structure to develop one
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A Crowded Field
Source: BIO, State Government Initiatives in Biotechnology, September 2001; life sciences institutions’ web sites
U.S. States U.S. States
• 41 states have launched Life Sciences initiatives
• 16 states have appropriated funds for new biotech activities
• 12 states have a dedicated Biotech specialist in government
• 10 states have explicit biotechnology strategies
• 41 states have launched Life Sciences initiatives
• 16 states have appropriated funds for new biotech activities
• 12 states have a dedicated Biotech specialist in government
• 10 states have explicit biotechnology strategies
CountriesCountries
• Denmark/Sweden, Mediconvalley
• Germany, BioRegio-Initiative
• Netherlands, BioDelta
• Saudi Arabia, Jeddah BioCity
• Singapore, Biopolis of Asia
• United Kingdom, Genome Valley
… and many other countries
• Denmark/Sweden, Mediconvalley
• Germany, BioRegio-Initiative
• Netherlands, BioDelta
• Saudi Arabia, Jeddah BioCity
• Singapore, Biopolis of Asia
• United Kingdom, Genome Valley
… and many other countries
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Life Sciences Cluster
Research OrganizationsResearch OrganizationsResearch Organizations
Biological Products
Biological Biological ProductsProducts
Specialized Risk CapitalVC Firms, Angel Networks
Specialized Risk CapitalVC Firms, Angel Networks
Biopharma-ceutical
Products
BiopharmaBiopharma--ceutical ceutical
ProductsProducts
Specialized BusinessServices
Banking, Accounting, Legal
Specialized BusinessServices
Banking, Accounting, Legal
Specialized ResearchService Providers
Laboratory, Clinical Testing
Specialized ResearchService Providers
Laboratory, Clinical Testing
Dental Instrumentsand Suppliers
Dental Instrumentsand Suppliers
Surgical Instruments and Suppliers
Surgical Instruments and Suppliers
Diagnostic SubstancesDiagnostic Substances
ContainersContainersContainers
Medical EquipmentMedical Equipment
Ophthalmic GoodsOphthalmic Goods
Health and Beauty Products
Health and Beauty Health and Beauty ProductsProducts Health Services ProviderHealth Services Provider
Educational InstitutionsHarvard University, MIT, Tufts University,
Boston University, UMass
Educational InstitutionsHarvard University, MIT, Tufts University,
Boston University, UMass
Cluster OrganizationsMassMedic, MassBio, othersCluster Organizations
MassMedic, MassBio, others
Analytical InstrumentsAnalytical InstrumentsAnalytical Instruments
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Clusters and CompetitivenessClusters Increase Productivity / Efficiency
– Efficient access to specialized inputs, services, employees, information, institutions, and “public goods” (e.g. training programs)
– Ease of coordination and transactions across firms– Rapid diffusion of best practices– Ongoing, visible performance comparisons and strong incentives to improve vs.
local rivals
Clusters Stimulate and Enable Innovations– Enhanced ability to perceive innovation opportunities– Presence of multiple suppliers and institutions to assist in knowledge creation– Ease of experimentation given locally available resources
Clusters Facilitate Commercialization– Opportunities for new companies and new lines of established business are more
apparent– Commercializing new products and starting new companies is easier because of
available skills, suppliers, etc.
Clusters reflect the fundamental influence of externalities / linkagesacross firms and associated institutions in competition
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Institutions for CollaborationSelected Massachusetts Organizations
Economic Development InitiativesEconomic Development Initiatives
Massachusetts Technology CollaborativeMass Biomedical InitiativesMass DevelopmentMassachusetts Alliance for Economic Development
Massachusetts Technology CollaborativeMass Biomedical InitiativesMass DevelopmentMassachusetts Alliance for Economic Development
Life Sciences Industry AssociationsLife Sciences Industry Associations
Massachusetts Biotechnology CouncilMassachusetts Medical Device Industry CouncilMassachusetts Hospital Association
Massachusetts Biotechnology CouncilMassachusetts Medical Device Industry CouncilMassachusetts Hospital Association
General Industry AssociationsGeneral Industry Associations
Associated Industries of MassachusettsGreater Boston Chamber of CommerceHigh Tech Council of Massachusetts
Associated Industries of MassachusettsGreater Boston Chamber of CommerceHigh Tech Council of Massachusetts
University InitiativesUniversity Initiatives
Harvard Biomedical CommunityMIT Enterprise ForumBiotech Club at Harvard Medical SchoolTechnology Transfer offices
Harvard Biomedical CommunityMIT Enterprise ForumBiotech Club at Harvard Medical SchoolTechnology Transfer offices
Informal networksInformal networks
Company alumniVC communityUniversity alumni
Company alumniVC communityUniversity alumni
Joint Research InitiativesJoint Research Initiatives
New England Healthcare InstituteWhitehead Institute For Biomedical ResearchCenter for Integration of Medicine and Innovative Technology (CIMIT)
New England Healthcare InstituteWhitehead Institute For Biomedical ResearchCenter for Integration of Medicine and Innovative Technology (CIMIT)
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Shifting Responsibilities for Economic Development
Old ModelOld Model
• Government drives economic development through policy decisions and incentives
• Government drives economic development through policy decisions and incentives
New ModelNew Model
• Economic development is a collaborative process involving government at multiple levels, companies, teaching and research institutions, and institutions for collaboration
• Economic development is a collaborative process involving government at multiple levels, companies, teaching and research institutions, and institutions for collaboration
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The Massachusetts Life Sciences ClusterPerformance
ProductivityAverage wages in the Massachusetts Life Sciences Cluster are amongst the highest in the country, and growing stronglyThe Cluster has the largest share of national life sciences employmentof any metropolitan region but growth is only slightly above the national average for life sciences
InnovationThe Massachusetts Life Sciences Cluster has generated many recently approved biotech products, and has about 7.5% of the world’s pharmaceutical product pipelineThe Cluster is the leading metropolitan region in terms of life sciences patents, but growth in patents is only slightly above average
EstablishmentsThe Massachusetts Life Sciences Cluster has relatively few large local firms. Establishment growth is only slightly above average
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Bay Area, CA
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
$100,000
2% 3% 4% 5% 6% 7% 8%
Average Wage, 2001
