LIFE SCIENCES IN TEXAS A PROMISING SECTOR IN A PROMISING STATE

Transcription

1 LIFE SCIENCES IN TEXAS A PROMISING SECTOR IN A PROMISING STATE NBSO - Texas December 2012 Page 1

2 Netherlands Business Support Office Texas 1801 Allen Parkway, Suite 240 Houston, Texas Tel: Fax: Intern: Stephan Nijhuis (author) Contact: Saskia van Oostveen Representative Netherlands Business Support Office Texas T ext. 103 M Eli D. Mercer Adjunct Lecturer of Entrepreneurship The University of Texas at Austin elidmercer@global.t-bird.edu M) Page 2

3 ACKNOWLEDGEMENTS This report was my main assignment of my internship at the Netherlands Business Support Office (NBSO) Texas. Furthermore, the primary goal of the report is to identify business and research opportunities for Dutch Life Sciences related institutions in order to work with Texas institutions to increase bilateral economic growth and foster business relationships that lead to mutual economic gain. I tremendously appreciate all the people that provided me with directions which have led to this final report. First of all, I would like to thank my Chief Representative Gérard Brikkenaar van Dijk and my coworkers Saskia van Oostveen and Elizabeth Batlle at the NBSO. Without the guidance and supervision of them, reaching this result would have been more difficult. In addition, I want to extend my gratitude to Stephan Raes, Minister of Economics with the Royal Netherlands Embassy. He gave me the key directions for the final structure and content of this paper. Last but definitely not least, I would like to give special thanks to Eli Mercer, Lecturer at the University of Texas at Austin. He gave me the fundamental directions for this report. He taught me methods which will be great contributions to both my further academic and professional career. Moreover, his effortless guidance and assistance were more than a great help to the end result of this report. Page 3

4 EXECUTIVE SUMMARY Houston, December 2012 The Netherlands Business Support Office (NBSO) -Texas provides assistance to Dutch companies interested in establishing or expanding their presence in the United States market. The NBSO acts as a liaison for such Dutch companies as it actively identifies and pursues opportunities to forge partnerships with Texas businesses. Additionally, the NBSO offers its clientele information on critical business legal issues and remains constantly aligned with the latest US business trends and models. This report aims to attract Dutch entrepreneurs, investors, expanding businesses and research facilities to look deeper into Texas Life Sciences opportunities. Governor Rick Perry proclaimed Life Sciences to be one of six major industry clusters for Texas in The sector has since grown significantly and made a major leap toward becoming a leader in research and development worldwide. The traditionally welcoming climate for business, investment, education and R&D has fueled a strong and innovative Life Sciences sector. State government and various regional agencies make big efforts to combine policy, academic research and commercial success to have a positive impact on the sector, reaching far beyond the Texas borders and into the rest of the world. NBSO-Texas has selected the Life Sciences cluster as one of the most promising for internationalizing companies who wish to expand into the state. This report aims to identify opportunities for Dutch exporters, investors and research facilities to gain a grasp of what is currently going on in the sector beyond US regions like Massachusetts, the Carolina triangle and California. Attributes of the Business Environment According to CNBC s 2012 rankings, Texas is the number one state for business. Houston is ranked the second U.S. city for global trade and Austin within the top five cities for Start-Ups. With no state corporate income tax and no state individual income tax, it has one of the lowest tax burdens in the country. The overall cost of living in metro areas falls 15% to 20% below the national average. According to the U.S. Census, Texas has the most favorable business climate in the country. Texas leads the U.S. in exports at billion in 2008 and is the second largest economy in the U.S. Over the last 10 years, Texas has introduced a series of targeted initiatives to earmark resources to support innovation sectors including Life Sciences to attract R&D and new businesses. As part of this effort, the Texas Legislature created the Emerging Technology Fund (ETF) in 2005 to provide Texas with an unparalleled advantage in the research, development, and commercialization of emerging technologies. Grants are awarded in three areas: Commercialization Awards: funds to help companies take ideas from concept to development to ready for the marketplace. Matching Awards: funds create public-private partnerships that leverage the unique strengths of universities, federal government grant programs, and industry. Research Superiority Acquisition: funds for Texas higher education institutions to recruit the best research talent in the world. Page 4

