Innovation slows as productivity in the Biomedical industry declines
Sacramento, Calif., Feb. 8, 2012 – After two decades of steady annual job growth, employment in California’s biomedical industry stalled while the state has struggled to recover from financial shortfalls and the industry adapts to a sharp pullback in funding from risk-averse investors in an uncertain regulatory environment, according to the 2012 California Biomedical Industry Report published today by the California Healthcare Institute, BayBio and PwC US.
Job losses precipitated by the financial crisis, recent company downsizings and the lure of scientists, researchers and facilities outside of California set biomedical industry employment back to 2006 levels, the report found. At the same time, California is the source of approximately 28 percent of the nation’s biomedical pipeline and remains the world’s leader of new innovation in emerging scientific and technology disciplines such as personalized medicine, regenerative medicine, mobile health, and nanotechnology. The report finds optimistic signs that California’s biomedical industry is poised to regain its earlier momentum, but the pace and location of future growth is uncertain.
“California’s biomedical industry embodies the state’s distinguishing strengths, and there have been enormous investments of time, energy and money in building it,” said Gail Maderis, president and CEO of BayBio. “Yet we’re at a crossroads, and we’ll need to continue to work together – industry and policymakers – to address the challenges to innovation and productivity the industry now faces.”
PwC’s analysis of the most recently released labor figures for the California biomedical industry shows the following:
California’s Biomedical Industry on a Precipice
According to the 2012 biomedical CEO survey, a joint project of CHI, BayBio and PwC, most biomedical companies held steady or expanded their operations in California through the financial crisis, their decision to do so primarily influenced by the state’s culture of entrepreneurship and innovation. Companies that reduced operations in California over the past year did so to cut costs because of the overall cost of doing business and because they expanded operations outside of California. In fact, CEOs said they expect further reduction in activities at their firms over the next two years will hit their California facilities the hardest, compared to facilities located elsewhere.
Over the past year, California biomedical companies reported significant expansions in their out-of-state and foreign operations, according to CEOs surveyed. The survey also found that:
“The importance of California’s biomedical industry as an engine to create jobs and income cannot be overstated. Now is the time for creative solutions,” said David L. Gollaher, Ph.D., president and CEO of California Healthcare Institute. “California companies are adaptive and resourceful. Increasingly, they are looking beyond California and our nation’s borders to countries and regions with financial incentives, access to capital, and expanding markets. Despite the tremendous assets in research, talent and capital that so far have secured California’s leadership in the biomedical industry, we are at risk of losing our lead in an increasingly competitive global economy.”
Access to Capital is Critical to Future Growth
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 yield lucrative returns more quickly. The CEO survey found:
“The life cycle of biomedical startup companies has changed as challenges to raising capital have increased,” said Tracy Lefteroff, national life sciences partner at PwC US. “Whereas their greatest challenge in years past was in validating the science, these companies now need to validate getting funding by lowering costs and improving returns. The strength of California’s life sciences industry remains closely tied to the level of confidence that the investment community has in the industry’s ability to develop innovative products while effectively managing the challenges associated with clinical and regulatory risk.”
CHI and BayBio worked with PwC to collect and administer data for the 2012 CHI, BayBio, PwC California Biomedical Industry Survey. The survey was conducted in November 2011 and targeted approximately 100 companies that conduct business in California in the areas of pharmaceuticals, biotechnology, medical devices, diagnostics or medical equipment.
About the California Healthcare Institute
CHI represents more than 275 leading biotechnology, medical device, diagnostics, and pharmaceutical companies, and public and private academic biomedical research organizations. CHI’s mission is to advance responsible public policies that foster medical innovation and promote scientific discovery. CHI’s website is www.chi.org. Follow us on Twitter @calhealthcare, Facebook, LinkedIn and YouTube.
BayBio is Northern California's life science association, supporting the regional bioscience community through advocacy, enterprise support, and the enhancement of research collaboration. Its members include organizations engaged in, or supportive of, research, development and commercialization of life science technologies. Online at www.baybio.org. Follow BayBio on Twitter at @baybio.
About PwC’s Pharmaceutical, Medical Device and Life Sciences Industry Group
PwC’s Pharmaceutical, Medical Device and Life Sciences industry group (www.pwc.com/us/pharma and www.pwc.com/us/medtech) is dedicated to delivering effective solutions to the complex strategic, operational and financial challenges facing pharmaceutical, biotechnology and medical device companies. We provide industry-focused assurance, tax and advisory services to build public trust and enhance value for our clients and their stakeholders. Follow PwC Health Industries at http://twitter.com/PwCHealth.
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