Note: S. F. Bay Area — Average wage of San Francisco, San Jose, OaklandSource: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
Percent Change in Annual Wage Growth, 1990–2001
Nassau, NY
Orange Ct. ChicagoLos Angeles
Salt Lake City
Minneapolis
BaltimorePhiladelphia
New Haven
Raleigh-Durham
Washington DC
New York
Oakland
Middlesex, NJ
San Jose
San Diego
Seattle
San Francisco
Newark
Boston
Atlanta
Houston
IndianapolisTampa, FL Cleveland
Cluster average wage: $56,741
National cluster wage growth: 5.1%
Wages in Leading Life Science Clusters
New Jersey
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Bay Area, CA
New Jersey
0
2
4
6
8
-2% 0% 2% 4% 6% 8% 10%
Employment in Leading Life Science Clusters
2001 NationalLife Sciences Employment
(in 10,000 workers)
Note: S. F. Bay Area — San Francisco, San Jose, Oakland, New Jersey – Newark, MiddlesexSource: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
Compound Annual Growth Rate (CAGR) of National Life Sciences Employment, 1990–2001
Losing Share Gaining Share
Middlesex, NJ
Nassau, NY
Chicago
Los Angeles
PhiladelphiaNew York
Orange Ct.Baltimore
New Haven, CT
OaklandSalt Lake City
San Jose
Raleigh-Durham
Washington DC
San Diego
San Francisco
NewarkMinneapolis
SeattleIndianapolis Tampa, FLHouston
ClevelandAtlanta
Boston
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Bay Area, CA
New Jersey
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
Innovation Output in Leading Life Science ClustersPatents and Patent Growth, 1990–2001
Los Angeles
Life Science Patents,
1996–2001
Average Annual Growth in Number of Life Science Patents, 1990–2001
ChicagoWashington, DC
San Diego
Newark
New York
Minneapolis San JosePhiladelphia
Orange Ct.Middlesex, NJ
Nassau, NJ
San Francisco
New Haven
Oakland
Salt Lake City
SeattleRaleigh, Durham
Note: S. F. Bay Area — San Francisco, San Jose, Oakland, New Jersey – Newark, MiddlesexSource: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
HoustonAtlanta
IndianapolisCincinnati
Tampa, FL Cleveland
Boston
Baltimore
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218201 196
145
470
0
100
200
300
400
500
CA MA NJ NY PA
Innovation Performance in Leading Life Sciences Clusters Share of Global Clinical Development Pipeline by U.S. State
Number of Products in
Pipeline
Note: Pipeline includes large- and small- molecule drugs, diagnostic tests, and biodevices. State attribution based on headquarters location of product’s primary owner
Source: Biospace Clinical Competitive Intelligence Systems (CCIS) database, September 2002from Massachusetts Biotechnology Council, BCG- MassBiotech 2010: Achieving Global Leadership in the Life-Sciences Economy
Share of Products in Pipleline 17.5% 8.1% 7.5% 7.3% 5.4%
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Relative Performance
Competitive Assessment
Strategic Issues
Massachusetts' Competitive Position in Life Sciences
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Assessing Life Sciences CompetitivenessSources of Data
Findings from recent studies of the cluster:– The Economic Contributions of Health Care to New England, New England
Healthcare Institute, Milken Institute, 2003– Massachusetts Life Sciences Data, Massachusetts Technology Collaborative,
2003– MassBiotech 2010: Achieving Global Leadership in the Life-Sciences Economy,
Massachusetts Biotechnology Council, Boston Consulting Group, 2003– The Medical Device Industry in Massachusetts, Alan Clayton-Matthews,
MassMedic, Massachusetts Medical Device Industry Council, 2001
Survey of 250 Massachusetts’ companies, 50+ from the Life Sciences– Conducted by Monitor Company
125+ in-depth interviews with cluster leaders– Conducted by Monitor Group and the Boston Consulting Group
Analysis of regional and cluster data from the Institute for Strategy and Competitiveness at Harvard
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Massachusetts Life Science ClusterSummary Assessment
Demand ConditionsDemand Demand
ConditionsConditionsFactor(Input)
Conditions
FactorFactor(Input)(Input)
ConditionsConditions
Context for Firm Strategy and
Rivalry
Context for Firm Context for Firm Strategy and Strategy and
RivalryRivalry
Related and Supporting Industries
Related and Supporting Industries
StrengthsStrong base of local companies that compete on innovation using cutting edge scienceLocal companies compete and cooperate intensively
WeaknessesLimited manufacturing in the State, especially in pharmaceuticalsFew headquarters of large, international companies
StrengthsSophisticated local medical practitioners
WeaknessesReimbursement environment does not foster the adoption of product and process innovations in health care deliveryHigh medical malpractice costs in Massachusetts may deter new treatmentsBarriers to performing clinical trials with local institutions
StrengthsPresence of specialized service providers such as law firms and consultantsFrequent interaction with local suppliersPresence of instrument companies and other equipment suppliers
StrengthsStrong K–12 educational systemStrong science base of leading researchers and leading academic research centersFrequent technology and knowledge transfer from research to industryHigh availability of risk capital and federal research funding
WeaknessesHigh cost of doing businessHigh cost of living, especially housingWeaknesses in physical infrastructure, notably Logan airportDeveloping shortages of mid-level professionalsTechnology transfer lagging other important regions
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Demand ConditionsDemand Demand
ConditionsConditionsFactor(Input)
Conditions
FactorFactor(Input)(Input)
ConditionsConditions
Context for Firm Strategy and
Rivalry
Context for Firm Context for Firm Strategy and Strategy and
RivalryRivalry
Related and Supporting Industries
Related and Supporting Industries
Massachusetts Life Science ClusterSummary Assessment - Continued
Role of GovernmentRole of GovernmentRole of Government
StrengthsIncreasing recognition of the potential of Life Sciences for the Commonwealth
WeaknessesLack of consistent, predictable process for site regulation, especially at the local levelLack of overall responsivenessand a coordinated approach to support the cluster by state government R&D tax credits are not well structured to benefit research companies
StrengthsIncreasing recognition of the potential of Life Sciences for the Commonwealth
WeaknessesLack of consistent, predictable process for site regulation, especially at the local levelLack of overall responsivenessand a coordinated approach to support the cluster by state government R&D tax credits are not well structured to benefit research companies
Institutions for CollaborationInstitutions for CollaborationInstitutions for Collaboration
StrengthsStrong array of industry councils, tech transfer offices, enterprise networks, and other institutions for collaborationVery high frequency of interaction among cluster members relative to other locations (producers, suppliers, customers, universities, etc.)
