Bio report Lack of funding holds New Jersey back

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Ernst & Young Global Life Sciences Leader Glen Giovannetti said he is bullish on the future of the biotech industry in the annual report his company released this week.

But New Jersey still has some ground to make up.

NJBIZ saw an advance copy of the report, “Beyond Borders: Reaching New Heights,” which was released Monday, the opening day of the industry’s biggest convention, BIO 2015, in Philadelphia. And it gave a glowing review of the overall industry over the past 12 months.

“Biotech has had a tremendous run on just about every performance indicator that we track,” he said. “That’s new FDA-approved medicines, very strong product launches and very significant revenue growth, especially among the top two handfuls of companies in the industry.”

Giovannetti said this trend, coupled with record profitability as a result of successful product launches, has led to renewed investor enthusiasm over the years.

This enthusiasm, he said in a phone interview, is not seen in the Garden State.

“In New Jersey, the V.C. funding is probably the lowest I’ve seen it in five or six years,” he said. “I think a lot people who follow this trend are trying to figure out ways to spur this.”

Tony Torrington, a partner at Ernst & Young and its Northeast life sciences assurance leader, said the lack of funding has led to a decreased amount of research.

“If you think of research and development, there’s target identification and then there’s development,” he said. “Jersey has research facilities, but it’s certainly not as productive as it has been in the past.”

That sort of research, Giovannetti said, is imperative in generating venture capital interest and, ultimately, success for smaller companies.

“These are universities and teaching hospitals that are creating new technologies and the only way they ever make it to market is through venture capitalists who outlicense it, put it in a company and start to fund it,” he said. “Hopefully that company grows and gets an IPO.

“It’s that source of those new technologies and ideas that is one of the critical seeds for the industry.”

The state, they say, faces competition from research hubs including San Francisco and Massachusetts.

“New Jersey is not going to be a Boston. It just doesn’t have the same ingredients,” Torrington said.

Giovannetti echoed these sentiments.

“Boston is probably the extreme example in the world of the most productive biotech cluster,” he said. “It’s the universities, it’s the teaching hospitals and it’s all very concentrated geographically. These institutions are all almost within sight of each other.”

For their part, New Jersey’s larger pharmaceutical companies have moved their research facilities to these competing hubs in an effort to expand their influence.

And these large companies have been doing well.

“New Jersey continues to follow the U.S. in terms of increase in market share for its public companies,” Torrington said. “Celgene is a big driver of that; Celgene’s market cap is close to $100 billion now and I think at the end of the year it was $90 billion.”

Other positive activity within the state involves NPS Pharmaceuticals, which sold to Ireland-headquartered Shire for $5.2 billion in the first quarter of 2015 after having an impressive 2014. This, Torrington said, was the result of several successful product launches.

“There are late-stage assets in New Jersey that are driving the whole U.S. increased profitability, market cap growth and revenue growth,” he said.

Torrington, who also serves on the board of BioNJ, said that, even though the state is behind the curve on research and generating venture capital funding, there are other areas where New Jersey performs well.

“If you’re trying to get a product approved, marketed, commercialized, developed, New Jersey has the greatest personnel, I think, in the U.S.,” he said.

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