Partnering and investment is the key to high tech future, says Medarex CEO
By: Lauren Otis
PLAINSBORO New Jersey is in danger of losing its status as a center for high-technology entrepreneurs, and without the tax income from high-tech and research-driven corporations the state’s residents will wind up with an ever greater share of the state tax burden, said the chairman of the New Jersey Commission on Science and Technology.
"New Jersey is in a desperate way in terms of loss of high-tech jobs. This is a high technology employment crash," said Donald Drakeman, president and CEO of Medarex Inc., a Princeton-based Nasdaq-listed biotechnology company which develops monoclonal antibodies for the treatment of life threatening and debilitating diseases.
"All told we have lost 14 percent of our high-tech jobs in the past five years. High-tech employment levels are below 1990 levels today," said Mr. Drakeman, who was appointed by Gov. Jon Corzine to chair the state Commission on Science and Technology, which is seeking ways to maintain New Jersey’s prominence as a research and entrepreneurial center in the world of high technology.
Mr. Drakeman gave his sobering prognosis, as well as possible solutions to the problem, at a luncheon sponsored by the Princeton Regional Chamber of Commerce at the Doral Forrestal Conference Center & Spa on May 4.
"If we don’t stem this outflow then the Thomas Edisons of the future are going to be working somewhere else," Mr. Drakeman warned.
High-tech employees account for only 7 percent of the state work force, but pay nearly 30 percent of state income taxes, Mr. Drakeman noted. As high-tech jobs have left the state "they have been replaced primarily with casino worker jobs, which is not an equal match," he said. Employees who pay several thousand dollars a year in state income taxes are being replaced by workers who pay several hundred dollars a year in taxes. "What happens to the rest of us? Our taxes go up," said Mr. Drakeman.
Part of the problem is that "everyone in the rest of the world" is trying to recruit the type of high-tech entrepreneurial companies which today call New Jersey home, Mr. Drakeman said. New Jersey’s neighbors, Pennsylvania and New York, have also been offering "cold cash" to startups and established companies alike funds they obtained from large recent tobacco company liability settlements in an attempt to lure them to their state, he said.
New Jersey took its own tobacco settlement money and balanced its budget for one year, Mr. Drakeman said, something that is fine to do but didn’t invest in the state’s future. "You didn’t do it then, you’ve got to do it now," he said.
Mr. Drakeman said Medarex was founded in New Hampshire but "we picked the company up and moved it lock, stock and barrel here to New Jersey," because of the pool of research talent, the educated workforce and New Jersey’s access to financial centers such as New York City.
The state Commission on Science and Technology has come up with a high-tech recovery plan for the state in an effort to again make New Jersey a magnet for entrepreneurs and researchers in the technology realm, he said.
The plan involves state incentives to encourage research, then providing resources to "turn new knowledge into a real product," as well as cross-fertilization of researchers, entrepreneurs and venture capitalists, Mr. Drakeman said.
Although New Jersey’s resources may be more modest than Pennsylvania’s or New York’s, the commission still recommends a significant investment of state funds, in the $300 million to $500 million realm, raised through a state bond issue, to further its goals, he said.
These funds would be used for such things as "entrepreneurial partnering plans," where the state would help match small companies with professors or researchers whose expertise could help them, as well as "technology fellowships," where the state would fund a year or two of post-doc study for talented young scientists in the hope that they would continue their professional careers in New Jersey thereafter, Mr. Drakeman said.
"We are also making investments in universities themselves," in order to get them to translate scientific research and breakthroughs into practical products and businesses, he said, adding, "Where the big money comes is in inventing new intellectual property."
Earlier, Mr. Drakeman described how huge an investment in time and money there is in creating such new intellectual property in the biotechnology realm, noting that it usually takes years for an idea to go from the research stage to a marketable product, with not every product even succeeding after this tortuous process.
He self-deprecatingly described his own company bearing these hurdles in mind. At Medarex, "we are now about 19 years old, closing in on about 80 unprofitable quarters in a row," he said. When Medarex was founded, "our goal was to cure cancer, and we said we were going to do that in three years. We still have that goal, we still say we are going to cure cancer in three years, but it is now a rolling deadline," Mr. Drakeman said.
"One thing about creativity, about new ideas, is that most of them don’t work," Mr. Drakeman said. "We’ve got a term for them at Medarex, we call them ‘shots on goal,’" with the assumption that you’ve got to take a lot of shots on goal before one goes in, he said. Many people, and companies, will try a new idea and if it doesn’t work they will go back to old ideas, he said.
But creative ideas and efforts, even unsuccessful ones, have to be encouraged, even rewarded. Mr. Drakeman told the Princeton chamber members to "pin a medal on somebody who took those risks, even when they turned out to be wrong."
Mr. Drakeman said a cultural change among area investors, venture capitalists and other interested parties, closer to what exists on the West Coast in Silicon Valley, would also help foster an environment which would encourage high technology startups.
"There is a very high tolerance for trying and failing in California," he said, with people able to continue to obtain backing for a good high-tech entrepreneurial idea even after multiple previous failures, something that is not the case back east, he said.
Asked whether he thought New Jersey missed an opportunity to create a single, large state-funded academic research system when an effort to merge all the state universities failed, Mr. Drakeman said the specific circumstances were too complicated to go into but the merger effort had been an attempt to gain more federal grant funding for academic research.
"New Jersey has not competed as effectively for federal grant funding as it should," he said. Merging the state university system was an idea to remedy that, but it failed. Going back to his earlier theme, Mr. Drakeman said "ideas that fail are just fine, but we’ve got to come up with idea two and idea three," to get more federal funding, rather than dwell on the failed merger idea.
In general, "we can do a lot in the very short term by just getting people together and providing a little bit of money," Mr. Drakeman said. But for the long term a much more concerted effort, involving significantly more funding, will be needed. However, "if we do these things, high tech jobs and the economy that comes with them will become a part of the future of New Jersey," Mr. Drakeman concluded.

