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Lack of Investment, Regulatory Environment Dampens Future Biomedical Growth, Innovation

January 11, 2012

You would think that with the pace of the economic growth (e.g., a snails pace, actually), there would be more surveys like this one.

Access to capital, a burdensome and uncertain regulatory environment and lack of innovation and productivity in R&D are threats to the biomedical industry’s growth over the next five years, according to biomedical company CEOs surveyed by CHI-California Healthcare Institute, BayBio and PwC US. The survey found:
•Nearly three quarters (74 percent) of biomedical industry CEOs surveyed said their companies have had to delay R&D in the past year.
•Lack of funding was the top reason for project delays, the survey found, accounting for more than one-third (40 percent) of delays by all public and private companies in the survey.
•Eight in 10 CEOs surveyed said hat the current FDA regulatory approval process has slowed growth of their organization.

Findings from the CEO Survey reflect issues being discussed throughout the biomedical industry by executives in California this week, and provides a glimpse into the 2012 California Biomedical Industry Report, due for release in February.

The report, published annually by CHI, BayBio and PwC, provides a look at the biomedical industry in California, the largest biomedical cluster, and a source of the greatest number of products in clinical development.

“As the center of biomedical innovation in the U.S, California’s biomedical industry is a national treasure,” said Gail Maderis, president and CEO of BayBio. “But the pace of R&D productivity and its global leadership position hang on the availability of capital to fund future innovation and a regulatory framework that is based on consistency and innovative technologies.”

Resourcefulness by the CEOs found that biomedical companies in California over the past year have had to seek out diverse funding sources, divided almost evenly among government grants, angel investors, venture capital and licensing agreements and partnerships.

The survey said:
•Forty-four percent of biomedical CEOs said they will look to licensing agreements and corporate partnerships as a source of finance in the next 12 months, double the number of CEOs who last year said their companies are using this avenue for finance.
•Corporate venture funding, the investment of corporate funds into external endeavors, is expected to become a much more important source of funding to the industry, with 30 percent of CEOs surveyed saying they will tap corporate venture capital as a finance source in the next 12 months, versus only 10 percent who did so in the past 12 months.
•Though still only a small contributor to the finance equation, disease foundations/non-governmental organizations are growing as a funding source for 11 percent of CEOs who plan to use these funds in the next 12 months, versus only 4 percent who did last year.
•Access to capital is seen by CEOs as the most influential state policy issue to keep biomedical research, innovation and investment in California. Nearly three-quarters (72 percent) of CEOs said that access to capital is extremely important, followed by (in order of importance) tax incentives for innovation (60 percent), corporate taxation (51 percent), workforce preparedness (47 percent) and duplicative regulation among various state and federal agencies (37 percent).


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