Kendall Square: Are We Tech or Textile?

Millions of skilled workers. Cutting-edge technology. Unlimited capital to scale new businesses and to create dominant market positions.

Is this Silicon Valley? Kendall Square? Xerox PARC? Nay, this could describe the textiles, steel, or the auto industries in the US for much of the 20th century. These industries experienced a sudden and complete loss of competitiveness over just a few decades.

Made in America

What caused the collapse of these sectors that had previously powered the US economy? Globalization, offshoring, and the lack of political will and support to keep these industries flourishing.

The biopharmaceutical industry is now facing our own textile moment. The past 25 years have seen an inexorable shift to China, first in biomanufacturing, then in “commodity” research and development, such as medicinal chemistry and protein engineering, and now including a dramatic amount of discovery and late preclinical development. The reason is simple: China has tens of millions of skilled motivated scientists who are willing and able to work for 80% less than US-based personnel. The Chinese government has aggressively supported many of the larger Chinese “service providers” such as WuXi AppTec to ensure that this trend continued.

Rather than making it easy and compelling to bring skilled specialized workers into the US through the H1B visa program like tech giants have done, US biotechs and pharmas have gleefully participated in the training of talented drug discovery personnel in China and India in the name of cost savings. The BioSecure Act, designed to stop the resulting flow of invaluable IP to China, has no real teeth.

And now we find ourselves at a reckoning. China is not a service provider. Instead it is poised to own the global biopharma industry in the coming decade. US-based venture capital dollars are increasingly spent to in-license and fund drug programs from China, rather than to take on the risk and expense of supporting earlier stage discovery programs in the US. Larger pharmaceutical companies are divesting and eliminating discovery teams and innovation engines, in favor of the capital-efficient strategy of in-licensing Phase 2 or Phase 3 programs that are (often) China-originated. Worst of all, the US is steadily losing its ability to internally develop and manufacture new therapeutic compounds and biopharmaceuticals and to attract and retain the talent to do so.

Our Hallowed Halls

Don’t worry! We have Harvard. Stanford. MIT. Caltech. Duke. Brown. Berkeley. The IVY LEAGUE! These are the true sources of biotechnology innovation in the USA, right? …right??!

Well, sorta wrong. The quality of the biomedical research coming out of US institutions over the past 30 years has been the envy of the world. But these breakthroughs, inventions, and discoveries made at universities are just the tip of the spear. Some really DO result in new medicines, novel ways of treating patients, paradigm shifts in standard of care…but most just result in publications in for-profit journals. Even then, the results are consistently irreproducible.

Without the careful deliberate shepherding of academic discoveries by seasoned drug development teams alongside meaningful investment and supportive university licensing offices, this research rarely results in new drugs. If venture capital dollars and pharma support decides that this model is inefficient, then no amount of academic research will power the US innovation pipeline.

Political Will

Kendall Square is inarguably the number one biotech hub in the country. This has made Massachusetts an economic powerhouse that continually punches above its size and weight class (population). The quality of the research and innovation in the Bay State is reflected in the federal dollars supporting this research. To put it in perspective: $3.5 billion in federal support came in to MA last year, around $492 per capita. That’s in comparison to $108 and $58 per capita in in similarly sized Tennessee and Indiana. Neighbor lil’ Rhody did better at $256 per capita. California, also an innovation leader, was at $135 per capita. Much of this federal funding goes into basic biomedical research at non-profit research universities, but a significant amount also goes to for-profit startups developing products that will benefit society.

This funding is effectively frozen.

RFK Jr. was confirmed today. He is a vocal skeptic of accepted public health measures ranging from vaccines to pasteurization and water fluoridation. Nobody yet knows what this means, but he is now running an agency with a budget of around $2 trillion and has a strange and irrational loathing of the biotech/pharma industry. Oddly, the industry did not appear to spend any lobbying efforts fighting his appointment, nor do they now appear to be spending any dollars to decry the frozen federal research support. The management teams of the most influential companies fear near-term political retribution more than they fear their own long-term irrelevance.

Derek Lowe points out that this is the worst kind of cowardice. Biotech and pharma executives are not even willing to speak up to save their own hides.

The Hub

I am worried.

Boston/Cambridge is, at the end of the day, a small university town. COVID quarantine measures killed a lot of retail and commercial businesses, and led to a veritable land-grab, where landlords with empty serviceable space (not leaking or actively collapsing) began whole-hog lab space conversions. At the time, lab space was renting at $110–$120 per square foot. I heard stories of CrossFit gyms and commercial kitchens being converted into Class B wetlab space. “You can’t do lab work from home!” the landlords would cheerily parrot. But you can do it for less in China.

Those mediocre Class B lab rentals, as well as the brand new built-to-purpose Class A lab spaces, now sit empty. I have toured them. The buildings are gorgeous, the locations are just right, the amenities comprehensive…and I am not convinced that there is ANY price point at which they will find tenants. Empty commercial space rots neighborhoods, kills small businesses, and drives down real estate value. There are serious knock-on effects here.

The market for talented scientists looks similar. Experienced Class A (top notch) people are having a hard time finding their next roles. Boston/Cambridge is becoming a victim of its own success, where the supply of talented researchers with sterling academic records and industry drug discovery experience cannot be absorbed by slimmed-down companies. Previously, these folks could pick their path, either in academia or in industry. If current trends continue, they will be picking up serviceware at Cambridge eateries.

What Comes Next

Capital markets have been brutally hard on private biotech companies over the past 3 years. It has been nearly impossible to go public. Of the paltry few (5) biotech IPOs in 2025, I can point to 3 that are based on China-originated drugs. Good for China! But bad for American competitiveness.

Large pharma has decided that its own internal discovery teams are not cost-efficient when it comes to discovering new medicines at the exact same moment that venture capital funds have decided that early-stage drug discovery presents too much risk to return-on-invested capital. If government research grants are no longer there as a catalyst, then we will see the domestic pipeline of new medicines run dry in just a handful of years.

Sic transit gloria. Nothing lasts forever and glory fades. But it shouldn’t; not here, not now. The work we are doing is important, impactful, and valuable.

Shortsighted pharma management teams, risk-averse venture investors, and politicized federal agencies are now putting a major US industry at risk. It would be a distinct tragedy if we look back in 15 years at what was once a leading position in an innovation economy, and instead have a handful of entrenched incumbents fighting over scraps. I hope we don’t see the stained brick textile mills that still haunt Boston joined by deteriorating glass-and-steel lab buildings, both grim reminders of former industry dominance.