How much Scripps will help is the $500-million question. Donn Szaro ("Modern-Day Gold Rush," below) heads up the health sciences practice of Ernst & Young, which ranks Florida 11th nationwide in its number of biotech firms. Szaro says he once doubted Florida could break into the top 10. Scripps, he believes, "gives Florida a great opportunity to get into the top 5."
Bush predicts Florida could land 44,000 jobs as Scripps draws a cluster of biotech firms to its west Palm Beach County site, now a 2,000-acre orange grove. But the governor acknowledges it's a gamble. "There's a risk here -- there is no denying it," Bush said in a speech to the industry group BioFlorida. "Of all the industries, this one has the greatest risk. It's not a T-bill."
Investing economic-development dollars in biotech is a dice-roll because the industry has huge startup costs and a tiny success rate. Of approximately 1,900 biotech companies in the U.S. and Canada, 20 are profitable.
Meanwhile, the sort of cluster that Bush envisions is found in only nine metropolitan areas of the country -- all anchored by top medical-research institutions, such as Duke and the University of North Carolina in the Raleigh area. According to a Brookings Institution report on the growth of biotechnology in the U.S., even successful clusters "have produced only modest returns to their regional economies," in part because the typical biotech firm is tiny.
And while Scripps is among the top private, non-profit biomedical research organizations in the world, it did not create San Diego's hot biotech hub on its own. San Diego's fortunes were intertwined with those of Scripps, the Salk Institute and the University of California at San Diego. The area's biotech industry can be traced back to one company: Hybritech, founded by two relatively unknown UCSD researchers in the late 1970s. Hybritech alumni reportedly have spun off more than 40 biotech startups in the past 15 years.
Still, industry officials say Florida's investment to lure Scripps puts it far ahead of other states competing for the burgeoning young industry that many predict will see a turnaround in 2004. "This is a changing, defining event for the state," says David Gury, chairman of Boca Raton-based Nabi Biopharmaceuticals, Florida's largest biotech company.
"We still have a long way to go -- but we're a lot farther along than we were five years ago."
Jobs Outlook: UP.
Scripps is expected to open temporary offices in Palm Beach County and hire its first 40 Florida employees by summer. But many of Florida's more traditional biotech companies -- that is, tiny ones -- also plan to hire workers this year. The plans of Teragenix, a biotech services company that specializes in collecting hard-to-find human biological materials, were typical of responses to an informal survey of BioFlorida industry group members by Florida Trend. Teragenix, which now has a dozen employees, plans to hire four more this year. It also plans an additional 1,800 square feet of office space at its Fort Lauderdale headquarters.
Investment: Charlotte, N.C.-based Kendall Capital Associates LLC, an investment banking firm that specializes in biotech companies, conducted an e-mail survey this fall of the nation's most active biotech VC investors. The results bode well for Florida's biotech firms. Of the 64 non-Florida VC funds that responded:
77% would invest in a Florida-based biotech company.
62% would lead an investment in a Florida-based biotech company.
56% of the funds expected to invest more in 2004 than they did in 2003.
Deflating the Hype
Some reports on the Scripps deal have been accompanied by inflated numbers on the biotech industry. A look at some of the hype vs. the facts:
Hype: Enterprise Florida reports that Florida is home to 375 biotechnology companies with 4,205 employees. If that were true, Florida would be the second-biggest biotech state in the nation, behind California, which has between 425 and 450 companies, and in front of Massachusetts, which has a little more than 200, according to Ernst & Young.
Fact: Florida has fewer than 50 true biotechnology companies, that is, firms that use molecular, cellular and genetic processes to develop products and services. Enterprise Florida numbers are overstated because the agency includes medical-device companies in its count.
Hype: The governor's office reports in its news releases on the Scripps project that there are "499 biotech businesses in San Diego, 80% of which are within a three-mile radius of the Scripps facility in La Jolla." These are the numbers state economists used to estimate Florida will see an additional 44,000 jobs as a result of the industry clustering expected to take place around the Palm Beach County facility.
