Second Largest Driver of California’s High Technology Economy

California’s biomedical industry has grown significantly to become the one of the biggest drivers of employment in the state and the second largest contributor to its high technology economy, second only to computer consulting and programming, according to a report released today by the California Healthcare Institute (CHI) and PricewaterhouseCoopers.

The 2006 report on California’s Biomedical industry provides a comprehensive overview of the impact of the biomedical sector on California employment, wages and investment  as well as a snapshot of the product development pipeline, funding pipeline and major players in the industry.

Highlights of the 45-page report include:

• California is now home to more than 2,700 biomedical companies and more than 100 universities and private non-profit  research organizations that are engaged in biomedical research & development and manufacturing.

• The state’s biomedical industry accounts for nearly 260,000 California jobs, far exceeding the aerospace, motion picture, computer and telecommunication industries in total employment.

•  Biomedical firms paid approximately $18.2 billion in wages and salaries in 2005.  Californians employed within the industry earned an average annual salary of $70,400, with the highest average annual wage going to those in biopharmaceutical companies, at $81,300.

• Biomedical companies in California generated $62 billion in revenue last year and accounted for two-thirds of the market value of all Nasdaq-listed life sciences companies.

“This report confirms that the U.S. leads the world in life sciences, and the U.S. is led by California,” said David L. Gollaher, Ph.D., president and chief executive officer, California Healthcare Institute.  “Though the biomedical industry is a solid, significant and growing component of the states’ economy, California’s life sciences leadership is fragile. Given increasing regulatory pressure and political dynamics, the future prosperity of the industry and the state will rely on a concerted commitment to promote the growth of this industry and forge stronger partnerships between the public and private sectors.”

The report findings position California on the forefront of product innovation, leading all other states and the world in biomedical research and development.  There are currently approximately 802 new medicines in California’s R&D pipeline.  Nearly one-third of these products target cancer.  Biomedical companies invested $26 billion in the development of new products for unmet medical needs in 2005.  This is an $11 billion increase over 2003. The typical California biomedical company invested 42 percent of its revenues back into R&D.

The biomedical industry relies heavily on funding from the National Institutes of Health (NIH) and venture capital to fuel the growth of emerging and fast-growth private companies as well as to fund ongoing research.  California receives the largest share of grant dollars from NIH, more than any other state, approximately 37 percent more than Massachusetts, the second largest grantee.  Between 2000 and 2004, funding to California increased by approximately 32 percent.

In addition, the life sciences industry attracted nearly $2.9 billion in venture capital investment in 2005, representing approximately half of the total $5.9 billion invested in life sciences in the U.S.

“Life sciences in general, and California’s biomedical firms in particular, continue to be a hotbed for venture investing,” said Tracy Lefteroff, global managing partner for Life Sciences Industry Services at PricewaterhouseCoopers.  “An increasing number of biomedical firms are also turning to the equity markets for funds, and as funding opportunities continue to expand as this industry matures, it bodes well for the sector and the state's economy.”

CHI partnered with PricewaterhouseCoopers LLP to collect and administer data for the 2006 CHI/PwC California Biomedical Industry Survey.  The survey was conducted in the spring of 2006 and targeted approximately 1,500 companies that conduct business in California in the areas of pharmaceuticals, biotechnology, medical devices, diagnostics or medical equipment.  

The California Healthcare Institute (www.chi.org) is a non-profit public policy research organization for California’s biomedical R&D industry.