WeaknessesLack of institutions facilitating networking across segments
StrengthsStrong array of industry councils, tech transfer offices, enterprise networks, and other institutions for collaborationVery high frequency of interaction among cluster members relative to other locations (producers, suppliers, customers, universities, etc.)
WeaknessesLack of institutions facilitating networking across segments
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New Jersey
Bay Area, CA
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
0% 10% 20% 30% 40% 50% 60%
Note: S. F. Bay Area — San Francisco, San Jose, Oakland, New Jersey – Newark, MiddlesexSource: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
Share of Life Sciences Patenting from Hospitals and Research Institutions, 1996 – 2001
ChicagoLos Angeles
Philadelphia
New York
Washington DC
San DiegoMinneapolis
Boston
Role of Universities and Research InstitutionsLeading Life Sciences Clusters
Life Science Patents,
1996–2001
BaltimoreHoustonCleveland
Raleigh-DurhamOrange Ct.
IndianapolisNew Haven
Seattle
Salt Lake CityTampa, FL
Nassau, NY
Atlanta
Middlesex, NJ Oakland
San JoseSan Francisco
Newark
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Regional Knowledge Spill-OversTotal Life Sciences Patent Citations by Region, 1990s
0%
5%
10%
15%
20%
25%
30%
35%
Min
neap
olis
-St.
Pau
l
San
Jos
e
San
Fra
ncis
co
Los
Ang
eles
Oak
land
San
Die
go
Phi
lade
lphi
a
Chi
cago
New
Yor
k
Was
hing
ton,
DC
Note: Data corresponds to non-individual patents issued between 1994-1998 and citing patents issued between 1990 and 1998; Self-citations are excluded; only life sciences patents citing life sciences patents are considered.
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
Share of regional life science patents citing other regional patents
Share of regional companies’ life science patent citations that are regional
Bos
ton
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Availability of NIH Funding for Life Sciences
Source: National Institute of Health, Office of Extramural Research from Massachusetts Technology Collaborative - Massachusetts Life Sciences Data
$568$472 $461
$336
$1,623 $1,601
$870
$724 $709
$484
$1,111$1,055
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
Boston, MA-NH(NECMA)
New York-Northern NewJersey-Long
Island, NY-NJ-CT-PA (CMSA)
San Francisco-Oakland-San
Jose, CA(CMSA)
San Diego, CA(MSA)
Los Angeles-Riverside-
Orange, CA(CMSA)
Raleigh-Durham-Chapel Hill, NC
(MSA)
19972001
$ Millions
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Massachusetts Life Sciences ClusterCompetition and Collaboration
Massachusetts vs. Regional Average: Perception of Local Competition
Survey and Interviews HighlightsSurvey and Interviews HighlightsSurvey and Interviews Highlights
Local CompetitionMassachusetts Life Sciences Cluster has a relatively intense level of local competition with high numbers of competitors based in the area– “Life science businesses in the area compete
primarily for skilled labor, and competition here can get intense.”
– Senior Executive, Hospital Organization
Competition and CooperationDespite intense competition, companies work together on common concerns– “We come together to lobby for regulatory
reform and legislation that can benefit the industry. It’s one of the perks of a high industry concentration.”
– Senior Executive, Medical Device Company
Local CompetitionMassachusetts Life Sciences Cluster has a relatively intense level of local competition with high numbers of competitors based in the area– “Life science businesses in the area compete
primarily for skilled labor, and competition here can get intense.”
– Senior Executive, Hospital Organization
Competition and CooperationDespite intense competition, companies work together on common concerns– “We come together to lobby for regulatory
reform and legislation that can benefit the industry. It’s one of the perks of a high industry concentration.”
– Senior Executive, Medical Device Company
Percentage of Respondents in Agreement
58% 56%
48%46%
0%
25%
50%
75%
100%
Local competition isintense
Local competitors arenumerous
Massachusetts Life SciencesLife Science Average
Note: Life Sciences average reflects data from the life sciences clusters of San Diego, Pittsburgh, and the Research TriangleSource: Professor Michael E. Porter, Monitor Company survey and interviews
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Massachusetts vs. Regional Average: Characteristics of Local Customers
Massachusetts Life Sciences ClusterLocal Demand
Survey and Interviews HighlightsSurvey and Interviews HighlightsSurvey and Interviews Highlights
Local Customers
Local customers in the Massachusetts Life Sciences cluster are relatively sophisticated, demanding, and offer frequent feedback to firms
– “Customer needs are sophisticated because of the high concentration of medical treatment and academic centers. Patients’ expectations are very high, both in terms of access and quality.”
