When you hear biotech and California, your mind naturally gravitates to Silicon Valley or maybe San Diego. But, Los Angeles? That’s, of course, a famous home for an entirely different industry.
Yet, according to the life sciences trade organization Biocom California, LA County boasts almost 20% of all life science direct employment in the state — 96,844 direct jobs — “the largest share of life sciences employment in the state.” LA County also received more than $1.94 billion in NIH funding in 2020, outpacing all other counties in the state.
To learn more about the biotech boom in LA, we caught up with Joseph Panetta, president and CEO of Biocom California.
In addition to explaining how LA has become an overnight success that’s “taken 20 years,” Panetta discussed other trends he’s tracking on behalf of the more than 1,600 member companies that make up this thriving California life science community. Panetta couldn’t help but brag a little, pointing out that the state's life sciences industry provides more than 1.37 million jobs, generates more than $405 billion in economic activity and had access to more than $5.5 billion in NIH funding in fiscal year 2020 — that’s a lot of research.
PharmaVoice: Where are you witnessing the biggest areas of opportunity for your member companies?
Joeseph Panetta: I certainly would put pharma’s deep pockets at the top of the list. The other place where I see enormous opportunity for our members is in obtaining venture funding. We had a record year in the San Diego area for venture funding and life science last year. I think we approached about $3 billion in VC funding in the San Diego area alone. That's just about double what we had seen before. There is enormous interest from the venture community and there is money available from the venture side.
In the last couple of years, we've rapidly expanded our membership and our reach. We have member companies in Los Angeles and San Francisco and here in San Diego, and we've expanded our staff to have significant staff presence in all three of those areas. And we're expanding our capital development program beyond San Diego and the Bay Area to LA to create partnering efforts between large pharmaceuticals and our companies, and venture capital firms and our companies. Obviously, the Bay Area is a big area for venture funding and always has been.
Through some of the work in our Los Angeles office and in partnership with some of our members, we're seeing companies like [Thousand Oaks, Calif.-based] Amgen develop more of an interest in investing in start-up companies. We've got Westlake Village Partners Ventures, which is a half-billion-dollar fund that has done a lot to seed startups. The venture world in Los Angeles was almost nonexistent a few years ago. We are seeing a lot of small startup companies stay that would have had to move somewhere else to be close to the venture money in the past. So, the LA venture arena is an area that I see growing.
Los Angeles is not the first place one thinks about as a hotbed for biotech innovation. Why now?
Well, it's been an overnight success that's taken 20 years. We didn't open our office in LA until about four years ago, and we did it very, very cautiously, because we didn't see some of the key elements necessary to create success in a life sciences cluster. Certainly, there is the ability to develop science and intellectual property in Los Angeles, there’s Caltech, Cedar Sinai, City of Hope, UCLA — all powerhouses. But what LA didn’t have was the serial entrepreneur community, a community that had the experience in developing products and partnering to take those products to market or the venture community to fund it.
When we first looked at LA, early-stage companies were being formed, and then the company or the technology would depart to San Diego or to San Francisco. So, there wasn't much growth taking place. But when we looked at the numbers, it was revolutionary, we were astonished. The greater LA community receives more NIH research grant funding than San Diego does in the life sciences and the employment base in life sciences in LA is as large as it is in San Diego. In some ways, a lot of this was lost because LA didn't have the catalysts to grow the industry.
In addition, in the last five years LA’s county and city governments have taken an interest in expanding life sciences real estate, which had been another challenge. There just wasn’t the laboratory space. Companies like Alexandria Real Estate Equities weren’t focused on developing in LA, but they are now. So, a lot changed in LA. It's the second largest city in the country. It's an international city. We're seeing success with our presence there and I think we're going to see the industry continue to grow there.
Could LA prove to be a model for other urban areas across the country?
I think so. Having been in this industry here in San Diego for 34 years now, I think it still comes back to the fact that you need world-class research and academic institutions and the ability to successfully do technology transfer — this provides the base for investment and interest in developing companies. If other areas of the country have those abilities, LA can serve as a model.
You also have your sights on public policy. What are you watching for?
The challenge we have in Washington, D.C., is that there's this never-ending desire on the part of our politicians to do drug pricing in a way that will provide little public support, and more government involvement in regulating the market. We know that the success of this industry here in the United States has been very much due in part to the fact that companies are rewarded for the time and investment that it takes to develop these revolutionary products. We’ve got to protect that.
What are some top trends you’re tracking?
Because of COVID, we're seeing an evolution away from the way that diagnostic products have been commercialized and utilized in the past to a whole different model going forward. And not just the home testing market, but the ability to collect samples and then the testing systems that have to be set up to collect samples and report out results. I think this is a new groundbreaking opportunity for a sector that used to be a poor stepsister in the industry.
There is also a whole new level of respect for what this industry is capable of accomplishing. And that's not just respect from a public image standpoint. There is excitement around the industry’s ability to develop products rapidly, turn products around, get them through regulatory processes quickly and build on experience.
Where are you seeing interest from investors?
The whole landscape has changed in terms of Big Pharma’s interest in technologies and early-stage companies. I can remember not too many years ago when larger companies would come talk to me about Company X when it’s well into phase 2 of clinical development, and then maybe we'll want to have a conversation with them. Today, companies in preclinical [research], if they have interesting technologies, are of interest to Big Pharma.
These larger companies are flush with cash and are continuing to look for opportunities to diversify their pipelines. At the same time, the competitiveness within the industry continues to increase. Not only does a small company have an opportunity because it has a potentially promising new area of biotech or medical technology, but large companies are acquiring technologies that they may or may not develop down the road, simply to have them in their bank account, so to speak. They might want to take advantage of the technology or to keep somebody else from getting their hands on it.