Fact: All of California has fewer than 450 biotech firms. Several sources, including Ernst & Young, the Institute for Biotechnology Information and the Brookings Institution, report the entire San Diego metropolitan area has between 90 and 100 biotechnology firms. Include medical-device and related manufacturers, and the number is closer to 400. Include law, public relations and other firms that have grown around the industry in San Diego, and it's closer to 500.
Q&A with Donn Szaro
Modern-day Gold Rush
Scripps puts Florida 'on the cutting edge of biotechnology.'
Donn Szaro is Ernst & Young's Global and America director for the health sciences industry. He has overseen development of E&Y's much-quoted Biotechnology Report, which ranks Florida 11th nationally in biotechnology. Last year, Szaro relocated from E&Y's New York headquarters to his native Florida to become managing partner of the firm's Miami office. He talked to Florida Trend about the state of the industry and the impact of the Scripps project on Florida:
Q: You've called biotechnology the first global gold rush of the 21st century. But isn't America's 19th-century gold rush remembered more for its losers than its winners?
A: Yes, the gold rush analogy brings to mind potential downsides. In any high-risk industry, there may well be losers, but there is also great optimism. The $41-billion global biotech industry is derived largely from 150 biologics that have been integrated into medicine. Today, there are 300 biologics globally in Phase III trials, 250 of those in the United States. Even if just a fraction of those biologics come to fruition, to me, that puts us on the cutting edge.
Q: The sort of biotechnology cluster that Gov. Jeb Bush envisions for the Scripps project is obviously a long-term promise for Florida. What are the more immediate benefits of the project to Florida businesses and universities?
A: You're talking about a long, long cycle. It takes eight to 10 years to take a discovery to the marketplace and a total investment of some $800 million. Our research into other markets that have succeeded -- such as Boston, San Francisco and the Research Triangle in North Carolina -- shows you've got to have the clinician base, the scientific base, the entrepreneurial spirit, and then money in the middle of that triangle funding it all.
Florida has the basis for succeeding in creating this biotech cluster. We have great research centers with the University of Florida and University of Miami, to name just two. We have the clinical base and the patient-testing base. The Scripps project is a magnet to draw into the state some of the ingredients we may be missing in this development process.
The buzz alone generated by Scripps is very important for both the money and the executives. Creative capitalists are looking for places to invest. Serial entrepreneurs in the Northeast want to escape the winters but may not want to move out West. A buzz like this is critical to creating excitement and creating an epicenter. We saw it in Boston, San Francisco and Raleigh. San Diego was the fourth spot, and the fifth is up for grabs.
Q: San Diego's thriving biotech industry is historically linked to not only Scripps, but also to UC San Diego and the formation in the late 1970s of Hybritech, a UC spinoff whose alumni have started up more than 40 biotech companies in the area over the past 15 years. How could Florida replicate that sort of success without the framework that existed in San Diego from the earliest days of the industry?
A: I've only been back in Florida for 18 months but have been pleasantly surprised with what I've seen. The governor's office's support for this industry is strong. The Florida Research Consortium brings together research universities and private players, such as lawyers and accountants, to build a strategy to approach the Legislature for funding. Instead of competing against one another for very limited funds, universities are working together and making Florida the point of commerce. We've got to remember that the competition isn't between Boca and Tampa and West Palm. It's between Florida and Hyderabad, India, and Sydney, Australia. We're competing against places that can offer one-seventh our labor costs. Florida can succeed if it can marshal all of its strengths, including the soundness of the scientific discovery here and the good clinical research.
Q: Some Florida lawmakers are interested in biotechnology not only at the economic-development level but also at the cellular level. For example, a bill last year would have outlawed not only human cloning but also the therapeutic cloning known as somatic cell nuclear transfer. Does this level of interest put Florida at a disadvantage in the global competition for biotechnology?
