Someone Needs to Rank U.S. Biotech Hubs, For Real

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San Diego ranks No. 1 in life sciences employment, with 4.8 percent of its local labor pool working in life sciences. That’s more than twice the density of biotech workers in the San Francisco Bay Area, which only has 2.3 percent of its workers engaged in life sciences, according to BLS data.

But that’s not the right way to look at a local labor market. That statistic serves to penalize the Bay Area for being a larger, more diversified regional economy with thousands of people working at Apple, Google, Intel and more.

The data only goes downhill from there. San Diego absolutely crushes San Francisco on the “number of life sciences establishments” ranking No. 3 overall, compared to the Bay Area’s seemingly pathetic ranking at No. 13. The victories in those categories—which are never thoroughly defined in the report—are part of what propelled San Diego ahead. Again, the authors chose to look at the percentage of local businesses that are involved in life sciences, not the total number of life sciences companies, where the Bay Area would score much higher.

Then, you might ask, what about venture capital? Surely the San Francisco Bay Area, home of Sand Hill Road, must trounce a VC desert like San Diego, right? Not really, by this analysis. San Francisco, indeed, was miles ahead of every other region in biotech venture financing, with $2.37 billion of support, according to 2011 data from PwC’s MoneyTree report. San Diego came in way behind at $602 million.

But even though the gap was enormous in real terms, San Diego ended up as the No. 3 overall region, so still secured a respectable 15.1 points compared with 25 points San Francisco got on the weighted average scoring system used by the authors.

The same story held true with NIH funding—San Francisco was far ahead of San Diego in real dollars ($1.37 billion to $872 million), but the weighted average system used in this report made the gap look narrow (17.9 weighted points for San Francisco’s third-place finish, compared with 14 weighted points for San Diego’s eighth-place position).

To be fair to the authors, this isn’t the worst report I’ve ever seen on regional biotech clusters. Back in 2004, the Milken Institute infamously ranked San Diego as the nation’s No. 1 biotech hub. Where did they go wrong? They gathered data that divided the San Francisco Bay Area (truly one sprawling, but united, region) into three different metropolitan statistical areas (San Francisco, San Jose, and Oakland).

That analysis made San Diego look bigger than San Francisco. But was it bigger than the entire Bay Area biotech cluster? No way.

Other reports suffer from regional bias, or political bias. California biotech boosters often like to pool all of their regions together to show how much bigger and more vibrant the Golden State is than Massachusetts or New York. It’s a fundamentally misleading way to look at the question of regional biotech clusters, partly because California is so much bigger, with 38 million people, compared with 6.6 million in Massachusetts.

Beyond that, the San Francisco Bay Area and San Diego may be in the same state, but they are different places with different cultures and regional economies, just like Boston and New York.

The problem is really with the measurements the authors used to measure overall activity in a life sciences cluster.

Now, I’m not an economist or statistician. But just on my own, I’ve thought of 15 criteria that I think could be used to provide a reasonable ranking system for regional biotech hubs. Naturally, every effort should be made to gather data that’s truly regional, and not just a crude statewide measurement that would, say, lump together different places like San Francisco, Los Angeles, and San Diego into one uber-region.

Here are the criteria I think are worth measuring:

1. Number of public life sciences companies

2. Number of private life sciences companies

3. National Institutes of Health funding

4. R&D spending at public life sciences companies

5. Number of patents issued per capita

6. Total life sciences employment

7. Public life sciences company revenues

8. Public life sciences company profits

9. Total venture capital dollars invested

10. Venture capital allocated for early stage/seed investments

11. Number of life science startups formed each year

12. Rate at which local scientific institutions are cited by other scientists

13. Number of qualified service providers, such as contract research organizations

14. A composite measure of the employer base. The highest marks would go to regions with a diverse mix of nonprofit research centers, startups, small public companies, large public companies, and Big Pharma operations, as well as jobs for people with scientific and business skills.

