A Battle Royale

The question almost always came up -like clockwork.

It would come up as William W. Wells was discussing funding for his startup medical technology firm, ViewRay Inc. And it would be posed by investors who were considering financing the development of the company's medical imaging device.

"Where are you considering relocating?" the investors would ask Wells.

For the better part of a year, Wells did not have an answer to that question. Then in January, he and his colleagues at ViewRay decided to relocate the Gainesville, FL-based company 807 miles north to Oakwood, OH, a tiny village on the outskirts of Cleveland with a population density of one person per square mile.

"We looked at a number of places that are probably pretty obvious ones," Wells said, citing the San Francisco Bay area; Research Triangle Park in North Carolina; Boston, MA; Cleveland, OH; and Atlanta, GA as contenders.

After eliminating three of those locales (the San Francisco Bay area, for example, was ruled out due to the high cost of living and exorbitant housing prices), officials at ViewRay narrowed it down to the Cleveland and Atlanta metropolitan areas. The final choice wasn't easy-both states offered Wells' company incentives to relocate, and both areas have a solid biotechnology base and top-notch research universities.

In the end, Ohio won. "One of the things that was attractive to us initially about Cleveland was that our product involves magnetic resonance imaging [MRI], and if you were to look around the country and ask yourself where the most engineers are concentrated with experience in [MRI], historically, it has been Cleveland. We thought it might be useful to be in an area where there is such a large talent pool of MR engineers."

The Buckeye State has more than just a large pool of engineers to attract biotechnology companies. With 636 FDA-registered medical device companies and millions of dollars in state funding (the state allocated $100 million in May for biomedical business growth), Ohio quickly is becoming a mecca for biotechnology and medical device manufacturing firms.

"What sets Ohio apart is its history of manufacturing," said John F. Lewis Jr., vice president of BioOhio, a non-profit organization created in 1987 to build and foster the state's bioscience industry, research and education. With a business culture steeped in automotive manufacturing, he said, "the old-style businesses are skilled at bending metal and, now, creating FDA-approved devices. Massachusetts and California are good places, but it's more expensive there. And at the end of the day, companies are in business to make as much money as they can."

A growing number of medical device manufacturers are beginning to realize the cost benefits of doing business in Ohio. An average of 58 new biomedical companies set up shop there each year between 2004 and 2006; as a result, Ohio now has the second-highest number of FDA-registered medical device firms in the Midwest. The total (636) surpasses the number of firms in statesâ€"such as Minnesota, Michigan, Indiana and Wisconsin-that have more well-established medical device manufacturing hubs.

The attributes that have made Ohio an appealing destination for medical device manufacturing firms also have made it a target among states that are trying to replicate its success. The fight for biotechnology investments and medical device manufacturing has become fierce among states well known for their industrial base or technological innovations and states famous for their temperate climates and breathtaking landscapes.

The difference in recruitment efforts between these two groups of states is as varied as the geography. MPO spoke to economic development representatives in areas where medical device manufacturing is deep-rooted to compare their procurement strategies with those in regions where the industry is in the early stages. The following report provides a snapshot of the tactics employed in the battle for bioscience business.

A Bioscience Business Boom in Utah With its colorful canyons and snow-capped mountain ranges, Utah is perhaps more well known for its natural beauty than its burgeoning life-sciences industry. But the state's economic development officials are working to change that perception.

"I am from Pennsylvania originally, and many of us have stories of when we first came here," said Gary Harter, managing director of business creation for the Governor's Office of Economic Development in Utah. "You don't know a lot about Utah, and you come out to Utah and you say to yourself, 'I'm not leaving, I'm staying.' It's an amazing quality of life that we have for anything you possibly want to do here, whether it be the national parks or skiing or anything else. Utah's workforce plays hard and works hard; that is why the business sector in the state continues to grow and is recognized by many outside organizations as America's most dynamic economy."

The medical device and equipment sector in the Salt Lake City, UT metropolitan area employs nearly 7,900 people.

Of course, Utah has more to offer companies than the Great Salt Lake, majestic scenery (two ranges of the Rocky Mountains extend through the northeast corner of the state) and a grandiose Mormon temple. The Beehive State is home to more than 4,300 life-sciences and information technology companies.

