By Jim Damicis, Senior Vice President & Jessica Ulbricht, Analyst Camoin310
Hardly a day goes by where the biotech industry is not in the news. In early 2020, Jim Damicis and Jessica Tagliafierro authored Recent and Emerging Trends in Biotechnology which touched on COVID-19’s expected impact on the rate of innovation and change within the biotechnology industry. Since then, we have continued to track economic performance in biotech and the impacts of the pandemic on the industry and related trends. This article provides an update of the biotechnology industry data and trends shaping the industry.
Biotechnology is a broad field that covers a wide array of activities. Like the previous analysis, biotechnology is defined in this article as:
- Bio-science related distribution;
- Drugs and pharmaceuticals;
- Medical devices and equipment; and
- Research, testing, and medical laboratories.
- Employment Trends
Employment growth in biotechnology has outpaced the economy as a whole; this was occurring prior to COVID-19 but has been accelerated by the response to COVID-19.
Based on this definition, biotechnology industries accounted for over 1.6 million jobs in the U.S. in 2020, representing around one percent of the nation’s jobs. In the past ten years, biotechnology jobs have grown at a substantial pace of 22 percent, outpacing growth across all industries (12 percent). This growth is positive news in terms of wealth creation as the average total earnings for biotechnology jobs in 2019 were nearly double that of all jobs, at $132,936 versus $70,917.
Trends in biotechnology job growth were further accelerated as a result of increased demand for industry products from the COVID-19 pandemic. One-year job growth in the biotechnology industry is three percent, compared to negative two percent for all sectors. Research and development in biotechnology has experienced the largest one-year job growth, adding over 19,000 jobs—an increase of nine percent since 2019.
Major biotechnology subsectors include: Drugs and Pharmaceuticals; Medical Equipment and Supplies Manufacturing; Bioscience-Related Distribution; and Research, Testing and Medical Laboratories. With 617,741 jobs, Research, Testing and Medical Laboratories comprises the largest portion of jobs in the biotechnology industry at 37 percent. This is followed by Drugs and Pharmaceuticals with 27 percent. Medical Equipment and Supplies Manufacturing and Bioscience-Related Distribution make up 20 and 16 percent of the sector’s employment, respectively.
Within these major categories, the largest industries in terms of 2020 employment are:
- Medical, Dental, and Hospital Equipment and Supplies Merchant Wholesalers (264,069 jobs);
- Research and Development in Biotechnology (226,336 jobs);
- Medical Laboratories (215,339 jobs);
- Pharmaceutical Preparation Manufacturing (212,386 jobs); and
- Testing Laboratories (176,066 jobs).
Historically, four of the 16 biotechnology sub-industries experienced job loss over the 2010-2020 period. These industries included Pharmaceutical Preparation Manufacturing, Dental Equipment and Supplies Manufacturing, Ophthalmic Goods Manufacturing, and Dental Laboratories. Pharmaceutical Preparation Manufacturing reversed this trend over the last year and increased its number of jobs by one percent from 2019 to 2020.
Research and Development in Biotechnology and Medical, Dental, and Hospital Equipment and Supplies Merchant Wholesalers added the most jobs, growing by 86,106 and 72,110 jobs, respectively.
Output Trends
Economic output in biotechnology in the U.S. is driven by Pharmaceutical Manufacturing; Research and Development in Biotechnology overall; Equipment and Supplies Wholesaling; and Medical Equipment and Supplies Manufacturing.
With nearly $671 billion in sales, the biotechnology sector accounts for nearly two percent of total output across all industries in the U.S. The Drugs and Pharmaceuticals category is responsible for the largest portion of biotechnology’s sales, at 45 percent. This is followed by Research, Testing, and Medical Laboratories at 27 percent.
Within these categories, the top industries in terms of output are:
- Pharmaceutical Preparation Manufacturing ($152,972,193,606);
- Research and Development in Biotechnology ($106,943,747,451);
- Medical, Dental, and Hospital Equipment and Supplies Merchant Wholesalers ($86,972,165,197);
- Surgical and Medical Instrument Manufacturing ($42,769,708,827); and
- Electromedical and Electrotherapeutic Apparatus Manufacturing ($42,078,993,047).
Supply Chain Trends
As top purchasers of biotechnology products and services, hospitals, including private and public, were impacted significantly by COVID-19 supply chain disruption.
Biotechnology industries buy goods and services from a variety of other industries but most predominately from corporate offices (likely related to life sciences), drug wholesalers, and bio-product and medical manufacturers. They sell primarily to the healthcare sector and most notably to hospitals and offices of physicians.
Workforce Trends
There are a variety of jobs and skills demanded across the biotechnology industry, presenting opportunities for individuals with varying skill sets and levels of education.
Of the top ten occupations in biotechnology, nearly all have added jobs since 2009. With the exception of Miscellaneous Assemblers and Fabricators, each of the top ten occupations grew over this period. Inspectors, Testers, Sorters, Samplers, and Weighers occupations employ the most amount of biotechnology workers and grew by the most amount of jobs over the ten-year period. While biotechnology jobs are typically thought to be high-skilled jobs requiring advanced education, the diversity in job types and education requirements amongst the top ten occupations in this industry tells a different story. Additionally, the majority of the top ten occupations do not require previous work experience, with many of these occupations incorporating some level of on-the-job training.