15. Number of FDA-approved drugs, devices, and diagnostics discovered in the region.

[UPDATED With additional criteria suggested by readers:]

16. The 5-year survival rate of biotech startups

17.The ratio of new companies started vs. the # of employees in the cluster. (A measure of a region’s entrepreneurial spirit.)

18. The total number of seasoned, VC-backed biotech entrepreneurs. (A measure of a region’s entrepreneurial depth).

The annual Ernst & Young “Beyond Borders” report, in my view, comes closest to an accurate portrayal of regional biotech clusters in one of its appendixes. But it doesn’t cover all of these criteria listed above.

At this point, you might say, “Ah, who cares about some flawed report by a real estate firm that’s just out trotted out some fancy charts and graphs in an effort to drum up more business?” But misinformation can cause people to jump to all kinds of misleading conclusions, and make bad decisions.

Kleanthis Xanthopoulos, CEO of Regulus Therapeutics

Just for a quick reality check with someone in the trenches, I spoke Friday with Kleanthis Xanthopoulos, the CEO of San Diego-based Regulus Therapeutics (NASDAQ: RGLS). He’s a proud San Diegan, and a member of the board of BIOCOM, the local life sciences trade association.

He had heard about the Jones Lang LaSalle report, and dismissed it out of hand when he heard it put San Diego No. 2. But Xanthopoulos didn’t quite want to ignore it, either. He worries that such regional bioscience rankings can create a sense of complacency. “That’s my great fear,” he says.

San Diego certainly has some great research centers, terrific entrepreneurs, and some Big Pharma outposts that do important early stage R&D. It has the top two makers of DNA sequencers, in Illumina (NASDAQ: ILMN) and Life Technologies (NASDAQ: LIFE).

But its most successful biopharmaceutical companies have gotten acquired, so it hasn’t been able to build a home-grown biopharmaceutical company that plays the role of regional “anchor tenant” like Biogen Idec (NASDAQ: BIIB) and Genzyme have historically in Boston. Genentech and Gilead Sciences (NASDAQ: GILD) have played a similar role for a long time in the Bay Area.

San Diego does clearly have a talented biotech workforce, at least for R&D functions. Regulus, which now has 75 employees, has been able to grow almost entirely by tapping talented people from the local area, Xanthopoulos says. Talented CEOs and sales and marketing people can be recruited to San Diego because of its high quality of life and tight-knit biotech community, Xanthopoulos says.

Still, there are some weaknesses. San Diego, even though it’s the sixth-largest city in the U.S., has an airport that reminds me of where I grew up near Madison, WI. You can only hop one daily non-stop flight from there to Boston on Jetblue. If that flight won’t do, you have to connect through LAX if you’re a serious business traveler with places to go and people to see in the big leagues of biopharma.

“It’s ridiculous,” Xanthopoulos says.

Things like that might seem small, but if a region is really committed to raising its game as a biotech center, it needs to take a realistic look at how it stacks up. Just because someone cheers “We’re No.2!” loudly on social media doesn’t make it so. It might actually make some regions sit on their laurels, and fail to do basic things to stay competitive. Think about that the next time someone passes along a flawed ranking of U.S. biotech clusters.

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24 responses to “Someone Needs to Rank U.S. Biotech Hubs, For Real”

  1. defrajac says:

    Great article! In the list of criteria you are proposing to rank the clusters, I would like to see also the number of companies after 3-5 years from their inception. This survival rate will give a sense of how the cluster “incubate” its own companies and how the hub could be conducive of creating a possible anchor tenant or not.

  2. Whalley says:

    Related to #15, it would also be good to see the number of people treated and/or benefitted by the approved products.

  3. Dan EramianOracle at Delphi says:

    Sounds like a good project for BIO in DC

  4. Imran Nasrullah says:

    You should check out MassBio’s 2015 Report which was conducted by Delloitte and LEK. The did a comprehensive study of not just US clusters but also global clusters.

