Biomedical Industry Loses Momentum in California, According to 2012

California Biomedical Industry Report

SACRAMENTO, Calif., Feb. 8, 2012 /PRNewswire/ -- After two decades of

steady annual job growth, employment in California's biomedical

industry stalled while the state has struggled to recover from

financial shortfalls and the industry adapts to a sharp pullback in

funding from risk-averse investors in an uncertain regulatory

environment, according to the 2012 California Biomedical Industry

Report published today by the California Healthcare Institute, BayBio

and PwC US.


Job losses precipitated by the financial crisis, recent company

downsizings and the lure of scientists, researchers and facilities

outside of California set biomedical industry employment back to 2006

levels, the report found. At the same time, California is the source

of approximately 28 percent of the nation's biomedical pipeline and

remains the world's leader of new innovation in emerging scientific

and technology disciplines such as personalized medicine, regenerative

medicine, mobile health, and nanotechnology. The report finds

optimistic signs that California's biomedical industry is poised to

regain its earlier momentum, but the pace and location of future

growth is uncertain.

"California's biomedical industry embodies the state's distinguishing

strengths, and there have been enormous investments of time, energy

and money in building it," said Gail Maderis, president and CEO of

BayBio. "Yet we're at a crossroads, and we'll need to continue to work

together - industry and policymakers - to address the challenges to

innovation and productivity the industry now faces."

PwC's analysis of the most recently released labor figures for the

California biomedical industry shows the following:

-- The 2,323 biomedical companies with operations in California

provided 267,271 jobs, paid approximately $20.4 billion to

California-based personnel and generated revenue of $115.4 billion in

California in 2010.

-- Approximately 6,300 biomedical jobs, or 2.3 percent of California's

biomedical workforce, were lost across the state between 2008, when

biomedical employment peaked, and the beginning of 2011.

-- Employment in the academic research sector was hit hardest,

suffering a net decline of 3,121 jobs between March 2008 and March

2011, as state cutbacks in funding for higher education affected the

research mission of California's universities and competition

increased for California's research talent.

-- The strongest sectors in California's biomedical industry are

focused on translating basic research and discoveries into products to

serve patients and their caregivers. Biopharmaceuticals, including

human therapeutics and drugs, is the second largest and highest-paying

employer in the state's biomedical industry. Modest growth in this

sector offset losses in all other biomedical sectors except wholesale

trade, which includes import and export of products in the global


-- The San Francisco Bay area continues to command the highest number

of biomedical industry employees in California, but San Diego County

and Orange County are the only areas where biomedical employment

increased in 2010, by 14 percent and 9 percent respectively.

California's Biomedical Industry on a Precipice According to the 2012

biomedical CEO survey, a joint project of CHI, BayBio and PwC, most

biomedical companies held steady or expanded their operations in

California through the financial crisis, their decision to do so

primarily influenced by the state's culture of entrepreneurship and

innovation. Companies that reduced operations in California over the

past year did so to cut costs because of the overall cost of doing

business and because they expanded operations outside of California.

In fact, CEOs said they expect further reduction in activities at

their firms over the next two years will hit their California

facilities the hardest, compared to facilities located elsewhere.

Over the past year, California biomedical companies reported

significant expansions in their out-of-state and foreign operations,

according to CEOs surveyed. The survey also found that:

-- While more than half (57 percent) of biomedical company CEOs plan

to expand research and development (R&D) activities in California over

the next two years, almost as many (56 percent) say they will expand

manufacturing outside the state.

-- Nearly 78 percent of biomedical company CEOs said that their firm

had been courted by other countries and/or states within the past

year. Respondent companies have expanded operations in every major

continent around the world, with the greatest concentration of

companies so far in Western Europe and China.

-- Boston, North Carolina and Minneapolis/St. Paul were cited as the

top three most attractive biomedical markets for R&D innovation in the

U.S. outside of California.

"The importance of California's biomedical industry as an engine to

create jobs and income cannot be overstated. Now is the time for

creative solutions," said David L. Gollaher, Ph.D., president and CEO

of California Healthcare Institute. "California companies are

adaptive and resourceful. Increasingly, they are looking beyond

California and our nation's borders to countries and regions with

financial incentives, access to capital, and expanding markets.

Despite the tremendous assets in research, talent and capital that so

far have secured California's leadership in the biomedical industry,

we are at risk of losing our lead in an increasingly competitive

global economy."

