Points of View What is a life science cluster that creates and nurtures new drugs? Implications from the Boston Innovation Ecosystem

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The Office of Pharmaceutical Industry Research Hideyuki Kagii, Senior Researcher

1 Introduction

In Japan and abroad, there exist environments and mechanisms, called "industrial clusters," "life science parks," and "ecosystems," that link early technology seeds from academia and ^startups1) to practical applications.

The author has focused on new drug discovery modalities such as nucleic acid medicine, gene therapy, and regenerative medicine, and has analyzed their development pipelines, etc. Through these analyses, the author has noted that academia and start-ups play a significant role in the R&D of new modalities, especially in their discovery and early development stages. ²⁾, ³⁾.

For pharmaceutical companies, the current drug discovery environment is making it difficult for them to create new drugs through their own independent R&D, as the diversification of drug discovery modalities and the evolution of ICT technology in recent years have increased the speed of technological development on a global scale, and the trend to acquire new technological seeds through open innovation is progressing The current drug discovery environment is making it difficult to create new drugs through in-house R&D alone. On the other hand, academia and start-ups generally do not have the know-how or funds to commercialize the technologies and ideas they have created on their own, so they need to form alliances with pharmaceutical companies or obtain funding from investors and other sources.

In this paper, we introduce the ecosystem that plays an important role in bringing early technology seeds to practical application. We also introduce the ecosystem in Boston, USA, which is considered one of the largest in the world, as well as the trends of life science clusters in Japan, and analyze and discuss their challenges.

In this paper, the term "ecosystem" is used in the same ^sense as the term "innovation ecosystem, ^{"4) which} refers to "an ecosystem-like environment and state in which various players, including governments, universities, research institutions, companies, and financial institutions, are mutually involved and innovations are continuously created. The term "innovation ecosystem" is used in the same sense.

2 Boston's Ecosystem, the Largest in the World

1) Scale and Players of the Boston ^Ecosystem5)

Boston, along with Silicon Valley, forms the world's largest ^ecosystem6) in the life science field (Table 1).

World-class universities such as Harvard University, Massachusetts Institute of Technology (MIT), and Tufts University are sources of highly educated human resources that play a central role in the ecosystem as well as the birthplace of many innovations.

Core hospitals that promote translational research are also well established. Boston hospitals receive 56% of the total NIH research funding for independent ^hospitals7), and notably, four of the top five hospitals in the country (Massachusetts General Hospital, Brigham and Women's Hospital, Dana-Farber Cancer Institute, and Boston Children's Hospital) are located in the area.

In addition, Boston is home to many global megapharma companies (Table 2) and ICT companies such as Facebook, Google, Amazon, and Microsoft.

MassBio, a private non-profit incubation organization, conducts a wide range of activities to enhance the value of the life science industry, including organizing events, disseminating industry information, providing educational programs, and promoting policies on behalf of the industry, with more than 1,200 member companies, mainly in Boston. ⁸⁾ CIC （The Cambridge Innovation Center (CIC) provides small, easy-to-use offices primarily for startups, and currently has more than 1,800 companies, mainly in ^Boston9). It also serves as a networking hub, with investors and pharmaceutical companies also moving in.

JLABS, operated by Johnson & Johnson, and LabCentral, a non-profit institution, provide shared lab space for startups. While most of the investors in LabCentral are foreign pharmaceutical companies, Takeda and Astellas are among the Japanese pharmaceutical companies that have invested in LabCentral. The tenancy period is two ^years10).

In addition to its scale, the Boston ecosystem is characterized by an extremely high geographic concentration of players (Figure 1).

As a reference to the scale of the Boston ecosystem, Figure 2 shows the ^pipelines11) of novel modalities, mainly biopharmaceuticals, held by companies headquartered in Massachusetts. The total (total) number of pipelines is 174, accounting for 17% of the NMEs under development in the U.S. as a whole and about 9% globally, mainly in the areas of oncology and central nervous system (Figure 2). This is equivalent to about 80% of the total pipeline in Japan as a whole, which is discussed below.

