By Jim Damicis, Senior Vice President & Jessica Ulbricht, Analyst Camoin310
Over the last several years it has been clear that we are in an ever-changing economic environment. Technological advancement and innovation have been occurring across industries, a trend that has been true in biotechnology. In light of COVID-19 this has become even more true, as biotechnology is at the core of understanding the virus and developing treatments and solutions. In 2016, Jim Damicis and Alex Tranmer authored an article titled “Biotechnology Market Trends: What Economic Developers Need to Know,” which provided a snapshot of the industry and its contributions to innovation-led economic development across the U.S. In this article, we update the industry snapshot and explore emerging trends and how they may shape the industry from an economic development perspective.
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;
- Research, testing, and medical laboratories; and
- Employment Trends.
Based on this definition, biotechnology industries accounted for 1.3 million jobs in the U.S. in 2019, representing around one percent of the nation’s jobs. In the past ten years biotechnology jobs have grown at a substantial pace of 19 percent, outpacing growth across all industries at 13 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 $128,248 versus $67,979.
Major biotechnology subsectors include: Drugs and Pharmaceuticals; Medical Equipment and Supplies Manufacturing; Bioscience-Related Distribution; and Research, Testing and Medical Laboratories. With 596,407 jobs, Research, Testing and Medical Laboratories comprises the largest portion of jobs in the biotechnology at 37 percent. This is followed by Drugs and Pharmaceuticals with 26 percent. Medical Equipment and Supplies Manufacturing and Bioscience-Related Distribution make up 21 percent and 16 percent of the sector’s employment, respectively.
Within these major categories, the largest industries in terms of 2019 employment are:
- Medical, Dental, and Hospital Equipment and Supplies Merchant Wholesalers (252,590 jobs);
- Medical Laboratories (213,169 jobs);
- Research and Development in Biotechnology (207,270 jobs);
- Pharmaceutical Preparation Manufacturing (206,952 jobs); and
- Testing Laboratories (175,967 jobs).
Historically, three of the 16 biotechnology sub-industries experienced job loss over the 2009-2019 period. These industries included Pharmaceutical Preparation Manufacturing, Opthalmic Goods Manufacturing, and Dental Laboratories. Research and Development in Biotechnology and Medical, Dental, and Hospital Equipment and Supplies Merchant Wholesalers added the most jobs, growing by 63,937 and 62,990 jobs, respectively. These two industries, along with Medical Laboratories now employ the greatest number of people in Biotechnology, overtaking Pharmaceutical Preparation Manufacturing which held the most jobs in the sector in 2009.
Output Trends
With over $648 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 26 percent.
Within these categories, the top industries in terms of output are:
- Pharmaceutical Preparation Manufacturing ($146,616,106,590);
- Research and Development in Biotechnology ($96,620,277,030);
- Medical, Dental, and Hospital Equipment and Supplies Merchant Wholesalers ($83,415,866,121);
- Surgical and Medical Instrument Manufacturing ($45,839,409,759); and
- Medical Laboratories ($42,200,260,330).
Supply Chain Trends
In terms of the biotechnology supply chain, 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
Of the top ten occupations in biotechnology, nearly all added jobs since 2009. With the exception of 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. There are a variety of job functions needed across the biotechnology industry, presenting opportunities for individuals with varying skill sets and levels of education.
Geographic Distribution
Biotechnology jobs can be found across the county, with clusters in certain metropolitan areas. The metro areas with the highest number of jobs are:
- New York-Newark-Jersey City, NY-NJ-PA: 113,756 jobs
- Los Angeles-Long Beach-Anaheim, CA: 84,085 jobs
- Boston-Cambridge-Newton, MA-NH: 80,159 jobs
- San Francisco-Oakland-Berkeley, CA: 62,295 jobs
- Chicago-Naperville-Elgin, IL-IN-WI: 55,670 jobs
Unsurprisingly, a large number of biotechnology jobs are present in some of the largest metropolitan markets. The Biotech industry however is highly concentrated in 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 quotient1 include:
- Warsaw, Indiana: 20.99
- Marion, North Carolina: 14.41
- Columbus, Nebraska: 9.41
- McPherson, Kansas: 8.96
- Bloomington, Indiana: 8.77
Capital Funding Trends
Venture capital (VC) investments help transform innovation into economic growth by providing funding to grow companies, and therefore grow the economy. Over the five-year period from 2015 through 2019, 3,532 biotechnology VC deals were completed in the U.S., representing nearly $39.5 billion in capital investments.2 The capital invested in biotechnology companies represents nearly a third of all capital invested in healthcare related deals (32 percent).
Since 2015, the number of biotechnology related VC deals has ranged from approximately 600 (in 2019), to a peak of over 800 in 2017. The amount of capital invested however has trended upwards, indicating an increase in the size of the deals that are being undertaken. There is some cause for concern however as deals and dollar decline in Q42019 and are likely to continue declining into 2020 due to the Covid-19 economic downturn.
