OBR-Bay: Defending the Biotech Birthright

The San Francisco Bay Area is the birthplace of biotechnology, or so declares a Genentech-sponsored road sign in South San Francisco. Trail blazed in 1973 through the discovery of recombinant DNA technology by Stanley Cohen of Stanford University and Herbert Boyer of the University of California at San Francisco (UCSF), the area retains its bragging rights as the oldest and largest biomedical cluster in California and the world.

The original cross-fertilization between Cohen, Boyer, and the commercial sector captures the requisite parameters for nurturing a spawning ground for biotech companies – collaborative university research, a bustling entrepreneurial climate, and a mature venture capital (VC) community. These parameters triangulate strategically in the SF Bay Area, and have given birth to industry giants like Genentech and more than 200 other early-stage companies.

Unlike most high-tech sectors, the biotech industry attributes its inception and continued survival to the collective wisdom shared between companies and academic institutions. The Bay area hosts a prestigious constellation of biomedical research universities including UCSF, UC Berkeley, and Stanford. In 2012, this triad amassed $954 million National Institute of Health (NIH) funding and $464 million California Institute of Regenerative Medicine (CIRM) funding, representing 29% and 27% of the California-wide totals, respectively.

Grassroots efforts at synergizing interdisciplinary collaborations have flourished for over a decade, with the establishment of Bio-X at Stanford in 1998 and the California Institute for Qualitative Biosciences (QB3) linking UC Berkeley, UCSF, and UC Santa Cruz labs in 2000. In the realm of regenerative medicine, rival schools UC Berkeley and Stanford buried their proverbial football hatchet and join forces in the Siebel Stem Cell Institute, a consortium built in 2008 to catalyze new therapies for degenerative diseases. The Bay Area truly is a fertile petri dish for attracting and breeding a formidable biomedical and biotech research force.

Academic innovations around the bay are continually being siphoned into licensed programs or startup companies, thanks to the contagious entrepreneurial itch permeating the Silicon Valley. Avenues exist within universities that encourage commercial spinouts. The QB3 garage at UCSF and Berkeley, and StartX Med at Stanford are notable examples of incubators that provide lab spaces and mentor networks to aspiring student entrepreneurs. Since 2000, over 60 companies and $230 million in venture financing have nucleated through the QB3 network alone. Bio-innovations such as recombinant DNA, functional antibodies and fluorescence activated cell sorter have contributed to the bulk of Stanford’s $1.4B total royalty income. StartX Med, launched in the summer of 2012, now houses 11 young companies wishing to continue the tradition in a more formalized way.

The startup culture is also buttressed by the B-schools. Stanford’s Graduate School of Business, which tops the 2012 Bloomberg Businessweek entrepreneurship ranking, opens its doors to non-MBA’s through “Ignite”, a certificate program that furnishes the business fundamentals of venture formation and experiential opportunities to pitch to professional investors. Across the bay, programs are also offered through the Lester Center for Entrepreneurship at the UC Berkeley’s Haas School of Business, which comes in 4th in the Businessweek ranking.

Bioentrepreneurs in the Bay Area enjoy the most face time with angel and venture capital investors than anywhere else in the country, not only through incubators and B-school mixers, but also because venture capital firms are based here. Bay Area companies have raised $2.9 billion through 248 biotechnology deals, and $2.5 billion through 210 medical device deals from 2010 through the third quarter of 2012, highest in the nation according to the PricewaterhouseCoopers/National Venture Capital Association Money Tree report. Runner-up New England clocks in at $2.7 billion and $0.9 billion through 271 biotech and 98 medical device deals in the same period, respectively.

Will the Bay Area continue to be the No. 1 life science hotbed? In recent years, VCs have been weighting their Bay Area investments towards later-stage companies, leaving younger companies struggling for seed funding. Upon closer scrutiny, New England seems to be taking over as the next breeding ground for Biotech startups, closing more deals and receiving 55% more seed round dollars over the past five years than the Bay Area.

Macroeconomic factors could also be driving the biotech industry away from the Bay Area to Boston or other clusters with lower living costs. In California, San Francisco employers bear the “Bay Area Premium” in labor costs, shelling out an average of $109,000 annually per biomedical worker, while those in Riverside and San Bernardino counties pay only $51,000. On the other hand, the Bay Area is a strategic geographic portal to emerging international research hubs and markets in Singapore, China and India.

So how should the Bay Area retain its cutting edge? Southern Californian clusters have a pharma and diagnostics epicenter in San Diego, a cancer focus in Los Angeles, and a growing medical device sector in Orange County. New England on the East Coast has long been known for its Big Pharma focus. The SF Bay Area really prides itself on its broad cornucopia of fresh biotech innovations, for the reasons discussed above.

The launch of OBR-Bay in the Spring of 2013 could not have been more timely. In the thick of academic innovations, entrepreneurial excitement, and venture activities, this student-led chapter will be well-positioned to unite young academics across the bay, and channel their enthusiasm towards fertile collaborations with industry, to defend the area’s birthright as the original biotech nucleus.