The Impact of Large Biotechnology Centers on Florida’s Economy

Florida’s commitment to forming a biotechnology cluster within the state will have significant impact on both the healthcare industry and Florida’s overall economy during the next 10 to 15 years. During the last four years, the state has earmarked nearly $700 million in incentive plans to help attract two of the largest biotechnology research institutes in the world, the Scripps Research Institute and the Burnham Institute.

The Clustering Effect

The true impact both the Scripps and Burnham institutes will have on the economy will be determined by the synergies of the resulting emerging partners in each area. The clustering effect refers to the ability of these institutes to attract start-up enterprises and highly skilled workers to a particular area. The attraction for these businesses lies in the ability to service and work with these institutes. It has long been noted that many medical breakthroughs occur through interaction between researchers outside of the lab and even from different companies. This “serendipitous” relationship is the driver for biotech firms clustering together.

The model for this clustering effect is San Diego, CA where the presence of both institutes has resulted in the third-largest biotechnology cluster in the nation. Thirty years ago, San Diego was an economy driven by tourism and land development. Today, the San Diego biotechnology cluster receives more than a billion dollars a year in research grants, employs more than 40,000 people and has an economic impact of more than $8.5 billion annually. Similar clusters have formed in the Boston/Worcester area, the Research Triangle area of Raleigh-Durham and the Silicon Valley outside of San Francisco.

Early Clustering Indications

Early indications of a clustering effect in Central Florida seem strong. The University of Central Florida is building a 113,000-square-foot medical school that is expected to be clinically operational by 2008, producing 120 graduates per year. In addition to a proposed addition of a new $400 million Nemours children’s hospital and research facility, two of the largest hospital systems in the United States, Florida Hospital and Orlando Regional Medical Center, plan to build nearby facilities, along with a new Veteran’s Hospital. Rounding out the supporting infrastructure is a planned research facility jointly run by Burnham and the University of Florida.

In Palm Beach County, the Scripps Institute has formed the nucleus of a biotechnology cluster with existing companies such as Nabi Biopharmaceuticals, Dyadic International and Solomon-Page Group’s life science unit. While this nucleus is impressive in terms of the current commercialization of its companies’ products and services, it seems to lack the supporting infrastructure of the Orlando cluster’s numerous hospitals, research institute and medical school.

The Value Proposition to Central Florida Business

While the full impact of attracting both the Scripps and Burnham Institutes will not be known for some time, it is obvious that their presence will create substantial value and opportunity for Florida’s healthcare industry as well as the overall economy. First, investment dollars will certainly increase as investors try to capitalize on the large potential that support organizations can realize from aligning with either institute. Evidence of this can be seen in the pre- and post-Scripps effect on the Palm Beach County region. From 1998 to 2002, that region received only one private placement of capital in the life sciences industry. However, since 2003 that’s grown to 10 private placements. Compare these numbers to the 97 and 139 private placements in the San Diego area during the same respective timeframes and it becomes clear that the burgeoning Florida clusters will attract capital. Second, the clustering effect will create more high paying jobs throughout the region by attracting world-class talent to the region. This boost in higher paying jobs will create an increase in discretionary spending dollars. Nearly all industries impacted by an increase in consumer spending (such as retail, construction and entertainment to name a few) will be positively impacted.

We are excited about the emerging presence of the biotechnology industry in Florida. We believe that we will not need to wait three decades to achieve the current results of San Diego. The impact may not be felt today, but the groundwork has been laid for a bright future. Let’s get involved.

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Michael Poole

Investment Banking
Orlando Office

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