2015 California Biomedical Industry Report – Page 4
A Magnet for Investment
California’s academic excellence generates thousands of life sciences innovations. The basic science discoveries funded by the NIH do not stay in the laboratory. They are often licensed to pharmaceutical companies, biotech firms and start-ups. In many cases, the scientists who make these discoveries start their own companies to carry the research forward.
This constant flow of innovation attracts investment from around the world. It’s estimated that California life sciences companies will have received $3.8 billion from venture capitalists in 2014, or 45 percent of the $8.4 billion VCs are projected to invest in the life sciences nationwide. Especially significant, $1.8 billion will support California’s early stage companies as they work to bring new therapies, devices and diagnostics to market.
These investments, at all stages, are felt throughout the state. Silicon Valley is projected to receive $2.8 billion in 2014. San Diego is projected at $647 million and Los Angeles/Orange County at $254 million.
Life sciences venture capital investment is second only to software in California and is a significant contributor to California’s projected 60.1 percent share of all venture capital investments in the United States in 2014.
The NIH also invests in California’s life sciences industry through their small business grants. The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs provide significant support for emerging companies, particularly those who are not yet positioned for venture capital. These grants provide critical seed funding to help small start-ups prove their technologies and grow.
Once again, California leads the nation in NIH small business grants. The state received 391 awards in 2014, which translates into $146 million. Massachusetts is second on the list, with 175 awards for $73 million. While these numbers seem small when compared to venture capital funding, they are critically important investments that help small companies gain a toe hold in the competitive life sciences industry.
Mergers and IPOs
As products come closer to market, smaller firms must often seek more resources through initial public offerings or mergers with larger companies. This process rewards investors for their faith in the company and allows them to recirculate capital, investing in other innovative start-ups.
In 2014, the M&A market is on pace to eclipse 2013. Through late September, there were 70 completed biomedical M&A deals where the target company was located in California, compared to 70 completed deals in all of 2013. Where terms were reported, these 2014 transactions have totaled more than $34 billion.
The IPO side has been equally busy. Through late September, there were 20 IPOs in 2014, bringing $1.5 billion into emerging companies. In 2013, there were 17 initial public offerings.