The life sciences are booming in California, a state blessed with robust universities, great talent, established companies, and a well-engineered ecosystem catalyzing innovation. What began as a few select businesses working in drug discovery, life science tools, and medical diagnostics a couple of decades ago is now a $346 billion dollar a year industry, employing nearly 1.3 million people across the state, and growing. In fact, a new economic impact report from BIOCOM finds that industry growth isn’t limited to one region, but is spread all across the state.
While the trends certainly look good, there are some possible storm clouds on the horizon. The national economy, which has been supercharged over the past 18 months, will eventually simmer, impacting capital flows; threats of trade wars and tariffs are getting markets and investors nervous; regulatory compliance remains challenging, particularly for companies operating internationally; and California’s escalating cost of living continues to serve as a significant factor preventing some companies from locating to the Golden State.
So maintaining the current momentum in California’s life sciences isn’t a slam dunk, but it is certainly possible if industry leaders are proactive in addressing several key elements that will position them for long term success. For one, they must be aggressive in paving the road for future executive talent. This requires the development of innovative mentorship programs and other opportunities designed to steer young people into the field, including programs to help attract more young women and people of color to pursue leadership jobs in the sector. The recently announced STEM Scholars Program is a step forward, and should be replicated. Life sciences companies will become more economically viable when their leadership reflects the markets in which they operate and the people whose lives they hope to improve.
Secondly, life sciences leaders must begin to think like investors think. Investors see a clear ROI in those businesses that combine the right technology, vision, and people in their business plan. It isn’t enough to have just the right technology without a smart game plan and the best leaders to implement it. A good game plan isn’t viable without the right technology and people in place. And the best people won’t succeed without the technology, vision, and strategy. It is the combination of all three together that form a clear value proposition for investors.
Life sciences executives need also be mindful that investors are becoming more and more interested in platform companies, those firms that do cutting edge work and whose technologies allow for that work to be monetized across multiple revenue streams. Exciting companies like Ambys Medicines, GigaGen, Nektar Therapeutics, Nimble Therapeutics, and Zymergen are just a few examples of California-based firms that have licensed their medical discoveries and products across platforms or are working on partnerships that will increase earnings and enhance their company’s long-term value. Life sciences industry leaders and newcomers should continue to foster these types of business operations in order to sustain the current market growth that we are seeing in California.
And finally, life sciences leaders must work diligently with state and municipal officials to ensure that the vibrant life sciences ecosystem that has attracted more than 11-thousand companies to California remains hospitable to entrepreneurs and startups that can blossom into super successful enterprises, employing hundreds, if not thousands of people, and generating millions, if not billions in revenues. Working together, leaders in academia, government, and industry must prioritize STEM education in K-12 schools and protect funding for science, technology, and medical and pharmaceutical research programs in both the state and private university systems. A healthy life sciences ecosystem stitches together research and discovery with entrepreneurship and business so that all of them feed off each other. California is well equipped and uniquely positioned to remain a national leader on this front.
The life sciences are a significant and growing sector in the California economy, and it can remain so if the best talent is recruited, business plans are properly positioned, and the underlying foundation remains solid. The future looks bright if all of these pieces are in place.
Commentary by Leslie Loveless, CEO of Slone Partners, an executive search firm specializing in the life sciences.
This article was edited and published by Rick Weinberg, California Business Journal’s Founder and Editor-in-Chief. Click here for Rick Weinberg’s biography.