2017 California Life Sciences Industry Report

2017 California Life Sciences Industry Report

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 Letter from the Governor

California has a unique history of innovation: from agriculture to the film industry to information technology to life sciences. As a group, Californians have repeatedly devised new technologies, and better ways to use old technologies, to solve some of the world’s most intractable problems.

As the birthplace of biotechnology, California prides itself on the innovation born in the life sciences in particular. Genomic
technologies help us detect disease, while new therapies and devices help treat them. Biofuels provide clean, sustainable energy that will ease our dependence on foreign sources and help solve climate change. Digital health technologies help prevent disease and give patients better tools to manage their conditions.

The California Life Sciences Association is an important partner in our efforts to foster a stronger biomedical industry and boost job growth in California. This state is committed to supporting this critical sector, both economically and through strong public policy. Life Sciences is a cornerstone of California’s economy and I look forward to working with leaders in this sector as we continue to contribute to a healthier society, strengthen our economy and advance new medical technologies.

Sincerely,

Gov Signature

Letter to Stakeholders

When people envision a vibrant life sciences community, they think of California. It begins with the state’s public and private research universities and institutes, which produce a highly trained scientific workforce, invaluable insights into human biology and world- changing research.

Sara PeterIn some cases, these breakthroughs might be developed into a product – a drug that targets a cancer-driving protein, for example. A pharmaceutical, biotechnology or medical device company licenses the intellectual property, or the researchers find investors and create their own start-up. Years and millions of dollars later, the treatment may enter the clinic and improve patient care.

California succeeds because the state’s political, academic and business leaders are committed to a strong life sciences ecosystem. Smart policy decisions have played a role in continued success. Because the state has long supported higher education, California produces more biology and engineering PhDs than any other state.

In 2004, when national policy shifted away from stem cell research, California voters approved Proposition 71, which funded the California Institute for Regenerative Medicine (CIRM). This commitment led to groundbreaking basic and translational research, accelerating stem cell therapies into clinical trials and making California the epicenter for stem cell research.
By most measures, the California life sciences industry is strong and growing. There are 3,040 life sciences companies, including industry-leading global corporations, entrepreneurial startups and everything in-between. California’s life sciences industry directly employs more than 287,000 people, generated $147.7 billion in revenue in 2015 and has 1,269 medicines – and even more devices and diagnostics – in the pipeline to boost patient care.

This report lays out the many strengths that define the life sciences in California, but the work must continue. Few industries can do so much to improve quality of life. We must continuously renew our commitment to these efforts.

Sincerely,

Signatures

California’s Unique Life Sciences Ecosystem

California’s life sciences community continues to grow, with 3,040 life sciences companies – 192 more than the previous year – producing new technologies and boosting the state’s economy. In 2015, the Golden State’s life sciences industry employed more than 287,000 people. This highly trained and diverse workforce helped develop novel drugs, devices and diagnostics, while also exploring other applications, such as leveraging biotechnology to produce sustainable energy.

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Life sciences companies have been incredibly successful. As of September 7, 2016, 1,269 drugs from California companies were in the FDA pipeline. In 2015, 264 new devices developed by California companies were approved.

In addition, these companies produced more than $147 billion in revenue, received $4.4 billion in venture capital funding, drove $22 billion in exports and paid $15.6 billion in federal and California state and local taxes.

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Academic excellence, forward-thinking public policy and the commitment of thousands of entrepreneurs and business leaders has translated into new ways to address some of the world’s most severe medical conditions: cancer, hepatitis, HIV, rare diseases and many others. These efforts help power our economy, support jo prove health for millions around the world.

 


Producing Drugs, Devices, Diagnostics and Digital Health Technologies

Great ideas often begin in academic labs as scientists research human biology and look for better ways to diagnose and treat disease: a new marker to track cancer progression; a unique molecule that controls an aberrant protein; a digital device that helps patients better manage their heart disease.

California’s life sciences community does an excellent job at moving these ideas out of labs, through various regulatory processes and ultimately to patients. In 2016, California biopharmaceutical companies had 404 therapies in the FDA pipeline for cancer, 134 for infectious diseases and 129 for central nervous system disorders. Similarly, the state’s medical device sector saw 264 products successfully through the FDA: 10 premarket approvals (PMA), 250 510(k) clearances and four de novo’s.

Even more importantly, the total number of therapies in clinical trials continues to grow, ultimately providing more choices for patients and physicians as they work to overcome disease. One of the many strengths of California’s life sciences community is its eagerness to embrace new ideas. The digital health sector is only a few years old, but is showing tremendous potential to improve care.

Innovative digital technologies can keep congestive heart failure patients out of the hospital, help patients comply with their drug regimens, support treatment for PTSD and much more. California companies lead the nation in attracting venture capital (VC) investment for innovative digital health technologies.

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Driving Economic Growth

p03g01California has a strong and diverse economy, powered by information technologies, agriculture, energy, tourism and the life sciences. Second to life-saving products, excellent jobs may be the biomedical community’s greatest contribution to the state. In 2015, California life sciences companies employed more than 287,000 people, a two percent increase over 2014. These jobs ran the gamut from academic research to bioengineering to wholesale trade.

Even more impressive, the industry generated 597,000 indirect and induced jobs, bringing the total to 884,200. In addition, the average wage for California life sciences employees topped $116,000 and total wages exceeded $33 billion.

While biomedical growth has been historically stronger in the San Francisco Bay Area and San Diego, new, entrepreneurial companies are becoming more prevalent in Los Angeles, a trend that could bode well for the region (see Los Angeles insert).

