Californian budget deficit poses “real risk” to biotech investment

By Nick Taylor

- Last updated on GMT

The Californian budget deficit presents a “real risk to future biotech investments”, according to the CEO of BayBio who explained to how the industry now has a difficult relationship with the state.

Speaking to Outsourcing-Pharma Matt Gardner, CEO of BayBio, outlined how California’s budget difficulties threaten the biotech industry. In its IMPACT 2009 report BayBio detailed the measures that it believes need to be taken to support the Californian biotech industry.

However, since the report was published the Californian budget deficit has risen in prominence. Gardner believes that measures to help biotech will now be sidelined because it is “very difficult to prioritise economic development and job creation​” in California’s financial situation.

Biotech has played a large role in shaping California over the past 30 years but the new financial frugality has created a difficult relationship between the industry and the state, according to Gardner.

Fortunately for the biotech sector the state passed two of the key proposals from IMPACT 2009 before the budget crisis hit. Both these related to the tax system, which Gardner described as very complex, and their passage into law is an important development for biotech.

Growth in biomanufacturing

 

The proposals in the IMPACT 2009 report were intended to help protect Californian biotech, in particular the biomanufacturing industry which now faces increased competition in the US and overseas.

In the report Gardner commented that although California’s innovation is strong it is failing to take full advantage because it is ​“letting multimillion dollar manufacturing gems like Genentech expand in a neighbouring state with a favourable tax policy​”.

The success of California’s biomanufacturing sector can be seen in the graph, which plots pharma manufacturing employment in thousands against time.

Gardner attributes this growth to investment in innovation over the past three decades that has created a strong pipeline and resulted in over 1000 approved drugs being developed in California.

Biomanufacturing capacity was created to support the clinical trial supply and commercial production of these products, helping California achieve consistent growth over a period when other states have fluctuated.

However, this growth has slowed and pharma manufacturing employment was declining slightly. Gardner believes that consolidation that is taking place is the primary cause of this decline, highlighting two small scale manufacturing facilities that were on the market as evidence.

The rise of the CMO

Gardner also acknowledged that there are now unprecedented levels of strategic options available to biotechs that need to manufacture a product.

Contract manufacturing organisations (CMO) have grown in number and for some biotechs are better options than investing in in-house capacity.

Many of these CMOs are based in other US states or overseas in countries such as Singapore that have committed significant resources to creating a biomanufacturing industry.

It is in this more competitive and global environment that California must attempt to sustain the biomanufacturing industry that has enjoyed such impressive growth over the past 20 years.

All figures used in the graph are taken from the US Bureau of Labor Statistics​.

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