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San Diego Acts as Role Model and Regional Competitor

There’s no doubt the greater San Fernando Valley area is a hub for biotechnology, medical device and related companies. It’s home to Amgen, Advanced Bionics, MannKind, Medtronic, Pharmavite, and other established and start-up firms. Yet, the region has never gained a reputation as a biotech and medical device “cluster” on par with San Diego and the Bay Area. And the lion’s share of investments and companies in these industries is going to the latter. Many industry experts believe the greater San Fernando Valley area has the potential to boost its standing as a biotech and medical device cluster and attract more companies and capital. But there are still a few hurdles slowing down growth. This special report explores the region’s biotech and medical device infrastructure – the foundation for growth. As a point of reference, it looks at what led to San Diego’s ascent. And the report explores local educational, financial, technology transfer and real estate infrastructure that support these industries. View: Life sciences industries are located in a cluster in San Diego. San Diego’s biotechnology cluster includes more than 400 life sciences companies; numerous world-class research institutions; business incubators; and myriad financial firms, real estate firms and industry advocates that support the local industry. Many are bunched into a few mile stretch from Torrey Pines Mesa to the Sorrento Valley. And the cluster, which trickles into surrounding communities, attracts hundreds of millions of dollars in research and development and venture capital investments annually. “What has made this cluster a success is reaching a critical mass of research institutes, scientists, entrepreneurs and money,” said Terri Somers of the life sciences trade group BIOCOM. “We see places around the globe interested in creating what San Diego has.” The catalyst The first factor that led to the creation of San Diego’s biotech cluster was the existence of world-class life sciences research institutes, many of which are located on Torrey Pines Mesa, said Somers. The defense industry historically operated in the area. In 1978, Dr. Ivor Royston, a UCSD scientist, co-founded one of the area’s first biotech companies, Hybritech. The well funded firm developed diagnostic kits and other products. In 1985 it developed a successful prostate cancer test. Eli Lilly purchased Hybritech in the mid 1980s for $400 million, said Somers. After the purchase, Royston and other former scientists from the company reinvested proceeds from the sale into launching several other life science companies in the area. “It’s an evolution not a revolution,” said Somers, adding plenty of vacant office space, and close proximity to UCSD and other research facilities in Torrey Pines Mesa fostered the geographic clustering of companies. Biotech is also an appealing industry because it’s relatively clean, salaries are good, and money boosts the quality of surrounding communities, she added. Former Hybritech managers are widely credited with “seeding” the San Diego biotechnology industry, said Steven Casper of the Keck Graduate Institute of Applied Life Sciences in an August 2009 study about California biotech clusters. They founded or took senior management positions in at least 12 companies formed between 1986 and 1990, said Casper. And a 2002 study found more than 40 biotech companies in San Diego employed people linked to Hybritech. Investment uptick Wall Street increased investment in life science companies during the 1990s, further fueling growth of the area’s cluster, said Somers. San Diego gained a reputation as a biotech hotbed and has been marketed as such. The large number of firms operating in the area led to a lot of innovation. “You can’t go to breakfast or to a mall here without running into someone you know,” said Somers. “A lot of these people have worked together and collaborations are very common.” The City of San Diego also supports the growth of life sciences in the region, said Jason Anderson, VP of business development for the San Diego Regional Economic Development Corporation. The city does not offer a large incentive package to companies moving to the area, he said. But it helps existing companies obtain permits quicker. San Diego Regional Economic Development Corp invests in marketing the region. And the city helped launch a business incubator. “What the cluster has created is a place where companies want to be,” said Anderson. “We consider ourselves a competitor (in terms of attracting new companies) to any region in the country.” Anderson attributes the region’s success largely to the amount of quality R&D being done by local institutes. UCSD, the Salk Institute for Biological Studies, Sanford-Burnham Medical Research Institute, and Scripps are a few of the facilities. Access to that R&D helps drive innovation, he said. And San Diego is a diversified high tech economy that does not solely rely on biotech. The convergence of multiple technologies also fuels innovation. The National Institutes of Health doled out $1.2 billion in funding to San Diego County life sciences firms and research organizations in 2009 alone, said Somers. Venture capital firms invested $185 million into 15 San Diego deals in the fourth quarter of 2009, according to the PricewaterhouseCoopers MoneyTree report. San Diego vs. L.A. Casper said the Los Angeles region, including the San Fernando Valley area, is well placed geographically – smack in the middle of San Diego and the Bay Area, has anchor companies such as Amgen, an inventor culture, and access to R&D institutes such as UCLA and Caltech. L.A.’s biotech and medical device industries have not developed more robustly because the area has not generated a sufficient marketplace for ideas needed to support activities of entrepreneurs, scientists and investors. The biotechnology industry is highly collaborative and failure prone, said Casper in the 2009 biotech cluster study. “There are a lot of inventors in the area but they’re more isolated,” he said in a telephone interview. “There are signs of life for sure with former Amgen people starting companies such as Kythera Biopharmaceuticals. And there are bridge groups and angel investors.” Another positive is that Amgen employees are a little more transient than years past, which boosts the region’s level of available talent and intellectual capital. However, the L.A. region lacks available and inexpensive laboratory space. The labor pool is more likely to move to San Diego or the Bay Area. The region also needs more sources of funding and networks for scientists and other industry professionals. “The ingredients (in L.A.) are far better now than ever,” said Casper. “You need a catalyst. The hard part is how to get that critical mass. And you gotta have highly credible people willing to stake a claim on the area.”

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