BIO 2010: Minnesota’s biotech sector languishes far behind medical devices

More evidence that Minnesota has a lot of work to do in developing a viable […]

More evidence that Minnesota has a lot of work to do in developing a viable biotech industry.

From 2004 to 2009, local human biotech firms attracted only $1 million in venture capital compared to $1.2 billion for medical devices, according to a report by Battelle Memorial Institute and the Biotechnology Industry Organization.

$1 million over five years! By contrast, investors poured $98.5 million into Wisconsin biotech companies during the same period and $107.2 million in drugs/pharmaceuticals.

The numbers shouldn’t be too surprising: You only get returns if you make investments. Minnesota universities spent $86 million on research and development in biological sciences in 2008 compared to $332.1 million in medical technology. Over the past five years, local companies won over 3,000 patents in medical and surgical instruments, and equipments compared to 679 in biotech/drugs.

In a way, the Battelle report reinforces the argument that perhaps Minnesota should stick to medical devices. By every measure, Minnesota, along with California and Massachusetts, dominates the industry thanks to companies like Medtronic Inc. (NYSE: MDT), Boston Scientific Corp. (NYSE: BSX), and St. Jude Medical Inc. (NYSE: STJ). Minnesota employs 6.9 percent of the nation’s entire medical device workforce, trailing only California at 16.8 percent.

And the industry has held up well. Since 2004, the workforce has grown 6 percent or about 1.5 percent a year — not great, but steady given today’s economy. Last year, publicly traded medical device makers generated $106 billion in revenue, or 18 percent of all bioscience companies, and $7.1 billion in profits, or 10 percent of all bioscience companies.

But here’s a sobering fact: Judging by the report, medical devices and by default, Minnesota, are on the wrong side of the future.

Research, testing and medical laboratories, with rapid job growth in recent years, now employ 39 percent of all bioscience workers, beating out medical devices at 32 percent. From 2001 to 2008, this industry has added more than 176,000 jobs or 46.1 percent to its employment base with no signs of letting up.

These firms provide the brain power behind the creation of new therapeutics and offer biomedical diagnostic and lab services. Within this industry, biotechnology and other life sciences research and development grew the most and now accounts for 60 percent of employment. Average annual pay within this field was $80,785 in 2008, up 12.5 percent since 2001, compared to $63,606 for medical devices, a gain of 9 percent.

What’s Minnesota’s share of this promising industry? Less than 1 percent of the nation’s total workforce.

I’m not saying Minnesota should abandon medical devices anytime soon. But it’s worth noting the state is so heavily dependent on the industry. In fact, if you strip out medical devices from biosciences, the report would have very little to say about Minnesota.

Now take nearby Madison, Wis. The city seems like small potatoes compared to the Twin Cities. But Madison is one of only a few major metropolitan areas in the country to rank in the top ten in employment concentration in each of the four bioscience industries tracked by the report: agriculture/feedstocks, drugs/pharmaceuticals, medical devices and research and testing.

Minneapolis-St. Paul had only one industry. Can you guess which one?

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