MA Seed-Stage Funding at Critical Juncture

August 20, 2014

While deal flow is healthy, 2014 will be pivotal year to assess trends in funding startups

CAMBRIDGE, MA (August 20, 2014) – Seed-stage funding in Massachusetts companies continues to grow, but 2014 investment must near $200 million to sustain five-year averages and ensure a solid startup environment into the next decade, according to an annual industry report published by MassBio.

The 2014 MassBio Industry Snapshot shows Massachusetts leads in federal research funding and venture capital invested per capita, as well as research and development jobs, but that recent dips in seed-stage funding could negatively impact innovation long-term.

“Massachusetts’ strength in the life sciences depends on its vibrant startup and early-stage research activities, but funding for those activities—the fuel for industry growth here—is getting more difficult to come by,” said Robert K. Coughlin, President & CEO of MassBio. “The Industry Snapshot and MassBio’s recent Impact 2020 report demonstrate that we must find new avenues for companies to seeking seed funding to ensure life-changing treatments make it out of the ‘valley of death’ and into the hands of patients in need.”

In aggregate, Massachusetts seed-stage deals have grown in number and size since 1999. In the last five years, Massachusetts companies have received 33.4% of all seed funding for biotech in the U.S. Over the past decade, Massachusetts has outperformed the nation in percentage of deals and investment at the seed-stage as a percentage of total venture funding.

While this is positive news, there has been a drop in MA seed-stage funding since the 2008-2010 highs and 2014 figures will determine whether the current five-year average is equal to that of the prior five-year period.

Other industry statistics are trending positive and the industry’s economic impact as measured by MA-based payroll topped $7.2 billion.

Massachusetts employment in the biopharma industry rose to 57,642 in 2013, an increase of almost 1,200 jobs over 2012, based on data from the U.S. Bureau of Labor Statistics’ Quarterly Census of Employment and Wages (QCEW). Employment in the industry has grown nine to ten times faster than state and national growth rates for employment.

Postings for open biopharma industry positions on MassBio’s online job board are trending up, with an average daily number of listings above 1,400 jobs in June and July of 2014. MassBio.org is not a comprehensive listing of all jobs available in the industry in Massachusetts but given its significant volume, it does provide a statistically strong sampling in determining job hiring trends.

Massachusetts still leads the nation in biotechnology R&D jobs, a segment of the larger industry employment, with more than 28,042 positions in 2013 and maintained its position as the leader in R&D in biotechnology, as defined by industry concentration.

In 2013, NIH funding was reduced by 12.2% nationally, but just 7.3%, or $182 million in Massachusetts. While research in the Impact 2020 report shows biotech venture investment overall is trending downward, in 2013 venture investment in Massachusetts rose to $984 million. Massachusetts received more than 21% of all VC investment in biotechnology in the U.S.

New this year, MassBio also analyzed the reach of Massachusetts-developed medicines. Massachusetts-headquartered companies have developed therapies that focus on patient populations of 232 million in the U.S. and more than 1.5 billion around the world.  

Additional highlights from the report include:

  • Massachusetts-headquartered companies have a total of 1,384 drug candidates at some stage of R&D. Oncology drug candidates continue to make up 35% of that pipeline with systemic anti-infectives, central nervous system, and musculoskeletal therapeutic areas as other strong areas of research.
  • Massachusetts accounts for 12% of the U.S.-based drug development pipeline. Massachusetts-headquartered companies account for 6% of the global biologics pipeline.
  • With 14 IPOs through July 2014, Massachusetts has beaten its previous biotech/pharma annual  IPO record of 9 (2013).
  • The top five NIH-funded independent hospitals in the U.S. in 2013 are in Boston.
  • On an NIH-funding per capita basis, Massachusetts continues to far exceed other leading NIH-recipient states. Only California receives more total NIH funding.
  • In the last year more than 2.5 million square feet of commercial lab space has been added to inventory in Massachusetts. 
  • The estimated average salary in the biopharma industry is $125,056.
  • Nationally, biopharma manufacturing employment has declined by 3.6% since 2004. Massachusetts grew by 24.2% in biopharma manufacturing in the same time period.

This year’s Snapshot was produced in partnership with EvaluatePharma®, the premier source for commercial analysis of the pharma and biotech sector. Snapshot statistics are compiled annually by MassBio from sources including EvaluatePharma, National Institutes of Health, the U.S. Bureau of Labor Statistics, the Quarterly Census of Employment & Wages and others.

Click here to download the 2014 MassBio Industry Snapshot. For more information on the Massachusetts cluster, or Impact 2020, visit www.MassBio.org.

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