Ten Reasons Why the South is the Next Great Biotech Region  

By Mike Randle

For 14 years now we have published Southern Business & Development magazine (www.SB-D.com), the parent company of BioIndustrySouth.com. SB&D was launched in 1992 to reveal opportunities and even some pitfalls to companies looking to locate and operate in the American South.

In the beginning almost all of SB&D's issues were directed to executives from outside the South. Not unlike the 1970s and '80s, the early 1990s saw a wave of migrating companies from the Northeast and Midwest to the South. The magazine was founded on the premise that it would guide those companies to suitable sites in the South. It worked.

By the late 1990s, however, something occurred that had never before happened in the South. The source of the majority of corporate and industrial expansions in the region didn't come from the Northeast, Midwest or California. Nope, most of the job and investment-making deals now were coming from companies already in the South. Corporations headquartered in Atlanta were now expanding to Tennessee for example. North Carolina companies were setting up shop in Mississippi, Texas companies were expanding to Virginia and Alabama corporations were spreading to Florida and so on. Because of that our circulation changed. By 1999, just over 50 percent of SB&D's readership was located in the South.

Another significant cycle of business migration from outside the South to the South was renewed again during the recession of 2001-2002. During that time not only did we experience another huge round of companies expanding or consolidating to the region, we also saw a rash of headquarter relocations to the South from California, Illinois, New York and other high-cost areas. We can't remember a time when so many large companies relocated their headquarters to the South from other locations in the U.S. than in 2001, 2002 and 2003. It should be noted that several of those companies were Fortune 500 members.

If you've ever read Southern Business & Development, you may have read this statement because we say it and write it all the time: "Certain industry sectors may not start in the South, but they always end up here." The automotive industry is a perfect example of that statement, as is the financial services industry, retail, construction, utilities, healthcare and every other industry sector that is tracked by the federal government. Fact is, the South leads all U.S. regions in every single industry sector the federal government tracks.

The life sciences industry is another in a long line of industry sectors that initially rooted itself outside the region, yet now has its sights set on the South. Here are 10 reasons why the American South will surpass all other U.S. regions in the growth of biotech over the next several decades.

1. The South is a huge market, by far the largest in the U.S.

The South's growth hasn't been limited to corporate migration. If anything, corporate migration is just one of the results brought about by the migration of people to the American South. In 1955 the Midwest, Northeast and South all had about the same population, right at 55 million. Back then the West was much less populated than the other three U.S. regions. Today, 50 years later, 60 million people live in the Northeast, 65 million live in the Midwest and the West's population has grown to about 68 million. In contrast, the South's population is right at 114 million people or more than double its size just 50 years ago. Business chases growing markets and the life sciences is no different. The South is far and away the fastest growing U.S. market and it's been that way for 50 years.

2. Because the South is the largest U.S. market, it is also the largest market for seniors

I don't know what sales percentage seniors make up for every bio-related product, but I'd bet it's around 75 percent. The South is home to about double the number of senior citizens than any other U.S. region. Industry doesn't make buyers go to them. Industry goes to the buyers. That's why bio-related companies headquartered in California, New York and Massachusetts will bring more of their manufacturing and distribution centers to the South than in past years. That's if they want to tap into America's largest senior market.

3. Speaking of California, New York and Massachusetts

There are few if any states in the U.S. where business costs are higher. Some high-brow economists and the like argue that the life sciences industry is different than all other industries. They maintain that biotech isn't concerned that much with overhead compared to labor quality. There's some truth in that, the labor quality part of it anyway. The life sciences is no different than any other industry; the bottom line counts supreme. Paying double operating costs in the big three biotech states in the U.S. not only will get old, it will become more apparent at every economic downturn. Not only that, global competition means lower prices for bio-related products. Lower prices almost always mean leaner profits. That's when companies expand, consolidate or relocate to less costly climes. The South has successfully been living off the fact that it's less expensive to operate a business here for 50 years now.

4. There is an expected slew of manufacturing activity in the coming years in the life sciences, particularly in medical devices and pharma

Some experts in the field have projected as many as 75 large pharma plants may be built in the U.S. within 10 years. We think it will be more, all dependent of course on new drug approval. Others have projected as many as 200 significant medical device manufacturing facilities will be built in the U.S. within five years. We think that figure is right on. Now, where are those plants going to be built? For 50 years now the South has been the region for manufacturing in this country. In fact, in 2004 manufacturing activity rose in the South, something that wasn't supposed to happen. When these bio-related products are approved are they going to be produced in California, Massachusetts or New York? Hardly. The vast majority of the new plants will locate in the South, the least expensive place to manufacture in the largest consumer nation in the world.

5. Federal dollars

The political strength in Washington welded by Southern politicos dominates the hill, from the President to the Congress. It wouldn't be a coincidence if more federal money flowed to Southern states from here on out for bio-related projects. It also doesn't hurt that the National Institutes of Health is located in the South.

6. A maturation of life sciences in the region

The life sciences industry has been around a long time in Maryland, Virginia and parts of North Carolina. However, it has only been in recent years that state and local governments as well as universities throughout the South understand the potential of biotech. Billions have been invested in infrastructure, worker training and other critical factors to enable the life sciences to grow in the region. Those investments have been made in virtually every Southern state and dozens of markets.

7. Permitting and allowance to grow

The three largest states for bio in this country - California, New York and Massachusetts -- are not exactly business friendly when it comes to the certain sectors of the bio industry. Permitting can be a huge problem, especially in California. What you will find in the South is rational thinking when it comes to doling out permits. If the deal is right and it honestly does not harm the environment, in most cases you have a deal. Fair permitting for all parties involved is something the South invented and tweaked to perfection years ago.

8. The political climate is ripe in the South

The South has been the most successful U.S. region in economic development for quite some time now. Yet, it has not been the most successful region at attracting investment and job generation from the life sciences sector. Southern governors, senators and other economic development leaders in the region have placed a target on the recruitment of biotech. It's simply a politically correct industry target in the region. That wasn't the case just 10 years ago.

9. Incentives have never been better for biotech deals

If governors in the South have recently targeted the life sciences, you know they have helped write legislation that helps them recruit the industry. In other words, there is more assistance for startups, expansions and relocations for that industry than at any time in the region's history. No other industry, except for the automotive industry, can garner more incentives per job created than bio can right now in the South.

10. Quality of life

The softer factors of site selection, such as quality of life, are very important to some industry sectors and less important to others. The bio industry places quality of life near the top of its site selection checklist. Simply put, the South is the most popular region for migrating companies and families because it's a great place to live, work and operate a business.