Our partners include:Greater Cleveland Partnership

Greater Akron ChamberStark Development Board

Team Lorain CountyYoungstown-Warren Regional Chamber

Medina County Economic Development Corporation

Cleveland Plus® Economic ReviewMarch 2009Volume 3, Issue 1

biomedical industrya driving force in Northeast Ohio

March 2009 | Volume 3, Issue 1

Growing Biomedical Sectors are Helping to Transition the Cleveland Plus Region’s Economy

With 60 hospitals, we know that the Cleveland Plus region is a healthcare hub, but how does that translate into business for the economy?

The biomedical industry is a driving force in Northeast Ohio. While the region has long been a leader in healthcare, our 30 colleges and universities, strong manufacturing capabilities, plus billions of dollars in private and public investment are making the region a premiere location for biomedical business.

Northeast Ohio’s biomedical industry is producing goods and services that are exported nationally and internationally, thus redefining healthcare in the 21st century, and increasing the wealth of the Cleveland Plus region.

According to BioEnterprise —Northeast Ohio’s healthcare business formation, recruitment, and acceleration initiative—the regional biomedical industry has grown by more than 30% in the past five years. Northeast Ohio is now home to 600 biomedical companies, with many more starting or moving to the region each year.

$395M$2.3B

7.4%600

annual growth

2008 outsideVC/NIH funding

State of Ohio TechnologyInvestment

biomedicalcompanies

“Access to partners, customers and workforce is critical to Proxy Biomedical’s success. Establishing US Operations in Northeast Ohio will allow us to take advantage of critical product development support and clinical trials that will enable our accelerated growth and service to the world’s largest market, the United States.”

Peter Gingras, CEO, Proxy Biomedical, an Irish Biomaterials Firm

Furthermore, as a share of the total GRP for Northeast Ohio, the biomedical sector has increased 33%—from 2.1 to 2.8 over the past five years.

The GRP for the biomedical sector (which includes pharmaceuticals & therapeutics; medical devices & equip-ment; and research & development) has grown more than 37% over the past five years.

While the Cleveland Plus region has grown an average of 7.4% annually, the United States has grown at 6.8% annually.

NEO Bio Sector Growing 7.4% Annually: Outpacing U.S. Average

0.00

1000.00

2000.00

3000.00

4000.00

5000.00

6000.00

( Mill

ions

200

8 $)

2003 2004 2005 2006 2007 2008

NEO Bio-Related GRP Growth: 2003-2008

Medical Device Manufacturing Pharmaceuticals & Therapeutics R&D and Labs

Source : Moody’s Economy.com

0.9%

1.0%

1.1%

1.2%

1.3%

1.4%

Aggregate Bio Sectors GDP: NEO vs US: 2003-2008

2003 2004 2005 2006 2007 2008

NEO US

Source : Moody’s Economy.com

1.5%

1.7%

1.9%

2.1%

2.3%

2.5%

2.7%

2.9%

Biomedical Share of Total NEO GRP: 2003-2008

2003 2004 2005 2006 2007 2008

Series 1

Source : Moody’s Economy.com

“ Prior to 2003, at Astro Manufacturing and Design the revenue we generated was more than 50% automotive related. By the end of 2008, we had evolved our production to the point that more than 60% of our revenue comes from work done for customers in the medical and biomedical markets.” Rich Peterson, Vice President, Business Development Astro Manufacturing & Design, Inc.

Manufacturing in Northeast Ohio continues to account for a higher share of output than the national average and remains an important advantage for the Cleveland Plus region. However, the products that are being produced are changing as the economy is transitioning. For example, the medical devices & equipment manufacturing sector has grown 75% in the past five years. Because of Northeast Ohio’s strength in healthcare, and the region’s strong legacy of skilled manufacturing, the Cleveland Plus region is primed to meet the needs of the biomedical industry.

Proactive attraction of new venture capital (VC) funding from outside of Ohio is fueling much of this biomedical growth. Since 2005, the State of Ohio has attracted $783.9 million in new VC funding. In fact, more than 60% of this has been attracted to the 16-county Cleveland Plus region: $493.2 million.

National Institute of Health (NIH) funding has added additional fuel. In fact, in 2008 alone, Ohio attracted $817 million combined VC/NIH funding, making Ohio the second in the Midwest for outside VC and biomedical funding. These grants recognize and fund cutting edge research in the treatment and prevention of diseases, and their funding is pivotal to advancing the biomedical industry in the United States and Northeast Ohio. The Cleveland Plus region alone has attracted nearly half of Ohio’s VC/NIH 2008 funding, accounting for $395 million of Ohio’s total. This ranks our region higher than some states, including Indiana, Kentucky, and Kansas.

In addition, Ohio’s Third Frontier Project has added $1.6 billion to expand the state’s research capabilities, company formation, new product development, and advance manufacturing technologies in Ohio’s high-tech industries such as alternative energies and biomedical. When coupled with $750 million Building Ohio Jobs programs, $2.3 billion in state technology funding is leveraged.

Illinois

Ohio

Minnesota

Michigan

Pennsylvania

Missouri

Wisconsin

Cleveland Plus

Indiana

Kentucky

Kansas

$0 $100 $200 $300 $400 $500 $600 $700 $800 $900

Venture Capital & NIH Funding on Bio/Healthcare: 2008( in Mid-American States)

Venture Capital$ Millions NIH Grants

Source : National Institute of Health and Midwest Health Care Venture Report (2008), BioEnterprise and Mid-American Healthcare Investor Network.

Historical Assets Fuel New Economic Landscape

Since 2005, Ohio has attracted $783.9 million in new VC Funding.

The Cleveland Plus region attracts more outside VC funding than many states, fueling new business start-ups.

