The Early Stage Innovation Crisis

10/9/12

With more than 850 biotechnology companies, the Bay Area is the oldest, largest and most productive life sciences cluster in the world, employing more than 125,000 people in the region. For more than 30 years, this region has led the world in researching and delivering new cures and treatments for debilitating diseases including cancer, Multiple Sclerosis and HIV/AIDS. But the industry is facing serious challenges with early stage innovation in the current economic climate.

For years, our strong roots, supported by our vibrant businesses, academic community, and engaged elected officials – have brought countless biotech firms to the Bay area, cementing our nationwide role as a leader in biotechnology and biomedical scientific breakthroughs. In short, this is where all the action’s taking place.

And the biotech community in San Francisco is still strong today. While California is struggling to recover from a severe recession and economic uncertainty, the Golden State’s bioscience industry has continued to outpace the nation. In fact, California has the nation’s highest biosciences employment, with more than 268,000 jobs. [Correction 8:05 pm PT 10/9/12: An earlier version of this post said California has 228,000 jobs.]

While biotechnology does big things, most biotech companies are small – with 50 employees or fewer – and largely dependent on a capital intensive environment in order to survive and innovate. In this challenging economic climate, however, it can be difficult to obtain capital funding. In fact, it has been estimated that nearly 40% of early stage companies fail to receive the venture capital funding they need. Because of these capital constraints, the biotechnology industry overall is 25% smaller than it was just a few years ago.

It is not surprising therefore, that many biotech firms are looking for any way to help their bottom line. In some cases, that could mean looking to other parts of the country, where public policies – and elected officials — promote and support investment.

States with large biotech hubs, such as North Carolina, Massachusetts and Texas, are working diligently to attract talent – and investment – to bolster their biotech industries. Elected officials across the country are offering up tax credits and other supportive public policies aimed at bringing in investment.

While we understand the serious constraints that are incumbent with California’s budget shortfall, we worry that other regions are winning the race to attract new investments in biotechnology and attracting companies away from California, achieving tremendous benefits to their local economies. With that in mind, Californians cannot afford to take our leadership position for granted.

Patients and their families are looking to us to uncover the next medical breakthrough. We call on statewide and local officials to demonstrate their appreciation for the important – and promising – work taking place in labs throughout our area through supportive public policies.

BayBio is proud to support Northern California’s life science community by working to educate public officials about the biotech sector and by connecting the capital and resources needed to sustain critical innovation in the industry.

This is why we are honored to once again to work with our partners at the Biotechnology Industry Organization to co-host the upcoming BIO Investor Forum in San Francisco on October 9-10, which will bring nearly 40 of the most promising discovery stage companies with under $25 million raised to date to the Bay Area. By bolstering collaborations between investors, companies, associations, and government – we hope to promote the Bay Area’s innovation in the biotech industry and maintain our leadership position for years to come.

Gail Maderis is President & CEO of BayBio, the industry organization representing and supporting Northern California’s life science community. Follow @

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  • David Jensen

    This interesting commentary does not mention California’s $3 billion stem cell research effort that has pumped nearly $190 million into iPSC research since Yamanaka published his discoveries. Overall, $1.7 billion has been awarded to biotech researchers since 2005. If want to learn more about the Golden State’s stem cell agency, see the California Stem Cell Report (californiastemcellreport.blogspot.com).

  • Jimbo

    so what do you think about Luke;s report which is somewhat contradictory? I happen to agree more with you, but you also have an obvious bias due to your job