Emerging Market Trends
As we were initially researching and preparing for this article Covid-19 was not on the radar in terms of economic implications. Well things have changed, and they changed rapidly and significantly. As indicated in this article, biotechnology includes multiple subsectors and is connected to multiple supply chains. Therefore, there are many market trends to follow and report on. Given the impact and timeliness we have chosen to focus on a few that are gaining importance or emerging in response to Covid-19 and are at the crossroads between biotechnology and the digital economy.
With no current vaccine or treatment Covid-19 has exposed the importance of speed in the R&D to trials to approvals to market process for new drugs. The process is understandably slow and deliberate given the need for effectiveness and safety. Artificial intelligence (AI) is on the rise specifically to improve and accelerate the drug discovery process. Pitchbook, a national leader in capital investment data, explains: “We believe that COVID-19 has demonstrated the validity of AI-based pandemic response and may catalyze changes in regulations around medical data sharing between companies, healthcare providers and governments for AI training purposes. That shift would unlock numerous opportunities in diagnostics and drug discovery.3” Additionally Crunchbase reports that companies are already in the mix. “OneThree Biotech is hoping to speed up the timeline for drug developers. The New York-based startup is building an artificial intelligence platform for use in drug discovery and development that aims to identify promising targets as well as potential risks and side effects at an early stage.4”
With unprecedented pressure to serve patients with critical needs at hospitals and the overall shortage of facilitates, Covid19 has shed light on the opportunity to deliver more services through telehealth. A rising trend prior to Covid-19, telehealth is now becoming mainstream as government and insurers ease regulations which were formerly barriers to growth. Crunchbase News highlights a startup in this space, Hims & Hers. “Hims & Hers, recently launched its primary care service via its telemedicine platform. In addition to being able to treat conditions such as the flu, asthma, allergies and UTIs, it now offers a free COVID-19 self-assessment. The startup says it is trying to relieve the pressure currently felt by primary care providers by giving patients more virtual options. Hims & Hers has had over one million medical visits take place through its platform since its launch in 2017.5” Telehealth is on the rise and projected to increase by traditional healthcare systems as well. For biotechnology, this means more demand for equipment as well as the ability to integrate more data for use in diagnostics, R&D, and trials.
In sum, much, if not all future biotechnology markets will be integrated with trends in IT and data. This is expressed by the World Economic Forum’s recent report on biotechnology: In the Fourth Industrial Revolution, biotechnology is poised for its next transformation. It is estimated that between 2010 and 2020 there will be a fifty-fold growth of data. Concurrent with the collection of personal data, we are also amassing a mountain of biological data (such as genomics, microbiome, proteomics, exposome, transcriptome, and metabolome).6”
Summing Up – What this means for economic and business developers?
There are several key action points for business and economic developers seeking to grow and support the biotechnology related economy.
Know Your Niche – Biotechnology integrates and connects to multiple markets and supply chains. 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 – They have a symbiotic relationship so connections within regions are critical to support existing and emerging companies and investment.
Look for Domestic Sourcing Opportunities – With the level of increased global risk more companies may 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/Gaps Through Industry Partnerships – 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 biotech continues to increase new business models and 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 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 Pitchbook. Includes companies for which Biotechnology is the primary industry. Pitchbook defines Biotechnology as companies engaged in research, development, and production of biotechnology. Includes embryology, genetics, cell biology, molecular biology, and biochemistry, among others.
3 The Ripple Effects of COVID-19 on Emerging Technologies – How the crisis is affecting the startup ecosystem, Pitchbook, March 26, 2020.
4 AI Driven Drug Platform, Crunchbase News, Joanna Glasner, March 26, 2020, https://news.crunchbase.com/news/onethree-biotech-raises-seed-round-for-ai-driven-drug-platform/
5 Startups Pager, Hims & Hers Boost Telehealth Offerings to Address COVID-19 Pandemic, Mary Ann Azevedo, Crunchbase News, April 2, 2020, https://news.crunchbase.com/news/startups-pager-and-hims-hers-boost-telehealth-offerings-to-address-covid-19-pandemic/
6 Expert Essays on the Future of Biotech World, Economic Forum, 23 Jan 2020, https://www.weforum.org/agenda/2020/01/6-expert-views-on-the-future-of-biotech/
Bios: Jim is Camoin 310’ Senior Vice President. He has more than 25 years of experience in public policy research and analysis. Jim brings a holistic, innovative approach to Camoin’s data-driven economic development planning efforts. Through his work with the Communities of the Future and World Future Society, he is a national leader in preparing the profession, communities and regions for an emerging economic future.
Jessica joined Camoin Associates in 2018 and is excited to use her background in statistics, economics, and consulting to help communities uncover their unique strengths. Jessica believes in combining a data driven approach with stakeholder collaboration to reach development success. Jessica comes to Camoin with an M.S. in Applied Statistics and Decision Making from Fordham University and a B.A. in Economics and Political Science from Providence College.
