California's Biomed Industry Stalls, Report Finds

The 2323 biomedical companies with operations in California provided 267,271 jobs, paid approximately $20.4 billion to California-based personnel, and generated revenues of $115.4 billion in California in 2010.

Approximately 6300 biomedical jobs, or 2.3% of California's biomedical workforce, were lost across the state between 2008 and the beginning of 2011.

Employment in the academic research sector was hardest hit, suffering a net decline of 3121 jobs between March 2008 and March 2011 as state cutbacks in funding for higher education affected research at 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 market.

The San Francisco Bay area continues to employ the largest number of biomedical industry workers in California. However, in San Diego County, biomedical employment increased in 2010 by 14%, while in Orange County, it increased by 9%.

While 57% of biomedical company CEOs plan to expand R&D activities in California over the next two years, almost as many (56%) say they will expand manufacturing outside the state.

Nearly 78% of biomedical company CEOs said that their firms had been courted by other countries or states within the past year. Respondent companies have expanded operations on every major continent, most prominently 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.

Nearly three-quarters of respondents said that their companies had delayed an R&D project in the past year, compared with 69% of responding companies in 2010. Lack of funds was cited by 40% of respondents.

Venture capital investment in California life sciences declined following the 2008 financial crisis, but venture capital 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, they invested $2.7 billion in California life sciences companies, a slight increase over 2009. Further growth took place in 2011.

There has been a decisive shift toward venture capital 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. By that measure, California accounts for more than 28% 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%. Venture capital investment was accessed by 25% of the respondents. Only 6% successfully tapped the capital markets for funding, while 4% were supported by nongovernmental organizations or disease foundations.