5 In total, there have been $ Million in ETF investments in Biotechnology and Life Sciences Projects in the state since 2005, and an average of $4 of private sector investment in ETF companies for every dollar awarded through the program. These awards are available to foreign entities that set up Texas ventures and demonstrate long-term commitment in the state and at least one major award has been given to an international partnership that targeted, competed, and won the selection process to conduct R&D and commercialization activities in the state. Aside from government resources and funds provided at the federal, state and local level, innovation has thrived in Texas thanks to proactive leadership and investment from self-motivated private sector and science and technology research collaborators intent on making Texas a leader in the nation. Innovation centers, incubators, accelerators, entrepreneurship centers and related organizations, universities and economic development partnerships are all well connected and enjoy broad participation from the public, private, and education sectors as well as a wellspring of entrepreneurs and business talent to man startups and growing technology firms. This provides the state with a unique infrastructure and resources for Life Sciences R&D and innovation. Geography and Infrastructure Texas is strategically located in the center of the United States both geographically and in terms of time zones, allowing for quick and efficient travel to other states, as well as cost-effective operations when dealing with both the East and West coast. The state serves as the primary land bridge from the US to Mexico and is located on the Gulf of Mexico with the second busiest port in the US in Houston. This unique geographic position allows strategic and operational flexibility in manufacturing, import, and export of goods and services internationally. Geographically, more than 90% of the companies in Texas are located in the central region dubbed The Texas Triangle, which includes Houston, San Antonio, Austin and Dallas Fort Worth. Each of these cities and their surrounding regions is known for unique opportunities, industries, assets, and entrepreneurial ecosystems. These cities have good airports and transportation infrastructure, including two national headquarters for major US airlines and primary hubs for connecting flights, thus facilitating business activities among partner institutions across the state, nationally, and globally. Health and Life Sciences Sector in Texas Texas is one of the leading states in biotechnology with an estimated annual economic impact of $75 billion and more than 3,400 manufacturing and R&D firms. A significant number of top global biotechnology companies have Texas locations, underscoring the state's vitality in this industry. In 2010, one out of every 15 U.S. biotechnology establishments was located in Texas. The top 3 Life Sciences Sectors in Texas are: Medical Devices; Pharmaceuticals; Biologics. The top 5 areas of specialty in the Life Sciences are Cancer; Cardiovascular; Orthopedics and Spine; Wound Management; Surgical Technology. Medical devices is one of the largest biotechnology sectors by Page 5

6 employment in the state, and has grown substantially over the last five years. Texas is home to more than 1,250 medical equipment and electrical instrument establishments, which employ more than 35,000 skilled workers, or approximately one third of Texas biotech employment. The segment s average annual salary is over $70,800. Life Sciences R&D, Life Sciences Degrees Granted, and Signature Institutions In 2010, total university expenditures on Biomedical R&D in Texas were over $2.137 billion. In the same year, Texas conferred more than 6,700 degrees from health related universities. In 2010 the University Of Texas (UT) was ranked No. 2 nationally for the number of patents earned and the state ranks second nationally for the total number of patents and patent applications. The state has a number of globally recognized signature institutions in Life Sciences and Health R&D that serve as hubs for science, technology, and business activities in the sector. As an example, the Texas Medical Center (TMC), located in Houston, is the world s largest medical center and attracts many Life Sciences related institutions to the Houston area. The State s promising talent pool, NASA, and Worldwide Headquarters for US Military Medicine Texas ranked No. 3 in 2008 in Life Sciences talent employing 39,900 Science, Engineering and Health doctorate holders according to the National Science Foundation (NSF). In 2010 Texas ranked No. 2 with 48,850 of Life and Physical Scientists employed, according to the NSF. Despite the impacts of the national economic downturn the Biotech sector as a whole saw an overall employment increase in The strength of the Texas Biotech labor pool is evidenced by Texas ranking in the top 3 states for Biotech doctorates awarded in Life Sciences. In 2012 U.S. News & World Report ranked the nation s top 100 research medical schools, including five Texas Universities. Along with the robust pool of talent, several major US entities headquartered in Texas help to drive R&D, innovation, and commercialization in the Life Sciences. As an example, the TMC and other institutions benefit from the presence of NASA in Houston. Due to NASA s spinoff technologies, Texas Life Sciences institutions have been enabled to introduce new products and technologies especially in the medical devices branch. On a similar note, the city of San Antonio has become the worldwide headquarters for US military medicine including R&D and clinical care. This has fueled multi-billion dollar investment in the region and similarly enabled many Life Sciences institutions to discover, patent, and commercialize new products and services in the sector. Page 6

7 Attractive trends and developments for years to come In recent years, Life Sciences institutions from other U.S. technology hubs have been relocating or setting up operations in Texas to take part in the rapid growth, the dynamic entrepreneurial environment, and take advantage of macroeconomic conditions in the state. While other states are suffering from depressed economies, Texas has managed to grow through the recession, especially in advanced science and technology as well as professional sectors. As an example, in the highly advanced subsector of electro-medical instrument manufacturing, employment increased nearly 11% from , despite the recession. In order to enable this growth in key targeted areas of Life Sciences R&D and commercialization, the state government has worked with private sector and higher education stakeholders across the state to identify areas of need and galvanize investment to fill holes in Life Sciences infrastructure and resources in the state. As part of this initiative, and with support of federal and state government, higher education institutions have initiated state of the art innovation and development programs in the last few years specifically designed to create new entities and to recruit world-class talent to the state to overcome the identified holes and to enable growth. As an example, in June 2012, the federal government announced that Texas A&M University was selected by the U.S. Health and Human Services to become one of three new national centers for Innovation and Advanced Development. With the opening of this center in College Station, the city will become a hub for the pharmaceutical industry and research, which could potentially draw millions of dollars into the economy for years to come. Additionally, new facilities have been built and talent has been recruited in order to boost the availability of wet lab space, facilities for earlystage trials and animal testing, as well as clinical trials in order to accelerate the number and pace of FDA approvals for promising early-stage technologies. This is expected to serve as an attractive enabler of both the pharmaceutical and biotechnology sectors and is expected to allow new Life Sciences researchers, entrepreneurs, and investors to relocate to Texas in the coming decade. Due to sustained economic growth and the availability of high paying jobs, coupled with inexpensive housing and no state income tax, there has been a mass migration into the state from California, Boston, and other major tech hubs over the last decade. Texas has earned a reputation for the low cost of living, high living standards, and being easy to conduct business and is considered to be one of the closest domestic high-tech rivals to Silicon Valley. For many companies, the major cost advantage for setting up and operating a business coupled with the high earning potential in the state make it an attractive alternative to Silicon Valley and other major tech hubs for investment, relocation, and partnership. This trend is expecting to continue and growth and investment in the Life Sciences sector is projected to accelerate rapidly over the coming decade. Some estimate that the sector could double by the year Page 7

