Biotechnology Cluster Progress Report of The Santa Fe Plan The Cluster Approach to Economic Gardening Prepared by Santa Fe Economic Development, Inc. March, 2000
Executive Summary Santa Fe Economic Development, Inc. (SFEDI), in redefining the clusters to ensure an inclusive approach, has identified the Biotechnology Cluster to include biomedicine; the spin-offs from the Los Alamos National Laboratory (LANL), the National Center for Genome Resources (NCGR), and the Santa Fe Institute (SFI); and other businesses that develop, manufacture, or sell products which are based on "the direct modification of biological processes". SFEDI concluded that this cluster should receive economic development support because it adds to the diversity of the Santa Fe business community, it has the ability to bring dollars into the region, it provides quality jobs, and it maintains the special character of Santa Fe. Through the ongoing efforts of the operating committees and staff, SFEDI has agreed to Assist in the creation and organization of the Santa Fe Chapter of the New Mexico Biotechnology and Biomedical Association with the first meeting to be held in June, 2000, Support TRADE in the process of developing a shared research library, Coordinate with the recruiters in the biotechnology companies to develop a one-stop web page for spousal employment opportunities in Santa Fe, Create a Quality of Life brochure and offer it at cost to the biotechnology companies to be used in their employee recruitment efforts, Work with members of the biotechnology cluster who have agreed to help market Santa Fe to attract other biotechnology companies to the region by displaying relocation materials at industry trade shows, and Work directly with Sue Fenimore, Project Director for LANL s Small Business and Entrepreneur Initiative, to keep SFEDI informed of spin-off companies as they occur from her project. SFEDI will identify an individual from NCGR and one from SFI to provide information of spin-off activities from their institutions.
Evaluation of Biotechnology for Cluster Development Cluster Identification Biomedical research and manufacturing was one of ten clusters identified in the Community Economic Development Plan based on public focus groups conducted in April and May of 1995. High-tech business based on technology transfer from LANL, the Santa Fe Institute (SFI) and the National Center for Genome Resources (NCGR) was identified as a separate cluster. Santa Fe Economic Development, Inc., in redefining the clusters to ensure an inclusive approach, has identified the Biotechnology Cluster to include biomedicine (the application of biotechnology to medicine), the spin-offs from the identified institutions, as well as other businesses that develop, manufacture, or sell products which are based on "the direct modification of biological processes". The Community Economic Development Plan (June, 1996) identified biotechnology as a cluster with potential for growth. SFEDI confirmed that this cluster should receive economic development support because it adds to the diversity of the Santa Fe business community, it has the ability to bring dollars into the region, it provides quality jobs, and it maintains the special character of Santa Fe. Opportunities for Economic Diversity Biotechnology and its many applications offer diverse opportunities for discoveries that revolutionize everything from pharmaceuticals to toxic waste degradation (bioremediation). The Santa Fe Biotechnology cluster has products including, but not limited to, computer hardware and software, point-of-care diagnostic test kits, environmental equipment, chemicals, and vaccines. As breakthroughs in chemistry and physics shaped the 20th century and gave us computers and plastics, biotechnology will transform human lives in the 21st century. The
biotechnology industry is as diverse as biological processes, themselves. The industry is growing rapidly, and many biotechnology companies compete globally. With the proper economic foundation support, this cluster can significantly add to the diversification of the economy of Santa Fe. The Santa Fe Biotechnology cluster is very dependent on resources from outside the region, including the labor pool, financial serves, legal services, and FDA compliance services. Although these businesses hire locally where possible, many of the technical and scientific positions in this highly competitive industry are filled by recruits from outside the region. As the cluster continues to expand and the labor pool deepens, the ease of movement of employees between biotechnology companies will augment the overall regional competitiveness of the cluster. Opportunities to Bring Dollars into the Region Biotechnology is a global industry and revenue potential is substantial. The seven largest biotechnology companies in the U.S. have combined revenues of over $6 billion. The industry has grown from $20 billion in 1980 to a little over $50 billion in 1998. It is important to note that small research-oriented firms and spin-off companies may take 10-15 years to get a product to market. This gives the biotechnology industry unique financial needs, and special attention is required to support small start-up companies through the financially difficult years. The financial impact of a strong biotechnology cluster in Santa Fe would extend into many ancillary businesses that would be created to support the cluster. Additionally, many Santa Fe biotechnology companies entertain clients from all over the world. The unique character of Santa Fe is important to the image these companies want to present to their clients. Although no statistics exist to support the claim, SFEDI believes the ability to showcase Santa Fe to international business leaders must certainly add tourism dollars to the local economy.