– Senior Executive, Hospital Organization
– “Our customers are primarily hospitals . . . It’s a real benefit to be located so close by. In addition, we can get immediate feedback from doctors about how a product is working.”
– Senior Executive, Medical Device Company
Local Customers
Local customers in the Massachusetts Life Sciences cluster are relatively sophisticated, demanding, and offer frequent feedback to firms
– “Customer needs are sophisticated because of the high concentration of medical treatment and academic centers. Patients’ expectations are very high, both in terms of access and quality.”
– Senior Executive, Hospital Organization
– “Our customers are primarily hospitals . . . It’s a real benefit to be located so close by. In addition, we can get immediate feedback from doctors about how a product is working.”
– Senior Executive, Medical Device Company
Percentage of Respondents in Agreement
86%
57%
50%55%
38%
47%
0%
25%
50%
75%
100%
Local customersare very
sophisticated
Firms frequentlyget customer
feedback
Local customershave special
needs
Massachusetts Life SciencesLife Science Average
Note: Life Sciences average reflects data from the life sciences clusters of San Diego, Pittsburgh, and the Research TriangleSource: Professor Michael E. Porter, Monitor Company survey and interviews
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Massachusetts Life Sciences ClusterHigh Cost Location
Survey and Interviews HighlightsSurvey and Interviews HighlightsSurvey and Interviews Highlights
The cost of doing business in Massachusetts is high relative to other regions and may represent a barrier for further expansion in the region
– “Labor costs and price for space are much higher here.”
– Senior Executive, Medical Device Company
– “Space and the cost of space are significant barriers to future expansion in the region.”
– Senior Executive, Biotechnology Company
The cost of doing business in Massachusetts is high relative to other regions and may represent a barrier for further expansion in the region
– “Labor costs and price for space are much higher here.”
– Senior Executive, Medical Device Company
– “Space and the cost of space are significant barriers to future expansion in the region.”
– Senior Executive, Biotechnology Company
Massachusetts vs. Regional Average: Cost of Doing Business
4%
28%
0%
25%
50%
75%
100%
The cost of doing business is low relative to otherregions
Massachusetts Life ScienceLife Science Average
Percentage of Respondents in Agreement
Note: Life Sciences average reflects data from the life sciences clusters of San Diego, Pittsburgh, and the Research TriangleSource: Professor Michael E. Porter, Monitor Company survey and interviews
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Massachusetts vs. Regional Average: Physical Infrastructure
Survey and Interviews HighlightsSurvey and Interviews HighlightsSurvey and Interviews Highlights
Physical infrastructure
The quality of the transportation and communications infrastructure are seen as lacking relative to other life science clusters
– “The transportation infrastructure is a significant barrier to future expansion for companies in the area.”
– Senior Executive, Industry Organization
– “Something needs to be done about the Logan Airport. It’s becoming a bigger problem for our employees, most of whom travel a great deal.”
– Senior Executive, Medical Device Company
Physical infrastructure
The quality of the transportation and communications infrastructure are seen as lacking relative to other life science clusters
– “The transportation infrastructure is a significant barrier to future expansion for companies in the area.”
– Senior Executive, Industry Organization
– “Something needs to be done about the Logan Airport. It’s becoming a bigger problem for our employees, most of whom travel a great deal.”
– Senior Executive, Medical Device Company
Massachusetts Life Sciences ClusterPhysical Infrastructure
Percentage of Respondents in Agreement
64%
36%
84%
35%
0%
25%
50%
75%
100%
Communicationsinfrastructure is very good
Transportationinfrastructure is very good
quality
Massachusetts Life SciencesLife Science Average
Note: Life Sciences average reflects data from the life sciences clusters of San Diego, Pittsburgh, and the Research TriangleSource: Professor Michael E. Porter, Monitor Company survey and interviews
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Research OrganizationsResearch OrganizationsResearch Organizations
Biological Products
Biological Biological ProductsProducts
Specialized Risk CapitalVC Firms, Angel Networks
Specialized Risk CapitalVC Firms, Angel Networks
Biopharma-
ceutical Products
BiopharmaBiopharma--
ceutical ceutical ProductsProducts
Specialized BusinessServices
Banking, Accounting, Legal
Specialized BusinessServices
Banking, Accounting, Legal
Specialized ResearchService Providers
Laboratory, Clinical Testing
Specialized ResearchService Providers
Laboratory, Clinical Testing
Dental Instrumentsand Suppliers
Dental Instrumentsand Suppliers
Surgical Instruments and Suppliers
Surgical Instruments Surgical Instruments and Suppliersand Suppliers
Diagnostic SubstancesDiagnostic SubstancesDiagnostic Substances
ContainersContainersContainers
Medical EquipmentMedical EquipmentMedical Equipment
Ophthalmic GoodsOphthalmic GoodsOphthalmic Goods
Health and Beauty Products
Health and Beauty Health and Beauty ProductsProducts Health Services ProviderHealth Services ProviderHealth Services Provider
Educational InstitutionsHarvard University, MIT, Tufts University,
Boston University, UMass
Educational InstitutionsHarvard University, MIT, Tufts University,
Boston University, UMass
Cluster OrganizationsMassMedic, MassBio, othersCluster Organizations
MassMedic, MassBio, others
Analytical InstrumentsAnalytical InstrumentsAnalytical Instruments
Among National Leaders (1–5)Established Position (6–20)
Significant Presence (21–40)Less Developed (41+)Note: Competitive position based on relative employment
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
Massachusetts Life Sciences ClusterCompetitive Position by Sub-Cluster, 2001
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Massachusetts Life Sciences ClusterRole of Government
Massachusetts vs. Regional Average: Perception of Government Regulation
Survey and Interviews HighlightsSurvey and Interviews HighlightsSurvey and Interviews HighlightsGovernment Regulation
Massachusetts ranks below other regional clusters in perceived governmental support for Life Sciences
– “Local government regulations and compliance procedures can often be a problem; in contrast, there aren't as many issues at the state level."
