BayBio President and CEO Gail Maderis challenged California’s leadership to collaborate more with the state’s biomedical companies through legislation, regulation and support for state-level investment, particularly policies which support innovation. The life sciences community urges the state’s leadership to support core state programs that will drive innovation over the next 10 to 15 years. We look forward to working with our companies, investors and elected officials to continue bringing a robust pipeline of therapies to the patients who need them.
Maderis joined representatives from the California Healthcare Institute, PriceWaterhouseCoopers and OncoMed at a media webinar on February 1 to launch the 2011 California Biomedical Industry report. You can view the webcasthere.
Eighty percent of biomedical company CEOs in California report that their companies have been courted by other countries, state governments or regional economic development associations in the past year, according to survey findings included in the 2011 California Biomedical Industry Report. Yet the survey found surprising consensus of confidence in the state’s ongoing attractiveness to the biomedical industry, with many CEOs planning to increase jobs, manufacturing, research and development operations within California versus elsewhere.
Still, the danger for the U.S. and California is that other parts of the world are quickly catching up, warns the report. The survey of CEOs found that the unique ecosystem that has helped to build California’s leadership in biomedical technology innovation may be fragile and short-lived unless both government and industry adapt to new challenges.
- Sixty-seven percent of CEO respondents said that within five years, another country could conceivably recreate the ecosystem that has made the U.S. the leading biomedical region in the world.
- Sixty percent believe that another state could recreate the ecosystem that has made California the leading biomedical region in the U.S.
The 105-page report provides insight into California’s rise to global leadership in the biomedical industry and the impact of the industry’s presence on the state. California is home to the biggest concentration of biomedical companies, researchers, entrepreneurs, suppliers, venture capitalists and workers in the world. Despite increased competition and proliferation of biomedical and medical technology innovation overseas, California remains the industry’s global leader and it stands to grow even larger as the U.S. epicenter of biomedical innovation. At the forefront of new developments in biologics, the fastest growing segment of the global biopharmaceutical industry, California has the largest clustering of companies and more products in clinical development than any state in the U.S. or any other country in the world.
Confidence in California and the outlook for the industry is evident in the findings of the reports’ CEO survey:
- For the first time in the report’s 17-year history, nearly twice as many biomedical CEOs said they intend to increase manufacturing within California (41 percent) versus outside the state (21 percent) over the next two years.
- Sixty-eight percent of CEOs said they expected to expand the overall size of their workforce within California, while only 31 percent planned to increase workforce levels outside the state.
- Seventy-eight percent of CEOs surveyed said that they maintained or expanded R&D operations within California over the past year, and 88 percent plan to do so over the next two years, with the majority of those (62 percent) saying that they expect to expand R&D within California.
- The key reasons cited for locating in California were the availability of a highly skilled, entrepreneurial workforce and California’s culture of innovation, anchored by leading research universities.
- While relocating out of state was not a strategy cited by CEOs surveyed, when asked about the most attractive U.S. biomedical markets outside California, 76 percent named Greater Boston followed distantly by North Carolina (31 percent), Minneapolis-St. Paul (25 percent) and the Washington-DC corridor (20 percent).
Biomedical Industry in California
- For the first time in five years, in 2009 biomedical employment declined in California by nearly 6,000 jobs.
- Still, cumulative growth over the past five years remains positive. Between 2005 and 2009, the biomedical industry added nearly 12,000 jobs in California, with academic research and biopharmaceuticals growing at an average annual growth rate of more than 2.3 percent and wholesale trade by 1.5 percent. The two sectors where employment has declined are in laboratory services and medical devices.
- Employment declines varied by cluster. Biomedical industry employment in San Diego and Sacramento counties continues to grow, offsetting losses in the Bay area and Riverside and San Bernardino counties.
Access to Capital
- More than two-thirds of CEOs surveyed (69 percent) reported that R&D projects had been delayed, and the number one reason cited (44 percent) was “lack of funding.”
- Forty-eight percent of respondents said they were somewhat or very likely to participate in a merger or acquisition over the next year while 51 percent said they were very or somewhat unlikely to do so.
- Only 9 percent of respondents said they were likely to participate in a sale or divestiture in the coming year.
Opportunities and Barriers to Growth
- Among issues deemed either somewhat or extremely important to keeping biomedical research, innovation and investment in California, the elimination of duplicative regulation by state and federal regulators was cited by 80 percent of respondents, workforce development was cited by 67 percent, and R&D tax credits were cited by 67 percent.
- Other high ranking threats point to the complexity of thriving in the life sciences sectors as companies adapt to changing rules and regulations. Thirty-six percent of respondents said that lack of data to demonstrate product safety and effectiveness is a top threat to their business. And 35 percent said that liability of products on the market is a threat.
- Survey respondents also ranked federal policy issues as somewhat or extremely important to their operations. Eight-four percent of respondents believe that the FDA regulatory approval process has slowed the growth of their organizations.
- More than three-quarters of respondents predict that the cumulative impact of changes in the healthcare marketplace, driven largely by health reform, will decrease their profit margins and 54 percent believe that the pace of innovation will slow.