  5. Thanks for the great suggestions of other criteria to put into the regional biotech cluster ranikings. I’ve heard 3 new criteria worth adding:

    1. The 5-year survival rate of biotech startups

    2. The ratio of new companies started vs. the # of employees in the cluster. (A measure of a region’s entrepreneurial spirit.)

    3.The total number of seasoned, VC-backed biotech entrepreneurs. (A measure of a region’s entrepreneurial depth).

    Imran—I also looked at the MassBio 2015 report, which is decent, but a little outdated from 2009. It says SF has the largest concentration and diversity of life science companies.

    • AJP says:

      Or the one that really matters to people in the industry: median length of time it takes to get re-employed in the same area after loss of a job.

  6. I agree that putting San Diego ahead of the Bay Area is kind of ridiculous, but I’d still only drop them to #3. To your list, I would add something about ‘density’. That’s one of the things I really like about San Diego – the vast majority of companies and research institutions are within a 5 minute drive of each other (and the ocean!). And Life/Invitrogen is only 30 minutes away. My understanding is that Boston/Cambridge is even more concentrated. The Bay Area, not so much. It could be a two hour drive from one meeting to the next.

    • realposter says:

      it also doesn’t make sense that Westchester/New Haven is separated from NYC/New Jersey.

  7. Shawn — I agree that density is an important factor. This is one big advantage that Boston/Cambridge has over the Bay Area, and it’s why I think Boston is poised to overtake SF in the future. SD has decent density on the Torrey Pines Mesa, but you still need a rental car to get anywhere. The mini clusters of Sorrento Valley, the La Jolla Town Center where Illumina/Amylin are, Carlsbad—they are fairly close, but still require getting in a car.

    Transportation in SD needs a lot of work. One time I was in SD and really struggled to find a Zipcar for hourly rental, which I take for granted is easy to find anywhere in Seattle, Boston, or SF. Airport is tiny, and there aren’t any cheap/frequent/fast trains either. This basic infrastructure and density of land use is really helping Boston.

    • Luke, that all certainly makes sense, but you’re coming at this from an outsider’s point of view. I’m thinking about it from a person who lives and works here. It’s true that you mostly can’t walk from place to place, you can very easily drive there (and everyone has a car – it’s just how California is). I don’t know why Zipcar isn’t here in San Diego, but that seems like a pretty minor inconvenience (but then I always rent, even when going to SF or Seattle.)
      SD doesn’t have the density of Boston, and I hope it never does. It’s why I live here and not there.

      • andypipkinuk says:

        Car2Go is the same as Zipcar and I see their cars all over Central SD. Not sure why they don’t expand the area to UCSD or SDSU

    • > SD has decent density on the Torrey Pines Mesa, but you still need a rental car to get anywhere.

      True. But if you do have a car, you can reach almost all of San Diego biotech within a 10-15 min. drive from the Torrey Pines area.

      The fact is that all these biotech hubs are of different flavors and there are no easy way to ‘rank’ them. In addition to a lot of under-the-radar entrepreneurs (many companies with less than 5 people), there are many small service and reagent companies. I used to work for a 10 people start up and we didn’t even bother register a business license with the city.

      In recent years, there are increasing number of garage entrepreneurs also. In the last couple of years, we always had 2-3 small companies incubating within my company.

  8. Argo says:

    Here is a great report from MassBio looking at clusters and employment

  9. I’ve worked on a lot of the cluster reports to one degree or another and the vast majority suffer from bias of various sorts. I was amazed by the degree to which the economists and researchers are willing to adjust to meet the needs of the sponsors. Density is an important factor, but it can be very subjective — is the need to use a car in San Diego really relevant compared to driving from Emeryville to Mountain View? Should biotech, device, tools, or mHealth clusters be considered separately?

    • realposter says:

      Very good points. Some of the regions don’t make sense to me. How is “Central & Southern Florida” one region? Also how can maryland/DC/Arlington be one region – but New Jersey/NYC be separated from Westchester/New Haven…?

