California Biotech, Despite Lots of Ugliness, Poised to Add Jobs, CEO Survey Says

2/1/11Follow @xconomy

California has horrific budget deficits, high taxes, high unemployment, and an overall economy for investment that’s still a bit shell-shocked from the financial crisis of 2008. And yet in one of the riskiest of all industries, life sciences, leading executives in California are confident that things are starting to turn for the better.

That’s a surprising theme that emerged in this year’s 2011 California Biomedical Industry Report, being released today by the California Healthcare Institute, BayBio, and PwC. The report, which has been produced for 17 years now, is packed with all kinds of stats on jobs, economic impact, etc. from the usual official sources, such as the Bureau of Labor Statistics, and the National Institutes of Health. I focused mainly, though, on a survey of 93 C-level executives from pharmaceutical, biotech, med device, diagnostic, and medical equipment companies.

There’s plenty to still be worried about if you are a biotech executive in California today. Venture investing in biotech declined last year, making it harder to raise cash for new R&D projects. There’s all that cut, cut, cut talk going on in state politics. And on the federal level, the FDA has taken a cautious stance toward approving new products, since it has been burned when unforeseen safety problems popped up with drugs it approved years ago.

Despite all that discouraging news, the executives surveyed sound pretty bullish on California. For the first time in the report’s 17-year history, almost twice as many executives plan to increase manufacturing in California (41 percent) compared with those looking outside the state (21 percent). More than two-thirds of the executives (68 percent) plan to increase their workforces in the Golden State, while less than one-third (31 percent) plan to boost their staffs outside the state.

Rather than taking the Chicken Little approach—possibly as a way to coax lawmakers into doing more of their bidding—this report cited a bunch of reasons why biotech makes sense in California as things are today. The biggest reasons cited for expansion in California are its skilled workforce, the fact that many biotech companies were founded in the state, a culture of entrepreneurship, access to top universities, and quality of life.

Tracy Lefteroff, the national life sciences partner with PwC in Silicon Valley, put a lot of emphasis on the threats posed to biotech when I spoke to him the other day. Most of the challenges were pretty similar to the ones cited four or five years ago—although there was a greater worry then about taxes and unemployment insurance putting California companies at a disadvantage, he said. But ultimately, California is the No. 1 region in the world for biotech, and nothing in the report indicates the status is about to be lost anytime soon. Biotech employs about 268,000 people in the state, making it the second-biggest industry in the state behind information technology, according to the report.

“If somebody already has operations here, it may be cheaper to grow here than relocate elsewhere,” Lefteroff says.

For a link to the full report, click here.

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