Earlier this year, Jones Lang LaSalle (JLL) released its 2012 Global Life Sciences Cluster Report. The report covers 35 life sciences clusters around the world, from Greater Boston to Kobe, Japan.
Using industry employment, number of establishments, venture capital funding, and National Institutes of Health funding as variables, the reports ranks the Greater Boston cluster as the top in the U.S. “The Boston market continues to benefit from global realignment,” it notes, as the drug development industry places “greater emphasis on the next wave of drugs and treatments.”
The realignment is very directly related to the drug industry’s “patent cliff.” Throughout 2011 and 2012, many of the drug industry’s giants saw the loss of patent exclusivity for an inordinate number of blockbuster drugs. Pfizer’s Lipitor, Sanofi’s Plavix, and Novartis’ Diovan, are just three examples of expiring drug patents during the period, which resulted in significant declines in product sales. Ernst & Young estimated that the top 13 drug makers lost a combined $22 billion as blockbuster products fell off the cliff in 2012.
The big drug companies saw the cliff approaching. All adopted strategies to guide them through its impact. Over the past several years, many companies shifted their focus from trying to develop new blockbusters to pursuing more diversified drug development portfolios, including biologic drug candidates. Not only did Massachusetts benefit from this shift to biologic drugs, because of its high concentration of small- and mid-sized biotech companies, it also was rewarded as big drug companies sought new collaborative relationships with the many non-profit, hospital, and disease foundation research institutions in the area. It is notable that Pfizer, Sanofi, and Novartis are all in the process of adding significant lab facilities to their Massachusetts portfolios.
As much as the realignment has positively affected the Massachusetts cluster, it has, as the JLL report notes, wrought some havoc in other regions. In New Jersey, Pfizer closed its Monmouth Junction research facility in 2011as part of a global consolidation and Roche is closing its 100-plus acre Nutley research center. In California, mergers, acquisitions, and consolidations have increased fears of facility closures, with Pfizer’s recent sale of three campus buildings in Torrey Pines as a prominent example.
The biopharmaceutical industry is global. Its realignment in consideration of expiring patents and its hunt for new products for unmet medical needs drives decision-making regarding the location of research and manufacturing operations. More than ever, research activities are being drawn to areas in which the convergent forces of basic and early-stage research, found at hospitals, universities, and smaller companies, take place. The attraction of research campuses in remote suburbs or beyond, with few tangible ties to broader research networks is on the wane, if not wholly deceased. Massachusetts, from Worcester to Cambridge, is one tightly bound expanded campus that includes readily accessible, highly networked research, development, and manufacturing capacity. We are not the only region benefiting from the realignment. Company names very familiar to us – such as Shire, Novartis, and Vertex – are active elsewhere in sustaining or growing new operations.
The effects of the global reordering are very visible in Massachusetts is the surge of new lab development by major companies at the industry’s core in Cambridge. It begs the question: Will the expanding presence of large drug companies in Cambridge come with a price? Will they impact lab supply and cost in such a way that smaller users, which have been the engines of the industry and which are a big part of the reason that so many larger pharmas have come here – be priced out of east Cambridge or even Massachusetts?
“Preserving the Cambridge ecosystem, with its “start-up” mentality and talent, is vital,” states Don Domeretsky, Vice President at JLL. “A shift to rent-a-bench incubator services is an example of a creative solution in providing innovative and competitive space alternatives in Cambridge. Cambridge pricing pressure has also been a catalyst in the development of the region’s life science sub-clusters.”
And so, the patent cliff leads to global industry realignment, creates supply pressures in Cambridge, and provides new opportunities for developers and area communities to find innovative ways to meet the lab needs of small and large users alike.
Peter Abair is director of economic development and global affairs at the Massachusetts Biotechnology Council (MassBio).