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Attracting Major Investments

Because California companies have such a strong track record of translating lab science into products that help patients and consumers, the state has long been a magnet for investment. As in past years, California was the top state for life sciences venture capital (VC) investment in 2016* with $4.4 billion: $3.3 billion in biotech and $1.1 billion in medical devices. Massachusetts was second with $2.9 billion. The life sciences are second only to software in California for VC funding.

Across biotech, investment declined in later-stage companies, but increased dramatically for seed stage startups. Medical device investment also increased at seed and early stage.

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VC investment in digital health in 2016* was significant at $1.6 billion, but declined from $2.1 billion in 2015. Still, California led the nation, more than doubling New York’s $730 million. These investments funded wearables and biosensors, consumer health and wellness technologies, digital diagnostics, devices and therapies and other areas.

Mergers and acquisitions slowed considerably through early Sept. 2016 to 46, compared to 99 in 2015. Life sciences IPOs also declined to three, compared to 25 in 2015. These numbers reflect weak national M&A and IPO markets. *2016 data based on projections from the first two quarters.

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Academic Excellence

p05g02California’s commitment to education is one of the engines that drive life sciences innovation. The state boasts 11 universities in the world’s top 100, according to the Shanghai Index. California graduated more science and engineering PhDs in 2014 than any other state with 4,984. New York places second with 3,125.

Educational excellence attracts government investment. California continues to lead the nation in grants from the National Institutes of Health (NIH): 7,521 awards for nearly $3.6 billion, 15.4 percent of total NIH grant funding in federal fiscal year 2016. Of the top 20 California institutions receiving NIH grants, seven are part of the University of California (UC) system.

California also led the country in Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) funding, receiving 381 awards, totaling $176 million.

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Emerging Los Angeles

For years, the Bay Area and San Diego have been the two poles of California’s entrepreneurial life sciences culture. Despite its size and strength in entertainment, agriculture and other sectors, Los Angeles has remained relatively quiet. The city is starting to play catch-up and has made huge progress in the past few years.

dr-melmed“We’re where San Francisco and San Diego were 20 years ago,” says Shlomo Melmed, MD, executive vice president of Academic Affairs and Dean of the medical faculty at Cedars-Sinai.

Melmed points to several factors that may have previously slowed LA’s emergence: expensive real estate, no central research hub, few academic medical centers. UCLA and USC graduates have created startups – they’ve just done it elsewhere.

“Los Angeles metro area produces more biology graduates than any other city in America,” says Llewellyn Cox, PhD, who founded Lab Launch, a biotech incubator network based in Monrovia. “But all these UCLA and USC spinouts seem to start up in San Francisco or San Diego. Lab Launch was born out of the frustration of watching our friends leave town to start businesses.”

This disparity has not gone unnoticed. Led by Supervisor Mark Ridley-Thomas, the Los Angeles County Board of Supervisors recently earmarked $3 million to fund another bioscience incubator, LA BioMed.

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Cox is excited by the general business dynamism in Los Angeles and sees life sciences startups plugging into LA’s existing industries, such as agriculture.

“Look at cellular agriculture,” says Cox. “The technologyis biotech but once you have a product, you’re in the food industry, your partners are going to be food people.”

At a different level, Cedars-Sinai has been spinning off companies from its research for more than 30 years, developing a test to detect viruses in donated blood, heart imaging software and therapies for inflammatory bowel disease. Their tech transfer has shown continuing growth.

Despite the relative dearth of startups, Los Angeles County employs around 20 percent of California’s life sciences workforce. Both Cox and Melmed anticipate continued expansion.

“I think there’s going to be tremendous life science investment in population health management: software, accounting, patient management,” says Melmed. “Cancer will drive it because of our large, aging population and high cancer incidence growth rate.”

Keeping California On Track

The life sciences sector is an incredibly valuable asset for California. While the focus is life-saving medical technologies, that is hardly the limit of the industry’s impact. Researchers and companies are also working on new ways to provide sustainable energy and increase the world’s food supply.

p06g01The life sciences directly employ more than a quarter of a million people in California, providing economic benefits for communities and the state as a whole. These jobs are diffused to communities throughout the state.

Factor in the investments life sciences companies and academic institutions attract – through venture capital, NIH grants and other sources – and we can see the immense value these organizations bring to our state.

However, as strong as the life sciences enterprise may be in California, we must never forget that this is an incredibly competitive sector. The state must continue its longstanding tradition of supporting world-class educational institutions while encouraging a more business-friendly environment. We must continue to nurture the biomedical innovation that has made the Golden State a life sciences powerhouse.

We are committed to working with state and national policymakers, industry leaders, patient groups and other stakeholders to ensure that patients have access to excellent, affordable care.

That means reducing the barriers that keep cutting-edge medicines away from patients, streamlining the therapeutic pipeline and safeguarding intellectual property.

In addition, we must continue to support the Brain Research through Advancing Innovative Neurotechnologies (BRAIN), Precision Medicine and other exciting research initiatives. By championing innovation, we can measurably improve human health and quality of life.

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Report Authors

Sara Radcliffe
President & CEO
California Life Sciences Association (CLSA)

Peter Claude
Partner, Pharmaceutical & Life Sciences Advisory
PwC

Project Team

Todd Gillenwater
EVP, Advocacy & External Relations
California Life Sciences Association

Will Zasadny
Associate Director, Communications
California Life Sciences Association

Paula Finkbeiner
Manager, Pharmaceutical &
Life Sciences Advisory
PwC

Economic Analysis

Kristen Soderberg Bernie
Manager, Health Policy
Economics
PwC

Writing

Josh Baxt
Baxt Communications

Graphics and Design

Paul Horn
Special to CLSA

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