8 TABLE OF CONTENTS EXECUTIVE SUMMARY 4 ECONOMIC TIES BETWEEN THE NETHERLANDS AND TEXAS OVERVIEW LIFE SCIENCES AND HEALTH IN TEXAS THE LIFE SCIENCES AND HEALTH INDUSTRY WORKFORCE UNIVERSITIES AND R&D DEPARTMENT OF DEFENSE NASA SPINOFF TECHNOLOGIES IN LIFE SCIENCES LIFE SCIENCES SUBSECTORS HEALTH R&D PUBLIC RESEARCH HEALTH CENTERS PRIVATE COMPANIES TRENDS & DEVELOPMENT MEDICAL DEVICES COMPANIES TRENDS & DEVELOPMENT PHARMACEUTICALS COMPANIES TRENDS & DEVELOPMENTS INNOVATION AND DEVELOPMENT GOVERNMENT INITIATIVES & FUNDING STATE INITIATIVES INNOVATION AND DEVELOPMENT PROGRAMS UNIVERSITIES AND INNOVATION UNIVERSITY OF TEXAS (UT) TEXAS A&M UNIVERSITY (TAMU) BAYLOR COLLEGE RICE UNIVERSITY 29 Page 8

9 3.3. INNOVATION CENTERS, INCUBATORS AND ECONOMIC DEVELOPMENT 3.4. PRIVATE CAPITAL ANGEL CAPITAL NETWORKS VENTURE CAPITAL TRENDS & DEVELOPMENT UNIQUE SELLING POINTS OF TEXAS 32 APPENDIX 1: CONTACT DETAILS MEETINGS 37 APPENDIX 2: LIFE SCIENCES COMPANY LIST 39 Page 9

10 ECONOMIC TIES BETWEEN THE NETHERLANDS AND TEXAS The relationship between the Netherlands and the USA has always been strong. Close to 625,000 Americans are at work as the result of the economic ties with the Netherlands. Texas has by far the most of these people employed, namely 75,653. Texas is also the leading state when it comes to Dutch FDI s in the USA ($1.8 billion out of the total of $11.4 billion). This makes the Netherlands the 4th largest investor in Texas, after the UK, Germany and Japan. The Netherlands is the 5th largest export country for the state of Texas worth $5.9 billion. The imports from the NL total $1.8 Billion, which makes the Netherlands one of the most important trading countries for Texas. Figure 1 gives an overview of the key figures on the economic ties between the Netherlands and the USA in Figure 1: overview of the key figures on the economic ties between the Netherlands and the USA. 1. OVERVIEW LIFE SCIENCES AND HEALTH IN TEXAS This chapter gives a broad overview of the Life Sciences and Health sector of the state. It starts off with a description of the structure and its key dynamics of the sector (2.1). This highlights the subsectors, areas of specialty, the geographical areas and the public & private sector. After this, there is a short focus on the sector s workforce (2.2). Finally, the last three paragraphs explore the three major parties of the public sector: Universities (2.3), Department of Defense (DoD) (2.4), and NASA (2.5) THE LIFE SCIENCES AND HEALTH INDUSTRY Texas is one of the leading states in Biotechnology in the U.S. with more than 3,400 manufacturing and R&D firms. 90% of the industry s entities are located in the Texas Triangle, Houston or the I-35 cities which include San Antonio, Austin 1 Page 10

11 and Dallas Fort Worth. According to a survey of the Texas Medical Device Alliance, the top three sectors regarding Life Sciences in Texas are: 1. Medical Devices; 2. Pharmaceuticals; 3. Biologics. The top five areas of specialty are: 1. Cancer; 2. Cardiovascular; 3. Orthopedics and Spine; 4. Wound Management; 5. Surgical Technology. Figure 2: Texas Triangle In the public sector, parties that conduct R&D are the University systems, NASA, and the Department of Defense (DoD). 90% of the R&D is conducted by the public sector. Private Life Sciences companies have components in public institutions. There are five leading university systems with Life Sciences programs including its two flagship universities. The university system is located mainly in the Texas Triangle; Houston, San Antonio, Austin and Dallas Fort Worth. San Antonio is Texas military hub. In September 2011 U.S. Air Force and Army officials activated the San Antonio Military Health System (SAMHS), which provides an overview of all military treatment facilities and the health care needs of approximately 230,000 DoD beneficiaries in the San Antonio area. SAMHS healthcare services are provided by the San Antonio Military Medical Center (SAMMC). The state is home to the NASA Johnson Space Center, located just outside of Houston. The state s talent pool benefits from NASA s spinoff technologies. Kimberly Clark, Celanese, and Kinetic Concepts, are examples of Fortune 1000 companies that have headquarters in the state. Texas is home to over 88,500 workers that are employed in life sciences-related sectors. 82% of the Life Sciences companies in the state are privately held companies. Approximately one Page 11

