Originally Published MX November/December
2001
BUSINESS PLANNING & TECHNOLOGY DEVELOPMENT
Hot Spots: 10 Sites for the Medtech Executive’s Itinerary
Communities throughout the country are wooing medtech companies. Here are 10 of the most notable.
Cliff Henke
Medical
technology has always been one of the star attractions of economic development
agencies throughout the world, and those in the United States have not been
immune to its luster. As the world appeared to be already dipping into recession
well before the outrages of September 11, such agencies are stepping up their
efforts to lure companies in this sector.
However, medtech
companies and their investors can be hard to convince. The complexity of the
industry and its finances means that regional development agencies have to work
doubly hard to offer medtech executives just what their companies are looking
for.
According to Daniel
Wood, a partner with the venture capital (VC) firm IngleWood Ventures (San Diego),
"Location is still very important. Virtual companies can’t offer the
employee-management synergies, with face-to-face, instantaneous contact, offered
by traditional companies."
In Wood’s view, the main factors to consider in evaluating a region’s
potential to attract medtech firms are "the quality of employees and management
and the availability of venture capital" in an area—especially in
the case of private, early-growth-stage companies.
What about the importance of a technology base? According to Wood, communities
no longer need to build a critical mass of companies in order to reach hotbed
status, because in today’s wired world the ideas and technology edge lure
both the money and people to them, wherever they may be. "Having the right
people and technology tends to attract venture capitalists," he says.
When it comes to the preferences of such VCs, however, Wood admits that location
can be a key factor. "VCs typically wish to invest as close to home as
possible, particularly with early-stage companies." Whether they have an
emotional or intellectual stake in their protégé’s success,
or just want to keep a close eye on their money, the usually high-risk nature
of the venture-capital deal means that VCs want contact.
While there are many more successes than listed here, the 10 regions discussed
below illustrate certain themes that have resonated with medtech companies.
By no means a 10-best list, the sites are arranged alphabetically.
1. Austin, Texas: Medtech Joins High-Tech
The convergence
of money, technology assets, and people make Austin a fast-growing medtech hotbed.
According to Susan M. Davenport, director of economic development at the Greater
Austin Chamber of Commerce, the region’s academic institutions have strengths
in computer science that have helped spur several start-ups in the emerging
genomics field. "In so much of genomics and biotechnology, as well as pure
bioinformatics products and services, there is a very strong emphasis in computer
science and software engineering. The Austin area has a strong tradition in
these areas," she says.
In addition, the University of Texas (UT), which is based in Austin, boasts
the number two pharmacy school in the country. Moreover, the MD Anderson Medical
Center (Houston) is the university’s teaching hospital, and both institutions
have spawned numerous companies and products based on research conducted there.
However, in their economic development plans, business and academic leaders
are choosing to emphasize interdisciplinary collaboration and greater technology
focus, says Davenport. "This is because so many medical products are now
technology based."
To this end, UT has recently formed a Center for Nanotechnology and Biology,
designed to bring previously separate academic fields together in a single place
in order to foster collaboration. In addition it has founded a Center for Computational
Science and Bioinformatics, bringing together researchers and professors from
computer science and biology for the same reasons.
2. Boston: Will Route 128 Surpass Silicon Valley?
Boston has been
a national leader in medtech development for many years. That leadership is
expected to continue, as the region’s critical mass of existing medtech
companies, growing labor pool supplied by world-class academic institutions,
and depth of investment and technology resources show no sign of faltering any
time soon.
The Boston area already boasts nearly 600 medtech enterprises combining for
more than $8.3 billion in annual sales, according to U.S. Department of Commerce
data. These organizations employ more than 35,000 people and are contributing
an increasingly important share of the regional economy, particularly as a source
of high-wage jobs.
Officials in Boston constantly compare their medtech economic strength with
that of Silicon Valley—but they insist that they are not in competition.
Rather, they note, many Boston-area companies are involved with cutting-edge
collaborative research projects with Silicon Valley companies. Researchers of
the Whitehead Institute at the Massachusetts Institute of Technology, for example,
have collaborated with San Francisco firms Hyseq and Affymetrix, two manufacturers
of microarray chips, in genomics research.
3. Florida’s High-Tech Corridor
The outlook for
the medical technology industry in Florida is characterized by strong growth,
a very healthy export market, and high value-added manufacturing. The demands
of Florida’s own healthcare market—fueled by the continued influx
of retirees from the rest of a graying America as well as one of the fastest
immigration rates anywhere —are certainly among the critical drivers of
this growth.
Florida’s medtech industry employs 49,300 workers in nearly 2000 businesses.
When combined with the state’s healthcare services providers, the sector’s
employment totals more than 261,000 in more than 2100 firms, ranking the state
second in the nation.
