California, which is ranked 1st for medical device and biopharmaceutical employment in the country, saw 7% employment growth in the sector between 2011 and 2015. In 2015, there were more than 3,000 life science companies in the state and nearly 300,000 employees in the industry.
“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,” Sara Radcliffe, president & CEO of CLSA, and Peter Claude, partner in pharmaceutical & life sciences advisory for PwC US, wrote in the report.
This year, California’s biopharmaceutical companies had more than 1,200 therapies in the FDA pipeline, with 400 of them dedicated to the treatment of cancer. The medical device sector also saw growth, as 264 products moved through the FDA regulatory process to reach premarket approvals, 510(k) clearances and de novo status.
Venture capital investment in new technology like digitally connected therapies fell slightly this year, the report observed, but still topped the list compared to other biotech hubs like New York. VC investment in digital health this year hit $1.6 billion for the state, down from $2.1 billion in 2015. New York brought in $730 million in VC funding for digital health this year.
“One of the many strengths of California’s life sciences community is its eagerness to embrace new ideas,” the authors wrote. “The digital health sector is only a few years old, but is showing tremendous potential to improve care.”
VC investment in life sciences continued to grow, bringing in $3.3 billion for biotech and $1.1 billion for medical devices. California is the top state in the nation, with Massachusetts in second place with $2.9 billion. Investment in biotech declined in later-stage companies, with most of the funds going to seed stage startups in California, the report authors noted.
Reflecting national trends, mergers and acquisitions slowed considerably to 46 in 2016, compared to 99 last year.
California, which boasts 11 universities in the nation’s top 100, is the top state in the nation in grants from the National Institutes of Health. The state saw NIH funding grow to $3.6 billion this year – 15.4% of total NIH grant funding in federal fiscal year 2016.
Many seed stage startup companies spin out from technology developed at major universities across the state. For years, the report observed, those startups have gone to the Bay Area or San Diego. But more recently, Los Angeles has made progress in keeping its entrepreneurs from moving away.
“We’re where San Francisco and San Diego were 20 years ago,” Dr. Shlomo Melmed, executive VP of academic affairs and dean of the medical faculty at Cedars-Sinai, told the report authors. Los Angeles County now employs about 20% of California’s life sciences workforce. “I think there’s going to be tremendous life science investment in population health management: software, accounting, patient management,” Melmed said. “Cancer will drive it because of our large, aging population and high cancer incidence growth rate.”
The report authors cautioned that the state must continue to support educational institutions while encouraging a more business-friendly environment if they want to stay on top of the competitive sector. “We must continue to nurture the biomedical innovation that has made the Golden State a life sciences powerhouse,” the authors wrote. “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.”
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