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Letter to Stakeholders

This report presents a group portrait of California’s biomedical industry. From an economic perspective, it is an impressive picture, encompassing some 267,271 jobs statewide that pay an average of $76,495 a year. And the range of employment is remarkably diverse: research scientists in university laboratories, biotechnology
entrepreneurs, software engineers, pharmaceutical sales and marketing professionals, high-tech manufacturers, and many others. What they have in common is a commitment to innovation, to discovering and producing new diagnostics, treatments and cures for the diseases that afflict humanity.

Yet, while California has for a generation led the nation, and the world, in biomedical research and development, there is no question that the long financial crisis that began in 2007 with the collapse of the housing bubble, and the subsequent recession, pose serious challenges for our industry’s future. For two years now, after two decades of strong increases, employment has flattened and slightly declined.

The real problem, which became evident in 2011, is that today’s financial crisis is not a conventional recession with the economy bouncing back and quickly regaining lost ground. The European sovereign debt crisis has revealed the extent to which the global economy was overleveraged. Contagion spread from Greece to Spain
to Italy, prompting many analysts to wonder whether the euro could survive. So far, the response of European leaders has been to impose austerity on nations with high budget deficits, though it remains unclear how these measures will restore growth.

At the same time, the United States as a nation, and California as a state, have struggled with the twin problems of massive public-sector debt and high unemployment. The beginning of 2012 saw some positive indications for job creation: national unemployment dropped to 8.5 percent, and California’s rate, which topped 12.5 percent, fell to 11.3 percent. Even so, there are 6.6 million fewer jobs in the U.S. than there were four years ago, and 23 million Americans who want to work full time remain jobless. Indeed, the U.S. needs to create at least 150,000 jobs a month just to stabilize unemployment.

Since employment growth is what fuels the overall economy, it logically should be the main focus of U.S. policy. But policy has been subjugated to politics, and the result has been gridlock. Last year’s debt ceiling debacle and failed deficit-reduction “super committee” exemplified the gulf between the urgency of the nation’s economic problems, on the one hand, and the ability of Congress effectively to address them, on the other. A January 2012
ABC/Washington Post poll found that the approval rating for Congress dropped to just 13 percent, an historic
low and virtually the same as the Field Poll’s finding for the California Legislature.

Against this pervasive anxiety about whether America is capable of solving our most pressing economic and social problems, a close look at California’s biomedical industry suggests reasons for optimism. After all, biotechnology was born in the 1970s, in the wake of Vietnam, Watergate, stagflation, the energy and Iran hostage crises – a time when national pessimism ran even deeper than it does nowadays.

In our search for green shoots, the place to start is with science. For the foundation of California’s remarkable success in spawning biomedical companies is its unique combination of public and private research institutions, from the University of California (UC) to Stanford, USC, Gladstone, Scripps, Salk, Sanford-Burnham and scores of others.

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