Another key factor in Florida’s rosy outlook is that the Sunshine State
is one of the Western Hemisphere’s great commercial crossroads. Total exports
of Florida’s biomedical manufactured products increased from $1.6 billion
in 1993 to $1.9 billion in 1997, according to state government data.
"Although biomedical technology firms can be found in all regions of the
state, they tend to cluster in or near communities that have a substantial scientific
and academic presence," says Ann Patrick, marketing director for Enterprise
Florida Inc. (Orlando).
4. Kansas City, Missouri: The Heartland of Medtech Research
Situated near the
nation’s geographic center, Kansas has long thought of itself as the heart
of America. Now, the state’s namesake city—the one across the river
in Missouri—is aiming to capture some of that glory by becoming at least
one of the major arteries in the nation’s life sciences research community.
The reason is simple: many officials and business leaders see medtech growth
in the region as key to the economic survival of Kansas City, which has been
rocked in recent decades by the steadily worsening Farm Belt crisis.
There are several aspects to their strategy. First, they have developed the
KCCatalyst, a strategic plan for promoting the technology community in the Kansas
City area. The plan is intended to better coordinate and monitor the activities
of technology companies, academic and research institutes, and financial and
professional services in the region.
In addition, the Kansas City Life Sciences Institute was formed to combine six
local medical and research facilities in order to make their work more effective
and attractive to outside investors. Two wealthy Kansas City cancer survivors
established an endowment of more than $515 million to found the institute, and
they and the institute’s leadership hope to attract another half-billion
dollars annually to its work. The institute has identified five areas for advanced
studies: cancer, human development and aging, cardiovascular disease, infectious
disease, and neurological disease. Its overall objective is for the region’s
annual biomedical R&D expenditures to expand from $100 million to $500 million.
5. Montgomery County, Maryland: DNA Alley
Stretching along
15 miles of Interstate 270 from Bethesda to Gaithersburg in Montgomery County,
MD, is the so-called DNA Alley. Thanks to breakthroughs in genomics and bioinformatics
by companies headquartered there, this county in the suburbs outside Baltimore
and Washington, DC, has become the anchor of the nation’s third-largest
biotech community.
Home to some 200 medtech establishments, the county’s phone directory is
a who’s who of those involved with genetic research, including Celera,
Human Genome Sciences, Gene Logic, Origene, and the Institute for Genomic Research.
None of this is an accident. Montgomery County is also home to the National
Institutes of Health and FDA. Thus, the county has one of the largest pools
of scientists and engineers in the nation. Indeed, many who left to start or
join DNA Alley’s many companies are former employees of these federal agencies.
Other federal establishments that have synergies with medtech fields include
NASA’s Goddard Space Flight Center (Greenbelt) which developed the Hubble
space telescope and thus possesses unique capabilities in imaging and optical
technologies; and the National Security Agency (Fort Meade), which has some
of the most sophisticated informatics technology in the world. Supplying a steady
influx to the talent pool is the large cluster of prestigious colleges and universities
located within a half-hour drive of Montgomery County.
6. New Mexico: Techno-Oasis
It probably shouldn’t
be surprising that New Mexico is ranked second among the 50 states for the most
doctorate-level scientists and engineers per capita. After all, the state is
home to the Sandia and Los Alamos National Laboratories, which became known
throughout the world for their nuclear weapons research, but in recent years
have emphasized their capabilities in a variety of fields with more civilian
uses. Three growing research universities and three developing research parks
add to New Mexico’s high-tech credentials. The state ranks near the top
in the nation in total R&D expenditures (per $1000 of gross state product).
Other public-sector research facilities include the University of New Mexico–based
Institute of Advanced Microelectronics, which was established under the aegis
of the Microelectronics Research Center created by NASA in 1995. Potential commercial
applications of its research include data storage, medical diagnostics, telemedicine,
surgical instrumentation, and communications.
There are nongovernmental research institutions located in New Mexico as well.
For example, the Santa Fe–based nonprofit National Center for Genome Resources
(NCGR) is conducting nationally recognized work in the industry. NCGR creates
biological databases and analytical tools to accelerate and enable discovery
through genomic research.
Among New Mexico’s 900-plus high-tech companies are those in microelectronics,
information technology, optoelectronics, medical technology, and advanced materials.
Of those, more than 90 are medtech businesses.
Recognizing the role of money in attracting medtech firms, New Mexico plans
to invest more than $161 million in state funds to be used as seed money with
resident venture capital firms. But state funding is merely a drop in the bucket.
Since 1997, New Mexico has seen a 900% growth rate in resident venture capital
firms, with total capital invested by these firms reaching nearly half a billion
dollars.
