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Indiana's life sciences industry sees trouble ahead

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Long sold as one of the state's brightest economic hopes, Indiana's life sciences industry has weathered the recession relatively well.

Total employment is up nearly 7 percent and major investment announcements are trickling in.

Signs of trouble, however, loom. Indianapolis-based Eli Lilly and Co., arguably Indiana's life sciences engine, continues to shed jobs. The state government's direct investments into the industry's smallest companies are down.

And, perhaps most ominously, tighter capital markets threaten to starve the risky process of medical innovation.

"That is the legacy of this recession. Not one or two missed companies, but a changed capital market," said David Johnson, president and CEO of BioCrossroads, a statewide life sciences organization.

"The challenges of getting capital are going to be permanently harder."

At the moment, however, the industry is still producing new jobs.

Statewide, life sciences employment is up 6.5 percent since the recession hit, according to data from the U.S. Bureau of Labor Statistics. The bureau tracks the medical supplies manufacturing as well as medical and diagnostic laboratories sectors.

More Hoosiers were working in those sectors in August 2010, 26,200 people, than at any time in the last decade, the data shows.

More jobs could be coming, too.

This summer, several life science firms across the state announced significant investment plans.

In Warsaw, orthopedic device manufacturer Biomet Inc., will invest $26 million and create 280 jobs, officials have said.

In Indianapolis, Beckman Coulter plans to spend $18.2 million and create 95 jobs. In Greenwood, Advantis Medical intends to add 100 positions with a $6 million expansion.

In early 2010, a $85 million manufacturing facility opened by Cook Pharmica in Bloomington created more than 100 jobs.

While many of the mid-size firms are expanding, Indiana's life sciences giant is pulling back.

Lilly is in the midst of the largest restructuring in its 134-year history, and aims to cut 5,500 jobs worldwide and $1 billion in annual costs by December.

The hope among business leaders is that former Lilly employees in Indiana stay here, and join other life sciences companies.

"The goal is 'brain neutral,' not 'brain drain,'" Bart Peterson, a senior vice president with Lilly and a former mayor of Indianapolis, said this summer.

An important part of that effort is funding startups, experts said. The state's 21st Century Fund tries to do exactly that, offering early-stage investments to promising young companies.

However, the fund's investments in the life sciences have steadily fallen during the recession — from $14.6 million in 2007-2008 to just $6.6 million in 2009-2010 — even as normal venture capital also disappears.

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