12 third of the companies are in their expansion/growth stage. 2 A concentration of highly trained Biotech workers, multiple top-tier research institutions and a topranked business climate all strengthen the state s status as one of the Biotechnology leaders. 3 The total economic impact of the Life Sciences industry in Texas in 2009 was estimated at $75 billion. 4 A good way to approach Life Sciences and Health organizations is through regional chambers of commerce and/or regional economic development partnerships. They have knowledge of the regional Life Science and Health sectors and they have strong connections with local companies. This also includes major global Life Sciences companies that have headquarters and/or operations in the Texas Regions. 5 Appendix 3 consists of a list of all chambers of commerce and economic development partnerships WORKFORCE The state ranked No. 3 in 2008 with employing 39,900 Science, Engineering and Health doctorate holders according to the National Science Foundation (NSF). In 2010 Texas ranked No. 2 with 48,850 of Life and Physical Scientists employed, according to the NSF. 6 From 2007 to 2011 Biotechnology employment in Texas increased by 1.3%. The medical and diagnostic clinics segment saw continuous employment increases each year during that period, while testing labs and electro-medical apparatus manufacturing experienced the greatest overall employment increases. They each increased by more than 13% between 2007 and Despite the impacts of the national economic downturn the Biotech sector as a whole saw an overall employment increase in UNIVERSITIES AND R&D The two flagship universities are the University of Texas (UT) and Texas A&M (TAMU). These two universities are also the leading ones in Life Sciences and Health studies. With regards to Life Sciences and Health the other two important universities are Rice University and Baylor University. 8 In 2010 Texas Universities expenditures on Biomedical R&D were over $2.137 billion. In the same year Texas conferred more than 6,700 diplomas from health related universities. 9 In 2010 the University Of Texas (UT) ranked No. 2 nationally for the number of patents earned, up from No. 5 in From ,329 pharmaceutical-related utility patents were issued in Texas for 2 Survey Life Sciences Texas, Jack Hart (TMDA) Interviews with CoC s Meeting Eli Mercer, lecturer at UT at Austin, Page 12

13 Class 424: Drug, Bio-Affecting and Body Treating Compositions. 11 This pharmaceutical patent class is one of Texas strongest areas of patent activity. University of Texas (UT): UT is Texas flagship university system in Life Sciences and Health with regards to both the number of institutions and R&D expenditure. The UT-system is home to nine universities and six health institutions. The expenditure in Biomedical R&D was over $1.1 billion in Annually $1.1 billion was awarded in sponsored R&D over the past two years. About 800 patents have been awarded to the university. UT saw a 22% increase in patents over the previous year. UT-Health UT Southwestern Medical Center UT Medical Branch at Galveston UT Health Science Center at Houston UT Health Science Center at San Antonio UT MD Anderson Cancer Center UT Health Science Center at Tyler Table 1: UT-System. 12 UT Universities UT Arlington UT Austin UT Brownsville UT Dallas UT El Paso UT Pan American UT Permian Basin UT San Antonio UT Tyler UT-Health has over 10,000 faculty, staff, students and residents and educates more health care professionals than any other Texas institution. UT-Health conferred more than 1,270 diplomas and spent almost $261.2 million for research in FY UT-Science Center managed $228 million in annual research related activities in FY Texas A&M University (TAMU): The Texas A&M University System is one of the largest systems of higher education in the U.S. with 11 universities and a Health Science Center. $689 million was spent on research and development in Researchers and graduate students are involved in projects on every continent in the world with more than 600 initiatives underway in more than 80 countries. 14 Baylor University: Baylor College of Medicine is Texas only private medical school. It is located in the Texas Medical Center in Houston. According to U.S. News & World Report Baylor College of Medicine (BCM) ranks in the top 25 medical schools nationally and second on state level. It has over 11,600 faculty, staff, students and residents with research support of $400 million. Its Biomedical R&D expenditure was $428 million over Page 13

