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Stand in Kendall Square in Cambridge, Mass., and take a look around. Familiar names adorn the surrounding buildings. Genzyme, Biogen, Amgen. There's no question that you're standing in a biotech stronghold. Cambridge is one of the original biotech hubs, together with the San Francisco Bay Area, and some people believe that it has the highest concentration of biotech companies anywhere in the world, based on area. Ask executives at Boston-area biotech companies why their region has been so successful in the biotech industry, and they'll tell you about what Janice T. Bourque, president of the Massachusetts Biotechnology Council, calls the area's "natural resources." These include powerhouse academic institutions such as Massachusetts Institute of Technology and Harvard University, strong medical institutions such as the teaching hospitals at Harvard Medical School, and an active venture-capital community. But most important is the strong biotech-oriented workforce that those factors combine to create. "What makes a company first and foremost are the people," says Jean-Pierre Sommadossi, chief executive officer and chairman of Idenix Pharmaceuticals in Cambridge. "You want to be in a location where you're going to be attractive for a management team to join the company. You want to have access to a scientific pool directly there. It would be extremely difficult for a biotech company to have to recruit everyone from outside and not have a [local] scientific pool to tap into." Alexis Borisy, president and CEO of Boston-based CombinatoRx, agrees. "This business is fundamentally about intellectual capital. Without your people, you're not going to do anything," he says. "That's the most important thing, having that talent pool both inside the company and all the ancillary services around the company. For that, you really have an advantage being located in one of the top biotech clusters."
The largest move to the area is the relocation of Novartis' worldwide research headquarters to Cambridge, which is expected to bring 400 jobs (roughly 300–350 scientists) to the area this year and a total of 900 by the end of next year. The first phase of Novartis' Cambridge digs in Technology Square opened in March. More than 200 people are now working there, including approximately 150 scientists. According to Jeff Lockwood, director of external and government relations, the company is on track to meet its ambitious recruiting goals. Novartis is also outfitting an old candy factory for laboratories, which are expected to be ready by the second quarter of next year. However, Novartis is neither the first nor the last major pharmaceutical company to set up shop in the Boston area. For example, AstraZeneca opened a facility in the Boston suburb of Waltham in spring 2000. The process was set in motion as far back as 1994, when pre-merger Astra started looking for a location in the U.S. In 1995, the Boston operations started with three people in leased space in Cambridge, growing to 80 or 90 people by the time the building in Waltham opened. Since 2000, those 80 to 90 employees have increased to 380, approximately 280 of whom are scientists. Actually, AstraZeneca R&D Boston has already reached the capacity of the building's three wings. Some of the scientists are currently housed at a temporary satellite facility in Worcester, 20 to 30 miles away. Two additional laboratory wings are being constructed and are scheduled to be finished later this summer and to open in the fall. AstraZeneca is still hiring, with 25 positions open for 2003. No projections have been made for 2004. Peter Lasky, director of human resources at AstraZeneca R&D Boston, points out that the pharmaceutical industry in Boston is competing with 275 biotechnology companies. It has to make itself attractive to employees who might choose the small companies over large ones. "A lot of those employees chose to work for a biotechnology company for certain reasons," he says. "The pharmaceutical companies have to present themselves in an entrepreneurial spirit." And the pharma companies keep on coming. Merck is currently building a research facility on the campus of Emmanuel College in the Longwood Medical Area of Boston, the neighborhood that is home to a number of the hospitals affiliated with Harvard Medical School. The building, which will house 300 scientists and 150 support staff, is expected to open in 2005, according to company spokeswoman Janet Skidmore. CAMBRIDGE CONTINUES to be a favorite location for biotech and pharma companies, but some companies are bucking that trend, either by necessity or choice, and moving out to the suburbs. Although a Cambridge site was also considered, AstraZeneca chose to locate in Waltham because it was able to obtain a 64-acre parcel of land, which allows the facility to expand "organically," according to Scott Young, public relations director for R&D Boston. "The decision was made to come out to Waltham because it gave us more flexibility in terms of expansion," Young says. "To build in the downtown urban environment, you basically have to make a significant commitment to your infrastructure right off the bat." The Waltham location is only about 20 minutes from downtown Boston and is conveniently located within a triangle of major highways: Route 2, the Massachusetts Turnpike, and Route 128. "It puts us within striking distance of where people live," Lasky says. "Even though Cambridge is a very dynamic, wonderful city, commuting day in and day out into Cambridge or Boston can be difficult. The 20 minutes makes a huge difference for us, not only in terms of recruiting people but retention of people once they're here." Smaller companies have also chosen homes outside Cambridge and Boston, but they find themselves going through a bit of soul-searching in making that decision. TransForm Pharmaceuticals is located in Lexington, which is 10 miles from Boston and