Profile
Silicon Valley biomedical firms specialize in three areas: research and development of
medical devices, R&D in the life sciences, and biopharmaceuticals. Each of these
areas have the common purpose of improving the quality of human health and life.
Silicon Valley firms lead the industry in conducting R&D and in developing tools for researchers. Their products continue to support major shifts in the Biomedical field, such as the emergence of genomics, proteomics, and bioinformatics.
With employment that is three times more concentrated in Silicon Valley than nationally, the Biomedical cluster in Silicon Valley employed approximately 33,657 people in the first half of 2004.
Biotechnology and medical device firms account for 18% of all venture capital dollars given to Silicon Valley firms in 2004. Investment in these firms has doubled, increasing from 9% in 2001. Among Silicon Valley’s top 50 Biomedical firms, revenues rose 600% between 2003 and 2004 and R&D-related employment has been an important source of job growth during the 1990’s.
In terms of employment, the Bay Area’s Life Sciences cluster ranked first in the nation in instruments manufacturing, first in research, and second in medical devices manufacturing. Anchor firms in Silicon Valley include Varian Medical, Roche, Gilead Sciences, and Genencor.
| Exhibit 2: Ranking Life Sciences Cluster by Employment | |||
| Pharmaceuticals Manufacturing | Instruments Manufacturing |
Medical Devices Manufacturing | Research |
|---|---|---|---|
| 1. Philadelphia | 1. Bay Area | 1. Minneapolis-St. Paul | 1. Bay Area |
| 2. Los Angeles | 2. Boston | 2. Bay Area | 2. Houston |
| 3. Newark, NJ | 3. Bridgeport | 3. Los Angeles | 3. Boston |
| 4. Middlesex-Somerset- Hunderson | 4. Los Angeles | 4. Boston | 4. Washington DC |
| 5. Chicago | 5. San Diego | 5. Chicago | 5. Los Angeles |
| 6. Bay Area | 6. Indianapolis | 6. St. Louis | 6. Chicago |
Source: California Technology, Trade and Commerce Agency
Source: Bay Area Life Sciences Strategic Action Plan. Bay Area Economic Forum, June, 2003
Changes driving opportunities
- Rising and unsustainable cost of healthcare drives innovation. This is especially true in drug discovery and development where the “time to market” averages ten years. This fact creates pressure to reduce the costs and improve the efficiencies of getting safe, well-researched products to consumers.
- Emerging personalized healthcare model. The convergence of bio-nano and information technologies is improving research tools so that we can begin to understand the interaction between the individual patient and available pharmaceutical and medical treatments.
- Prevalence of diseases. Parkinson’s and Alzheimer’s as well as cancers and heart disease are driving the quest to better understand the human body and how these diseases arise.
- Convergence with information technologies fueled by technology innovation and faster processing at a lower price. The economics of computing change according to Moore’s Law. That means more computer power and processing speed for less cost. As a result, in the biomedical and bioinformatics fields, the technology allows for the processing of huge amounts of data. This has enabled breakthroughs in decoding DNA and in analyzing other biological processes.
- Convergence with nanotechnologies fueled by research in proteomics and genomics, for instance, has stimulated development of innovative tools for conducting research. Silicon Valley firms lead in this tools development area.
- Local cities have begun supporting the biomedical cluster. In particular, the city of San Jose launched a $6.5 million initiative to attract biotechnology companies.
Where the opportunities are
More than 50 Silicon Valley firms operate at the interface between bio and information technologies. Twelve major research universities and laboratories in the region help to drive innovation including Stanford, UC-San Francisco, UC-Berkeley, UC-Santa Cruz, Lawrence Berkeley National Labs, Lawrence Livermore National Labs, Sandia National Lab, NASA-Ames, SRI International, Stanford’s Bio X Center, QB3 at UC San Francisco and Center for Information Technology Research in the Interest of Society (CITRIS) at UC Berkeley.
Stem Cell Research: The Stem Cell Research Initiative approved by the California voters will add $3 billon in new research funding for the state’s research institutions over the next decade with much of that support going to institutions in the Bay Area. It is expected that this funding will attract talent and fuel research that will lead to new health discoveries and commercial opportunities.