7. Silicon Valley, California
Think of a place
for high-tech innovation and it’s almost impossible to miss Silicon Valley,
the stretch of Northern California running from San Francisco to San Jose. Not
only is it the cradle of the computer age, it is home to a long list of medtech
firms, ranging from Hewlett-Packard’s businesses in clinical laboratory
equipment and medical imaging, to manufacturers of so-called DNA chips, the
new microarray technologies that make large-scale gene-hunting projects possible.
Indeed, a glance at the roster of any area venture capital firm reveals that
life sciences companies are among the handful of industrial sectors these investors
consistently target.
Combine the financial muscle and anything-is-possible entrepreneurial attitude
of Silicon Valley—though daunted by the dot-com implosion—with the
formidable intellectual assets of Stanford University, the University of California
at Berkeley (still boasting the largest number of faculty with Nobel laureates
of any public education institution in America), and the Lawrence Berkeley and
Lawrence Livermore National Laboratories (not to mention the Ames Research Laboratory
of NASA), and Silicon Valley will remain a force to reckon with for many years
to come.
8. Southern California: The Tech Coast?
Up and down the
length of the Tech Coast that runs from Santa Barbara to San Diego, business
groups and local governments alike are letting it be known that the region is
a hotbed of medtech development. Virtually every market in medical devices and
biotechnology has a major company that hails from Southern California, ranging
from Beckman Coulter in Orange County; to Baxter Pharmaseal, Siemens Pacesetter,
and Minimed in Los Angeles County; to biotech giant Amgen in Ventura County.
The area’s venture capital and financial muscle is enviable. According
to data compiled by VentureOne and PriceWaterhouseCoopers, no fewer than 20
financings in biopharmaceuticals and an equal number in medical devices worth
more than half a billion dollars were concluded in Southern California during
the first half of 2001 alone. The region also has a wealth of scientific resources,
including the University of Southern California and the University of California
campuses at Los Angeles and Irvine, which have world-class biomedical research
programs and facilities. In addition, prodigious technology transfer opportunities
are available via NASA’s Jet Propulsion Laboratory (Pasadena), which is
operated by Caltech.
Yet many prominent business leaders and public officials in the region believe
that too few people outside Southern California know these facts—and that
too many view the region as second fiddle to Silicon Valley. Other challenges
include high marginal tax rates; increasing energy, labor, and land costs; and
a general attitude of unhelpfulness among certain governmental agencies, particularly
compared with neighboring states. Then there is another problem: getting a hearing
with investors whose attention is often drawn away by the glamour of Hollywood.
9. Twin Cities: The Alley as Avenue
The confluence
of world-class healthcare research and academic institutions, plus ample access
to a skilled labor pool and synergies with similar companies, continues to give
credence to the nickname bestowed on the corridor stretching between Rochester
and the Twin Cities area in Minnesota: Medical Alley. While the Mayo Clinic
(Rochester) is perhaps the best-known medical facility in the world, the University
of Minnesota is one of the top universities in the country when ranked by the
number of patents generated by its esteemed faculty and staff.
According to FDA figures, there are about 800 registered medical device firms
in Minnesota, an increase of almost 40% since 1994. More than 65 new medical
device manufacturers were established in the state between 1990 and 1998—an
increase of 45%—making the Gopher State one of the top five in this category
nationally.
In the field of cardiology, Guidant Corp., Medtronic, and St. Jude Medical are
headquartered there. The huge Minnesota conglomerate 3M has a major healthcare
presence; its surgical drapes and biomaterials are just two product lines in
which the company is a world leader in market share.
10. Utah: Beehive of Medtech
Make no mistake:
Utah is one of the regions that is looking to attract medtech and other high-technology
companies away from the traditional locations for these industries. Last year,
the Economic Development Corporation of Utah (EDCU) released a study evaluating
the competitive position of Utah’s metropolitan areas over other high-technology
locations, including Silicon Valley.
In the wake of last year’s report, Governor Mike Leavitt and other leaders
created the Utah Technology Alliance to jointly target Silicon Valley companies
and try to attract them to the Beehive State. To accomplish this task, the alliance
is focusing on two main goals: provide an attractive location for high-technology
firms and create a business- and capital-friendly environment.
The state boasts a lower-cost, well-educated, and healthy workforce, which has
been attractive to medtech companies, says Kim Scott, director of marketing
and communication for EDCU. Other assets include the region’s history of
success in the fields of computer science, which can help attract firms in the
fields of bioinformatics and genomics.
Conclusion
Whether trying to emulate the Silicon Valley model or compete with it, all the above regions of the country share one characteristic: they intensely want medtech companies to locate there. The combination of low-polluting, high-wage, and high-growth facets of most of the companies they are attempting to woo are themselves too great a lure not to try.
Cliff Henke is a freelance writer based in Southern California.
Copyright ©2001 MX