  10. Great post. What about a metric that reflects the density of major research universities, which supply lots of ideas and talent to a region? One of the things that makes Boston great for life sciences is the co-location of MIT, Harvard, Tufts, BU, and others. Same for Stanford, Berkeley, and UCSF. Same for Duke, UNC, and NC State. Is there a metric that can accurately reflect that? Or would we just lean back on NIH funding as a proxy?

    • enlace_quimico says:

      A metric reflecting the density of institutions and thus dollars is very important to ranking biotech hubs. Consider the Torrey Pines Mesa in San Diego. Institutes within a 2 (!) mile radius include UC San Diego, The Sanford-Burnham, Salk, and Scripps Research Institutes, Novartis, Pfizer, and Illumina. Also, the Sanford consortium and Venter Institute just sprung up on the same stretch of road. People literally walk samples across the street from each other around here. In the Bay Area, you have to take a boat from Berkeley to Stanford (I’m joking of course).

  11. Karp says:

    Look at your definition of “bio tech” first and foremost. Then look to the Midwest, Michigan specifically, and their University Research Corridor (URC) and the presence of the only satellite U.S. patent office in Detroit. Start ups, an agriculture mega university (MSU), a medical mega university (UM) and the 2nd most agriculturally diverse state in the U.S. Check out and add Michigan to your list of leaders. A new revolution….after all, we did it once before.

  12. Erin Bovee says:

    It is refreshing to see how the Global Cluster Report is starting an important dialogue about the best way to quantify and qualify the economic dynamics impacting the life sciences community. We welcome constructive feedback on our analysis as it provides new insights to consider for future reports. You can access the full report, which details our methodology and the myriad of variables considered in greater detail here:

    Please contact me directly for more information about our analysis.
    Erin Bovee
    Life Sciences Senior Research Analyst and report author
    [email protected]

  13. queenofzen says:

    thank you for an important and objective article

  14. LCP says:

    Along the lines AJP suggests, I would like to see how hubs
    rank in terms of employee opportunities. How many job opening are there at any
    given time and in what specialties? In other words, within a hub, what types of
    professionals are most sought after (e.g., research scientists, biostatisticians,
    software engineers, lab technicians, marketing people, science, medical, and
    tech writers)? Also, how long do job requisitions typically remain open for
    various roles?

  15. yang xie says:

    Great points, Luke! Another factor we might want to consider is the rate at which all factors are changing from the past. Such could offer a perspective to how the future holds for the region, if someone wants to land there afresh. All things aside, it is important to remind that common merits should not trump personal preferences-what matters to YOU most should gain the priority when considering career options.

  16. Mary Canadymarycanady says:

    Nice, frank assessment Luke. San Diego isn’t 7th or 2nd as the two LaSalle reports suggest, but 3rd or 4th I suspect. We did a quick study based on the number of people on LinkedIn designating Biotechnology, Pharmaceutical, or Medical device as their industry (linked below). When only Biotechnology is measured, Boston, San Francisco, New York, and San Diego are the top four in that order. In the end, however, I’m not sure how important the ranking is, but that we all understand the differences between the regions towards the end of working together more closely.

    West vs. East Coast Life Science Hubs, Which are Bigger? Analysis of LinkedIn Data

  17. Velamoor V says:

    Let us take a step back and ask, Why such a ranking is important? So a certain region can toot their horn? or someone can showcase their statistical skills with nice graphs & charts? Neither of those acts are despicable by any means but what is our ultimate goal for doing such an analysis? Any hub is created when there is wealth in the region and that wealth result in investments or the wealthy lobby to create a certain hub so they can multiply that wealth. While there are advantages for an entrepreneur or a company to already be in a ‘successful hub’, what ultimately determines success is what they create. Can we just let the companies do what they are good at- ‘create’? May be we can agree that such an analysis if conducted be just a good bed-time reading material. Nothing more and nothing less.