2) How the Boston Ecosystem was formed

Boston was a fishing city in the early 19th century and an industrial city in the late 19th century, but its population declined 25% between 1920 and 1980, making it a middle-income city in decline. The climate was cold and tax rates were high, making it less attractive for companies to relocate.

The driving force behind the transformation into a life science city was the wealth of scientific knowledge accumulated from a group of world-class universities, which in turn became a source of highly educated human resources. In addition, during the late 1970s and 1980s, the period of the rise of molecular biology, the enactment of the Bayh-Dole Act (Bayh-Dole Act) ¹³⁾, which allowed genetic engineering research to be conducted and its results to be ^patented12), was a tailwind that led researchers at Harvard University, MIT, Tufts University, and others to Biogen, Genzyme, Genetics Institute, and other startups have been established.

The cluster form is as follows: (1) A cluster of universities, public research institutes, hospitals, and a group of small companies (start-ups) in the 1970s and 1980s. In the 1990s, venture capitalists (VCs) from the Boston area began investing in these research projects. (3) After 2001, pharmaceutical companies established bases in Boston. The cluster developed in stages through (1) the establishment of biotech companies by university researchers, (2) investment by VCs in the Boston area in the 1990s, (3) pharmaceutical companies establishing bases in Boston after 2001, and (4) the establishment of a network of advisory boards and research collaborations by university researchers in the early stages of cluster formation. tech companies between 1980 and 1997, 54% of the 131 people involved in the formation of biotech companies were from Boston-based organizations, 52% (67) were university professors, many of them (48/67) were from Boston universities, 66% of the total were affiliated with their home organizations in a cross-functional capacity, and the percentage of serial entrepreneurs was low (4%). An analysis of patents granted shows that Harvard, MIT, and Boston University played a major role between 1976 and 1998, with 67% of the 907 inventors coming from universities, 29% from biotech companies, and the remaining 4% co-owned by companies and ^{universities14)}.

Government support in the 2000s also contributed to the development of the ecosystem: in 2008, the Massachusetts Life Sciences Act was enacted, providing loans to startups, a non-profit lab facility called " In 2008, the Massachusetts Life Sciences Act was enacted to provide $1 billion over 10 years for startup financing, the establishment of "LabCentral" research facilities, human resource development, investments in infrastructure such as water and sewage facilities at special research facilities, and tax incentives.

3 Domestic Life Science Clusters

Life science clusters are being formed in various parts of the country. This section presents examples of clusters led by the government and the private sector.

3-1 Cluster formation led by the government

3-2 Cluster Formation Led by the Private Sector

4 Analysis and Discussion

In this section, the author will list the differences between domestic and foreign ecosystems in his opinion, as well as the characteristics and challenges of ecosystems being promoted in Japan. (See Table 3 for a summary.)

3-2 Cluster Formation Led by the Private Sector 3-3 Achievements and Challenges in Promoting Cluster Formation in Various Areas in Japan

Although the clusters discussed in this paper have different origins, they generally have in common that they are all building soft and hard mechanisms for the continuous creation and commercialization of competitive technologies and seeds through industrial concentration centered on core research institutes and technological fields. As a result of these efforts, startups have been established and funded, and pharmaceutical companies have been concentrated in the region, which in turn has generated economic benefits for the region.

On the other hand, compared to Boston, aside from their size, domestic life science clusters each have their own challenges to overcome. First is sustained access to new technology seeds. For example, how to maintain international competitiveness in the case of an industrial cluster that relies on a specific technology, or how to cope with the obsolescence of the technology as it is replaced by other technologies. If there are no universities or hospitals in the vicinity, which is difficult to access both domestically and internationally, the hurdles to accessing new technological seeds, absorbing expertise, and securing specialized human resources will also increase.