According to the Utah Department of Workforce Services, the state's life-sciences sector employed 26,800 people in 2006; nearly half of those employees worked for medical device manufacturing firms. Utah also produces 70% of the world's arterial and vascular access devices and has a history of medical device manufacturing that dates back to 1956 with the production of disposable plastic catheters by the Deseret Pharmaceutical Company. (The firm eventually was acquired by Franklin Lakes, NJ-based Becton, Dickinson and Company.)

Economic development officials also touted Utah's growing population, low real-estate costs and easy access to West Coast markets as factors that make the state an attractive business locale. The state's healthy economy, along with Salt Lake City's recent designation by Forbes.com as one of 10 "recession-proof" cities in the United States, also help.

"We have a pretty interesting economy in our state," said Jeff Edwards, president and CEO of the Economic Development Corp. of Utah, a 21-year-old organization that helps attract new business to the state and foster the growth of those already there.

"We have a growing population. It's a relatively small population but a growing one-and that means a growing workforce," Edwards noted, adding that Utah's population growth rate is 2%-3% annually (compared to others states that have flat or declining growth rates). "If you are a manufacturer, and you are looking to build a new facility in the United States, you want to know where your workers are going to come from, not just now but 10 years from now. We also have geography-if you are going to serve western markets, Utah is good for distribution."

While Edwards admitted that it is difficult for Utah to compete for research and development dollars with the likes of Boston, MA and San Diego, CA, he said the state has been able to generate funding by emphasizing its strength in genetics and biotechnology.

In addition, the Utah Science Technology and Research (USTAR) initiative was rolled out two years ago to recruit top science teams, build research facilities at Utah State University and the University of Utah as well as open five Innovation Centers that are projected to help launch hundreds of new companies and create as many as 73,000 new jobs in the life-sciences sector. The state has invested nearly $500 million in the USTAR program over the next 10 years.

Recruiting science teams and researchers to Utah might be a little easier now that the state has its own Nobel Peace Prize winner: University of Utah scientist Mario R. Capecchi and two other scientists won the 2007 prize in medicine for their work manipulating mouse genes to study disease. Edwards said the award has generated interest in the state from other research groups.

"Utah has a really unique offering in that it has a strong genetics [research] base. We know we can't be another San Diego, but we can be a strong contender in the genetics space," Edwards concluded.

A Funding Frenzy Draws More Business in Southern California San Diego, CA, may not be as strong a contender as Utah in genetics research, but it has one of the top universities in the country -University of California-San Diego- and is home to more than 700 life-sciences companies. As a whole, southern California attracts more research funding from the National Institutes of Health (NIH) than any other state, except Massachusetts and New York. Last year, southern California received more than $1.79 billion in research funding from the NIH, which was more than half of the $3.1 billion awarded to the state of California.

Venture capital was just as plentiful in 2007, with the southern California area attracting $1.68 billion. That amount beat the $1.22 billion venture capitalists invested in Boston, MA, last year, according to BIOCOM, a regional life-sciences association formed in 1995 that represents more than 570 companies.

"The venture capital between here and Orange County is very deep and far-reaching," said Joseph D. Panetta, BIOCOM's president and CEO.

It wasn't always that way. Panetta said San Diego (including San Diego County) and Orange County operated independently of each other, competing for venture capital and life-sciences firms. Several years ago, however, economic development officials in both counties realized they could be much more effective -and competitive- by working together.

"There is a biomedical powerhouse in California that is best described as southern California. It's not defined as San Diego alone; it's not defined as Orange County alone," Panetta explained. "When things began to become much more competitive in the life-sciences arena, and other states and regions in the country were making a play to get life-sciences companies, we realized we needed to make a marriage between San Diego County and Orange County." Both areas had strong medical device communities, he added, giving any new entrants access to a diverse workforce.

It also gives them access to a collaborative work environment and a field that is still in its infancy -factors that help attract companies wanting to capitalize on the region's growth in life sciences, as well as academics who want to test their business acumen.

But the relatively young age of southern California's life-sciences industry also can act as a deterrent for companies looking to relocate or open a manufacturing plant in areas where the industry is older and more entrenched, such as Minnesota or Massachusetts.

"California is still a little bit more in the earlier stages of development as a biomedical region," Panetta said. "It's only been in the last 20 or 25 years where California has identified itself as a place where biomedical engineering is done."

