Can Worcester attract more global biotech firms?

Published Sunday, April 28, 2013
by Peter Cohan

Massachusetts is on the hunt to attract global biotech firms. Can Worcester get a piece of the action?

In order to answer that question, it first helps to examine what would make a biotech chief executive in, say, England or Belgium want to make the investment required to locate in Massachusetts. In the simplest terms, those biotech CEOs will invest in the state if they believe that the profit that flows from the asset they create here will quickly repay the investment.

How could such an asset pay itself back? If you ask biotech CEOs that question, you get three answers: talent, access to customers, and capital. More specifically, Massachusetts educates and attracts many of the world's smartest biotechnology minds; locating here gives those companies a shorter trip to the people who would be big buyers of their products; and they have access to investors who understand their markets and products.

Susan Windham-Bannister, president of the Massachusetts Life Sciences Center, told the Boston Globe that her pitch to one such biotech executive included, "the potential for tax credits, and help in finding real estate and raising capital, available through Governor Deval Patrick's $1 billion life sciences initiative."

A Wallonia, Belgium health cluster likes Massachusetts for its talent. As Frederic Druck, director of international relations for Wallonia, told a Boston Globe reporter who attended a biotech conference in Chicago, "Massachusetts is number one, excellent in science and business. We are trying to connect with Massachusetts to internationalize our research and development."

An example of a company interested in Massachusetts for its customers is Cambridge, England's Innova Biosciences Ltd. Its corporate business manager, Tom Speedy, told the Globe that Innova wants to set up a U.S. subsidiary to sell its reagents for testing biotech drugs. Unfortunately, Innova suffers from a common problem in the biotech industry — limited cash flow.

As a result, when it comes to opening a Massachusetts sales arm, its investment may be delayed. "Our focus now is on sales. As we move to the new financial year, resources will be reallocated," said Mr. Speedy.

An example of a capital-seeking biotech company is one that was started based on research done at a The Walter and Eliza Hall Institute of Medical Research in Melbourne, Australia.

Leslie Williams, chief executive of Immusant Inc., a venture-backed Cambridge company that bought a therapeutic vaccine to treat celiac disease at the Melbourne university, was interested in a new state program to fund joint research products between the state and overseas companies.

"I'm looking for all opportunities for different sources of funding as we look to expand our platform to other diseases," Ms. Williams told the Globe.

Does any of this spell good news for Worcester?

For that, I interviewed Massachusetts Biomedical Initiatives Managing Director Kevin O'Sullivan, who also attended the BIO conference in Chicago. Mr. O'Sullivan argues that Worcester offers compelling tax benefits to biotech companies as does Cambridge.

As Mr. O'Sullivan explained, "(Ms. Windham-Bannister's comments) are every bit as applicable to Worcester as they are to Cambridge. Local tax increment financing in Worcester, as one example, has been a staple within the city's economic 'tool box' and they have used it as much as, or greater than, most cities in the commonwealth."

But Mr. O'Sullivan sees a significant challenge in luring biotech companies to Worcester because they want to be where all the other biotech companies are — in Cambridge.

According to Mr. O'Sullivan, "The Massachusetts life science mystique
Cambridge and Kendall Square, and in my experience over the years, well over half the companies I speak with from out of state or country want to be there for just that reason. Look at the amount of ridiculously high rents big biotech and pharma companies are paying because there is a herd mentality that you have to be in the world's life science epicenter because of MIT, Harvard, etc. Great for Cambridge and their tax base, but how long can this scenario last?"

While Cambridge's high costs are not a reason for big biotech and pharmaceutical companies to locate there, biotech startups cannot afford those costs. And Mr. O'Sullivan believes that Worcester can make a compelling argument based on its lower costs.

"Advantage Worcester, because if you are not Microsoft or Novartis you can't make it there as a small growth company," he said. "Only time will tell if this strategy helps fill pipelines for all of these companies who are in trouble because they have no ready-made drugs coming along (with a few exceptions) and their patents are coming off line."

Worcester has the potential to be the outer limit of where biotech companies will locate in Massachusetts. According to Mr. O'Sullivan, "Worcester will continue to position itself as the western anchor along the state's burgeoning biomedical corridor."

Some of the companies he cites are located near, but not in, Worcester. Mr. O'Sullivan points out that Genzyme is in Framingham and Bristol Myers Squib is in Devens. The good news for Worcester is that "Abbott and Blue Sky BioServices are growing and staying in Worcester."

Why did they choose Central Massachusetts? According to Mr. O'Sullivan, the reasons include, "scientific talent; easy time permitting and receiving local regulatory approvals; economic development partners such as the Worcester Business Development Corp. and MassDevelopment; retraining and replenishment of their workforces through local colleges and universities; and unencumbered development, water/sewer, and animal permitting costs."

Peter Cohan of Marlboro heads a management consulting and venture capital firm, and teaches business strategy at Babson College. His email address is