Why Has Area Failed to Build a Biotech Cluster?
By Mark R. Madler
April 28, 2008
When Grant Bitter left Amgen more than a decade ago to start his own research company he considered going to either San Francisco or San Diego.
For family reasons Bitter remained in the Conejo Valley although in retrospect getting his company BitTech off the ground would have been easier in those other cities where more activity, networking and collaboration takes place in the biotech industry.
Bitter expected that his former employer, a major player in the global industry and the largest biotech company in the Los Angeles region, would create an atmosphere similar to that found in those other cities.
As it turns out, Bitter can count on one hand the number of other companies competing in the biotech space in the 101 Corridor.
“I expected there to be more start ups and more activity,” said Bitter, who operates his lab in Westlake Village.
Los Angeles is synonymous with the entertainment industry and even after the major hit taken with the end of the Cold War and loss of government contracts, aerospace, and even manufacturing in general, remain a strong presence in Los Angeles County.
Biotech in Southern California, on the other hand, barely registers and the emergence of clusters of companies as found in San Francisco and San Diego has not materialized.
In a 2004 study on the industry, Milliken University ranked San Diego as the number one biotech cluster in the U.S. The Los Angeles-Long Beach area ranked 10th.
That same study defined a cluster as a concentration of competing or collaborating firms and their related supplier network. It isn’t enough to just have one or two big companies researching new drugs or developing medical devices but a true cluster includes the entire chain “from supplies to end products,” according to the study.
So why hasn’t a biotech cluster developed here and is it too late to get one off the ground considering the competition from San Diego and San Francisco?
The door had been open about 20 years ago for clusters to take root here but new drugs didn’t stay in the region once the research ended, said Ahmed Enany, president and CEO of the Southern California Biomedical Council.
The City of Hope hospital developed a drug that was later commercialized by Genentech, one of the largest of the Bay area firms. Research out of CalTech also found its way north to get into the marketplace, Enany said.
“If we had taken care of keeping them here and spinning off you would have had commercial activities based on this technology,” Enany added.
The absence of a Los Angeles cluster is the topic of an ongoing study by Steven Casper, an associate professor at the Keck Graduate Institute of Applied Life Sciences in Claremont.
The data collection stage of the two-stage study has been completed and Casper now moves to interviewing biotech industry professionals.
So far Casper identified three areas contributing to biotech clusters – university research, a labor pool and availability of capital.
“One mechanism to get a cluster is to marry good science with experienced managers from a local company,” Casper said.
While Los Angeles area universities can compete with those in San Francisco and San Diego, their late entry to secure patents on research puts them behind those other institutions.
While venture capital firms investing in biotech has improved of late, many of those firms that had been in Los Angeles gravitated south, Casper said.
One area of particular interest to Casper is how the lack of mobility between companies results in the failure for clusters to take hold. In San Francisco, for example, this high mobility leads to social networks linking companies together. Such a network is practically non-existent in Los Angeles.
“Dense networks within a cluster of companies can lead to the quicker diffusion of important technological advances and market intelligence, creating a regional advantage of sorts,” Casper wrote in an article published at online science magazine BioTech360.
In a presentation in January at Stanford University, Casper showed that while 25 senior managers (16 percent) left Genentech to start new companies, only 4 senior managers (3.5 percent) left Amgen to pursue other opportunities in the industry.
In the same presentation, Casper gave figures that of the 170 instances of workers leaving a Los Angeles biotech firm, an overwhelming majority of them – 88 percent – were moves out of the city.
In the case of Amgen, an abundance of money created a corporate culture that people did not want to leave, unlike Bay Area companies that had multiple comings and goings among the workforce.
The layoffs that took place last fall after Amgen hit the financial skids were not viewed as a bad thing by Casper.
“You need a bit of turbulence and to shake things up to develop the capital and human resources markets,” Casper said.