The Once and Future Hub

Fourteen reasons Boston is poised to lead America’s economic comeback. (Whenever it comes.)

5. Because these startups and others like them are the byproducts of the universities and teaching hospitals that, despite the recent gloomy headlines, remain the engines of our local economy.

Start with the schools. Sure, budgets have been slashed; even MIT and Harvard are looking to cut $50 million and $105 million in annual spending, respectively. But the universities’ principal output—brains—makes for a highly adaptable infrastructure. In places like Michigan and Ohio, after any bailout they’ll still need to literally rebuild their economic landscapes, since too many jobs will be lost for good. By contrast, there will always be demand for top minds and the institutions that school them. “We employ close to 100,000 people, and we aren’t going to relocate out of state,” notes Richard Doherty, president of the Association of Independent Colleges and Universities in Massachusetts. All told, the universities pad out the state’s bottom line to the tune of $27 billion. Yes, Harvard has lost $8 billion this fiscal year from its endowment, but it’s still got $29 billion in the kitty. You can’t say that for Lehman Brothers.

Similarly, our medical complexes remain fundamentally strong. Brigham and Women’s and Mass General are perennial top-10 finishers in U.S. News and World Report‘s hospital rankings. Taken together, the city’s teaching hospitals and affiliated med schools provide 110,000 jobs and $24 billion a year for our local economy. Like the universities, they aren’t going anywhere. Actually, they’re getting bigger: Despite everything, Mass General is still on track to spend $686 million on the state’s most expensive hospital expansion, set to open in 2011.

6. Because much of what goes on in that new building will doubtless be aided by the National Institutes of Health, which for 14 straight years has sent more cash to Boston than to any other city.

Massachusetts’ total haul has habitually led that of all states, save California (though per capita we get roughly four times more). Between 2005 and 2007, the NIH plowed over $6.7 billion into the commonwealth, more than five times what the average state received, and more than one-tenth of all the money doled out nationwide.

Sure, there’s concern that NIH dollars will disappear as the economy worsens. But that didn’t happen during the last downturn, in 2000—funding increased that year and in the years following, and that with a conservative president in the White House. Even more auspicious: As a candidate, Obama pledged to double the agency’s funding over the next 10 years. Anything he does to even come close to that goal will help not only Boston’s medical industry (which includes the top five NIH-funded hospitals), but also our universities. Last year MIT alone received just under $200 million in NIH money, which was more than 26 entire states reeled in.

There’s another local sector fortified by the NIH’s pipeline. Some 450 biotechs are located in Massachusetts, and last year 69 of them received a total of almost $86 billion from the NIH. That free money helped account for $5 billion of the industry’s payroll. For scientists and medical innovators interested in working at top-flight universities and hospitals while having the opportunity to spin their research into startups, the proven flow of NIH backing to local institutions makes Boston exceptionally attractive.

7. Because the links among our universities, hospitals, and the aforementioned startups have created what’s often referred to as a “biotech ecosystem.”

It works more or less like this: You start with an idea, incubated and nourished in one of the universities or hospitals. Angel investors provide seed money to get the venture off the ground. For the ensuing rounds of fundraising, other area venture capitalists pitch in, offering not just cash but coaching that’s informed by a deep understanding of both early-stage development and the local terrain. As the fledgling biotech staffs up, it can turn back to the universities for talent to fill the jobs it’s creating. As it needs business services, it can look to the many technology-support companies to help with everything from animal experiments to producing the proteins needed for lab work. The hospitals right next door can be accessed for human trials. Finally, while it takes its products to market, the biotech can tap the city’s large pool of lawyers who specialize in licensing and commercial deals for new drugs. All the organizations within the ecosystem interact with and need one another, which means one can’t just be yanked from this habitat and expected to perform as well.

Jeff Elton, a senior VP in Novartis’s Cambridge office, notes that the ecosystem has spawned a flurry of new medical drugs, as well as a few successful companies you may have heard of: Genzyme, which enjoyed a $480 million profit last year, is one; Biogen Idec, which boasted a $638 million margin, is another. That performance “is something that a lot of regions just can’t replicate,” Elton says.