14 Rice University: Rice University is located in Houston. The Department of Bioengineering at Rice University is ranked among the U.S. top 10 bioengineering/biomedical engineering graduate programs. Approximately 130 graduate students are enrolled in the program. One of Rice s value propositions is its collaboration with TMC. Total research expenditures of the Bioengineering Department for fiscal year 2011 were $14.3 million. 16 Recently it received five multi-million dollar grants from CPRIT for the development of new technologies and therapies, recruitment of established investigators and the opening of a new $20 million pre-commercialization center DEPARTMENT OF DEFENSE The military is an early adopter of biotechnologies and therefore a contribution to the state s emerging technologies. A number of Texas health centers expansions are a result of the DoD s military base realignments across the nation, which consolidated military healthcare facilities in San Antonio. In 2011 the U.S. Air Force and Army activated the San Antonio Military Health System (SAMHS), which provides an overview for all military treatment facilities and the healthcare needs of approximately 230,000 Department of Defense (DoD) beneficiaries in the San Antonio area. 17 San Antonio is home to the National Trauma Institute (NTI). NTI research topics are focused on Comparative Effectiveness Research and the need for evidencebased clinical practice. Current priority areas include: Hemorrhage Management, Airway & Ventilation Strategies, Technology Development, Disaster Preparedness, Infection Control and Burn Treatment. NTI has awarded $4 million to 16 clinical and translational studies, involving 55 trauma investigators in 39 participating institutions nationally NASA SPINOFF TECHNOLOGIES IN LIFE SCIENCES A Johnson Space Center-private industry Small Business Innovation Research (SBIR) partnership has resulted in a new eye-tracking device for LASIK surgery, called LADARTracker. LADARTracker measures eye movements at a rate of 4,000 times per second, 4 times the established safety margin. The device is manufactured by Alcon Laboratories and is used in conjunction with the company s LADARVision 4000 system for LASIK surgery Page 14

15 Engineers from Johnson Space Center teamed up with famed cardiologist Dr. Michael DeBakey to develop a ventricular assist device that functions as a bridge to heart transplant by pumping blood throughout the body to keep critically ill patients alive until a donor heart is available. The consortium analyzed blood flow through the battery powered heart pump using NASA supercomputers and the same methodologies used to analyze fuel and oxidizer flow through rocket engines. NASA patented the heart pump and licensed it exclusively to MicroMed Technology Inc Page 15

16 2. LIFE SCIENCES SUBSECTORS This chapter explores the three sectors of the sector: Health R&D, Medical Devices, and Pharmaceuticals. The first paragraph explores the public and private site of the Health R&D subsector (3.1). It highlights the leading research centers of the public and private side, and the trends and developments of this subsector. The second paragraph describes the Medical Devices subsector (3.2). It takes off with a broad overview of this subsector, followed by a description of the company side of this subsector, and finally a listing of the key trends and developments. The last paragraph of this chapter, the Pharmaceuticals subsector (3.3) has the same structure as paragraph HEALTH R&D R&D is mostly provided by the state s network of public universities and healthrelated institutions which invest heavily in R&D and intellectual property generation. In fiscal year 2010 Texas public institutions of higher education expended over $2.5 billion on Medical and Life Sciences research, accounting for 61% of all higher education R&D expenditures in the state Public Research Health Centers Texas Medical Center (TMC): The Texas Medical Center (TMC) in Houston is the world s largest medical center with over 71,500 students and 93,500 employees and located on over 1,000 acres. The TMC annually conducts $1.2 billion in research and has a yearly economic impact of $14 billion on the region. Its 50 member institutions, comprised of hospitals, schools and other specialty institutions include the Baylor College of Medicine, UT M.D. Anderson Cancer Center, UT Health Science Center, Texas A&M University Health Science Center, The Methodist Hospital and Texas Children s Hospital. TMC plans $7.1 billion in capital investment through 2014 including the $1 billion Baylor Clinic and Hospital. Texas Children s Hospital (TCH) recently completed its $1.5 billion expansion. 22 The state is home to state of art R&D health centers. The top 5 are listed below. UT MD Anderson: In November 2011 the governor announced the creation of the Institute for Applied Cancer Science (IACS) at The University of Texas (UT) MD Anderson Cancer Center and the recruitment of 25 scientists from Harvard University to M.D. Anderson. The Institute s scientists will focus on research, drug discovery, and translational medicine, integrating academic and pharmaceutical science to develop innovative medicines and therapies tmc/ 23 us/facts- and- history/index.html Page 16