– Senior Executive, Pharma Company
Priorities for State Government
Speed up the approval process to decrease time to market
Improve the incentives and processes for innovation and investment in R&D initiatives
– “Introduce legislation that permits life sciences to innovate in a clear and predictable framework (e.g., permitting and ability to do research).”
– Senior Executive, Biotech Company
Government Regulation
Massachusetts ranks below other regional clusters in perceived governmental support for Life Sciences
– “Local government regulations and compliance procedures can often be a problem; in contrast, there aren't as many issues at the state level."
– Senior Executive, Pharma Company
Priorities for State Government
Speed up the approval process to decrease time to market
Improve the incentives and processes for innovation and investment in R&D initiatives
– “Introduce legislation that permits life sciences to innovate in a clear and predictable framework (e.g., permitting and ability to do research).”
– Senior Executive, Biotech Company
Percentage of Respondents in Agreement
29%
14%
27%32%
38%
32%
0%
25%
50%
75%
100%
Appropriatenessof state
regulations
Government ishighly responsive
State incentivesfor R&D
investments arehigh
Massachusetts Life SciencesLife Science Average
Note: Life Sciences average reflects data from the life sciences clusters of San Diego, Pittsburgh, and the Research TriangleSource: Professor Michael E. Porter, Monitor Company survey and interviews
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Tax PolicyTax Policy
Institutional Support
Institutional Support
Financial Support
Financial Support
Source: Massachusetts Biotechnology Council, Boston Consulting Group - MassBiotech 2010: Achieving Global Leadership in the Life-Sciences Economy; BIO, State Government Initiatives in Biotechnology, September 2001
Government Support for Life SciencesLeading States
MassachusettsMassachusetts New JerseyNew Jersey
• 10% R&D tax credit; can be carried forward for up to 3 years
• 3% credit on depreciable assets
• Single sales factor
• 10% R&D tax credit; can be carried forward for up to 3 years
• 3% credit on depreciable assets
• Single sales factor
• 10% High tech investment tax credit; transferable to other companies
• Net operating-loss can be carried forward for 15 years
• 10% High tech investment tax credit; transferable to other companies
• Net operating-loss can be carried forward for 15 years
• Massachusetts Biomedical Initiatives (MBI)
• Massachusetts Biomedical Initiatives (MBI)
• Biotechnology Council of New Jersey
• New Jersey Technology Council’s Life Sciences Network
• Biotechnology Council of New Jersey
• New Jersey Technology Council’s Life Sciences Network
• Cumulative MBI investment of $8 million
• Some state-pension-fund investment
• Cumulative MBI investment of $8 million
• Some state-pension-fund investment
• Early Stage Enterprises, $40m
• NJ Technology Council Venture Fund, $30m
• Seed Capital Program
• Early Stage Enterprises, $40m
• NJ Technology Council Venture Fund, $30m
• Seed Capital Program
CaliforniaCalifornia North CarolinaNorth Carolina
• 15%-24% R&D tax credit
• 100% net-operating-loss carry forward for 8 years
• 15%-24% R&D tax credit
• 100% net-operating-loss carry forward for 8 years
• 5% R&D tax credit• 7% tax credit for
machine and equipment leases
• 5% R&D tax credit• 7% tax credit for
machine and equipment leases
• Jointly-funded research programs of state universities and industry
• Jointly-funded research programs of state universities and industry
• State-funded North Carolina Center for Biotechnology (NCBC)
• State-funded North Carolina Center for Biotechnology (NCBC)
• $500 millionCalPERSBiotechnology Program
• $500 millionCalPERSBiotechnology Program
• $10 million North Carolina Bioscience Investment Fund
• $42 million-$150 million in tobacco money for bio-manufacturing
• $10 million North Carolina Bioscience Investment Fund
• $42 million-$150 million in tobacco money for bio-manufacturing
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Institutions for CollaborationHelpfulness for Entrepreneurs
How Much Do the Following Local InstitutionsHelp Entrepreneurs in Your Region Form Valuable Business Contacts or
Obtain Valuable Business Advice?
