From the October 4, 2002 print edition

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Doing business here: Biotechs say state can be friendlier

Just what is the state of biotech in Massachusetts, and is this state the one the industry wants to be in?

There are no longer any easy answers to that question.

The subject had several members of the biotech community engaged for more than two hours one recent morning at a forum sponsored by the Massachusetts Alliance for Economic Development, a private nonprofit group that works to attract businesses to the state.

Blair Okita, senior vice president of the therapeutics manufacturing and development unit at Cambridge-based Genzyme Corp., said his company continues to expand its manufacturing operations here, despite a question of whether the Bay State lacks manufacturing workers. About 2,500 of the company's 3,300 employees in the Bay State are in operations.

Richard Gill, on the other hand, was less rosy in his assessment of doing business in the Bay State. Gill, president and CEO of Burlington-based AnVil Inc., a young bioinformatics company, said the state's biotech cachet makes it one of the most expensive to do business in because of its high salaries, high costs of living and relocation, and premium real estate prices.

Ron Sparks, president of Smith & Nephew Inc., Endoscopy Division, based in Andover, said he knows the cost all too well, but decided against moving to a cheaper locale, Research Triangle Park in North Carolina, because he said Massachusetts had "the people who know how to do what we do."

He said if he had a straight manufacturing business, it would have been harder to say no to North Carolina's offers of tax incentives and dinners at the governor's mansion.

However, he offered a word of caution to Massachusetts legislators and policy makers: "Remember, you need to stay friendly." For the most part, he said relationships between businesses and state agencies are spotty. For example, Sparks said it took seven years to hook up his company's facilities to sewer lines. "Do you know how hard it is to run 700-employee company on a leach field?"

Both Gill and Sparks lamented the difficulty of getting to and from Logan International Airport, but they acknowledged it will take more than a quick fix to remedy that.

When moderator Mitchell Adams, executive director of the Massachusetts Technology Collaborative, asked forum-goers where they would set up shop if it weren't the Bay State, they differed: Sparks said North Carolina, Texas or Florida for research and development, and the Midwest for manufacturing; Okita listed Philadelphia, New Jersey and San Francisco; Gill said he would stay on the East Coast, perhaps Princeton, N.J., or any city with better access to an airport.

The economic-development forum reminded us that running a company in Massachusetts can be expensive. And if you were wondering whether companies are still able to raise capital given the economic climate, the answer is yes, said Michael Lytton, partner with Boston's Oxford Bioscience Partners.

"There is and continues to be venture capital investment in Massachusetts," Lytton said. "In this environment, there may be some doubt about that."

And a quick revival of the IPO market? Don't hold your breath. Lytton said he sees the IPO market coming back by the second half of 2003 or early 2004.

And VCs can't wait. "It's all Monopoly money until the exit," Lytton said.

Lytton said there are new rules in this tired economy. For one, he says, his firm invests in companies with at least two years' worth of cash. And he said his firm, which invests as much as $20 million in a company, looks for "product-oriented platforms "that offer "multiple shots on goal," and ones that serve an unmet market.

"The whole industry has moved (away) from technology platforms that look at just one aspect of the drug discovery process," Lytton said.

Venture capitalists still tend to be influenced by what pharmaceutical companies want, Lytton said, and that especially includes clearing bottlenecks in the drug discovery and development process. However, he acknowledged that pharmaceutical research and development is languishing, with pharmaceutical companies doing more fee-for-service deals than major acquisitions.

ALLISON CONNOLLY, health care and biotechnology reporter for the Boston Business Journal, can be reached by e-mail at AConnolly@bizjournals.com.

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