• ACADIA Pharmaceuticals gets FDA approval of its drug Nuplazid, a treatment for the psychosis that often accompanies Parkinson’s disease.
• DexCom Inc. gets FDA approval for Dexcom’s G5 Mobile Continuous Glucose Monitoring System to determine insulin doses for diabetes patients. It was the first time in history that the FDA cleared a CGM system to replace finger-stick testing.
• ResMed Inc.’s valuation climbs billions as it shores up its position in the internet of medical things with the $800 million acquisition of software firm Brightree along with other strategic moves.
• NuVasive Inc.’s newest CEO, Greg Lucier, is setting the company on a trajectory of growth, with three major acquisitions in 2016: Ellipse Technologies Inc. for $410 million, Biotronic NeuroNetwork for $98 million and Mega Surgical for an undisclosed amount.
Concern for 2017:
It is unclear if Donald Trump’s administration will be as supportive to drug developers and medical innovators as his predecessor.
It’s been a rather down year for San Diego’s life science industry, no matter what the industry groups say.
The life science sector, made up largely of drugmakers and medical device companies, is a crown jewel of the local economy. The industry is responsible for 38,694 high-paying jobs, and its reputation for big exits and serial entrepreneurship are oft-lauded by politicians, industry groups, and private industry.
The vast majority of San Diego’s public companies are life science firms, and the lion’s share of local venture capital is sunk into the pockets of drugmakers and other medical innovators.
The industry is no doubt a star in San Diego’s economy, but it’s been a slow year all the same when compared with the recent “go-go” years of the latest economic upturn.
IPOs Down
A sign of hungry investors and a hot market, eight local life science companies filed to go public with an initial public offering (IPO) in 2014. In 2015, that number dropped to four companies. Then, in 2016, only one company went public: Obalon Therapeutics.
Longtime life science executive and investor Jay Lichter said he doesn’t take the small number of IPOs as a sign of doom and gloom, per se.
“I’ve been in this business for 30 years, and I’ve seen three or four boom-and-bust cycles,” said Lichter, managing director of Avalon Ventures. “There’s a relatively small pool of companies in San Diego that need to go public, and many who needed to go public already did in 2013 and 2014. The backlog got sucked out.”
VC Down
Venture capital invested in local life science firms during 2016 also declined compared with 2015, according to the MoneyTree report by PricewaterhouseCoopers LLP (PWC), which releases quarterly reports on venture capital investment based on information provided by Thomson Reuters.
Since fourth quarter data has yet to be published by PWC, the San Diego Business Journal used Q4 data collected by Mattermark, a San Francisco startup that mines and crunches internet data for investor intelligence. As of Dec. 20, San Diego life science firms had raised a total of $549.7 million in venture capital in 2016 — far below the $1.1 billion projection made by the California Life Science Association in its latest industry report. And that’s including a mega-sized $220 million deal landed by Human Longevity in April.
Falling Stocks
San Diego’s public life science firms collectively saw their stock fall 30.7 percent over the past 12 months, translating to billions of dollars in lost value. To be clear, much of that value is tied to the poor performance of San Diego’s largest public life science firm, Illumina Inc., which saw its value drop roughly $8 billion last year due to financial performance that came in under Wall Street’s expectations.
Macroeconomic forces, including the drug pricing scandal, the presidential election, and the uncertainty around what will happen to Obamacare, took its toll on the vast majority of life science companies nationwide.
The Tough Prevail
Still, industry leaders here in San Diego are optimistic about the industry’s future. After all, the life sciences are known for volatility. High risk and high reward is what these companies live and breathe.
“This is probably the worst and hardest industry on the planet,” Lichter said. Only players suited for the risk can win.
That could partly explain the latest boom-and-bust cycle. Generalist money started filtering in to the life science industry when times were good, but uncertainty and upheaval from the presidential election caused generalists to take their money and skedaddle.
Lichter said macroeconomic factors mean little to life science firms in the end, despite what the stock market reflects. It’s the binary events — the clinical data results — that truly indicate failure or success. And in the area of medical innovation, San Diego still rules.
LIFE SCIENCES
No. of local jobs: 38,694 (2015)
Average salary: $138,951 (2015)
Key economic fact: $31.8 billion in total economic impact
Largest public companies: Illumina Inc., ResMed Inc., DexCom Inc., Ionis Pharmaceuticals, ACADIA Pharmaceuticals Inc.
Sources: California Life Science Association, San Diego Regional Economic Development Corp.