17 Baylor College of Medicine: The Baylor College of Medicine (BCM) in Houston, located in Houston s TMC, is the state s only private medical school. Baylor has over 11,600 faculty, staff, students and residents with research support of $363 million ranked as one the nation s top 25 medical schools for research by U.S. News & World Report in It ranked 2nd nationally in federal funding for R&D in the biological sciences at universities by the National Science Foundation. 24 UT Southwestern: UT Southwestern Medical Center at Dallas (UTSWMC) alone employs about 11,400, trains nearly 4,600 students annually and has an operating budget of $1.79 million. In 2012 it ranked No. 20 for best U.S. research medical schools. Ongoing support from federal agencies such as the National Institutes of Health, along with foundations, individuals and corporations provide more than $417 million per year to fund about 3,500 research projects. The medical center houses one of the 12 U.S. principal laboratories of the Howard Hughes Medical Institute (HHMI). HHMI has invested more than $8 billion over the years for the support, training and education of scientists. Almost 60 researchers have come through the medical center's Scholars Program in Medical Science, and combined have obtained about $75 million in research funding from the National Institutes of Health. 25 UTMB Galveston: UTMB has developed a strong program in infectious disease research with several facilities devoted to it. UTMB has over 13,600 faculty, staff and students with total research expenditures of $156.8 million in FY It serves as one of the nation s 11 federal Regional Centers of Excellence for Biodefense and Emerging Infectious Diseases Research (CBEID) for the Western Region. In 2003 the UTMB CBEID was awarded a $110 million NIH grant. 26 Furthermore, UTMB is home to one of the nation s two National Bio containment Laboratories. The Galveston National Laboratory (GNL) was established with grants awarded by the NIH s National Institute of Allergy and Infectious Diseases (NIAID). The GNL conducts research to develop therapies, vaccines and diagnostic tests for naturally occurring emerging diseases such as SARS, West Nile encephalitis and avian flu as well as for microbes that might be employed by terrorists. 27 UT Health Center San Antonio: This health center has over 9,800 employees and students in four cities in the San Antonio Area. It managed $228 million in annual research related activities in It opened the new $150 million South Texas Research Facility in October At the facility lab teams are working in areas ranging from regenerative medicine to cancer research sheet- 29nov2011.pdf Page 17

18 The CTRC is a National Cancer Institute designated cancer center, one of four in Texas and a distinction held by only the top-tier cancer centers nationwide. A leader in developing new drugs to treat cancer, the CTRC s IDD conducts an oncology Phase I clinical drug program and participates in development of cancer drugs approved by the U.S. Food & Drug Administration. 29 UT Health Houston: Located in Houston s TMC the University of Texas Health Science Center at Houston (UTHealth) is the largest medical school and focuses primarily on graduate education and research. It has over 10,000 faculty, staff, students, and residents. It conferred more than 1,270 degrees and spent almost $261.2 million for research in Private Companies Public investment in Biotechnology research is complemented by the state s cluster of private sector R&D activity. Texas is home to 850 private scientific R&D firms that employ more than 21,300 workers. Major private Biotechnology R&D firms have operations in the state. The Austin and San Antonio regions both boast particularly high concentrations of private sector Scientific R&D employment. In addition to R&D facilities there are more than 2,000 medical and testing laboratories including blood, pathology, imaging, diagnostics and device testing facilities. These laboratories employ more than 32,200 people. Major laboratory firms in the state include Lab Corp s Esoterix subsidiary and Spanish biological product firm Grifols. 31 SWRI San Antonio: SWRI s headquarters facility employs over 3,000 workers. SWRI s 2011 revenues exceeded $580 million and in 2011 the organization dedicated $6.1 million to fund its internal research programs separate from contract client projects. 32 Texas Biomedical Research Institute: The Texas Biomedical Research Institute has a nearly $55 million annual budget and employs over 400 people. The institute is home to the Southwest National Primate Research Center and the world's largest colony of baboons for biomedical research; the nation's only privately owned Biosafety Level 4 (BSL-4) laboratory and the AT&T Genomics Computing Center, which houses the world's largest computer cluster devoted to human genetic and genomic research Page 18

19 Trends & Development Robert J. Kleberg Jr. and Helen C. Kleberg Foundation: In March 2012 UT at San Antonio College of Sciences appointed Dr. John McCarrey as the initial holder of the Robert and Helen Kleberg Distinguished Chair in Cellular and Molecular Biology. A $1.5 million gift from the Robert J. Kleberg Jr. and Helen C. Kleberg Foundation will allow Dr. McCarrey and his students to continue working with researchers at the Texas Biomedical Research Institute and Southwest National Primate Research Center in the development of a nonhuman primate model for studying stem cells and regenerative medicine. 34 Oil & Gas and Life Sciences: Initiated by Exxon Mobil and The Methodist Hospital (at TMC), Life Sciences and Oil and Gas have discovered many similarities in the technologies they use and the challenges they face. This discovery prompted a decision to examine the various disciplines and to determine if there are overlapping technologies that could be mutually beneficial. Thanks to Pumps & Pipes, ExxonMobil can visualize well flow through a gravel pack to enhance recovery of oil and gas. An ExxonMobil s drilling and subsurface researcher built an experimental gravel pack made entirely of plastics to replicate the flow that s typical of highly productive deep-water wells. When researchers placed the 6-foot-tall, 90-pound vessel (250 pounds when filled with water) into an MRI machine at Methodist Hospital, they produced a three-dimensional model of flow direction and velocity inside the gravel pack. 35 National Institute of Allergy and Infectious Disease: In May 2012 the Baylor College of Medicine (BCM) announced the National Institute of Allergy and Infectious Disease, part of the National Institutes of Health and awarded it up to $6.2 million over five years to develop a vaccine for severe acute respiratory syndrome (SARS). BCM will work with researchers at the Sabin Vaccine Institute and Texas Children s Hospital Center for Vaccine Development, as well as the New York Blood Center and the UTMB at Galveston. 36 More information about innovation and development in Health R&D could be found in Chapter 4: Innovation and Development names- stem- cell- researcher- to.html Page 19