eight miles from Cambridge. The company has 85 employees, 70 of whom are in the science and technology group. The company focuses on optimizing the physical form (such as crystal structures) or formulations of products, sometimes from the beginning of development and sometimes for products that are already marketed. "We deliberated extensively as to whether we wanted to be as far out of the city as we are, which is still only a 20-minute drive," Levinson says. "We did not want to be more than a few minutes away from the universities." Cost also plays a major role in the decision to move beyond Cambridge. When TransForm was looking for a location, the vacancy rate in Cambridge was very low and the rents were consequently high. "We were thinking, 'Does it make sense to pay these exorbitant rates in Cambridge? We're practically speaking just a few minutes away.'" Barbara A. Carter, vice president of human resources and public relations at TransForm, agrees. "The question is, What's the value of having a Cambridge address and easy access to walk across the street to MIT or Harvard?" she says. "That's a hard thing to put a dollar value on, but you can put a dollar value on rent." Synta Pharmaceuticals is another Lexington-based company. Cost was a factor in the decision. "We secured space at a sizable discount to what the equivalent space would have cost in Cambridge or Boston," CEO Safi Bahcall says. "Finding expansion space as we've grown has been that much easier because there are a lot of facilities available right next door to us." But finances weren't the only motivation for choosing Lexington. "Sometimes being in the middle of a big city can be distracting. It's nice to be close, but you don't necessarily want to be right in the heart of it," Bahcall says. "You want to have access to all the good ideas and projects, but you also want to have your own space where you can get away and be free from all the distractions when you really need to focus and concentrate on developing your drug candidates." Watertown, a neighbor of Cambridge to the west, has also attracted biotech companies. Enanta Pharmaceuticals moved to Watertown in October 2001. The company had looked for space in 2000. "At the time, we were in Cambridge in the Kendall Square area. We would have preferred to stay in that area, but those were the boom years for both the Internet and biotech. There was nothing available," says Spiros Jamas, CEO and president. "This facility has given us a little more flexibility than we might have had in Cambridge. We've been able to take a little more space than we needed initially, but we have expansion capability. We could think a little more long term over here." Despite the success that the Boston-area biotech industry has enjoyed throughout its history, people acknowledge that the job market is tougher right now than in recent memory. Borisy believes that the current job market favors employers. "Employers have a better pick of candidates than they had a couple of years ago," he says. He attributes this to the overall market conditions in which companies are forced to be choosier, the downsizing of a number of companies, and a shift from a research focus to a product-development focus. However, he doesn't think that the market is particularly "out of whack." "Biotech has been hit less hard than high tech, generally speaking, but it's still not a terribly easy time for employees at biotech firms," Bahcall says. "I think it's certainly a harder job market than it was two or three years ago. There are a few companies that are doing reasonably well, and those that are, are still hiring. The hiring is generally focused around the companies that are finding the most acceptance in the market today." THOSE COMPANIES finding acceptance are the ones that are product-focused rather than platform- or technology-driven, and the further they can advance their products, the better. "You basically need to use your capital to move the drug as far as you can in the clinical arena," Idenix' Sommadossi says. "Today, it's very unlikely that pharma will be interested in licensing preclinical compounds." Nevertheless, some companies find themselves in the position of being able to grow. "We definitely will have specific needs over the next year," Enanta's Jamas says. "Many of them will be related to the quality areas. QA/QC, process development, and clinical development are some of the areas in which we will be hiring over the next year." Likewise, growth has continued to be strong at Synta. "We are one of the few companies that have been well financed recently," Bahcall says. "We do have to pace our growth so that we don't grow too fast or too out of control, so that we grow following a well-thought-out business plan." Synta is currently focusing its resources on the clinical development of its lead candidates. "Over the next six to 12 months, as our drug candidates advance in the clinic and as we look to establish corporate partnerships with large pharmaceutical firms, that will create a whole new set of resources for additional projects and manpower." Bahcall anticipates that Synta will continue growing at the rate of 20 to 30% over the next two to three years. "The exact hiring growth rate will depend on progress in the clinic, as well as progress in developing good corporate partnerships, as well as the overall market for biotech and pharma," he says. Synta recently completed a spate of hiring 12 scientists, including five chemists, according to President and Chief Operating Officer Mitsunori Ono. Synta is unusual among small companies in the Boston area. Since 1992, its founders have been involved with first one and then another Japanese pharmaceutical company, functioning basically as a medicinal chemistry and drug discovery subsidiary. Synta became an independent company less than a year ago. "We think of ourselves much more as a turbo-charged minipharmaceutical company than as a traditional