MDDI Online is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

The Biggest Threats to Biomedical Industry Growth

Over the next five years, access to capital, a burdensome and uncertain regulatory environment, and lack of R&D innovation and productivity will be the biggest threats to the growth of the biomedical industry, according to the results of a survey of biomedical company CEOs conducted by the California Healthcare Institute (La Jolla, CA), BayBio (South San Francisco, CA), and PwC US (New York City).

Conducted in November 2011, the California Biomedical Industry Survey targeted approximately 100 companies that conduct business in California in the areas of pharmaceuticals, biotechnology, medical devices, diagnostics, or medical equipment. The survey found that 74% of the CEOs surveyed said that their companies have had to delay a research or development project in the past year; that the lack of funding was the primary reason cited by private company CEOs for project delays, accounting for more than 40% of delays by all public and private companies in the survey; and that eight in 10 CEOs surveyed agreed or strongly agreed that the current FDA regulatory approval process has slowed the growth of their organizations.

The CEO Survey found that biomedical companies in California have sought diverse funding sources, divided almost evenly among government grants, angel investors, venture capital, and licensing agreements and partnerships. "Biomedical companies have long relied on government grants and venture capital to finance innovation, but funding sources are shifting and companies will need to adapt to a new reality," remarks Tracy Lefteroff, national life sciences partner, PwC US. "While venture capitalists and angel investors will continue to be an important source of funding, it has become increasingly difficult for biomedical companies to gain access to them. Alternative sources of funding are emerging, which highlight shifting opportunities and dynamics in life sciences innovation."

The CEO survey found that 44% of the biomedical CEOs surveyed said that they will look to licensing agreements and corporate partnerships as a source of finance in the next 12 months, double the number of CEOs last year that sought these financing sources. Also, corporate venture funding--the investment of corporate funds in external endeavors--is expected to become much more crucial to the industry, with 30% of CEOs surveyed saying that they will tap into corporate venture capital as a finance source in the next 12 months, versus only 10% in the past 12 months. In addition, the survey found that while disease foundations or nongovernmental organizations are presently only a small contributor to the finance equation, they are growing as a funding source for 11% of CEOs that plan to use these funds in the next 12 months, versus only 4% that did so last year.

Access to capital, according to the CEOs, will have the biggest impact on whether biomedical research, innovation, and investment will remain in California. Nearly 72% of CEOs noted that access to capital is extremely important. Other important issues are tax incentives for innovation, corporate taxation, workforce preparedness, and duplicative regulation among various state and federal agencies.

According to the CEOs surveyed, FDA and regulation are the key issues affecting R&D. In fact, 80% of the CEOs surveyed do not believe that FDA has the best regulatory approval process in the world, while three-quarters believe that within five years, another country could conceivably recreate the ecosystem that has made the United States the leading biomedical region in the world.

The findings of the CEO survey reflect issues being discussed throughout the biomedical industry by executives gathering in California, providing an early glimpse into the 2012 California Biomedical Industry Report, which will be available in February. Published annually by the California Healthcare Institute, BayBio, and PwC, the report provides a snapshot of the biomedical industry in California, the largest biomedical cluster in the world and the source of the most products in clinical development.

Filed Under
500 characters remaining