In order to gain access to U.S. stock exchanges, blue-chip investors or university research – or to all three – plus proximity to potential partners and the world’s largest medical markets, more international companies are setting up shop on American soil.
The trend may be cyclical, and the numbers aren’t tracked, but it is an issue of global concern, especially to Europeans. And the magnet is more than U.S. money.
“It’s proximity to major research universities, to other companies, to innovators and people developing the technology,” says Morrie Ruffin, executive vice president of business development at the Biotechnology Industry Organization (Washington). “It’s the desire to be in the heart of the largest biotechnology cluster.”
Last year, proteomics imaging company Ludesi (Lund, Sweden) set up an office in Washington in an effort to form partnerships or access funding from the National Institutes of Health (NIH; Bethesda, Maryland). And Stem Cell Sciences (Edinburgh, Scotland) is seeking a U.S. office site to facilitate licensing of its assays for use with drug discovery. Earlier this year, the company reported seven states competing for its attention.
Ruffin cites “intense competition among the states to court the biotech community.” And many states not known for their biotech clusters, such as Maryland, Virginia and Florida – where the Scripps Research Institute is locating near West Palm Beach – are scrambling to attract both U.S. and international firms.
“We’re getting more traction now. When we announced the Scripps initiative, we got a lot of interest,” said Diana Robinson, president and CEO of BioFlorida (West Palm Beach).
Florida, home to 71 biotech firms, is actively seeking more, with Scripps Florida saying that it brought 120 worldwide scientists to the state in the last six months. Also attracting entrepreneurs Florida-ward are the Mayo Clinic (Jacksonville), the H. Lee Moffitt Cancer Center (Tampa), the University of Florida (Gainesville) and the University of Miami (Coral Gables).
“We offer tax incentives, and presently they’re based on employee headcount,” Robinson added. “And of course, our state is tax-friendly anyway. There’s no personal income tax or state income tax.”
Both partnering and capital markets opportunities are attracting firms to states such as Florida and the traditionally strong U.S. med-tech and pharma clusters.
Mesoblast (Melbourne, Australia), the adult stem cell company, this month reported an American depository receipt program designed to reach U.S. private investors and institutions. With the company’s initial public offering on the Australian exchange in December, Mesoblast took a 33.3% stake in U.S.-based adult stem cell company Angio-blast Systems.
“At some stage, you need to capitalize, you need to partner,” says Florian Schonharting, co-founder of Nordic Biotech (Copenhagen, Denmark), referring to the needs of later-stage companies. “And that’s when you go to the No. 1 place.”
Case in point: Osteologix (also Copenhagen), which in December set up operations in San Francisco. The two-year-old company started by Nordic Biotech (also Copenhagen) has a lead osteoporosis product scheduled to enter clinical trials this year. The product addresses both the reduction in bone formation and the increase in bone resorption, with hoped-for fewer side effects than the products currently sharing the $5 billion U.S. market.
By setting up in the U.S., international companies have time to learn and prepare for the various regulatory, investor relations and public disclosure challenges.
“They want to understand all of the reimbursement hurdles that they have to overcome in order to get their products paid for,” Ruffin says. “And that may be easier to overcome while in the U.S.”
Schonharting – frequently asked why Nordic Bio doesn’t launch its companies in the U.S. – cites the expense of the San Diego, San Francisco and New York areas as a major factor but also the “robust biotech industry” in the Medicon Valley of Denmark.
“Medicon Valley represents a good place to operate, to do drug development,” Schonharting said. “But the U.S. dominates the world of pharmaceuticals in every aspect otherwise. . . . It’s the No. 1 market in terms of capital markets, and it’s probably the No.1 market in terms of experienced management – people who have done it over and over again.”
According to Wills Hughes-Wilson, of the trade association Emerging Biopharmaceutical Enterprises (Brussels, Belgium), the drain-off of life sciences to the U.S. is high on Europe’s biotech concerns.
“In 2000, the heads of government of the European Union member states pledged to try and put together an agenda to make Europe the most competitive knowledge economy by the year 2010,” she told Medical Device Daily’s sister publication, BioWorld Today. “Now obviously that requires a lot of different elements to support investment and research and development to counteract the brain drain and to counteract company relocations.”
While Europe has good academic research, Hughes-Wilson wonders: “Where’s the long-term financing?”
And she points to a key issue fragmenting the EU’s capital markets – 25 countries, 25 governments, 25 budgets. Like Florida and other U.S. states, European countries offer incentives to attract biotechs, but companies eventually need to access America’s larger market opportunities.
“You could have the most wonderful tax breaks and incentives and so forth,” she said, “but if there would be no market for your product, those incentives would mean nothing.”