0%
20%
40%
60%
University-basedNetworking
Organizations
UniversityTechnology
Transfer Offices
Regional Industryor Cluster Councils
National TradeAssociations
EconomicDevelopmentOrganizations
MassachusettsSan DiegoPittsburghResearch Triangle
Percentage of
Respondents Rating Helpful
Note: Life Sciences average reflects data from the life sciences clusters of San Diego, Pittsburgh, and the Research TriangleSource: Professor Michael E. Porter, Monitor Company survey
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Relative Performance
Competitive Assessment
Strategic Issues
Massachusetts' Competitive Position in Life Sciences
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Competitive AgendaMassachusetts State Government
• Address weaknesses in the physical infrastructure, especially in transportation
• Increase the supply of housing to lower the cost of living in the State
• Work with local governments to identify, develop, and permit promising sites for life sciences companies (e.g., single site locator)
• Improve the structure of R&D incentives for life sciences companies
• Create a clear point of contact for existing companies in the Life Sciences cluster as well as potential out-of-state investors
• Participate actively in the Life Sciences cluster development process
• Increase the overall responsiveness of state government to business needs
• Address weaknesses in the physical infrastructure, especially in transportation
• Increase the supply of housing to lower the cost of living in the State
• Work with local governments to identify, develop, and permit promising sites for life sciences companies (e.g., single site locator)
• Improve the structure of R&D incentives for life sciences companies
• Create a clear point of contact for existing companies in the Life Sciences cluster as well as potential out-of-state investors
• Participate actively in the Life Sciences cluster development process
• Increase the overall responsiveness of state government to business needs
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Competitive AgendaMassachusetts Life Sciences Cluster
• Improve technology transfer
• Make Massachusetts' health care delivery the most advanced and innovative in the nation- Create and environment and rules that facilitate the introduction of new
treatments- Adopt new service delivery technologies (e.g., IT)
• Secure the State’s medium skilled workforce position
• Expand clinical trials in the State
• Capture more downstream manufacturing
• Improve technology transfer
• Make Massachusetts' health care delivery the most advanced and innovative in the nation- Create and environment and rules that facilitate the introduction of new
treatments- Adopt new service delivery technologies (e.g., IT)
• Secure the State’s medium skilled workforce position
• Expand clinical trials in the State
• Capture more downstream manufacturing
31LSConsolidated-20030806 2003 Life Sciences Summit
0
50
100
150
200
250
300
-10% 0% 10% 20% 30% 40% 50%
Life Sciences PatentsTop Patenting Universities and Affiliated Hospitals
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
Life Sciences Patents, 1996–2001
Compound Annual Growth Rate (CAGR) of Life Sciences Patents, 1996–2001
Average CAGR of Top 50: 11.6%
UC San Francisco
MGH
Johns Hopkins
UMichigan
Rockefeller
UC Berkeley
UC San Diego
Tufts
Vanderbilt
Harvard
UPenn
UWisconsin-Madison
UFlorida
MIT
CalTech
SUNYUCLA
Columbia
CornellAverage Patents
of Top 50 : 122
UMass
Dana-Farber
Stanford
Duke
UMinnesota
Washington Univ.
Thomas Jefferson
YaleUPittsburghBaylorUWashington
RutgersUNebraska
NYUUUtah UFlorida
Mayo
BU
BWH
32LSConsolidated-20030806 2003 Life Sciences Summit
0
1
2
3
4
5
6
-10% -5% 0% 5% 10% 15% 20% 25% 30%
Life Sciences ResearchPatents per Publication, 1996-2001
Life Sciences
Patents per 100 Life
Sciences Publications
2001
Compound Annual Growth Rate (CAGR) of LS Patents per 100 LS Publications, 1996-2001
Cal Tech (34.7%, 8.4)
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School and NIH Pubmed.
Thomas Jefferson
UC BerkeleyMIT
Iowa State
Johns Hopkins
UPittsburgh
UConnecticutTufts
UC San Diego
UFloridaUMichigan
UC San Francisco
CornellUC Los AngelesRutgers
UC Davis
UAlabamaUWashington
BUNYU
UUtahNorth Carolina State
HarvardUWisconsin-Madison
UMass
Columbia
Washington Univ.Brown
Michigan State
Princeton
UNorthCarolina
UMinnesota
UPennDuke
Stanford
PennState
DartmouthSUNY
UTexas
33LSConsolidated-20030806 2003 Life Sciences Summit
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
-40% -30% -20% -10% 0% 10% 20% 30% 40%
Technology Transfer Effectiveness
Note: Dana-Farber values for 1996 are averages of 1995 and 1997Source: AUTM Licensing Survey 1995–2000
analysis by Professor Michael E. Porter and Monitor Company Group
Iowa State
Licenses and Options Executed per Patent,
1996–2000
Compound Annual Growth Rate (CAGR) of Licenses and Options Executed per Patent 1996–2000
Average CAGR of Top 50: -2.9%
Purdue
Columbia Stanford
UWashington
Washington U.
UPenn
UKentucky
UBritish Columbia
Texas A& M
Mayo Foundation
Virginia TechUWisconsin-Madison
UNorth Carolina-Chapel Hill
Cornell
UMinnesota
UTexas-AustinUVirginiaJohns Hopkins
SUNY
UMass
UC SystemPrinceton
CalTech
AverageLicenses
per Patentof Top 50:
1.2Harvard
MGHMIT
Children’s Hosp.Dana-Farber
BWH
34LSConsolidated-20030806 2003 Life Sciences Summit
Technology and Knowledge TransferKey Issues
• The transfer of technology from research to commercialization is traditionally a key competitive advantage of the Massachusetts Life Sciences cluster
However• Other regions are catching up
– Life Sciences research institutions in Massachusetts show only average performance on a number of technology transfer indicators
• Tech transfer performance is seen as lagging in some institutions, with cumbersome decision-making processes and inappropriate understanding of appropriate deal structures
• The context for technology and knowledge transfer is changing– Pharmaceutical companies entering the cluster will need to establish new
relationships with local research institutions• Massachusetts’ traditional approach of knowledge transfer via small start-up
companies needs to evolve
35LSConsolidated-20030806 2003 Life Sciences Summit
100 100.1101.2 101.3
99
92.291
87.4
84.4
101.5100
97.395.9
94.9
92.2
88.9
82.2
77.5
102
100
70
75
80
85
90
95
100
105
110
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
USMA
Source: Massachusetts Medical Society, MMS Index Report, March 2002
Massachusetts Physician Practice Environment Index,
1992-2001
Massachusetts Life Sciences ClusterHealth Care Delivery & Financing: Challenges Facing Physicians
36LSConsolidated-20030806 2003 Life Sciences Summit
Massachusetts Health Care DeliveryOverview
• Competitiveness and innovation in a region are strongly influenced by sophisticated local demand
• Having the most advanced health care delivery offers major benefits to the cluster as well as to patient care
• While Massachusetts is seen as the home of demanding companies, research institutions, and medical practitioners, cost pressures, and reimbursement structures have the potential to slow down innovation
– Health care delivery runs the risk of becoming driven by short-term cost reduction
37LSConsolidated-20030806 2003 Life Sciences Summit
Massachusetts Life Sciences ClusterMid-Level Workforce Retention and Recruitment
Highlights from the Survey and InterviewsHighlights from the Survey and InterviewsHighlights from the Survey and Interviews
The cost of living in Massachusetts makes it difficult to recruit employees at all levels
– “The high cost of living, especially housing, makes it difficult to convince people to move to Boston.”
