Monitor San Diego Life Sciences

TAKING
ACTION FOR
TOMORROW
San Diego Life Sciences
Strategic Action Plan
OFFICE OF THE
GOVERNOR
TAKING
ACTION FOR
TOMORROW
San Diego Life Sciences
Strategic Action Plan
OFFICE OF THE
GOVERNOR
ii SAN DIEGO REGION LIFE SCIENCES STRATEGIC PLAN: Taking Action for Tomorrow
From its inception in January, 2003, the Life Sciences Initiative was designed to provide a frame-
work of support for the innovative efforts of scientists, entrepreneurs, industry and community lead-
ers throughout the State.
It is currently estimated that the San Diego region is home to more than 500 biomedical companies
employing nearly 30,000 Californians in high-wage, high-tech jobs. The industry is beginning to
mature, but as it progresses, challenges to growth have also evolved.
In addition to the factors which impact the development of any business or industry cluster—the
availability of capital, the need for sophisticated management, the ebb and flow of markets, and the
cost of doing business—the Life Sciences industry faces unique hurdles, in the form of federal, state
and local regulations.
Key issues promising to impact the potential of the Life Sciences industry to grow and thrive in the
region were examined by industry leaders in a Summit, which was convened in May 2003. This
report is a compilation of the feedback from industry leaders provided at the Summit as well as key
findings from other significant research projects which have examined the Life Sciences cluster and
its impact on the region’s economic life.
The RTA extends our appreciation to the Office of the Governor of the State of California and asso-
ciated agencies. We are especially grateful for the efforts of the many community and industry asso-
ciations who assisted in the development and orchestration of this event, and especially to BIOCOM
San Diego for their partnership. Most importantly, however, we offer our thanks to the many busi-
ness and industry representatives who participated in making the Summit a meaningful expression of
the critical issues which the industry is currently facing.
We urge our elected representatives to collaborate with our industry leaders in order to fuel the con-
tinued growth and vitality of this important industry cluster. By squarely addressing the issues facing
the Life Sciences, the consequences of action have the potential to result in an enhanced quality of life
for millions of people world-wide.
Sincerely,
TYLER ORION
PRESIDENT AND CEO
SAN DIEGO REGIONAL TECHNOLOGY ALLIANCE
SAN DIEGO REGION LIFE SCIENCES STRATEGIC PLAN: Taking Action for Tomorrow iii
iv SAN DIEGO REGION LIFE SCIENCES STRATEGIC PLAN: Taking Action for Tomorrow
CONTENTS
Introduction to the California Life Sciences Initiative . . . . . . . . . . . . . . . . . . . . . iii
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi
1. The Importance of Life Sciences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Overview of the San Diego Life Sciences Cluster . . . . . . . . . . . . . . . . . . . . . . . 2
2. Critical Issues facing the San Diego Region . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3. Intellectual Infrastructure/Technology Transfer . . . . . . . . . . . . . . . . . . . . . . . 9
4. Workforce Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5. Sustaining a Competitive Business Climate . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6. Quality of Life/Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7. Ongoing Recommendations for Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
APPENDIX
A: Life Sciences Publications and Resources . . . . . . . . . . . . . . . . . . . . . . . 29
B: Summit Content
Agenda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Excerpts from Keynote Speeches and Presentations
Life Sciences Challenges in the San Diego Region

Duane J. Roth, Chairman and CEO,
Alliance Pharmaceutical Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Clusters of Innovation Theory and Life Sciences

Fred G. Cutler, Director, UCSD Connect . . . . . . . . . . . . . . . . . . . . . . . . 35
Keynote Remarks
David Hale, President/CEO,
Cancervax and Chairman, Biocom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
C: Hybritech Family Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ENDNOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SAN DIEGO REGION LIFE SCIENCES STRATEGIC PLAN: Taking Action for Tomorrow v
ACKNOWLEDGEMENTS
The San Diego region is well respected for its collaborative spirit. This spirit was clearly demonstrated
by the wide range of participation in and support for, the Governor’s Life Science Initiative and the San
Diego Regional Life Sciences Summit. In particular, the following individuals played a critical role in
marshalling the energies of the industry and the community:
Joan Dean Dr. Richard Attiyeh

