Despite ailing economy, biotechs remain healthy.

• Position: Pharmaceuticals

It's only fitting that the Tar Heel industry that seemed inoculated against the virus infecting the economy in 2001 was pharmaceuticals. Spurred partly by the rapid advances in human genomics, the Tar Heel drug industry managed to avoid the big layoffs and bankruptcies that were so common among high-tech companies. Instead, it added jobs and saw millions of dollars flowing to promising new projects.

"This time last year, we had 114 biotech companies in the state, in all fields," says Barry Teater, spokesman for the North Carolina Biotechnology Center. "This year, we have 138. And we had a lot of companies raise money through venture capital and private equity during the year. In fact, one, Merix Bioscience in Durham, raised $39.5 million in venture capital, which we believe is a state record for a biotech."

Even bad news turned out better than expected. Coming into the year, the merger of Glaxo Wellcome and SmithKline Beecham, which had its U.S. headquarters in Philadelphia, created fears that major layoffs might hit Glaxo's campus in the Research Triangle Park, as they did after the British drug company's 1995 merger with Burroughs Wellcome. At one point, it even looked as if the state might lose Glaxo's U.S. headquarters. But the company decided on dual headquarters here and in Philadelphia. In the end, fewer than 400 Tar Heel jobs were cut.

Another relief came as Durham-based Quintiles Transnational, the world's largest contract-research company, revised its strategy in an effort to revive flagging earnings. In March, Dennis Gillings, its founder and chairman, named Pam Kirby, formerly an executive with Switzerland-based F. Hoffmann-La Roche, as CEO. Kirby restructured, cutting jobs -- only about 50 of the 1,000 at Quintiles' headquarters were lost -- and announcing that the company would develop its own drugs besides doing research and sales for other drug makers. To that end, Quintiles will seek to buy small companies with promising drugs.

Kirby's strategy is risky: By making its own drugs, Quintiles will compete directly with its customers. But the strategy underscores the fact that young small companies are poised to give the biotech industry a boost. Thirteen North Carolina-based companies have 33 products in late-stage clinical trials or awaiting approval by the U.S. Food and Drug Administration.

An example is a migraine drug developed by Pozen, a 287-employee company in Chapel Hill. "Fifty percent of people who have migraines...