Ability to Bring Quality Jobs to the Region Although Santa Fe Economic Development, Inc. supports the creation of jobs in general, it believes that businesses that create quality jobs should be supported through directed economic development activities. For the purposes of the Cluster Cultivation Program, SFEDI defines quality jobs as those which Provide wage levels as high or higher than the local median wage, Offer favorable benefits packages, Make use of employees training and education, Show favorable career growth/advancement potential, Add to employer productivity and competitiveness, Have the potential to create spin-off companies, and Provide healthy and safe working conditions. By this definition, the biotechnology cluster provides quality jobs. Biotechnology companies offer wages higher than the local average: Average Annual Salaries 1 Molecular and Cellular Researchers $58,233 Pharmaceutical Researchers $54,692 Medical Device Researchers $46,960 Average U.S. Salary $26,939 Average Wages Santa Fe MSA 2 (1998) 3 $28,139 Most of the local biotechnology companies offer benefit packages including health and dental insurance, 401K plans, and paid vacation. Most of the professional and technical 1 Biotech Century Dawns in the Western U.S., An Economic Geography, Frederick Bolin, Points West Review, June 1998 2 Santa Fe MSA includes Santa Fe County and Los Alamos County 3 U.S. Bureau of the Census, September, 1999 release
positions within biotechnology companies require specialized degrees and experience. The industry provides advancement opportunities within and among biotechnology companies and the business environment is conducive to the creation of spin-off companies. To the best of SFEDI s knowledge these companies provide healthy and safe working conditions. As a growing cluster, biotechnology will continue to provide quality jobs to the region. According to CorpTech, a directory publisher which tracks the U.S. 50,000+ technology manufacturers, over half of the biotechnology companies plan to expand their workforce during the next year by an average of 15.7%. The southwest region s biotechnology employment is growing at a rate of 20.7%. Bios Group in Santa Fe, a spin-off from the Santa Fe Institute, doubled employment last year and plans to double it again this year. In 1998 there were more than 150 biotechnology jobs in Santa Fe. 4 The Ability to Maintain the Special Character of Santa Fe Progress in the New Economy is important to the mission of Santa Fe Economic Development, Inc. but never at the sacrifice of the quality of life and the character of Santa Fe. Most U.S. biotechnology companies are small, employing under 50 employees. In Santa Fe biotechnology businesses tend to locate in the plaza area or within business parks resembling "campuses". This results in minimal impact on the overall look of the community. Environmental impacts of cluster growth on requirements for water, utilities, and other resources are well within acceptable levels. Many challenges exist for biotechnology companies located in Santa Fe, yet it was a personal choice many of the owners/ founders of these companies made to be here. Considering that in this global industry companies can locate where they choose, SFEDI believes these businesses are motivated to maintain the character of Santa Fe not only because Santa Fe is their home, but because the charm of Santa Fe adds to the image 4 Biotech Century Dawns in the Western U.S., An Economic Geography, Frederick Bolin, Points West Review, June 1998
they want to present to their clients. Quality of life is at the center of the biotechnology industry. Quality of life, in part, is measured by health, and the biomedical segment of the biotechnology industry has contributed significantly to the quality of life of diabetes patients, children with growth hormone deficiencies, and organ recipients, to name a few. Bioremediation firms help rid our environment of toxins. These companies contribute to the local tax base, showcase Santa Fe to international business leaders, provide quality jobs, and add to the quality of life in Santa Fe, but these same businesses ask little in return (e.g. incentives).
Biotechnology Cluster Cultivation: Progress to Date Cluster Activation Action Steps Completed: The Biotechnology Cluster had been activated with the creation of the New Mexico Biotechnology and Biomedical Association in 1994 (formerly the Southwest Biomedical Coalition). Although formally organized, the cluster is still in the early development stage in terms of creating strategic advantages. Roundtable discussions conducted in February and March by SFEDI highlighted the need for local meetings to enhance the relationships of the Santa Fe biotechnology community. SFEDI has agreed to assist in the creation and organization of the Santa Fe Chapter of the New Mexico Biotechnology and Biomedical Association with the first meeting to be held in June, 2000. SFEDI has committed to six months of direct involvement in the announcement of these meetings, the selection of the venue, and the invitation of identified keynote speakers. To maintain regional connections, the Santa Fe Chapter will meet every other month, alternating months with the meetings of all New Mexico members in Albuquerque. This will encourage attendance at both venues, strengthening important regional links. Stephen C. Joseph, M.D., President and C.E.O. of the National Center for Genome Resources and Vice Chair of Santa Fe Economic Development Inc., has been identified as the key contact for the Biotechnology Cluster for the purpose of providing expertise to SFEDI. Next Action Steps: SFEDI will help the cluster identify an individual or individuals in the biotechnology industry to assume responsibility for the continued organization of the Santa Fe Chapter of the Biotechnology and Biomedical Association.