biotech," Bahcall says. Similarly, Idenix expects to grow at a rate of 25 to 30% per year, according to Sommadossi. The company, which focuses on anti-infective drugs in a class known as nucleoside analogs, has a drug that is currently in Phase III clinical trials. Idenix recently inked a deal that gave Novartis a 51% equity stake. The plan is to launch the company's first drug in 2006. Other companies are just holding steady for the time being. Waltham-based Beyond Genomics currently employs 56 people and hasn't had a major hiring push for at least a year. So far, Beyond Genomics has focused on developing its technology platform and research alliances with other companies. This approach "spins off free cash for your own internal programs," N. Stephen Ober, company president, says. "Call it what you will. It may have a little more of a service bent to it, but that's really been our strength since the beginning: to partner early, learn an awful lot from these partnerships, and get cash in the process." Beyond Genomics plans to begin work on its own projects this year. However, the region's employment picture may get worse before it gets better. Early last month, within days of each other, two longtime Cambridge firms--Millennium Pharmaceuticals and Vertex Pharmaceuticals--announced restructurings and major job cuts, particularly in their early-stage drug discovery. Both companies say that the changes will allow them to better focus on product development. On June 5, Millennium announced the elimination of 600 jobs by the end of 2004, on top of a reduction of 103 jobs announced last December. The cuts include the phasing out of facilities in California and the U.K. By the end of 2004, Millennium's workforce is expected to total 1,700--down from its current level of 2,300. Most of the cuts are from early-stage discovery teams. Less than a week later, on June 10, Vertex announced that it had laid off 111 employees from its Cambridge and San Diego facilities, bringing its head count to 737. The majority of the cuts, 65 positions, were in Cambridge.
"Some companies have decided they're going to shut down some of their projects, focus on some core projects, and do some layoffs. I don't think it's necessarily a bad thing," says Bourque, of the state's biotech council. "I know it worries people, because no one likes a layoff. Given that there's been such huge layoffs and disappearance of companies from the Internet and telecom industry, just a small layoff by anyone raises concerns and alarms. The thing we have going for us, despite how hard it is right now, is that the industry has gone through this before." Ober says that such downsizings are to be expected, given the normal cycle in the biotech industry. "The classic business model for biotech is to raise a bunch of money, spend it over a three-year period, then go out and raise more money. We're at this three-year point from the last upswing," he says. "It's natural that companies either have to raise money or downsize. I think we're seeing a natural manifestation of capital being a lot tighter than it was three or four years ago." He points out that Beyond Genomics is not one of the companies that have downsized or "needed to hit any reset buttons." It's not a stretch to say that Massachusetts has succeeded in biotechnology despite itself. Some people are worried that the region's very success--and possible complacency--could lead to it losing its preeminent position. Last December, "MassBiotech 2010," a report from the Massachusetts Biotechnology Council (MBC) and the Boston Consulting Group, predicted that if the Massachusetts state government doesn't act to reverse the trend, the state's biotech industry will continue to grow but at a rate that causes it to lose ground in terms of its share of the overall biotech industry. "The competition for this industry is growing by leaps and bounds in other states and countries," Bourque says. "We believe that Massachusetts could easily lose its leadership position if we don't collectively work together. That includes not only the state government becoming more active but also the community banding together in a way that perhaps we've not worked collectively in the past." TransForm's Carter believes that the Massachusetts government has been "neutral" with respect to the biotech industry. "They've not gotten in the way. At the same time, they've not pushed forward to really provide incentives," she says. "Although they take responsibility for having this wonderful industry, I'm not sure there's been a direct cause and effect between public policy and the growth of biotechnology." MBC is particularly worried about the jobs further down the "value chain," such as manufacturing, which could provide high-paying jobs to people other than scientists. However, financier Todd Foley of MPM Capital in Boston believes that it's premature to start thinking about attracting manufacturing facilities. He points out that most companies are not going to build their own site for their first drug, choosing to contract out manufacturing. Foley suggests that the state should instead try to bring contract manufacturers to Massachusetts. Bourque also worries about managing the expectations of both the government and the public. "Too often, they've seen industries start up overnight, expand rapidly, and then fall apart. I think we've been able to demonstrate that we've grown consistently. It's not extravagant growth, but it's solid, sustained growth," she says. Bourque hopes that the biotech industry in Massachusetts will refuse to rest on its laurels. "Overall as a community, we have some challenges ahead of us. We can't sit back and be complacent," she says. "We have some of the most spectacular input capacity in the world. If we can't harness it and do the most with it, then we will not have met our real vision of what we can be as an industry and as a community." |
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