Nations spend billions to woo biotech

NEW YORK (AP) - When it comes to attracting leaders in the biotech industry to their shores, foreign governments are taking the 'if you build it, they will come,' approach.

Biotechnology companies often congregate around a common attraction, whether that be a university with strong research capabilities or a high-tech talent pool developed by other established firms. And so governments and private groups are striving to create the ideal environment with which to attract life sciences firms, in the hope that any transplants seed a cluster of industry.

Some of these nations, especially in developing regions such as China and India, are willing to offer tax and other incentives hard to match in the United States. And along with lower manufacturing costs, Second World economies can offer biotech firms the kinds of trial populations difficult to find in the U.S. and other developed nations.

For example, U.S. patients enrolling in a biotech's cancer drug trial may be on their second or third different treatment, making it difficult for a company to assess how its drug performs as a first-line option. But in developing regions, the ability to enroll patients being treated for the very first time is quite possible. Taken together, these countries may eventually give North American industry a run for its money.

Many nations are trying to manufacture a version of the naturally occurring clusters seen in San Francisco and Cambridge-Boston areas, which sprouted from an abundance of university research in the region. And of course the mother of all models is North Carolina's Research Triangle Park, which was created in 1959 as a technology cluster and has evolved to house about 60 bioscience companies with 13,200 employees.

'Because of the success of those areas, practically every other state has wanted to attract biotech and create a cluster,' said Glen T. Giovannetti, leader of Ernst & Young's biotechnology center.

Currently, China boasts two centers at an investment of $500 million while Germany has four, with government investments of $900 million between 2001 and 2005, according to a 2006 report from New Economy Strategies, a Washington, D.C.-based consulting and economic development firm.

One major success story is Singapore's Biopolis, a 222,000-square-foot site opened in 2004 with the purpose of harnessing the nation's biomedical industry. In addition to a myriad of small, clinical-stage companies, several larger international drug developers including Eli Lilly & Co. and Genentech Inc. have set up research and manufacturing shops at the site. Plans are under way for the site to begin its third phase of expansion.

'There's a sense of success and achievement,' said Yeoh Keat Chuan, executive director of Singapore's economic development board's biomedical sciences group. 'We have a foundation for basic research and the other trend we're seeing is a lot more of a network environment.'

Singapore has so far invested $8 billion in the site and offers prospective tenants a myriad of grants for research and development costs as well as for employment expenses. Tax incentives are another key lure, ranging from full corporate exemption for a set period, depending on the project, to equipment cost allowances. Venture capital also is available.

The first phase of Biopolis has a 95 percent occupancy rate, with the second phase boasting 80 percent, according to Singapore's economic development board. Output by drug factories there has jumped by 30 percent since 2000.

Genentech is in the midst of building a $140 million manufacturing facility there for its age-related macular degeneration drug Lucentis. Eli Lilly is spending $150 million to expand its research operations in Singapore for cancer and metabolic diseases. GlaxoSmithKline PLC is investing $200 million to build a manufacturing facility for meningitis and typhoid vaccines.

Though the figures seem large, they don't necessarily signal a global shift in R&D investment. Genentech, for example, expects to have only 100 employees at the Singapore location at its peak, out of a total 10,500 workers worldwide. Eli Lilly plans to put just 150 scientists at the site out of its 41,500-strong work force.

Yali Friedman, author of the New Economy Strategies report, said the Singapore center has been doing well, but had a headstart, as the nation already had infrastructure in place for drug manufacturing and strong intellectual property protection.

But other areas have faced challenges in successfully attracting firms, as traditionally weak intellectual property protection in many nations has given some biotechs second thoughts about expanding too greatly into foreign markets. Also, many of these early-stage companies which depend on venture capitalists for funding prefer to make their investments closer to home.

'The jury is still out on the long-term success of this,' Friedman added.

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