As the state budget crisis threatens to stall research and venture capitalists keep a tight grip on their investments, local leaders of the life sciences industry have stepped up efforts to keep federal dollars flowing to the region.
Representatives of the county’s biotech and medical device industries have been lobbying decision-makers in Washington, D.C., for a piece of the $819 billion economic stimulus package.
Their goal is to keep San Diego, home to the nation’s third largest cluster of life sciences companies, a dominant player in the industry. The region’s life sciences community, made up of about 700 companies, has fueled tens of thousands of jobs and has an annual economic impact of $9 billion, according to the most recent estimate by the San Diego Association of Governments, the region’s planning agency.
“We think we could use a stimulus, given the state of the economy,” said Joe Panetta, CEO of local life sciences trade group Biocom.
Last year, Biocom teamed up with the Southern California Biomedical Council and BayBio to boost its life sciences lobbying clout. The newly established agency, SoCalBio, has a goal of traveling to Capitol Hill at least once a month, Panetta says.
Among other initiatives, the group is appealing for a measure that would make it easier for small, money-losing biotechs to continue to fund promising new drug research.
Tax Credits
The initiative calls for biotechs to receive government cash now in exchange for tax credits they would receive if they become profitable. The appeal, a so-called “biotech bailout,” comes at a time when many small and midsized biotechs are running low on cash and new funding sources are hard to come by.
According to the Biotechnology Industry Organization, 125 of the 370 publicly traded U.S. biotechs have less than six months cash on hand.
Life sciences firms noticed a sharp drop-off in the amount of venture deals last year. In San Diego, investments fell from $1.17 billion in 2007 to $585 million last year, according to a January MoneyTree survey released by PricewaterhouseCoopers and the National Venture Capital Association.
David Gollaher, president and CEO of the California Healthcare Institute, a San Diego-based advocacy for biomedical research, says the group hopes it might educate legislators on the challenges facing its industry.
Squeezed credit markets and nearly nonexistent initial public offerings have made it difficult for local companies to access funding, he says. And California’s $42 billion deficit has threatened to hamper scientific research.
“In a sense, it’s the most direct threat we face,” Gollaher said.
The California Institute for Regenerative Medicine, the state’s stem cell agency, says it only has enough money to fund its commitments through September.
At a January meeting, the agency’s governing board chose not to fund two anticipated research programs because of the state’s inability to sell bonds on the public market. The cash crunch has also jeopardized plans to build a stem cell research facility on Torrey Pines Mesa.
Industry analysts, however, say they’re confident that the state will continue to woo federal dollars. In 2007, California received $3.2 billion in grant money from the National Institutes of Health.
East Coast Competition
But competition is growing among other states that also hope to attract high-paying life sciences jobs, which come with an average salary of $75,000, and federal dollars. Unlike California, those states are dealing with much smaller budget shortfalls.
Florida and Massachusetts, for instance, are trying to close a $2.4 billion gap in their budgets.
Florida, already home to The Scripps Research Institute’s East Coast operation, has ramped up its state and local government tax incentives to attract life sciences companies.
Last week, it welcomed the Torrey Pines Institute for Molecular Studies, a $40 million facility. The institute received $90 million in government incentives to set up the 100,000-square-foot research hub.
This spring, the Burnham Institute for Medical Research plans to unveil its facility in Orlando, Fla.
Richard Houghton, president and CEO of the Torrey Pines Institute, says the institute’s proximity to other research facilities, along with the attractive tax incentives, made Florida a nice fit for its expansion.
And just last year, Massachusetts lawmakers approved a $1 billion life sciences initiative intended to grow its work force and spur innovation.
“Everybody is trying to develop what we have here in California, so there’s always competition for those grants,” said Duane Roth, CEO of local high-tech and biotech trade organization Connect.
Industry promoters say they hope President Obama’s Cabinet will hold true on his campaign promise to put science back near the top of the federal agenda. On Feb. 3, the Senate passed an amendment that would add $6.5 billion in NIH funding to the stimulus package, on top of the $3.5 billion already allotted to the agency in the bill.