– Senior Executive, Hospital Organization
– “I don’t even try to recruit people from California anymore.”
– Senior Executive, Biotechnology Company
– “We pay higher salaries here, but we lose people because of housing costs.”
– Senior Executive, Medical Device Company
The cost of living in Massachusetts makes it difficult to recruit employees at all levels
– “The high cost of living, especially housing, makes it difficult to convince people to move to Boston.”
– Senior Executive, Hospital Organization
– “I don’t even try to recruit people from California anymore.”
– Senior Executive, Biotechnology Company
– “We pay higher salaries here, but we lose people because of housing costs.”
– Senior Executive, Medical Device Company
Massachusetts vs. Regional Average: Cost of Living
10%
49%
0%
25%
50%
75%
100%
The cost of living in your region makes recruitment andretention of employees easy
Massachusetts Life ScienceLife Science Average
Percentage of Respondents in Agreement
Note: Life Sciences average reflects data from the life sciences clusters of San Diego, Pittsburgh, and the Research TriangleSource: Professor Michael E. Porter and Monitor Company Group
38LSConsolidated-20030806 2003 Life Sciences Summit
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
Biomed
ical E
ngine
ers
Bioche
mists/B
iophy
sicist
s
Biomed
ical te
chnic
ians
Intern
ists
Regist
ered n
urses
Post-s
econ
dary
biolog
y tea
chers
Enviro
nmen
tal an
d hea
lth sp
ecial
ists
Pharm
acy t
echn
ician
s
Post-S
econ
dary
healt
h spe
cialty
teac
hers
Medica
l equ
ipmen
t repa
irers
Radiol
ogy t
echn
icians
Medica
l app
lianc
e tec
hnici
ans
Anesth
esiol
ogist
s
Mid-Level Workforce Employment Changes in Massachusetts
Source: NEHI
Change of Employment, 1999 - 2001
DecreaseIncrease
39LSConsolidated-20030806 2003 Life Sciences Summit
Mid-Level Workforce Overview
• The Massachusetts Life Sciences Cluster requires a strong base of mid-level professionals
– High cost of living makes the Boston-region increasingly unattractive
– The growth of corporate research facilities increases the pressure on hospitals and research institutions to compete for mid-level professionals
– Educational institutions need to be equipped to adjust supply to meet the need for mid-level professionals
• A strategy is needed to expand the supply of needed skills for the cluster
40LSConsolidated-20030806 2003 Life Sciences Summit
Nationwide, 2.3 million people participated in industry- and government-funded clinical trials in 2002
– In Massachusetts, an estimated 40 to 50,000 patients participated in clinical trials (ca. 2% of national trial participants vs. 2.2% of national population and 5.3% of life sciences employment)
The recruitment costs for volunteers are rising – Spending on recruiting volunteers is rising nationwide by 18% annually,
reaching $500m in 2002 (ca. $215 per volunteer)
The efficiency of carrying out clinical trials is declining – Nearly 25% of those enrolled in clinical trials drop out before the trial is
completed– Enrollment delays are increasingly pushing back the timetable for trials and
product introduction
Clinical TrialsCurrent Situation
Source: Center Watch; presented at MBC
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Clinical TrialsThe Challenge for Massachusetts
• The environment for conducting clinical trials in Massachusetts gets mixed reviews– Many companies value the close proximity to leading research hospitals– However, there is widespread concern about the lack of responsiveness of teaching
hospitals in conducting trials, and no mechanisms to facilitate the process of performing trials in the State
“It is incredibly difficult to work with the hospitals here for clinical trials. I’d like to but it is just so difficult.” Executive, Biotech Company
• Increasing the quantity and efficiency of clinical trials conducted here by Massachusetts (and other) companies would be an important competitive advantage for the region
– Clinical trials are a meaningful source of revenue for hospitals– Involvement in clinical trials can enhance the image and improve the quality of health
care delivery in Massachusetts hospitals– Conducting clinical trials at nearby institutions is cost effective and improves the level of
innovation throughout the cluster• A concerted strategy is needed to address the barriers to conducting trials in
Massachusetts, widen the array of hospitals involved in trials, and make the process of conducting trials more efficient
42LSConsolidated-20030806 2003 Life Sciences Summit
Capturing Life Sciences Manufacturing
• Capturing downstream activities such as manufacturing represents a major opportunity for the Massachusetts Life Sciences cluster
– The State economy would benefit from new high-paying jobs in downstream manufacturing activities (scaling of production, prototype manufacturing, full-scale production)
– Companies in the cluster would benefit from proximity to their manufacturing operations to allow easier coordination, shorter reaction times, and reduced complexity of management supervision“There is a very delicate passing of the baton. The nth plant can be in Ireland – for the first one, the instinct is to go with Cambridge. We’d pay a 20% premium to stay here” Executive , Biotech Company
• Massachusetts has a strong product pipeline and many companies will have to make manufacturing site decisions over the next several years
