California must guard its burgeoning biotech industry

California’s biomedical industry starts 2013 in a strong position. While rising stock prices for these companies are being fueled by promising clinical results and available financing, there is much more to their success.

“California continues to deliver life-saving treatments and new technologies that offer hope for patients in need," said Dr. David Gollaher, president and CEO of the California Healthcare Institute (CHI). "Last year alone, we saw the approval of novel medicines to treat rare forms of cancer, anemia associated with chronic kidney disease and cystic fibrosis, among others.”

CHI last week released its 2013 report detailing the 2,321 biomedical companies in the state, the highest number of any state in the country. In addition, these companies hire an estimated 270,000 people with payrolls of more than $15.5 billion in 2012.

San Diego is well represented in the life science industry with 25,883 jobs, 17 percent of the state’s biomedical industry.

“Education serves as a catalyst for innovation. The very roots of our life sciences industry cluster began with UC San Diego,” cites the Biocom 2012 Southern California economic impact report.

“Statistics show that students are more likely to stay where they already have established ties through their university. A region that can attract the best and brightest and retain their ‘homegrown’ talent is strongly positioned to capitalize on its unique educational assets,” the report states.

The local and statewide efforts paid off last year. Life science companies in California developed nine of the 32 novel medicines approved by the Food and Drug Administration in 2012.

However, despite the success, the industry faces some severe challenges.

“The pace of R&D productivity and its global leadership position hangs on the availability of capital to fund future innovation and a regulatory framework that is based on consistency and innovative technologies,” said Gail Maderis, president of BayBio, a co-sponsor of the 2013 report.

It found 16 percent of biomedical companies delayed a project in 2012 because of regulation, and 59 percent of CEOs cited limited or lack of access to capital as the most threatening issue to the short-term health of biomedical innovation.

Despite these headwinds, the biotech industry posted strong results in 2012. The Burrill Select Index of biotech companies rose nearly 42 percent in the 12 months at the end of November 2012. That compares to a 12.4 percent gain for the S&P 500 stock index.

Mergers and acquisitions declined in 2012 compared to the previous year with an estimated $101 billion worth of deals being completed, down 34.5 percent from 2011.

“Expect this number to increase by at least 20 percent with a pick-up in acquisitions of mid-cap life sciences companies and at least one Big Pharma or major biotech merger in 2013. Deals targeting drug companies that reach into Latin America, the Middle East, and Southeast Asia, will also drive activity,” said Steven Burrill, CEO of a San Francisco-based life sciences financial services firm.

Last year’s biggest acquisition was the $7 billion deal between San Diego’s Amylin Pharmaceuticals and Bristol-Myers Squibb. The two companies have been actively involved in the development of treatments for type 2 diabetes.

“Amylin’s innovative diabetes portfolio, talented people and state-of-the-art manufacturing facility complement our long-standing leadership in metabolics,” said Lamberto Andreotti, CEO of Bristol-Myers Squibb.

San Diego and other research and development communities in the state cannot be complacent about their success. Many other regions of the country are expanding and initiating life science centers.

Consider South Dakota, a state with a population of an estimated 825,000 people – a quarter of the population of San Diego County. A report from the governor’s office said South Dakota “is dedicated to becoming a leader in research and technology development by committing its resources to enhance its R&D infrastructure.”

Perhaps following the lead of San Diego, the state provided a seed grant “to support researchers at South Dakota public universities to develop research programs in their departments, become more competitive for external funding, and develop ideas with commercial potential.”