20 2.2. MEDICAL DEVICES The medical devices sector is often named as the state s biggest and most attractive subsector within life sciences. A wide range of medical products are developed and produced in Texas. Although not yet on the scale of such Medtech hubs as Massachusetts and Southern California, Texas s medical device industry has made great strides in recent years. In 2010, the total value of medical equipment shipments exceeded $4.3 billion. Manufacturers made total capital investments of over $100.3 million. 37 Medical Device Clusters in Texas: CLUSTER Orthopedics Cardiology Diagnostics Wound Care KEY PRODUCTS Spinal, extremity, bone/tissue implants Catheters, surgical instruments, prosthetic heart valves Cell cultures, laboratory equipment, clinical chemicals Electromedical wound equipment, mattress systems, skin dressings, bandages Companies Medical device giants that have manufacturing or major corporate operations include Abbott Laboratories, Johnson & Johnson, Medtronic, GE, Stryker, Cardinal Health, St. Jude Medical, Becton Dickinson, Thermo Fisher Scientific and Agilent Technologies, see appendix 1.These companies and others have created a large medical device work force in the state. Approximately 800 firms employ more than 15,200 workers. Texas is one of the top 10 states in the nation for medical device workers. Texas medical devices industry wages increased by 4.7% between Q and Q In the highly advanced subsector of electromedical instrument manufacturing, employment increased nearly 11% from , despite the recession. The percentage of the Texas workforce employed in the ophthalmic goods sector is 20% higher than the national average and these workers are particularly concentrated in the Dallas/Fort Worth region. 38 In 2011, Utah-based Merit Medical Systems Inc. announced plans to build a new surgical device research and manufacturing facility in Pearland, Texas. The new facility is expected to create 220 jobs. In 2011, ArthroCare Corp. announced that their R&D operations will move from Sunnyvale, California to Austin, Texas. The company had previously moved its headquarters from Sunnyvale to Austin in assets/documents/ medical- devices pdf 39 Page 20

21 Example of a Start-up, Jungwoo F&B: The Korea-based industrial automation company, Jungwoo F&B, will team up with the Austin-based biotech company, Bioo Scientific, to develop kits for the Image Oriented Navigation Laser Microdissection Device (ION LMD). Jungwoo F&B developed the ION LMD device, which enhances the imaging and increases the precision of cell dissection. Bioo Scientific will contribute sequencing and discovery kits for more precise analysis of tumor samples. The combined efforts and technologies of Jungwoo F&B and Bioo Scientific will improve the ability of physicians to diagnose and treat cancer patients by providing a more accurate analysis of micrornas and peptides in tumor samples Trends & Development Survey: In a survey conducted by the Texas Medical Device Alliance they asked respondents, life sciences related institutions, what their needs are regarding support and employee training. Funding, personnel/recruiting and international expansion are the three major needs for support. In employee training the three major needs are Quality Control/Assurance (GMP, GLP, etc.), Regulations/Compliance and Intellectual Property. State initiatives: Texas Emerging Technology Fund (ETF) has invested over $70 million in medical device-related start-ups. Funded companies have developed a wide range of technologies, including implants, imaging equipment and diagnostic tools. Over the six-year period venture capital firms invested approximately $568 million in 96 medical device and equipment companies, according to consulting firm PricewaterhouseCoopers. 41 See Chapter 6: Innovation and development for more information about the ETF. High tech contributes to growth in medical devices: Texas is considered to be one of the closest domestic high-tech rivals to Silicon Valley. As the semiconductor industry began to slip companies sought more stable markets to target. As a result Texas saw some of its high-tech companies join the medical device field. Such companies take the same knowledge that they use in other markets and apply it to the medical market. The past few years have seen a flood of progressive products, including various advanced chipsets and analog front-ends enter the market from semiconductor companies. Involvement of Texas chip companies in the Medtech industry could also be a boon to the state as telehealth/telemedicine begins to take off in the next few years. Companies such as TI and Freescale are already planning how to apply their wireless connectivity experience to make progress in this emerging market ic2/news- archives.html 41 assets/documents/ medical- devices pdf 42 star- state- takes- shine- medical- device- sector Page 21

