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Pharma strong, but N.J. says it’s no time to rest

State can't take industry's $24.2B impact for granted, say officials

A new report shows New Jersey’s pharmaceutical and medical device industries continue to play major roles in the state’s economy — but with the life sciences sector in flux and the wider economy on shaky ground, economic development officials say now is no time for complacency.

Last week, the HealthCare Institute of New Jersey, a pharmaceutical and medical device industry group, released its latest economic impact survey, which found the industry had a $24.2 billion impact on New Jersey’s economy in 2010.

“It’s a very significant number, and it indicates that the state’s premier industry continues to be a primary economic driver for the economy of the state,” said Dean J. Paranicas, president and CEO of the trade group.

The survey also found the sector employed 51,619 people in 2010, logged $700 million in capital expenditures, donated $161 million to Garden State nonprofits and paid $731 million in taxes.

Those numbers are slightly off the figures in last year’s report, which put the industry’s 2009 impact at $29.3 billion. Both studies were conducted by Deloitte.

Paranicas said it’s tough to draw conclusions from the year-to-year comparison, since only 19 member companies participated in the survey this year, versus 24 companies last year. But he pointed to two positive numbers as the most telling — research and development spending jumped 11.4 percent, to $6.1 billion, in 2010, and the number of medical device trials being conducted by member companies jumped 49.1 percent.

“Innovation is the lifeblood of our industry, and certainly from that perspective, the fact that R&D spending increased is very important,” he said.

Lt. Gov. Kim Guadagno, who spent much of 2011 meeting with business executives, credited improved research spending to increases to the state’s R&D tax credit, among other incentives. She said New Jersey’s location and pharmaceutical history give the state an undeniable advantage when it comes to recruiting and retaining life sciences firms.

“As I’ve said many times and in many different forums, New Jersey is a required stop in the United States if you’re a pharma or biotech company,” Guadagno said.

Katherine Kish, executive director of Einstein’s Alley, a nonprofit economic development agency working to grow Central Jersey’s tech sector, said the challenge for New Jersey is adapting to a business landscape where state and national borders are increasingly irrelevant, and where Big Pharma firms are becoming leaner, opting to outsource R&D and other tasks rather than build up enormous in-house staffs.

“If you think about the overall direction of the industry, the classic business decision is build or buy, and the pharmaceutical companies always used to build internally,” she said. “Now, they’re buying.”

From an economic development standpoint, Kish said that leaves two distinct challenges: bringing or retaining behemoths in the drug industry, and fostering entrepreneurs who start new, smaller life sciences companies.

In Kish’s region, the biotech startup Oncobiologics opened a new headquarters in Cranbury just a week before Novo Nordisk broke ground in Plainsboro. Guadagno, who attended both events, said small companies will be critical to New Jersey’s efforts to remain a key life sciences hub.

“I can tell you that the startup companies are what New Jersey is reaching out to now, because we see that as the growth structure,” she said.

Guadagno said a key factor in keeping the industry healthy here is maintaining and growing the state’s life sciences labor force.

“Companies like Bayer, who could go anywhere in the world, have decided to stay here and consolidate their offices here because they could get a quality work force here rather easily,” she said. “You hear that story over and over.”

Last summer, the state selected the biotech trade group BioNJ to run a new life sciences talent network, with the goal of linking job seekers with companies that are hiring. Guadagno said the state also is working with Sanofi to find new R&D jobs for employees affected by the closure of its Bridgewater facility.

Kish said the state should also work to boost technology education, and create programs to ensure foreign graduate students who get their degrees from New Jersey universities also find jobs here. She said the state’s not just competing against other states anymore.

“I think the important thing to realize is it’s a global business,” she said. “We have to make sure that we have the elements in New Jersey to keep this sweet spot in the state of New Jersey.”

E-mail to: jkaltwasser@njbiz.com
On Twitter: @JaredKaltwasser

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