SFEDI will work with Los Alamos National Laboratories (LANL), the Santa Fe Institute (SFI), and the National Center for Genome Resources (NCGR) to identify spin-off companies for inclusion in the industry cluster, specifically for inclusion in the association meetings and up-to-date information about other industry events and trends. Sue Fenimore, Project Director for LANL s Small Business and Entrepreneur Initiative, has agreed to keep SFEDI informed of spin-off companies as they occur from her project. SFEDI will identify an individual from NCGR and one from SFI to provide information of spin-off activities from their institutions. At this time SFEDI has determined through conversations that there are no direct action steps SFEDI can take to assist in technology transfer. SFEDI will, however, continue to look for ways to encourage technology transfer. Cluster Support Action Steps Completed: In December 1998, the Tri-Area Economic Development Alliance held a roundtable discussion with the biotechnology companies in the region. Among several issues identified, the need for a research library facility similar to those located at Los Alamos and the University of New Mexico was selected as an action item to be addressed by TRADE. Roundtable discussions held in February and March by SFEDI confirmed the library is still a priority. TRADE has taken the leadership role for this action step first by participating in the analysis of a feasibility study identifying potential industry funding sources and second by seeking additional funding through public sources. SFEDI will continue to support the process of developing a shared library, especially in ensuring access to the small, spin-off companies that cannot share in the financial burden. Currently biotechnology companies must recruit from outside New Mexico to fill the majority of the jobs in their businesses, confined by requirements for advanced degrees and research experience. Identified in the roundtable discussions, one of the
more difficult aspects of these recruitment efforts is spousal employment. Most biotechnology professionals who are married have spouses who are equally educated and looking for similar professional or technical employment. The difficulty in finding appropriate opportunities for the spouse seriously impedes recruitment efforts. SFEDI has agreed to coordinate with the recruiters in the biotechnology companies to develop a one-stop web page for spousal employment opportunities in Santa Fe. Initially focused on other biotechnology opportunities, the web page may expand to include other opportunities identified by the biotechnology recruiters as appropriate for spousal employment assistance. Recruitment efforts to attract qualified employees in a competitive industry rely heavily on Santa Fe s Quality of Life. In response to a specific request, SFEDI has created a Quality of Life brochure and has offered it at cost to the biotechnology companies to be used in their recruitment efforts. It is often necessary for biotechnology companies to hire outside the United States. Although work visas are processed by the federal government, members of the biotechnology clusters asked for assistance in determining if there are ways to expedite the process required through the Albuquerque office. SFEDI has agreed to research this issue further. Next Action Steps: SFEDI will include progress updates of the shared research library from TRADE in subsequent Progress Reports. SFEDI will secure funding for the development of the biotechnology spousal employment web page. SFEDI will hire a web page designer to create the web page. SFEDI will maintain the site.
SFEDI will request feedback from the recruiters using the page and will determine ways to expand the site to support other clusters with similar employment concerns. After the first 12 months SFEDI will ask the industry to financially support this web page. SFEDI will meet again with members of the cluster to determine workforce development initiatives in Santa Fe to increase the number of local hires. SFEDI will work with other workforce development organizations as necessary. SFEDI will encourage innovative approaches to improving economic foundations most critical to the biotechnology cluster especially in workforce development and technology accessibility. SFEDI will hold joint forums of economic development organizations and other institutions providing foundational support to further develop innovative approaches. SFEDI will attend the Santa Fe Chapter of the New Mexico Biotechnology and Biomedical Association as necessary to identify additional issues for the cluster as they are identified. SFEDI will collect baseline data (number of employees, average wages, and revenue) from the members of the cluster. SFEDI will gather this data annually to track growth. SFEDI hopes that direct involvement in the meetings of the Santa Fe Chapter of the New Mexico Biotechnology and Biomedical Association will provide access to this information. SFEDI will attend meetings of regional venture capital forums, including Coronado Ventures Forum and the Gathering of Angels. SFEDI will establish appropriate and innovative ways of communicating to the high school students of Santa Fe that opportunities for quality jobs currently exist in Santa Fe and SFEDI is actively seeking ways to increase the number and variety of quality jobs in the future.
Cluster Expansion Action Steps Completed: SFEDI is working with the members of the biotechnology cluster who have agreed to help market Santa Fe to attract other biotechnology companies to the region by displaying relocation materials at industry trade shows. Next Action Steps: With TRADE and the New Mexico Department of Economic Development, SFEDI will develop a marketing strategy and materials to attract biotechnology companies to relocate in Santa Fe. SFEDI is developing a network to identify spin-off companies from LANL, the Santa Fe Institute, and NCGR and to make initial contact with these companies to be included in on-going cluster activities. SFEDI will work with these institutions to identify specific needs of spin-off companies.
Challenges Cluster-based economic development requires a cooperative effort from various organizations and institutions, and therefore, many challenges will arise. The following challenges have been identified as those which SFEDI is positioned to take a leadership role to address: Maintaining each cluster's forward momentum while refining the program support elements appropriate to each cluster's stage of development, Identifying additional ways to measure outcomes of the cluster development program, Meeting state and city goals by identifying and providing special attention required by the clusters, Encouraging innovative approaches to create stronger foundations and a more diverse economy, and Continuing to survey "best practices" among economic gardening strategies, adapting these to Santa Fe s Cluster Cultivation Program, and implementing specific, measurable action items to maintain forward momentum. Challenges Specific to the Biotechnology Cluster In survey after survey, biotechnology company executives say that there is no more critical precursor to regional biotechnology development than a nearby presence of a research university with a strength in life sciences and ideally, a college of medicine. Currently Santa Fe has no such institution. Spin-off and research-oriented firms may take 10-15 years to get a product to market and require special consideration in those early years. Cooperative employee recruitment efforts are required by the industry to reach "critical mass", where there is sufficient talent concentrated in the region.