1. BUSINESS SENSITIVE 1 The Economic Impact of the Arizona Biosciences Sector Walter H. Plosila, Ph.D. Senior Advisor Battelle’s Technology Partnership Practice April 7, 2009

2. BUSINESS SENSITIVE 2 Assessing the Economic Impact of the Biosciences in Arizona Battelle prepared this analysis to answer the following questions –What is the contribution of the biosciences, including non-hospital biosciences, hospitals, and academic bioscience R&D to the Arizona economy today (2007 data)? –How much has this contribution grown since the Arizona Bioscience Roadmap was adopted in 2002? –What is the future impact of the biosciences likely to be? Analysis uses the IMPLAN input-output model –Measures how a dollar spent on a specific economic activity, such as health care or research, makes its way through the economy –Generates 3 measures of economic impact -Output, i.e. value of production or sales -Employment -Employee compensation

3. BUSINESS SENSITIVE 3 Economic Impact Methodology Four Measures of Economic Impacts Direct effects. The change in economic activity being analyzed—in this case the activities of the bioscience sector Indirect effects. The changes in inter-industry purchases, for example the purchase of raw materials by a biotechnology manufacturer, in response to the change in demand from the directly affected industries Induced effects. The changes in spending from households as income and population increase due to changes in production Total effects. The combined total of direct, indirect and induced effects

4. BUSINESS SENSITIVE 4 Data and Projections Two Inputs to Modeling Effort –Biosciences Sector Employment -Battelle analysis of and projections based on Bureau of Labor Statistics QCEW data from the Minnesota IMPLAN Group. –Bioscience-Related R&D -Battelle analysis of NIH and NSF Data.

5. BUSINESS SENSITIVE 5 Findings

6. BUSINESS SENSITIVE 6 The bioscience sector has become a key contributor to Arizona’s economy The bioscience sector contributed $12.5 billion in economic activity in 2007 Total impact was $21.1 billion accounting for more than 155,600 jobs or 4 % of all employment in the state The bioscience sector generated $765.7 million in state and local taxes ItemDirect ImpactIndirect ImpactInduced impactTotal Impact Output$12,539.3$4,286.8$4,359.0$21,185.0 Employment87,41731,136 37,079155,631 Employee Compensation$5,327.5$1,239.9$1,262.8 $7,830.2 State and Local Tax Revenues–––$765.7 Source: Battelle TPP and IMPLAN The Economic Contribution of the Entire Biosciences Sector Including the Non- Hospital Bioscience Sector, Hospitals and Academic Research To the Arizona Economy in 2007 ($ in millions; current 2007)

7. BUSINESS SENSITIVE 7 The bioscience sector grew significantly during the last 6 years and as a result annual economic impact has soared Annual total economic activity generated by the biosciences increased 46.6% from $14.5 billion to $21.2 billion Jobs from the total impact of the biosciences rose by almost 15,000 from 140,654 to 155,631 Annual state and local taxes generated grew 35% to $765.7 million Item Direct Impact 2002 Direct Impact 2007 % Change 2002 - 2007 Total Impact 2002 Total impact 2007 % Change 2002 - 2007 Output$7,975.7$12,539.357.2%$14,451.2$21,185.046.6% Employment72,85587,417 20.0%140,654155,63110.6% Employee Compensation $3,203.6$5,327.566.3%$5,176.6 $7,830.251.3% State and Local Tax Revenues ––$566.9$765.735.1% Source: Battelle TPP and IMPLAN Total and Percent Change in Direct and Total Impacts of the Entire Bioscience Sector, 2002 - 2007 ($ in millions)

8. BUSINESS SENSITIVE 8 The non-hospital bioscience sector was the growth driver for the last 6 years Annual total economic activity generated by the non-hospital biosciences sector increased 61.6% from $3.6 billion to $5.8 billion. Jobs from the total impact of the non-hospital biosciences rose by 17.6% - 4,440 jobs from 25,231 to 29,671. Annual state and local taxes generated grew 34% to $177.8 million Item Direct Impact 2002 Direct Impact 2007 % Change 2002 - 2007 Total Impact 2002 Total impact 2007 % Change 2002 - 2007 Output $2,147.3 $3,641.269.6%$3,615.3$5,842.861.6% Employment 10,895 13,54324.3%25,23129,67117.6% Employee Compensation $494.1 $777.857.4%$949.5$1,445.952.3% State and Local Tax Revenues – – $132.5$177.834.2% Source: Battelle TPP and IMPLAN Total and Percent Change in Direct and Total Impacts of the Non-Hospital Bioscience Sector, 2002 - 2007 ($ in millions)

