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Steven Pearlstein

Getting Out Of Biotech's Second Tier

By Steven Pearlstein
Wednesday, September 8, 2004; Page E01

If you added all the biotech activity that industry executives and local officials across the country have forecast for the next decade, my guess is the industry would be roughly the size of the Chinese economy.

This "biofantasy" is particularly virulent in former Rust Belt communities desperate for a next act. But it also afflicts genuine contenders such as Washington, where a host of natural advantages has yet to produce large and profitable biotech companies. That reality has been confirmed by a number of recent studies, measuring everything from the number of patents per PhD to the size of the local venture capital pool, which put Washington in the second tier of biotech clusters, behind leaders such as San Francisco and Boston.

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As boosters will tell you, the Washington region leads the nation in attracting research dollars and biotech-related PhDs, reflecting the local presence of the National Institutes of Health, the Food and Drug Administration and various other federal labs. But this strength also contains the seeds of the region's weakness. Much of the activity is focused on basic research that is several steps away from commercialization. It has created a scientific culture more oriented toward winning research grants and appropriations than toward starting companies.

The region has also suffered from the fact that its world-class research university and medical school, Johns Hopkins, is not only physically removed from the center of action on the Interstate 270 corridor, but has for most of its history been a stubbornly insular institution that disdained business and commerce. Even as late as the 1970s, when two Hopkins researchers would win a Nobel prize for discovering the early chemical tools needed for gene-splicing, rules and tradition discouraged them and the university from seeking a patent.

Some of this, however, may be changing for the better.

Although they still have a long way to go in turning research into companies, federal officials and industry executives say the culture at NIH and the federal labs has become much more entrepreneurial. Researchers who leave to start companies are now viewed with envy, not head-shaking sympathy.

Meanwhile, Johns Hopkins is undergoing a cultural revolution under new President William Brody, a scientist turned entrepreneur who is determined to have the university engage with the regional economy. Of interest to Washington is the rapid expansion of Hopkins's Rockville campus from a single building used to train local biotech workers into a three-building campus with advanced research labs and office space for biotech companies that have a commercial partnership with the university.

Furthermore, in terms of cutting-edge research, Hopkins no longer has a local monopoly, with competition from several campuses of the University of Maryland and George Mason University across the river in Fairfax.

But what really has the potential to turbocharge the Washington biotech cluster is a new $500 million research facility being developed in Loudoun County by the Howard Hughes Medical Institute. Up to now, the Bethesda institute has quietly provided $400 million per year to support biomedical research, all but a tiny portion of it outside this region. In the future, however, a healthy chunk will go to support 180 young researchers at the new Loudoun facility, where they will have a mandate to pursue interdisciplinary "what if" projects too risky for government or industry funding.

Hughes, with an $11 billion endowment, is one of the classiest outfits anywhere. It has the potential to do for Washington what the Whitehead Institute did for Boston and the Salk and Scripps institutes did for San Diego.

That said, there is still one element missing from the Washington biotech scene: an ongoing informal collaboration among top financiers, executives, academics and government officials willing to invest time, money and political muscle in the industry. That kind of powerful social network, however, probably awaits the day when a handful of Washington area biotech companies finally hit the jackpot.


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