Convergence of bio and information technologies: While most firms are still in the R&D phase of product development, there have already been a number of important breakthroughs, especially in medical devices and instruments at the convergence of bio and information technologies.
Example companies in the Bioinformatics space are,
- Affymetrix, a leading developer of gene chips that encode genetic information on wafers for medical diagnosis purpose, and
- Applied Biosystems, a pioneer in the development of computing power for mapping the human genome.
Genomics and personalized medicine: The Valley has a number of additional pioneering firms in the field of genomics, including Incyte Pharmaceutical and Genomic Health, both of which are developing personalized medicine based on the human genome. In addition, there are several Silicon Valley companies engaged in biotechnology research and drug development:
- Gilead Sciences is a Foster City bio company that develops therapeutics for life threatening diseases including cancer. It is selling a drug delivery mechanism using lipid spheres of 100 nanometers in diameter that encase an anti-cancer drug While primary a bio company, Gilead Sciences is an example of the emerging use of nanotechnology in the bioscience.
- Agilent develops microarrays and other tools used for research in genomics and has pioneered breakthrough technologies in microfluidics to support research in the study of proteins (proteomics).
- Genencor International is a diversified biotechnology company focusing on two markets: bioproducts and health care. For the bioproducts market, Genencor discovers, develops, and sells biocatalysts and other biochemicals for the industrial, consumer, and agri-processing markets. For the healthcare market, Genencor has drug development platforms in targeted biotherapeutics for cancer.
Major Labor Market Trends
Of Silicon Valley’s major industry clusters, Biomedical suffered the least job loss during the bursting of the high tech bubble in 2000-01 period. Scientific R&D-related employment has been an important source of job growth during the 1990s - and contributes to the habitat of innovation supporting major shifts in the Biomedical field.
Pay is rising in the biomedical cluster, a signal of
rising productivity and industry demand for talent. Average pay per employee rose from $90,823 in 2001
to about $99,346 in 2004 - an increase of 9%
Pay per Employee
| Biomedical Cluster | 2001 | 2002 | 2003 | 2004* |
|---|---|---|---|---|
| Pay per employee | $ 90,823 | $ 89,037 | $ 93,864 | $ 99,346 |
Source: California Employment Development Department
*2004 is the average of quarters 1&2 based on data availability
The Biomedical industry in Silicon Valley employed
approximately 33,657 in the first two quarters of 2004. About 1/3rd of these jobs (12,300) were
in research and development in the life sciences.
Biomedical employment is roughly three times as
concentrated in Silicon Valley as it was nationally in 2003 and made up about 2.9% of the
region’s employment in the first two quarters of 2004.
| Biomedical Cluster | 2004* |
|---|---|
| Employment | 33,657 |
| Pay per employee | $ 99,346 |
| Employment Concentration** | 3.08 |
| Share of Silicon Valley Employment | 2.9% |
| Number of Firms | 600 |
Source: California Employment Development Department
*2004 is the average of quarters 1 & 2 based on data availability,
**Employment concentration is given in 2003
Within the sector, an important growth area since 1990 is employment in scientific research and development services. This category includes research and development in the physical, engineering and life sciences, and in the social sciences and humanities. Though employment declined in the 2001 to 2002 period, it then remained steady at about 17,600 employees during the following three years. Over the longer term, R&D employment grew about 30% from 13,400 in 1990 to 17,400 employees in 2004.
Silicon Valley firms
Revenues among Silicon Valley’s top 50 Biomedical firms rose 600% between 2003 and 2004. San Jose Mercury News, Monday, April 11, 2005).
| Twelve Silicon Valley Biomedical Firms are in Silicon Valley’s Top 150 Firms by Revenue | |
|---|---|
| Gilead Sciences | Therapeutic viral medicines |
| Varian Medical Systems | Anti-cancer radiation devices |
| Varian | Scientific instruments |
| Genencor International | Diversified biotechnology |
| Affymetrix | Genetic information systems |
| Dionex | Chromatography systems |
| Kyphon | Orthopedic medical devices |
| Align Technology | Teeth straightening devices |
| Molecular Devices | Bioanalytical measurement systems |
| Connectics | Skin treatments |
| Intuitive Surgical | Minimally invasive surgical systems |
| Nektar therapeutics | Pulmonary drug delivery systems |
Venture Capital
Biotechnology and medical device firms are capturing an increasing share of venture capital dollars.