22 New Technologies: In March 2012 Vermillion reported that the American Medical Association (AMA) Current Procedural Terminology (CPT) Panel voted to approve an application for a Category 1 CPT code for its OVA1 test, which is designed to help differentiate benign versus malignant ovarian masses. 43 In Nov NMS signed a collaboration deal with Houston-based Leonardo Biosystems (LBS) to develop a commercial process to manufacture nanoporous silicon particles for Leonardo s multi-stage drug delivery system. NMS and LBS were co-founded by Houston-based biomedical nano/micro-technology expert Dr. Mauro Ferrari, who developed the companies core technologies and also serves as President and CEO of TMHRI and President of The Alliance for NanoHealth in Houston. 44 In April 2012 Luminex received CE marking of both its xmap NeoPlex4 Assay and NeoPlex System. This unique system revolutionizes the way newborn screening is performed, providing four assays from one blood spot punch, reducing sample requirements and improving laboratory efficiency. 45 More information about innovation and development could be found in Chapter 4: Innovation and Development PHARMACEUTICALS In 2010 the total value of Pharmaceutical shipments exceeded $4.7 billion. Manufacturers made total capital investments of nearly $100 million. 46 Texas is a leading Pharmaceutical research state. In April 2012 the state ranked second for the number of clinical trials with more than 14,000 studies underway Companies Many Pharma companies have set up operations in the state such as Reckitt Benckiser, Allergan and home grown companies like ophthalmic leader Alcon and Healthpoint Biotherapeutics. Approximately 125 (see appendix 1) firms employ more than 9,500 workers in this sector and as a result Texas is one of the top 10 states for the number of Pharmaceutical manufacturing workers. In addition, many of the world s leading clinical trial and contract research firms have operations in the state. Examples are PPD, Covance, Quintiles, Chiltern, Premier Research and INC Research. Texas pharmaceutical employment increased slightly from Q to Q New establishments: In 2011 Alcon Laboratories, a subsidiary of Switzerland-based Novartis Corp., announced an expansion of its research operations in Fort Worth. Alcon expects to invest $11-18 million and add 750 jobs. In 2011 California-based Allergan, 43 releases/vermillion- receives- category- 1- cpt- code- approval- for- ova html ir.net/phoenix.zhtml?c=79403&p=irol- newsarticle&id= &highlight= Page 22

23 Inc. announced an expansion to its Waco pharmaceutical manufacturing facility. This project will bring $10 million in investment and 100 jobs to the Waco region. 49 Example of a Start-up, Savara: Savara is developing AeroVanc (vancomycin hydrochloride inhalation powder), a novel dry powder form of vancomycin in a capsule-based inhaler for the treatment of respiratory methicillin-resistant Staphylococcus aureus (MRSA) infections in patients with cystic fibrosis (CF). Vancomycin administered by IV is the antibiotic of choice for the treatment of MRSA-related infections; however, IV administration, poor penetration into the lungs and systemic toxicities limit its use in a chronic setting. By delivering vancomycin directly to the site of infection AeroVanc is expected to improve clinical efficacy and reduce systemic exposure. Federal grants and equity funding were totalling over $8 million for this start-up Trends & Developments Survey: In a survey conducted by the Texas Medical Device Alliance respondents were asked needs were regarding support and employee training. Funding, personnel/recruiting, and international expansion are the three major needs for support. In employee training, the three major needs are Quality Control/Assurance (GMP, GLP, etc.), Regulations/Compliance, and Intellectual Property. 50 New products and technologies: In May 2012, Houston-based Pulmotect was awarded $7.1 million by the Cancer Prevention & Research Institute of Texas (CPRIT) to advance its novel product, PUL-042, which offers the promise of better protecting patients receiving chemotherapy from infection, allowing for significantly higher treatment success. 51 More information about innovation and development could be found in Chapter 4: Innovation and Development Survey Life Sciences Texas, Jack Hart (TMDA) 51 Awards- Pulmotect Million- Develop- Immune Page 23

24 3. INNOVATION AND DEVELOPMENT Over the last decennium, major Life Sciences companies have been relocating to Texas. The Life Sciences sectors are one of six industry clusters identified in 2004 by Gov. Rick Perry as part of his long-term, strategic job creation plan. Texas outstanding public and private research institutions have made a major impact on the growth of Life Sciences. Research spawns new products and industries which in turn attract highly skilled and talented people. 52 This chapter starts off with exploring the governmental initiatives and funding (4.1). It highlights the states funds (4.1.1) and innovation & development programs (4.1.2). The following paragraph takes a look at the innovation and development programs of the state s four leading universities (4.2). The third paragraph explores the structure of innovation centers, incubators and economic development in the state (4.3). Finally, the last paragraph focuses on the supply side of private capital in the state (4.4) GOVERNMENT INITIATIVES & FUNDING Texas has one of the largest and fastest growing medical centers in the world. Through partnerships with academic institutions, teaching hospitals and cutting edge research centers the state has become a hotspot for new Biotech R&D. The efforts listed below have been important in attracting Biotech. The most popular funding source historically is through angel investors and family members or friends. For those currently pursuing funding the most common method is through government grants, loans or incentives. Currently few companies seek funding through traditional financial institutions or banks. There is a significant increase in strategic alliances to acquire capital State Initiatives Over the last 10 years, Texas introduced a series of initiatives to support innovation sectors like Life Sciences to attract R&D and new businesses. Texas Enterprise FUND (TEF) Created in 2003 and renewed each session through 2011 the TEF provides deal closing funds to enable Texas leadership to recruit new business to the state and to assist existing businesses with substantial expansions. The largest fund of its kind in the nation, the TEF has generated $14.3 billion in capital investment and brought 52,000 jobs to date. While the TEF has been highlighted for bringing billion dollar companies like Apple to the state, CGI s choice of a rural corner in Texas to build their new $7 million information and technology facility showcases TEFs true value in supporting innovation in Texas economic- development/texas- cultivates- growing- biotech- sector 53 Life Sciences Survey Texas, Jack Hart (TMDA) 54 resources/texas- enterprise- fund.html Page 24