Second, in order for the ecosystem to create new value, it is important for its members (resident companies, member companies, etc.) to form a "Marshallian" network (Fig. 4) ^24). Specifically, this includes joint research and business partnerships between industry, academia, and government, as well as knowledge exchange through startup board memberships, etc. Strategic efforts that leverage the characteristics of each cluster will be necessary to create such networks among and between companies clustered in clusters.

Securing mobility of human resources and fostering highly educated human resources

For an ecosystem to function, the mobility of human resources is important. For example, the 5-year and 10-year survival rates for university-launched start-ups in Japan are reported to be 77% and 53%, respectively (49.6% and 33.6% in the U.S., ^{respectively25} ), and the labor market must be sufficient to absorb such turnover in employment for the ecosystem to function. In Japan, some clusters are small in size, and it is assumed that the creation of enough new jobs to support startup turnover is unlikely to occur.

Another factor contributing to the low mobility of human resources is the lack of back-and-forth between pharmaceutical companies, universities, start-ups, and VCs. For example, a survey of the management of 10 drug-discovery venture companies in Japan and the U.S. found that in the U.S., 90% of the managers were from pharmaceutical companies, while in Japan, 40% were from pharmaceutical ^companies26). While it is difficult to obtain a premium commensurate with the risk in terms of compensation for domestic start-ups, it is also undeniable that domestic pharmaceutical companies lack the skills necessary to become leaders in the ecosystem, as the frequency of departmental transfers is generally high and the percentage of Ph. In the aforementioned MassBio Entrepreneurship Development Program, entrepreneurs with rich experience in the biotech field serve as mentors to nurture the next generation of managers. In Japan, too, it is important for industry, academia, and government to take responsibility for fostering human resources that can be used anywhere.

Insufficient supply of risk money

Especially in the early stages of development, when uncertainty is high, both VCs and pharmaceutical companies face higher hurdles to investment.

For pharmaceutical companies, especially in technological areas where they have not accumulated in-house know-how, such as new modalities, the cost of establishing a drug discovery platform (e.g., knowledge acquisition, manufacturing and quality control, securing expert personnel, etc.) is involved.

In other countries, angel investors and donor philanthropists are thought to play a certain role in supplying risk money, and the Ito Report 2. ⁰²⁶⁾, which provides guidance for investors, states that "the design of a listing market and the development of an environment to enable institutional investors to supply risk money should be implemented as soon as possible It is necessary to " ^promptly establish an environment for the design of a listing market and the supply of risk money to institutional investors." For promising technology seeds that could lead the industry if successful despite their high development risk, it will be necessary for not only investors but also pharmaceutical companies and the government to work together to spread the risk and bear the ^burden27).

Expectations for the formation of an international hub to attract global human resources and investment

The "Bio-Strategy 2019 - Toward the formation of a bio-community that is sympathetic both domestically and internationally" decided by the Integrated Innovation Strategy Promotion Council in June 2019 calls for the formation of an international center that attracts human resources and investment from around the world. The government will work together to provide the necessary comprehensive support, including investment and financing support, subsidies and other financial support, regulatory reform, and commercialization support, for a certain period of time, and specific details are currently being discussed. If clusters in different regions of Japan compete with each other for human and resource resources, it will be detrimental to the industry as a whole, and a function that integrates the strengths of these clusters may be necessary.

While there are many examples in the U.S. of university-launched bio ventures that have grown into global companies, there are no such cases in Japan. However, there have been some cases in which seeds born in academia have been put to practical use through start-ups, such as the approval of the gene therapy drug Collategene by AnGes Inc. last year. Although it has been pointed out that Japan's international competitiveness in science and technology is declining, there are many new modalities in the domestic pipeline (see Figure 5). It is hoped that these technological seeds will be put to practical use ahead of the rest of the world through the current life science clusters in Japan and the newly developed bio-community spheres to be established in the future.

(End)

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