9. BUSINESS SENSITIVE 9 The hospital sector also grew significantly during the last 6 years Annual total economic activity generated by the hospital sector increased 42.2% from $10.3 billion to $14.6 billion Jobs from the total impact of the hospital biosciences rose by 11.1% - 12,029 jobs from 107,716 to 119,745. Annual state and local taxes generated grew 37% to $561.6 million Item Direct Impact 2002 Direct Impact 2007 % Change 2002 - 2007 Total Impact 2002 Total impact 2007 % Change 2002 - 2007 Output $5,537.7 $8,482.953.2%$10,251.0$14,568.842.1% Employment 57,410 70,69123.1%107,716119,74511.2% Employee Compensation $2,522.6 $4,354.972.6%$3,949.2$6,077.653.9% State and Local Tax Revenues – – $409.1$561.637.3% Source: Battelle TPP and IMPLAN Total and Percent Change in Direct and Total Impacts of the Hospital Sector, 2002 - 2007 ($ in millions)

10. BUSINESS SENSITIVE 10 Projecting future growth levels is challenging Employment and research growth projections are based on Battelle’s long-term involvement in analyzing the growth, importance and role of biosciences in the State and with the Roadmap Optimal projections are based on historical performance of biosciences in the state and the goals established in the Roadmap Optimal projections show what could happen if the goals of the Roadmap are attained, not what will happen. They are predicated on continued support and investment in the biosciences by the state as well as national and local economic conditions

11. BUSINESS SENSITIVE 11 Significant growth is projected during the 2007 – 2020 time period if the goals of the Arizona Bioscience Roadmap are attained The bioscience sector would generate a total impact of $34.3 billion in 2020, 62% higher than 2007 252,676 jobs would result from the total impact of the biosciences sector The bioscience sector would generate more than $1.2 billion in state and local taxes ItemDirect ImpactIndirect ImpactInduced impactTotal Impact Output$20,298.0$6,901.8$7,082.034,281.8 Employment142,01850,419 60,239252,676 Employee Compensation$8,630.6$2,009.3$2,052.2 $12,692.1 State and Local Tax Revenues–––$1,238.7 Source: Battelle TPP and IMPLAN The Economic Contribution of the Entire Biosciences Sector Including the Non-Hospital Bioscience Sector, Hospitals and Academic Research To the Arizona Economy in 2020 ($ in millions; current 2007)

12. BUSINESS SENSITIVE 12 Proposed Process for Reassessing Bioscience Roadmap Economic Assumptions 2002-2007 bioscience progress is impressive The Flinn Foundation remains committed to advancing the biosciences in Arizona Economic conditions in 2009 indicate that a review of the Bioscience Roadmap economic assumptions is indicated Battelle will conduct a series of sessions with Bioscience Steering Committee members to develop a range of projections and options for consideration The June 3rd Bioscience Steering Committee meeting will be devoted to reaching consensus on a refined action plan

13. BUSINESS SENSITIVE 13 Impact by Bioscience Sector Area 2007

14. BUSINESS SENSITIVE 14 Impact by Bioscience Sector Area 2002

15. BUSINESS SENSITIVE 15 2020 Growth Assumptions The core assumptions of the biosciences employment and R&D activity 2020 projections are as follows: 1.Agricultural Feedstock & Chemicals Employment is projected to grow at the 0.2 percent annual rate of growth experienced in the 2002–2007 period 2.Drugs & Pharmaceuticals Employment is projected to grow at the 3.2 percent annual rate of growth experienced in the2002–2007 period. 3.Medical Devices & Equipment Employment is projected to grow at the level required to attain an “above average” level of specialization in employment in this sector—or a Location Quotient (LQ)[of 1.20. 4.Research, Testing, & Medical Laboratories Employment is projected to grow at the level required attain an “above average” level of specialization in employment—or a LQ of 1.20. 5.Hospital Employment is projected to grow at the level required to attain the “average” national level of specialization in employment—or a LQ of 1.00. 6.Arizona Bioscience-related Research growth was projected at two levels: 1) National Institutes of Health R&D was projected to grow at the level necessary to catch up and attain the NIH research funding goals established in the 2002 Roadmap; and 2) All other Biosciences-related R&D was projected to grow at 7 percent annually, or the recent rate of growth in overall bioscience-related R&D activity.

16. BUSINESS SENSITIVE 16 Impact by Bioscience Sector Area 2020