Market Information
United States

Biotechnology: USA (Atlanta)

May 2002

Mary Louise Goodie
Business Development Officer
Canadian Consulate General
1175 Peachtree St. NE, Suite 1700
Atlanta, Georgia 30361
Tel.: (404) 532-2020
Fax: (404) 532-2050
E-mail: mary.louise.goodie@dfait-maeci.gc.ca
Internet: http://www.can-am.gc.ca/atlanta

Market Overview

Currently the United States tracks 1,450 biotechnology companies - firms that are dedicated to using new technologies, and that are generally founded to work with the technologies as defined by the U.S. Office of Technology Assessment. Of these firms, 253 or 16% are located in the Southeastern United States, with the heaviest concentration, 183 firms (72%), headquartered in North Carolina. In addition, 267 other companies (often larger corporations) are primarily involved in a particular industry, but are using the new technologies to diversify their activities or product lines.

In the southeast, biotechnology centres of excellence are clustered around universities: the University of Florida in Gainesville, where the primary focus is agriculture and veterinary; the University of Alabama at Birmingham, where the focus is on AIDS and cancer research; Georgia, at the private Emory University, where primary research is on AIDS, cancer and infectious diseases in conjunction with the Centers for Disease Control; and finally North Carolina, where Duke, a private institution, looks at most areas of human health, while North Carolina State University focuses on agriculture. In North Carolina's Research Triangle Park, we find the state-funded North Carolina Biotechnology Center, which serves as an incubator for new technologies. Companies looking at environmental biotechnologies are found near the University of North Carolina at Chapel Hill and the University of Tennessee at Knoxville/Oak Ridge.

These southeast U.S. biotechnology firms fall into the national average of being 10 to 12 years old, 63 of whom are actually involved in biotechnology. Average revenue per company is approximately $60.1million1 with the median being just over $6.8 million, because most of these companies are small with fewer than 30 employees. The median R&D budget exceeds $4.5 million. Many of these companies (48%), like the national average, continue to be privately funded. This is a shift since this industry began to be monitored, with 1999 marking the first time that the proportion of private companies was less than half of the total. Public companies were at 27%, while 25% remained subsidiaries, usually of large global pharmaceutical companies.

Venture capital (VC) remains an important source of funding for the biotechnology sector, with 270 U.S. VC firms investing in biotechnology. North Carolina ranks seventh nationally in the number of VC sites invested in biotechnology. Currently, 70% of the VC companies and investment dollars reside in California, New York and Massachusetts.

Southeastern biotechnology firms are subdivided into these primary subsectors: therapeutics (34%); diagnostics (15%); agriculture (10%); environmental (2%); other (29%). Other areas include reagents; specialty chemicals; vaccines; drugdelivery systems; veterinary; immunological products; and testing/analytical services.

Opportunities

Opportunities exist for Canadian biotechnology companies in the Southeastern U.S. in the form of strategic alliances or as contract research organizations. The Internet has become a major source of information on what the competition is doing. It is imperative that Canadian companies stay abreast of their competition so that they can foster partnerships.

The industry is very high-tech oriented, with 98% of biotechnology firms maintaining Web sites and looking to meet with companies with the same level of expertise. Both the State of North Carolina and the State of Georgia have provided direct funding to automate their biotechnology firms.

Market Access Considerations

Many issues face the biotechnology industry in the Southeastern United States, with the largest being the raising of funds and other related issues, such as tax credits. Other issues, such as patent protection and health-care reform, also tie into the availability of funds. Where Southeastern biotechnology falls short is in the areas of social and educational issues. The public does not understand biotechnology, and the industry has done little to educate the public.

All companies, whether local or foreign, are required to adhere to United States Food and Drug Association (USFDA) standards.

The needs and issues of the 253 dedicated biotechnology firms in the Southeastern United States are unique, not from the firms in the rest of the U.S.; but from the other high-technology industries. Elements that distinguish biotechnology firms from other types of high-tech firms are outlined below:

Cost of startup: Typically, it costs US$1-$2 million to get off the ground and an additional US$5-$10 million during the first few years, and all of this is long before a product is brought to market.

Other people's money: Due to the high cost of startup, biotechnology companies are not self-financing. The median paid in capitalization nears $20.3 million.

Early research-based: High capital outlay for equipment, plus a high level of technical training, means an expensive work force. The majority of activities (55%) are in R&D, while manufacturing and marketing account for only 29%. Many firms do not have a product to make or to bring to market.

Time to market: Development time is five to 12 years, during which time companies must endure expensive regulatory and R&D expenses. Most investors are not willing to wait.

Regulations: Heavy regulation by the federal government means that it typically takes hundreds of millions of dollars to bring a single biotherapeutic to market.

Patent questions: A backlog of more than 11,000 patent applications has decreased, but companies need to show patents in order to raise capital.

Strategic alliances: Over 6,000 intercompany alliances in biotechnology exist, with more than 500 new alliances added each year. Most are with university laboratories. Alliances bring capital, expertise, geographic diversity, access to new products and technologies, and regulatory experience. They allow companies to be "virtual," developing their own products, while outsourcing manufacturing, marketing, regulatory work and international sales.

Public perception: As a new science, biotechnology is not understood by the public.

Other Useful Information Sources/Web Sites

Bioability (formerly the Institute for Biotechnology Information): http://www.bioability.com/

E-mail info@bioability.com

Novartis: http://www.novartis.com

U.S. Biotech Information Institute (federal biotechnology transfer director): http://www.bioinfo.com/biotech

Canadian companies wishing to export to the U.S. http://www.ustradecenter.com

The Canadian Institute for Scientific and Technical Information (CISTI) http://www.nrc.ca/cist

The Food Biotechnology Communications Network: http://www.foodbiotech.org

For detailed market reports about this sector, please visit http://www.infoexport.gc.ca