A: I'm somewhat concerned about limitations placed on testing, but the fact is that this industry has grown too large for one government to control. The United States has defined bioethics more than anywhere else on the globe, with, for example, President George W. Bush's first major decision involving stem-cell research. Germany is more restrictive -- a result of World War II, whereas our restrictions have grown out of social and religious concerns. Many valuable avenues for adult stem-cell research are possible, but there are characteristics in an embryonic stem cell that just don't exist in the adult cell. Just like there are differences between the frog and the tadpole. If a discovery happened in Singapore and had major significance, it would quickly be embraced here in the United States. And Florida biotech companies are doing research in other parts of the globe. (Plantation-based) Viragen is working with the Scottish Roslin Institute that cloned Dolly the sheep to create chickens whose eggs might someday cure disease.
Q: When do you predict the biotech industry will be profitable?
A: By 2010, if not sooner. We're seeing reduced losses in the industry in the first six months of 2003, with a continued increase in revenues of about 16%. Meanwhile, R&D expenditures have declined 17% as a result of the cash crunch. Overall, net losses are down 80%. The dollars available are going after the sure things.
Of course this isn't a good thing for everyone. There's a real demarcation between the haves and the have-nots.
Q: Aren't the kinds of companies Scripps will help create among the have-nots? Those young companies in need of early financing?
A: They'll be in the have-not category for a while, and that's why it's important that we have this sort of coordination in Florida. While Scripps will draw additional dollars to the state, the money is not going to be handed out on a silver platter. Scripps will attract not only great minds in the scientific areas but also provide a platform for businesses and entrepreneurs to come to the state. It has a lot of positive potential. Of course, only time will tell for sure.
More Science, Less Psychology
A consortium of community colleges and universities is trying to help build a biotech-oriented workforce.
Gov. Jeb Bush says he has no problem with psychology. He just doesn't understand why it's the No. 1 bachelor's degree granted from Florida's universities.
"No disrespect to psychologists. They have an important job in a complex world," the governor says. "But I think we have enough of them."
Bush and business leaders clamor for Florida's colleges and universities to "gear the degrees to where the jobs are," a particular refrain when it comes to the unique training required to work in Florida's biotechnology industry. At Santa Fe Community College in Gainesville, a two-year biotech degree that prepares graduates for laboratory work has a 100% job-placement rate. But the program is not graduating nearly enough lab techs to supply the companies in the biotechnology incubator in nearby Alachua -- much less biotech firms elsewhere in the state.
This year, state workforce and education officials hope to solve the problem. With the help of a $1.4-million grant from Workforce Florida, a consortium led by Florida Community College in Jacksonville that also includes SFCC, Hillsborough Community College, Florida Atlantic University, the University of Florida and the University of South Florida, will work to take the SFCC model statewide.
With plenty of input from industry, the consortium will develop three associate's degrees in biotechnology: Lab tech, bio-manufacturing and regulatory affairs. "The idea is to have heavy industry involvement, validation and revalidation" to ensure the training matches the needs of Florida's biotech companies, says John B. Ray, director of business-sector development for Enterprise Florida.
The curriculum will have an online component so that it can be used across the state, but it won't be exclusively online. The idea is to make it easy for any of Florida's community colleges to offer the degrees, which will require a heavy concentration of science and math already available on Florida's campuses.
Linda Austin, the executive director of the Advanced Technology Center at Florida Community College, says the program also will link to high schools as well as upper-division colleges. "We want to find that right mix of skills in the two-year degree so that graduates have the background to go on for the bachelor's or master's or Ph.D. and the basic skills to make them employable right away," she says. "Ideally, they could do both."
At Santa Fe Community College, biotechnology program co-director Linda Nichols says an overwhelming number of incoming students already have bachelor's degrees, are deeply in debt from student loans and have figured out they have no marketable skills. "We should be getting the word out earlier -- to the high school kids -- that this is a real option for them, and one that won't leave them in debt."