Geographic Distribution
While larger metros have the most jobs in biotechnology, smaller markets across the U.S. have concentrations in biotechnology industries.
Biotechnology jobs can be found across the county, with large clusters in certain metropolitan areas. The metro areas with the highest number of jobs are:
- New York-Newark-Jersey City, NY-NJ-PA: 114,323 jobs;
- Los Angeles-Long Beach-Anaheim, CA: 85,937 jobs;
- Boston-Cambridge-Newton, MA-NH: 85,454 jobs;
- San Francisco-Oakland-Berkeley, CA: 65,802 jobs; and
- Chicago-Naperville-Elgin, IL-IN-WI: 57,059 jobs.
Unsurprisingly, a large number of biotechnology jobs are present in some of the largest metropolitan markets. The Biotechnology industry however is highly concentrated and critical to the economies of markets of all sizes across the U.S. Metro areas with the highest concentration of jobs in terms of location quotient include:
- Warsaw, IN: 20.86
- McPherson, KS: 11.94
- Brookings, SD: 8.92
- Bloomington, IN: 8.50
- Columbus, NE: 7.59
Capital Funding Trends
Growth in funding for biotech accelerated in 2020
Venture capital (VC) investments and private equity (PE) funding help transform innovation into economic growth by providing funding to grow companies and therefore grow the economy. In 2020, 739 biotech companies in the United States announced VC, PE, or seed funding. Total capital raised by biotech companies through these deals is equal to nearly $26.9 billion. This is an increase in total capital raised by biotech companies of approximately $16.0 billion compared to 2019. The number of deals announced in 2020 was 21 percent greater than in 2020 while the amount of capital raised was 161 percent greater. This indicates that in 2020 the deals, particularly the private equity deals, were much larger.
Looking Ahead: External Factors that Impact Biotechnology and Impacts of COVID
When tracking the biotech industry for economic growth it is important to understand and track the key external factors that impact the industry. The factors are the following:
Federal Funding – for R&D, Medicare and Medicaid – all directly increase supply and demand and all are expected to increase due to COVID-19 and emerging federal policy agendas.
Federal Regulation – has always been a significant external impact factor on the industry and includes everything from safety in production, how testing and trials are conducted, patent protections and price controls. Federal regulation on price, profit, increased safety and greater access are all likely to continue increasing in the near future to meet policy objectives including those based on lessons learned and impacts from COVID-19.
Research and Development – biotechnology is an R&D intensive industry and industry R&D is significant. After decades of increases, federal funding for R&D has been in a state of overall decline since 2011, increasing the percent of R&D performed by industry. COVID-19 and calls for equity and greater health outcomes of the national and world population have renewed calls for an increased federal role in R&D funding.
Sociodemographic – an aging population and a population subject to chronic illness along with income and education drive individual health conditions and demand. These relate to supply and demand but also to equity issues for which attention has increased during the COVID-19 response. This in turn impacts funding and regulation.
Healthcare Insurance – how many people have insurance and what that insurance covers impacts demand. Persons covered since Obamacare increased, and while this had been subject to roll-back attempts under the Trump administration, coverage will likely continue or even expand. As COVID-19 becomes more manageable for day-to-day activities to occur, people will resume seeking care and treatment of non-COVID-19 healthcare. This will increase calls for greater coverage.
Summing Up – what this means for economic and business developers?
In our 2020 article we outlined key action points for businesses and economic developers seeking to grow and support the biotechnology related economy. These still apply and are worth reiterating:
Know your niche. Biotechnology integrates and connects to multiple markets and supply chains. These have been significantly impacted by COVID-19 and offer both challenges and opportunities ahead. It is particularly important for mid to small regions to understand their industry and workforce strengths and fit within larger supply and knowledge chains.
Connect biotechnology activity with the healthcare activity. These have a symbiotic relationship so connections within regions are critical to support existing and emerging companies and investment. Hospitals and their workers have been under enormous stress due to COVID-19 and will need support to merge and be prepared for non COVID-19 demand as activity returns to a new normal.
Look for domestic sourcing opportunities. With the level of increased global risk more companies will look to meet supply and market needs within the U.S. and foreign companies may need U.S. presence to meet demands of U.S. customers.
Know your impact. Measure and track performance and impact of your biotechnology sectors and subsectors and understand your regional competitive position.
Address critical workforce and talent needs and gaps through industry partnerships. Track openings, support organizations with a finding and recruiting workers. Workforce remains a critical issue impacting industry growth. Gaps already exist and will only increase as technology and science change rapidly and render skills quickly outdated.
Connect legacy companies and institutions with the start-up and growth-oriented businesses. As the integration of IT and bio continues to increase new business models, new technologies will need to be developed and brought to market. A strong entrepreneur ecosystem combined that is well connected to existing companies and institutions will help accelerate and sustain growth.
Build out and modernize for your digital infrastructure. All this activity requires robust, fast, reliable, and redundant digital infrastructure. Unfortunately, far too many areas of the country including rural, urban, and suburban regions still lack adequate infrastructure to support biotechnology industry needs making them un-investable for businesses.
Sources:
1 Location quotient is a measure of industry concentration, indicating how concentrated a certain sector is in a given area, relative to the nation. It can reveal what makes a particular region “unique” in comparison with the national average. A location quotient greater than 1 indicates that sector employment in the area is more concentrated than it is at the national level.
2 Source: Crunchbase. Includes deals announced between January 1, 2020 and December 31, 2020.
