Having recently returned from a biotech conference in Japan; having traveled to Canada, India and Brazil in 2007; and having attended the global BIO conference that featured delegations from 60 countries, I have remarked previously on the globality of the biotech industry.
Another conference I recently attended was the Bio Mid-America Venture Forum, which was held this year in Milwaukee. Now on its fifth year, the conference has become like a band of troubadours wandering the Midwest in search of the Holy Grail: the elusive treasure known as venture capital.
The conference originated in Chicago and moved to St. Louis, Minneapolis, Cleveland and then Milwaukee. The good news regarding the conference is that there were more companies presenting than in the past (almost 60). The bad news is that it seemed like the same Midwest venture capital companies with no major additions from the east and west coast.
While most of their money-raising efforts were regionally focused, it did impress me that their product development and commercialization efforts went beyond the U.S. in a number of cases.
This is good news because the life sciences market today is global. Also, a company’s patent portfolio extends beyond the U.S., and the company needs to maximize the value of this technology not just in the U.S. Finally, it’s often easier and faster to launch a product and technology outside the U.S.
To support this statement and theory, I turned to an interesting Web site called DoingBusiness.org, which charts improvements and declines in doing business around the globe. DoingBusiness.org’s latest report ("Doing Business in 2008") was cited in recently in The Wall Street Journal.
As The Journal comments, the survey evaluates the regulatory climate in 178 countries (particularly for entrepreneurs looking to start up businesses). In the report overview and comments, Eastern Europe and Russia have not only surpassed Asia in the ease of doing business but also a number of Western European countries.
The report looked at starting a business, dealing with licenses, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business.
While we do think about the U.S. as one large open market, the reality is the U.S. can often be like 50 different countries when it comes to starting a business. The local legislation and laws for all of the above vary significantly. This confuses many foreign companies trying to come into the U.S. and figure out where to set up shop.
For entrepreneurs looking to do business overseas (particularly the U.S. biotech entrepreneur), it is logical to look at the size of the market for drugs, devices and diagnostics (meaning the European Union and then Japan). After that, selected markets such as Korea, Australia, Mexico, Russia and Brazil might be logical targets.
Though China and India are attractive, most companies are still frightened off by the IP issues along with the ability of local engineers and scientific talent to reverse-engineer technology and come up with slight improvements that might circumvent patents. Most biotech entrepreneurs don’t think about the details of the ease or lack thereof of doing business in a country.
Let’s take a look at DoingBusiness.org’s latest ranking on the ease of doing business in its 2008 report results. Interestingly, the U.S. is not ranked either first or second. It ranks third, behind No. 1 Singapore and No. 2 New Zealand.
These are some very interesting statistics particularly when you look at the BRIC countries, which are ranked at 83 (China), Russia (106th), India (120th) and Brazil (122nd). Little Costa Rica (115th) has become a Mecca for medical device companies to set up manufacturing bases for the U.S. and Latin America.
I would have thought that Japan (12th), Israel (29th)and Korea (30th) would have had higher rankings. If DoingBusiness.org was doing a life sciences version of this study, there would have to be some additional factors as an overlay to the study.
They’d have to take into account the regulatory time to approve a drug or device; intellectual property protection; price approval (or reimbursement) approval time; the ability to sell directly to hospitals, physicians and pharmacies; clearance for local investors to invest in company; and local vs. foreign ownership.
It’s clear that most small, young companies (life sciences firms or otherwise) have a lot on their plates in terms of developing products for the market, raising money and finding appropriate employees and talent. It’s hard enough to think about operating overseas when just getting established in the U.S. for U.S.-grown companies is sufficiently taxing.
From listening to the 60 life sciences companies presenting their stories in Milwaukee to a Midwest audience, I was encouraged by the improved quality of the presentations, their thinking about the global markets for their products and the initial tie-ups with foreign companies and investors.
It shows me that the Midwest life sciences community is beginning to really think globally.
The lessons of Friedman’s "The World is Flat" are finally becoming apparent to our often insular Midwest thinking processes. On the other hand, it’s not difficult to think beyond the U.S. even in the Midwest when a good portion of a life sciences company’s scientific employees and talent are coming from places like India, Pakistan, China and Russia.
Michael S. Rosen is senior vice president of new business development for the Science + Technology Group at Forest City Enterprises, a publicly traded real estate development company which develops and builds bioscience parks across the United States. Rosen is also a founder and board member of the Illinois Biotechnology Industry Organization. He can be reached at rosenmichaels@aol.com. His blog first appeared at Midwest.Business.com, a media partner of Small Business Times.