In 2004 biotechnology and medical device firms together accounted
for about 18% of all venture capital dollars given to Silicon Valley firms in 2004 – doubling from 9% in 2001.
Venture capital dollars awarded to biotechnology firms increased from
$243 million in 2002 to $312 million in 2004.
Biotechnology industry investments grew from 5% to 8% of all Silicon Valley
venture capital investment from 2002 to 2004.
Investment in medical device firms fell somewhat from $484 million
in 2002 to about $415 million in 2004, a decline of 14%. In 2004, medical devices firms accounted for 10% of all
venture capital investment in Silicon Valley, and they retained an increasing share of all
VC dollars (up from 14% in 2002).
Venture Capital Investment in Silicon Valley Biotechnology and Medical device Firms
| Biotech | Biotech Share |
Medical devices and equipment | Medical devices and equipment share |
Combined biotech and medical devices | Combined biotech and medical devices share | |
|---|---|---|---|---|---|---|
| 2002 | $ 243 | 5% | $ 484 | 10% | $ 727 | 14% |
| 2003 | $ 253 | 6% | $ 450 | 11% | $ 703 | 16% |
| 2004 | $ 312 | 8% | $ 415 | 10% | $ 727 | 18% |
| Grand Total | $ 808 | $ 1,349 | 2,158 |
Dollars in Millions
Source: PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree Survey
Cluster Infrastructure
- San Jose BioCenter: a state of the art facility equipped with wet / dry laboratory and office space that provides world class business and facility services to high potential life science companies. SJBC members have access to an extensive range of products, services and equipment that enables them to grow and scale successful businesses. The goal of the SJBC is to advance technology for societal benefit and to catalyze economic development for community growth.
- California Institute for Regenerative Medicine: The California Institute for Regenerative Medicine is a new state agency, established in early 2005, providing $3 billion in funding for stem cell research at California universities and research institutions. The agency makes grants and provides loans for stem cell research, research facilities and other vital research opportunities. The agency will be located in San Francisco. http://www.cirm.ca.gov/
- BayBio: Northern California’s life science association supports the regional bioscience community through advocacy, enterprise support, best practice dissemination and the enhancement of research collaboration. Members include organizations engaged in, or supportive of, research, development and commercialization of life science technologies.
- Stanford Bio-X Center connects Schools of Medicine, Sciences and Engineering around the use of computational tools in molecular, cellular, tissue and organ research.
- California Institute for Quantitative Biomedical Research (QB3) is a cooperative effort among UC Berkeley, UC Santa Cruz UCSF, and private industry. The center focuses on the intersection of quantitative sciences with biological systems at all levels of complexity - from atoms and protein molecules to cells, tissues, organs and the entire organism.
- UC Berkeley Center for Information Technology Research in the Interest of Society (CITRIS) a new $100 million science and technology center that will focus on the application of IT in several fields including bioengineering and bio-informatics. A number of Silicon Valley firms have signed up as industry partners including HP, SUN, Agilent, Intel and IBM and have pledged $170 million.
Research Universities
Stanford University
UC-San Francisco
UC-Berkeley
UC-Santa Cruz
National Labs
Lawrence Berkeley National Labs
Lawrence Livermore National Labs
Sandia National Lab
NASA-Ames
SRI International
Cluster Components
| NAICS Code | Description |
|---|---|
| 325411 | Medicinal and botanical manufacturing |
| 325412 | Pharmaceutical preparation manufacturing |
| 325413 | In-vitro diagnostics substance manufacturing |
| 325414 | Biological product (except diagnostic) manufacturing |
| 334510 | Electromedical and electrotherapeutic apparatus manufacturing |
| 334516 | Analytical laboratory instrument manufacturing |
| 334517 | Irradiation apparatus and furniture manufacturing |
| 339111 | Laboratory apparatus and furniture manufacturing |
| 339112 | Surgical and medical instruments manufacturing |
| 339113 | Surgical appliance and supplies manufacturing |
| 339114 | Dental equipment and supplies manufacturing |
| 541710 | Research and development in the physical, engineering and life sciences (50%) |
| 62151 | Medical and diagnostic laboratories |