Access to Capital is Critical to Future Growth Biomedical companies

have found it increasingly difficult to access capital through

traditional means and sources as investors turn to industries that are

more predictable and yield lucrative returns more quickly. The CEO

survey found:

-- Nearly three-quarters of respondents said that their company had

delayed a research or development project in the past year. That

compares to 69 percent of the responding companies reporting delayed

projects in 2010. The overriding reason, at just over 40 percent, was

cited as "funding not available."

-- Venture capital investment in California life sciences declined

from peak levels in 2007, following the aftermath of the 2008

financial crisis, but venture capital (VC) investments now appear to

be on a steady growth trend. Venture capital firms have invested more

than $2 billion per year in California's life sciences companies for

the past dozen years and in 2010 invested $2.7 billion in California

life sciences companies, a slight increase over 2009, with further

growth in 2011.

-- There has been a decisive shift toward VC investments in later

stage biotechnology projects while the medical device sector saw big

increases in early stage projects.

-- California companies have 699 products in clinical development,

from the investigational new drug (IND) filing to the end of Phase III

clinical trials. By that measure, California accounts for more than 28

percent of the country's biotechnology pipeline.

-- Biomedical companies are exploring every alternative resource to

fund their ongoing operations. In 2011, respondents relied most on

angel investors/self-funding and government grants, both coming in at

26 percent. Venture capital investment was accessed by 25 percent of

the respondents. Only 6 percent successfully tapped the capital

markets for funding, while 4 percent were supported by

non-governmental organizations (NGOs) or disease foundations.

"The life cycle of biomedical startup companies has changed as

challenges to raising capital have increased," said Tracy Lefteroff,

national life sciences partner at PwC US. "Whereas their greatest

challenge in years past was in validating the science, these companies

now need to validate getting funding by lowering costs and improving

returns. The strength of California's life sciences industry remains

closely tied to the level of confidence that the investment community

has in the industry's ability to develop innovative products while

effectively managing the challenges associated with clinical and

regulatory risk."

A full copy of the 2012 California Biomedical Industry Report is

available at, or

Methodology CHI and BayBio worked with PwC to collect and administer

data for the 2012 CHI, BayBio, PwC California Biomedical Industry

Survey. The survey was conducted in November 2011 and targeted

approximately 100 companies that conduct business in California in the

areas of pharmaceuticals, biotechnology, medical devices, diagnostics

or medical equipment.

About the California Healthcare Institute CHI represents more than 275

leading biotechnology, medical device, diagnostics, and pharmaceutical

companies, and public and private academic biomedical research

organizations. CHI's mission is to advance responsible public policies

that foster medical innovation and promote scientific discovery. CHI's

website is Follow us on Twitter @calhealthcare, Facebook,

LinkedIn and YouTube.

About BayBio BayBio is Northern California's life science association,

supporting the regional bioscience community through advocacy,

enterprise support, and the enhancement of research collaboration. Its

members include organizations engaged in, or supportive of, research,

development and commercialization of life science technologies. Online

at Follow BayBio on Twitter at @baybio.

About PwC's Pharmaceutical, Medical Device and Life Sciences Industry

Group PwC's Pharmaceutical, Medical Device and Life Sciences industry

group ( and is dedicated

to delivering effective solutions to the complex strategic,

operational and financial challenges facing pharmaceutical,

biotechnology and medical device companies. We provide

industry-focused assurance, tax and advisory services to build public

trust and enhance value for our clients and their stakeholders. Follow

PwC Health Industries at

About the PwC Network PwC firms help organizations and individuals

create the value they're looking for. We're a network of firms in 158

countries with close to 169,000 people who are committed to delivering

quality in assurance, tax and advisory services. Tell us what matters

to you and find out more by visiting us at

5/8 2012 PricewaterhouseCoopers LLP, a Delaware limited liability

partnership. All rights reserved. PwC refers to the US member firm,

and may sometimes refer to the PwC network. Each member firm is a

separate legal entity. Please see for further



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/CONTACT: Nicole Beckstrand, California Healthcare Institute, +1-858-456-8881,; Travis Blaschek-Miller, BayBio, +1-650-871-7101x207,; Art Karacsony, PwC US, +1-973-236-5640,


PRN Photo Desk,

/Web Site:

CO: PwC; California Healthcare Institute; BayBio

ST: California




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