1.94

1.96

1.98

2.00

2.02

2.04

2.06

2.08

(Mill

ions

)

NEO Total Employment (Not Seasonally Adjusted)

2002

2003

2004

2005

2006

2007

2008

2002

2003

2004

2005

2006

2007

2008

2002

2003

2004

2005

2006

2007

2008

2002

2003

2004

2005

2006

2007

2008

Q1 Q2 Q3 Q4

Soft Economy Reflected in NEO Job TotalThis chart shows total employment in Northeast Ohio without seasonal adjustments.

By viewing employment on a quarter to quarter basis we can see the overall trend that occurs due to seasonal patterns of employment. Typically there is a drop between the third and fourth quarters, however the state of the national economy is reflected in the more substantial drop realized from a year ago. Total employment dropped just below 2 million workers in Q4 2008, down 3% from Q4 2007.

GRP Continues to GrowModest growth is still projected for Northeast Ohio’s 2008 Gross Regional Product, based on the most recent projections available from Moody’s Economy.com. Moody’s detailed models of regional economic conditions are revised as actual data is received. Moody’s estimates that the Northeast Ohio economy has grown at an annual rate of 1.6% over the past 15 years and has grown in 13 of the past 15 years.

Real GRP Average Annual Growth = 1.6%

$120

$130

$140

$150

$160

$170

$180

$1900.4%0.4%

(-0.9%)0.5%

2.6%1.8%1.2%(-1.9)%0.3%1.2%2.6%

4.8%

3.0%3.8%5.1%

0.3%3.6%

NEO Real GRP Billions (2007 Dollars)

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%Q

1

Q2

Q3

Q4

NEO Quarterly Unemployment Rate

NEO 16 counties Ohio U.S.

2002

Q1

Q2

Q3

Q4

2003

Q1

Q2

Q3

Q4

2004

Q1

Q2

Q3

Q4

2005

Q1

Q2

Q3

Q4

2006

Q1

Q2

Q3

Q4

2007

Q1

Q2

Q3

Q4

2008

NEO Unemployment Rate Trending Better Than National RateThe regional unemployment rate has been following the pattern of both the U.S. and Ohio. However, Northeast Ohio did show a slight improvement from Q3 2008 to Q4 2008, closing the gap between the region and the state. Over the last 18 months, the rise in unemployment in Northeast Ohio has been less than the U.S. as a whole.

Source : Ohio Labor Market Information (LAUS Data)

Source : Ohio Labor Market Information (LAUS Data)

Source : Moody’s Economy.com

737 Bolivar Road, Suite 2000, Cleveland, Ohio 44115888.NEO.1411 • www.clevelandplusbusiness.com

375

380

385

390

395

400

405

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%

Occ

upie

d Sq

uare

Fee

t (M

illio

ns)

Vaca

ncy

Rate

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q4

Q1

Q2

Q3

2004 2005 2006 2007 2008

NEO Occupied Industrial Space & Vacancy Rate

Vacancy RateOccupied Square Feet

March 2009 | Volume 3, Issue 1

Demand for Industrial Space Remains Strong

This graph shows the total amount of industrial space occupied by quarter from Q1 2004 to Q4 2008. Over this period, total occupied industrial space grew steadily. In addition, the vacancy rate of 7.4% remains at the lowest point in the past five years.Industrial space includes primarily manufacturing, warehouse, and distribution related space.

About Team NEOTeam NEO advances Northeast Ohio’s economy by attracting businesses worldwide to the 16-county Cleveland Plus region. The organization is a joint venture of the region’s largest metro chambers of commerce. Since 2007, the organization has attracted more than 20 new companies, 2,200 new jobs and more than $70M in annual payroll to Northeast Ohio, leading to a total regional annual impact of $150M. For more information, visit www.clevelandplusbusiness.com.

Data Sources: Team Northeast Ohio uses a number of data sources for the Regional Economic Review. One of the primary sources is the Moody’s Economy.com (www.economy.com) Northeast Ohio modeling system. This firm is the leading independent provider of economic, financial and industry research and data that specializes in national and metropolitan economic growth forecasts. Moody’s Economy.com county level output, employment and payroll historical data are estimated from several publicly available sources and are summarized into the Team NEO regional footprint. It is important to understand data provided by Economy.com are estimates of economic activity.

Team NEO also uses data from federal and state sources as part of the report. As with Economy.com, the information for the Team NEO footprint is derived from data reported at either the county or metropolitan level. We rely heavily on data from the U.S. Bureau of Labor Statistics (www.bls.gov) and Ohio’s Labor Market Information (www.lmi.state.oh.us) for information on wages, unemployment and both general and industry-specific employment. In addition, Team NEO uses data from the Census (www.census.gov) to track housing-related activity including the number of single and multifamily permits, as well as their values.

Industrial real estate data for this edition was derived from the CoStar Group. The CoStar Group is a leading provider of commercial real estate data throughout the United States, covering more than 58 billion square feet of property throughout the country.

Due to market limits within the CoStar database, historic trend data for the Team NEO region is defined as 10 of the 16 counties forming the regional footprint. These counties include Ashtabula, Cuyahoga, Geauga, Lake, Lorain, Medina, Portage, Richland, Stark and Summit.

The categories and data used to analyze the Northeast Ohio Biomedical sector, including medical device and equipment manufacturing, pharmaceuticals and therapeutics, and R&D and Labs, were compiled based on sector definitions provided in the BioOhio 2007-2008 Ohio Bioscience Growth Report.

AshtabulaLake

Cleveland

Akron Youngstown

Canton

Geauga

Trumbull

Portage

Mahoning

Columbiana

Carroll

Stark

Summit

Cuyahoga

Medina

Lorain

WayneAshland

Richland

Cleveland Plus 16-County Region

Source : CoStar Industrial Data

This report made possible through the generous support of Dominion.