Despite Its Maturity, Minnesota Is Still Growing Minnesota is proof that maturity doesn't always lead to stagnation. Between 2001 and 2006, the medical device industry there grew 12.1%, according to a study released in June by Battelle and the Washington, DC-based Biotechnology Industry Organization. The study, "Technology, Talent and Capital: State Bioscience Initiatives 2008," concluded that the bioscience industry in the United States is a key driver of modern economic progress.

The industry certainly has been a key driver of Minnesota's economic progress. Between 2000 and 2006, the North Star State led the nation in the number of medical device manufacturing workers added to local payrolls, according to the Minnesota Department of Employment and Economic Development (DEED). In addition, the state issued 2,300 patents for medical devices between 2002 and 2006 -the second highest in the nation, DEED statistics indicate.

"In Minnesota, some areas of the medical device industry are more traditional and mature, but other areas are growing, such as the convergence of medical devices and pharmaceuticals and biologics," said Kirsten Morell, a DEED spokeswoman. "Overall, the industry continues to grow."

Morell attributes several factors to the state's continued growth in the medical device sector: excellent "coordination" between industry, government and academia, and the University of Minnesota's ability to coordinate efforts between researchers and the business community.

Besides linking researchers with businesses, the University of Minnesota has a number of resources that cater to medical device companies. These resources, combined with workforce training and financial incentives, are designed to lure new companies to the state and prevent existing ones from moving away. Resources within the university include the Institute for Engineering and Medicine, which features a heart laboratory for medical device testing, Morell said, as well as a center that helps cultivate the "next generation" of devices.

In five years, the university will have a state-of-the-art biomedical research facility dedicated to imaging, cancer, heart disease and infectious diseases. The state has agreed to fund 75% of the new facility's cost ($219 million), and the university is picking up the rest of the tab ($73 million). When it is completed, the university will have four new research buildings that can house 120 researchers and nearly 500 support staff members.

What also sets Minnesota apart from other states is its willingness to share non-proprietary information that comes out of these research facilities -even between competitors. "It has to do with the old notion 'a rising tide lifts all boats,'" noted Liz Rammer, vice president of marketing and communication for LifeScience Alley, a non-profit trade group formed to advance the growth and success of Minnesota's life-sciences industry. "It's the sharing of best practices. We've had people call us from other parts of the country and ask us, 'how and why do you do that?' That is part of our culture. Our membership includes the medical technology companies, but it also includes the payers and providers, and when you have those people talking, it's ultimately going to be beneficial to the patient."

A Solid Supply Base in Massachusetts Perhaps no other state in the nation is better known for medical device manufacturing and development than Massachusetts, and for good reason -there are 448 device companies within its borders, and those firms employ 22,498 people. The industry is so ingrained there that devices have become one of the Bay State's major exports: According to 2006 data from the University of Massachusetts' Donahue Institute, medical device exports represented more than $1 in every $10 of out-of-state shipments. Device exports there also represented 9% of the total number of industry exports in the United States that year.

"What distinguishes Massachusetts from other areas is the sheer volume of medical device activity that goes on here," said Thomas J. Sommer, president of the Massachusetts Medical Device Industry Council (MassMEDIC), a grassroots organization of medical device manufacturers and companies devoted to attracting new business to the state and helping established firms grow.

The industry's economic impact on the state is about $8.3 billion a year, according to MassMEDIC and is poised to grow given Massachusetts' vibrant venture capital environment. "Early stage companies have better access to venture capital than any other region in the United States outside the Silicon Valley. As a result, we have a very active early stage (medical device) community that is developing the newest technology, and that adds an energy level you don't find in other states and regions," Sommer said.

The Massachusetts Life Sciences Law, signed by Gov. Deval L. Patrick, is expected to create an additional 250,000 jobs in the state's life-sciences sector by 2015.

Besides the energy level, companies in Massachusetts don't have to look far for a comprehensive supply base. Sommer said companies that relocate or open a manufacturing plant in the state have access to attorneys, accountants, financial advisors and regulatory affairs specialists who specialize in the medical device market. "Companies don't have to look far for injection molding services, for example, or contract manufacturing services," he explained. "It's all within an hour's drive or a phone call away."

Manufacturing support was reinforced in June when Gov. Deval Patrick signed the Massachusetts Life Sciences Law, which features a $1 billion investment package that is designed to attract and retain top companies, technologies and academic minds. The legislation sets aside $500 million in capital spending through the next 10 years, $250 million for investment in research and development and $250 million for tax incentives for certified life-sciences projects.

