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Innovation Incubators

From the series Industry and pharmaceuticals

I

Since the beginning of the 21st century, the life sciences sector has undergone profound transformations. Great scientific and technological innovations rooted in the achievements of the 20th century have affected the whole of the world's healthcare system, revolutionising diagnostic procedures and therapies.

However, the fruits of this acceleration of scientific development only reach a minority of humanity. In many cases, the high costs and the limited number of adequate structures — think of gene and cell therapies — make them inaccessible to most of the population, which barely receives even the most basic and lifesaving medicines. Their economic sustainability is a challenge even for the more advanced healthcare and welfare systems.

Biotechnology is at the heart of this transformation, which is reshaping the world industry of life sciences, where competition between companies becomes confrontation between technological and scientific powers.

Superpower aim

Especially in the last decade, China has emerged as a protagonist of this transformation. The Western scientific world must recognise that the Asian giant, after becoming the workshop of the world, has now acquired the status of a scientific and technological superpower in every field, including biopharmaceuticals.

The Chinese government has promoted and generously funded the development of pharmaceuticals and biotechnology, making innovation in this field one of its national strategic priorities. The Made in China 2025 programme, launched in 2015, included biopharmaceuticals and medical devices among its ten priority sectors; in 2016, Healthy China 2030 targeted the development of health services; the 14th Five-Year Plan [2021-25] envisaged the creation of innovation hubs to build regional systems in research and development.

Scientific-technological hubs (or clusters) are large geographical concentrations of industry, academia, and finance. These are powerful innovation incubators which, having become firmly established in America and Europe, are now doing so in Asia, driving research and development in every field, including the military sphere.

A biopharmaceutical hub groups together big established companies and small startups, universities, hospitals, clinics, and research laboratories, promoting high levels of interaction. These are magnets which attract economic and scientific activity, brainpower, and private and public capital. As Marino Zerial, director of Milan's Human Technopole, observes, the life sciences technology revolution will have to pass through these ecosystems [Il Sole-24 Ore, January 29th].

Scientific progress takes place in the vast network of laboratories all over the world, often thanks to the work of individual researchers, whose observations are put to good use by others. These big research and development conglomerations act as powerful accelerators, and are, at the same time, indicators of the powers' scientific and technological strength. The major US hubs are the world's biggest innovation incubators, vehicles of America's so far undisputed scientific and technological supremacy since the second half of the 20th century.

Company migrations

In his report The Future of European Competitiveness, Mario Draghi observes that, between 2008 and 2021, about 30% of the unicorns founded in Europe relocated abroad, most of them to the United States. Unicorns are firms that have surpassed the startup phase, reaching a valuation of at least $1 billion. A recent EIB (European Investment Bank) study observes that Europe's most innovative startups and scaleups are relocating abroad and they are vital engines of innovation, growth, and competitiveness in the European Union [EIB, Drivers of Relocation by Innovative EU Startups and Scaleups, 2024].

The trend towards relocation is particularly marked in such sectors as artificial intelligence and biotechnology. This process is not the same as internationalisation, i.e., commercial and productive expansion on foreign markets. On the contrary, the ongoing outflow of companies to other economies weakens the European Union's ability to close the innovation gap with the United States and threatens its long-term competitiveness and technological sovereignty [EIB, op. cit.].

Based on the estimates of the European Commission, the economist Francesco Giavazzi sums up the impoverishment of the EU's innovative capacity, remarking that, of 11,000 venture capital-financed startups, around 600 have relocated abroad, 85% of them to the United States [Corriere della Sera, February 2nd]. The authors of these estimates highlight market fragmentation and the jungle of red tape among the causes of the migration of companies and investment capital. Giavazzi writes that this means that every year, €300 to €400 billion cross the Atlantic and are invested on American markets.

The force of attraction exerted by development hubs plays a decisive role. In his report, Draghi observed that EU clusters, such as the tri-national BioValley in France, Germany, and Switzerland, Medicon Valley across Denmark and Sweden, BioM in Germany, and FlandersBio in Belgium have not yet reached the critical mass to rival the size, appeal, and global impact of major US hubs. In comparison with the fragmented approach in Europe, where member States back their national champions, the US focuses its support on hubs. Massachusetts receives 11.4% of NIH funding [National Institutes of Health]. The result is loss of competitiveness. Of the top ten best-selling biological medicines in Europe in 2022, two were marketed by EU companies, while six (including the top four) were marketed by US-based companies. A clear drop in the market share held by EU companies is noted, whereas that held by US companies increased.

Battle of giants

The size of the geographical concentrations of productive and research activities is not the only standard of comparison, but it is indicative of the forces in the field.

The Massachusetts biopharmaceutical hub, with Boston and Cambridge as its main centres, employs more than 100,000 people, a workforce that has doubled since 2008 after the launch of the Massachusetts Life Sciences Initiative; this programme of the State governor allocated $1 billion dollars over ten years to promote life sciences in all its aspects, from teaching to academic research and companies, and to attract the best talents with higher salaries. The hub has attracted billions in public and private investments and hosts more than 1,000 biopharmaceutical companies, from global giants to startups [Mass-Bio — Massachusetts Biotechnology Council, 2022]. Three of the four most highly financed NIH hospitals, clinical research centres, and numerous universities, including Harvard and MIT (Massachusetts Institute of Technology), are part of this ecosystem.

The product pipeline which derives from the Boston-Cambridge biopharmaceutical ecosystem comprises 15.6% of the US total.

Today, Massachusetts competes for the title of the world's greatest biotechnology hub with the South San Francisco cluster, the cradle of American biotechnology where Genentech produced the first human insulin through genetic engineering in 1976.

The United States has various biopharmaceutical clusters, from consolidated to emerging ones. Among the biggest, three are of the same importance as Boston-Cambridge and are all in California: in the San Francisco Bay Area, San Diego, and Greater Los Angeles. Estimates vary regarding the numbers of companies and the staff they employ, but altogether the three hubs host more than 10,000 life science establishments and 300,000 direct employees.

We will return to these major American clusters, which the European biopharmaceutical clusters must confront. But Asia looms over both.

In China, scientific-technological hubs on an Asian scale are developing. The Yangtze River Delta (YRD) cluster is considered the biggest and the most dynamic in the biopharmaceutical sector. It has grown around the Zhangjiang Biotech and Pharmaceutical Base, known as Zhangjiang Pharma Valley, founded in 1994 and kickstarted by the Ministries of Science and Health, the Chinese Academy of Sciences, and Shanghai's municipal government. In the last twenty years, it has taken off as an ecosystem which includes Shanghai and the provinces of Anhui, Jiangsu, and Zhejiang, hosting thousands of companies, hundreds of thousands of employees, and dozens of universities. 40% of the total turnover of the Chinese biomedical sector comes from the YRD cluster.

Inconsistencies in data collection methods necessitate a cautious approach, but the orders of magnitude of industrial density apply. Shanghai alone, considered China's most advanced biotechnological district, has 3,000 companies with 270,000 employees. More than 9,000 biomedical companies form part of the recently founded G60 Science and Innovation Corridor subsystem [data from MERICS, Pudong Shanghai, and Yicai Global].

Besides its size, we should also note the speed with which it has grown. The YRD cluster has developed in less than twenty years and is young in comparison with many Western clusters. Uneven development undermines America's primacy.

Translated from the original work by , published in Lotta Comunista, , p. 19.

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