According to the California Biomedical Industry 2012 Report, published by the California Healthcare Institute (La Jolla, CA), BayBio (South San Francisco, CA), and PwC US (New York City), employment in California's biomedical industry has stalled. This slowdown takes place as the nation's most populous state has struggled to recover from financial shortfalls and the biomedical industry adapts to a sharp pullback in funding from risk-averse investors in an uncertain regulatory environment.
Job losses precipitated by the financial crisis; recent company downsizings; and the lure of scientists, researchers, and facilities outside of California have set biomedical industry employment back to 2006 levels, the report finds. At the same time, California is the center of much of the nation's biomedical industry activity and remains the world leader in emerging scientific and technology disciplines such as personalized medicine, regenerative medicine, mobile health, and nanotechnology. Despite the bad news, the report sees optimistic signs that California's biomedical industry is poised to regain its earlier momentum, although the pace and location of future growth remains uncertain.
Labor figures for California's biomedical industry reveal several developments:
- 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%.
Over the past year, California biomedical companies expanded their out-of-state and foreign operations significantly, according to the 2012 biomedical CEO survey. That survey also uncovered several other trends:
- 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.
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 that yield lucrative returns more quickly. The CEO survey found:
- 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.