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Can biotech spur job creation?

“The Battelle/BIO State Bioscience Industry Development report released today at the 2012 BIO International Convention signals significant job growth in the bioscience sector over the past decade, indicating the importance of the biosciences as an economic driver for the nation.” Biotechnology Industry Organization (BIO) press release, June 19, 2012

There was a time when talk of the 'knowledge-based economy' or 'fostering research-based businesses' led just about every Western government to think of the burgeoning bioscience sector as a wellspring of high-wage and highly skilled jobs that would also drive jobs in services and manufacturing. Governments and regional agencies poured public funds into life science research, infrastructure and tax breaks, convinced they were creating an industry for the twenty-first century. But in today's economy, is this still true?

According to BIO and consultants Battelle, the answer would be a resounding “yes.” Their Bioscience Industry Development report, released at the 2012 BIO annual meeting, paints the bioscience industry as a strong and steady generator of R&D jobs. The United States' $10.4-billion investment in basic sciences from 1993 to 2010 has driven “$796 billion in economic impact and created 3.8 million job-years of employment.” According to Battelle's tally, US biotech alone accounted for a total of 1,605,533 jobs in 2010, with the sector adding an average of 9,600 new jobs each year over the past decade.

The report also notes, however, that in the drugs and pharmaceuticals subsector there was an overall loss of 9,400 jobs between 2001 and 2010. Indeed, since 2008, the bioscience industry as a whole has shed thousands of jobs, with overall employment failing to rebound to the levels before the credit crunch.

Nonetheless, BIO and Batelle went to great pains to emphasize that job creation in biotech is much better than in other leading knowledge-based industries, including information technology services, computer equipment, finance and insurance, which all recorded net job losses over the past decade.

A presumption remains, therefore, that biotech represents a good bet for governments seeking employment growth. Looking back this has been true, but looking forward the picture looks very different.

The bedrock of any innovative life science industry is its research base. In academia, this comprises faculty, students and technicians; in industry, it is R&D personnel. Of course, in a research-based economy not all the jobs are highly skilled, highly paid, research posts, but such jobs form the core of an employment ecosystem. A vibrant research campus spawns tech transfer jobs, manufacturing, marketing, sales and logistics positions for instrument and reagent suppliers. Research-driven startups spur jobs at investment funds, patent firms, job agencies and incubators. And a large healthy R&D-driven company supports a coterie of intermediaries—corporate lawyers, investor and public relations advisors, bankers, accountants and tax specialists, not to mention all the endeavors that spring up around them: coffee shops, restaurants, groceries, barbers, gas stations, banks and the like.

Today, the R&D bedrock looks less solid than it once did. In recent years according to the US National Science Foundation, only 14% of those with a life science PhD now can find an academic position within five years. And although the $10 billion in federal stimulus funds to the US National Institutes of Health from the American Recovery and Reinvestment Act of 2009 created 50,000 science jobs, that money is now gone, putting more positions at risk.

In industry, the R&D picture is bleaker still. According to the consulting firm Challenger, Gray & Christmas, US drug firms have slashed 300,000 jobs over the past decade. Indeed, just last month, Roche announced the closure of its Nutley, New Jersey campus, with the loss of another 1,000 research jobs. Some large biotech firms and many multinational pharmaceutical companies seem now to view R&D as an expensive luxury. What's more, the comparatively smaller R&D spend in biofuels, agbiotech and industrial biotech suggests these will not compensate for drug sector job losses.

The problem is that across the industry, inertia and financial paralysis currently hold sway over dynamism and job creation.

As laid out in our pages (Nat. Biotechnol. 30, 395–400, 2012), $5.3 billion of venture capital was invested in private biotech in 2007. Last year, that fell to only $3.5 billion, nearly a $2-billion fall. And although pharmaceutical companies and corporate venture funds are putting more money into early life science innovation, their contribution is a mere drop in the ocean compared with the funding that has fled.

Just a handful of venture capital firms now invest in early-stage life science. And even if universities are spinning out more companies, the attrition rate is so high that many never progress beyond a seed round. Combine that with investors' propensity for backing 'capital-efficient businesses' and you get smaller enterprises that are designed for M&A buyouts, not sustainability or, for that matter, growth into companies that hire tens, hundreds or thousands. No matter how many enterprises there are, this equates to substantially fewer full-time positions.

Could employment growth arise from small and mid-tier established biotech firms? Probably not. Across the sector, companies are cash poor. Raising money is difficult for all but the largest firms and taken together, even these are not hiring. Research partnerships no longer attract large upfront payments and deals are loaded with options and get-out clauses for pharmaceutical partners.

An industry starved of funding from the bottom up is not an industry that will create jobs. And contrary to BIO and Battelle's rosy picture, past performance in the sector is no guarantee of future results. The truth is, outside Boston and the Bay Area, biotech does not seem like a good bet for job growth. In fact, urging governments to bet limited public funding on the sector with the promise of job creation might even be downright misleading.

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Can biotech spur job creation?. Nat Biotechnol 30, 725 (2012).

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