Source: Massachusetts Biotechnology Council, Boston Consulting Group - MassBiotech 2010: Achieving Global Leadership in the Life-Sciences Economy
43LSConsolidated-20030806 2003 Life Sciences Summit
Product Pipeline of the Massachusetts Life Sciences Cluster
Expected growth of FDA-approved Massachusetts Biotechnology products
2002 2005 2010
~40
~90
~130
Development phaseDevelopment phase
Phase IPhase IIPhase IIIApproval pending
Current number Current number of productsof products
63734823
Probability of Probability of successsuccess(1)(1)
21%31%59%91%
Time to Time to marketmarket(1)(1)
~6 years~5 years~3 years~1 year
Expected outputExpected output
13 compounds by 200823 compounds by 200728 compounds by 200521 compounds by 2003
(1) Based on average figures for new chemical entities (NCEs); BCG analysis; Tufts Center for the Study of Drug DevelopmentSource: Biospace CCIS database; “A Revolution in R&D,” BCG, November, 2001; BCG analysis
from Massachusetts Biotechnology Council, BCG- MassBiotech 2010: Achieving Global Leadership in the Life-Sciences Economy
44LSConsolidated-20030806 2003 Life Sciences Summit
Capturing Manufacturing in Life Sciences Massachusetts’ Current Position
• Companies report several competitive disadvantages for Massachusetts as a location for manufacturing
– High cost of doing business
“Massachusetts is almost prohibitively expensive”
– Delays and red tape:
“Research Triangle has a reliable 6 week process”
– Unpredictability of the local regulatory environment
“In MA, you never know what problem you’ll run into with placing a manufacturing plant”
• Most companies with operations in Massachusetts have located some manufacturing outside the State
Source: Massachusetts Biotechnology Council, Boston Consulting Group - MassBiotech 2010: Achieving Global Leadership in the Life-Sciences Economy
45LSConsolidated-20030806 2003 Life Sciences Summit
(1) Clinical development structure in state(2) Commercial manufacturing onlyNote: Sample is 134 human therapeutics companies Source: Massachusetts Biotechnology Council Survey 2002, BCG analysis
from Massachusetts Biotechnology Council, BCG - MassBiotech 2010: Achieving Global Leadership in the Life-Sciences Economy
CommercialCommercialResearchResearch DevelopmentDevelopment(1)(1) ManufacturingManufacturing(2)(2)
MAcompanies
Out-of-state companieswith MA locations
Activity in MA
Activity outside MA
899 10107
7
26
111515
3 2323 2 2424
Massachusetts Life Sciences ClusterLocation of Manufacturing
108
57
26 26 26
17 17
46LSConsolidated-20030806 2003 Life Sciences Summit
80%
65% 62%52%
20%
35% 38%48%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0 to 5 6 to 10 11 to 15 16 and over
Age of Company Out of State EmployeesMA EmployeesNote: Base Massachusetts headquartered companies
Source: MBC Survey 2002, Value Science, BCG analysisfrom Massachusetts Biotechnology Council, BCG - MassBiotech 2010: Achieving Global Leadership in the Life-Sciences Economy
Massachusetts Life Sciences ClusterLocation of Manufacturing% of Jobs in
MA
47LSConsolidated-20030806 2003 Life Sciences Summit
The Cluster needs to develop a strategy to increase its share of upcoming manufacturing investments, especially from companies already present in Massachusetts:– Development and pre-qualification of suitable sites, including
permitting, and infrastructure provision– A proactive approach to companies facing manufacturing
investment decisions– Efficient interaction with potential investors through one point-of-
contact– An explicit program to assist in workforce development– Approaches to minimizing the tax burden consistent with the State’s
fiscal realities
A successful strategy to attract and retain Life Sciences manufacturing in the State will need involve State government, local governments,companies, universities, and other institutions
Capturing Manufacturing in Life Sciences The Need for a Strategy
48LSConsolidated-20030806 2003 Life Sciences Summit
Other Strategic Issues Identified
Strategy for recruiting outside investors to the State
Biogrid / IT infrastructure for life sciences
Technology mapping and identifying technology gaps
49LSConsolidated-20030806 2003 Life Sciences Summit
Discussion Questions
Are these the right issues?
What are the priorities among them?
50LSConsolidated-20030806 2003 Life Sciences Summit
SourcesThe Economic Contributions of Health Care to New EnglandNew England Healthcare Institute, Milken Institutehttp://www.nehi.net/CMS/viewPage.cfm?pageId=29
Massachusetts Life Sciences DataMassachusetts Technology Collaborativehttp://www.mtpc.org/NewsandReports/the_index/index2001.pdf
MassBiotech 2010: Achieving Global Leadership in the Life-Sciences EconomyMassachusetts Biotechnology Council, Boston Consulting Grouphttp://www.massbiotech2010.org/report/
The Medical Device Industry in MassachusettsAlan Clayton-Matthews, MassMedic, Massachusetts Medical Device Industry Councilhttp://www.massmedic.com/01.pdf
Why Care? The Howell Group of Bostonhttp://www.whycare.info/pages/1/index.htm
Massachusetts Life Sciences ClusterProfessor Michael E. Porter and Monitor Company Group, L. P.
New Jersey Life Science Super-ClusterProfessor Michael E. Porter and Monitor Company Group, L. P.http://www.state.nj.us/prosperity/porter.shtml
The Boston Life-Sciences ClusterChristian HM Ketels, PHD, Institute for Strategy and Competitiveness, Harvard Business Schoolhttp://www.isc.hbs.edu/pdf/Boston_NHCM_CK_11-22-02.pdf