The life sciences industry is comprised of companies working in the fields of bio-tech, pharmaceuticals, and medical technologies. However, there is no official definition of Life Sciences industry given by the federal government. The companies manufacture products and conduct research which is aimed for the healthcare industry. Companies invest in R&D and talent to achieve success and look for innovations that will improve their position in the market. The life sciences industry is growing in the U.S. as more people have been able to obtain healthcare.
A study by the life sciences division of JLL found that in the industry, branded drugs alone generated revenue of approximately $158.7 billion in 2015 while generics produced revenue of $44.5 billion. However, the generic pharmaceutical drug sector is known to be growing. A recent study by Bloomberg found that 86 percent of all prescriptions in the United States are generic drug prescriptions.
JLL also determined the top areas for the life sciences industry in 2015 based on employment concentration & growth, concentration of life sciences establishments in the market, funding available for organizations, and life sciences patents produced in 2014.
California dominates U.S. generics manufacturing, producing 17.9 percent of the total domestic volumes. Texas, New York, Pennsylvania, North Carolina, and Florida are also popular locations for generics manufacturing. As for branded pharmaceutical sector, the best locations are the ones where there is plentiful availability of human resources, especially in areas like Boston where there are 50+ colleges with eight research universities. Companies need skilled manpower for developing new and innovative technology.
According to a study by Economist Intelligence Unit, life sciences growth is expected to accelerate, globally, by an annual average of 52% in 2014-2018. Currently, there has been an increase in M&A activity in the life sciences market. Companies are looking to diversify their portfolio and enter new markets, and big companies are acquiring small or mid–sized pharmaceutical and bio-tech companies. Companies also look to reduce R&D time and increase production and profits and, therefore, companies manufacturing branded drugs seek acquisitions of generic drugs manufacturers. Companies with innovative plans and new ideas are also being merged with larger companies.
It was found that in the first half of 2015, pharmaceutical deals worth $233 billion have taken place which is triple the amount of deals that took place in the first half of 2014. Teva Pharmaceuticals recently acquired Allergan Generics for $40.5 billion, AbbVie acquired Pharmacyclics for $21 billion, and Pfizer acquired Hospira for $17 billion. These are examples of some of the biggest acquisitions made by life sciences companies.
If we look at data from Conway Data, there have been 644 expansion projects and 564 new projects between 2009 and 2014 within life sciences. Fifteen NAICS codes for the life sciences sector have been listed below which were used to analyze data (i). During this period, Bayer Corporation along with its subsidiaries, Bayer Healthcare and Bayer Crop Science, have had six expansion projects and four new projects while Allergan Inc. announced three expansion and two new projects. Medline Industries which manufactures medical and surgical instruments had three expansion and six new projects. Boehringer Ingelheim Pharmaceuticals had five projects with four expansion and four new projects during this period.
The chart below shows the new and expansion projects in life sciences from 2009 to 2014.
The table below shows the top ten states with most number of projects from 2009-2014.
Relatively newer companies are also growing. A study conducted by BioSpace on up-and-coming companies established in 2011 or after ranked Juno Therapeutics at the number one position followed by Myokardia and Spark Therapeutics at second and third, respectively. Juno Therapeutics, which was established in 2013, leased a facility in Washington to manufacture the company’s self-therapy products in February this year. The company also acquired X-Body in June and is investing heavily in R& D. Myokardia, which was established in 2012, raised $46 in series B financing in April, and in September 2014, collaborated with Sanofi, which secured the company a $200 million deal that helped the company develop three of its programs. Spark Therapeutics, which was founded in 2013, recently opened an office in Boston. The company raised $161 million during its IPO back in January of this year. The company agreed to collaborate with Pfizer in December and Genable Technologies in March 2014.
As healthcare is a basic need, it is put on the priority list of the government. The rich and poor alike consume products manufactured by life sciences companies. Companies need to focus on introducing products according to customer demand. We can see positive changes in the life sciences market as established companies are expanding through acquisitions and facility expansions, and the number of new companies with innovative ideas continues to rise. Economic developers and site selection specialists should recognize the opportunities provided by the life sciences industry in order to bring in jobs and gain profits from its growth.
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(i) NAICS Codes Used: 325411,325412,325413,325414,334510,334517,339111,339112,339113,339114,339115,339116,541710,541711,541712