"Massachusetts will have a new and broader set of tools to help us compete," Patrick said upon signing the law.

Florida: A Wealth of Financing and International Trade Florida has some of those same tools.

For the last several years, the Sunshine State has been luring life-sciences companies to its shores with the promise of financing. Florida's first conquest was Scripps Research Institute of La Jolla, CA, in 2003. The company agreed to create a biotechnology research hub in Florida in exchange for $500 million in financing. The hub, which ended up costing the state $650 million in financing, opened earlier this year on a Florida Atlantic University campus.

It didn't take long for other companies to follow suit. The Torrey Pines Institute for Molecular Studies in San Diego, CA, agreed to establish a large research center in Fort Pierce, FL, in exchange for $100 million in financing. And the Burnham Institute for Medical Research in La Jolla, CA has been given more than $300 million in state and local incentives to establish a life-sciences research site near Orlando, FL.

Besides offering companies financial incentives to relocate, Florida economic development officials also try to draw a parallel between the biotechnology and medical device sectors. With more than 38,000 life-sciences firms (including 394 medical device companies) and 671,000 employees (20,775 of which work in the medical device sector), Florida's life-sciences industry plays a major role in driving the state's economy.

"Florida is more of an established hub than you think for medical devices," said Sena Black, senior vice president of marketing and strategic intelligence at Enterprise Florida, a public-private partnership devoted to statewide economic development. "As a state, we have a broad perspective when it comes to medical devices. We don't look at them solely in a manufacturing perspective. We believe there is a great deal of convergence between medical device companies and biotechnology."

As is the case in Massachusetts, medical devices are one of Florida's leading exports. However, companies looking to enter the international marketplace may find Florida a better place to access overseas markets. According to data from Enterprise Florida, more than $115 billion in merchandise trade passed through the state's airports and seaports in 2007.

"Florida is a very international state, and we know that exporting products can be competitive," Black noted. "There's a very strong export market of medical devices in Florida, and that is very good for business."

A Family-Friendly Atmosphere in South Carolina The Charleston, SC region has neither the venture capital of southern California nor the deep pockets of nearby Florida to finance the creation of biotechnology hubs. And the medical device industry in the region is relatively new compared to those in more well-established areas. Thus, economic development officials must rely partly on the region's quality of life and natural beauty to lure business to the area.

"If you talk to some of the companies that are here, like NanoScreen and Belimed, much of the site-selection factor has to do with the fact that their CEO wants to live here," said David Ginn, president and CEO of the Charleston Regional Development Alliance, a 13-year-old organization created to promote the Charleston region as a top location for business investment. "That has been a real coup for us."

Another coup for the Charleston region (besides its two research universities) is something that can also act as a disadvantage, depending on the company: the relatively small size of the medical device market. Companies that choose Charleston find an environment that is both welcoming and less competitive.

"We are not oversaturated, so there is not much competition for resources. There is more of a 'big fish in a little pond' mentality here," Ginn noted. "Companies that come here are able to get meetings with the mayor or meetings with the president of Medical University [of South Carolina]. We're not so big that we're not paying attention to every company we've got here. That kind of thing is important to some kinds of companies."

It certainly was important to Dr. Mark DeLegge, a gastroenterologist at Medical University who moved his family and the company he runs with his wife to Charleston in 1999. The DeLegges' company, Hammerhead Design, develops gastroenterological medical devices. Though many factors contributed to his decision to move to Charleston -including the university's biomedical infrastructure- DeLegge said one of the deciding factors was the chance to have an impact on the development of the area's medical device industry.

"Charleston is a fantastic place to live, and it's on the water, so it's very hard to beat," DeLegge said. "Medical University has a very avant-garde approach to the medical device industry. If I go to Massachusetts or California, I would be one of many. Here, things are still in the development stage, so I can have much more of an impact. When I look long term, I have a lot more to gain by being on the front end of this [industry] than I would in other arenas."

* * * Despite the different approaches, the states included in this report share one common goal: to create a business environment that supports the specific needs of the medical device and life-sciences industries. As both industries evolve, states will have to continually examine and revise their strategies for attracting (and retaining) business. BIOCOM's Panetta offered the following advice for states that want to stay competitive in the life sciences industry: "You can't just sit there and say how great you are and wait for people to come to you. The future of this industry is going to be based on how competitively you can innovate."

-M.B.