Don Fry Commentary on WYPR
Sun columnist Jay Hancock recently wrote about the importance of continued investment in Maryland’s biotech industry despite recession-related slowdowns in state funding, private-sector investment, and biotech development activity. He cites important distinctions about biotech that I’d like to amplify.
Because Maryland has such robust growth in its technology industry – including information, computer, and other high-tech businesses – people tend to think about biotech in the same way. But technology companies and biotech companies are fundamentally quite different.
Biotechnology is the most capital-intensive industry in the world. The typical time for a technology company to realize a profit is two to four years. For biotech, it takes 10 to 20 years.
Biotech companies need large amounts of long-term cash. The average technology company spends between $2 and $7 million before seeing profits – compared to between $50 and $200 million for a biotech company.
The product success rate for technology companies is very high – about 80 percent. For biotech firms, the technical failure rate is 95 percent.
A key distinction is that you can locate a technology company anywhere. But biotech companies grow in only the most select soil. They must have access to the right personnel, to research universities, to technology, and to capital. These are essential elements that define Maryland’s stature as a biotech center.
Biotech is the ultimate high-risk, high-reward business. Only 30 out percent of drugs approved by the FDA ultimately recoup their development costs. But the less than 5 percent that emerge as “blockbuster” drugs become multi-billion dollar products.
For a state where biotech is located, the industry brings highly-trained workers that make above average salaries with a stronger economic multiplier effect. It’s also an industry that makes a difference in the lives of millions.
Biotech thrives on persistence – a key reason for the governor and state lawmakers to find ways to get planned bioscience funding and investment incentives back on track.
For the Regional Business Report, this is Don Fry, President and CEO of the Greater Baltimore Committee, for 88.1 WYPR, your NPR news station.