Vice Chancellor for Research
Glynnis Vaughan UCSD
Tal Finney Eric Alexander
Joseph Panetta Employment Development Department
President Larry Fitch
Biocom President & CEO
Cristin C. Lis San Diego Workforce Partnership
VP Public Policy Ken Widder, M.D.
California Healthcare Institute (CHI) General Partner
Tyler Orion Windemere Venture Partners
President and CEO Mitch Mitchell
San Diego Regional Technology Alliance Vice President for Government Relations
Duane J. Roth San Diego Regional Chamber of Commerce
Chairman and CEO Tad Parzen
Alliance Pharmaceutical Corporation Assistant General Counsel,
Fred G. Cutler San Diego Unified School District
Director Alan Nevin
UCSD Connect Director of Economic Research
David Hale MarketPoint Realty Advisors
President/CEO A. Stephen Dahms, Ph.D.
Cancervax and Executive Director
Chairman, Biocom CSUPERB, San Diego State University
Marney Cox
Chief Economist and Director of Regional Planning
SANDAG
SAN DIEGO REGION LIFE SCIENCES STRATEGIC PLAN: Taking Action for Tomorrow vii
In addition, representatives of the following businesses and industry organizations contributed their
time and insight to the process of identifying critical issues for the State’s further action and attention.
Their willingness to participate in this process, and to provide private sector and industry feedback, is
gratefully acknowledged.
ABF Enterprises, Inc. Digirad Imaging Solutions
Agouron Institute East County EDC
Alliance Pharmaceutical Corp. Economic Development Network
Arena Pharmaceuticals, Inc. EGen Corporation
Arnold & Porter EKM Corporation
Baker & McKenzie Employment Development Department
BIOCOM Fallbrook Engineering
Biologics Process Development Ferris & Britton
BMS— BioMedical Strategies Fleishman Hillard
CA Assemblywoman Patricia Bates (rep) Forward Ventures
California Department of Transportation Heller Ehrman White & McAuliffe
California Healthcare Institute Human BioMolecular Research Institute
California Manufacturing Technology Center IBM Life Sciences
CA Senator Denise Moreno Ducheny (rep) Idun Pharmaceuticals, Inc.
California Technology Ventures Inglewood Ventures
Canji, Inc./Schering-Plough Inotech Medical Systems
City of Los Angeles Japan External Trade Organization
City of Los Angeles, Mayor Hahn’s office La Jolla Bioengineering Institute
City of Lompoc Ledford Enterprises, Inc.
City of San Diego Ligand Pharmaceuticals
City of San Diego Councilmember Scott Peters Luce, Forward, Hamilton & Scripps
Comerica Bank (Technology and Life Science Division) Marsh, USA
Commission of the Californias Market Point Reality Advisors
Conforma Therapeutics Metabasis Therapeutics Inc.
Consul of Sweden Mira Costa College
viii SAN DIEGO REGION LIFE SCIENCES STRATEGIC PLAN: Taking Action for Tomorrow
Molecular Medicine BioServices, Inc. Sidney Kimmel Cancer Center
Monitor Group Siegfried Ventures
Morgan Stanley Slayton International
Morrison & Foerster LLP Southern California Biotechnology Center
NovaRx, Inc. Spencer Stuart
Pacific Biopsciences Center The Staubach Company
Perlan Therapeutics, Inc. Strategic Investor
Perry Scientific Relations, Inc.
Pfizer Symbion Research
PGE, LLP U.S. Senator
Posco Bioventures Barbara Boxer (rep)
Prediction Sciences UC Discovery Grant
Preston Gates & Ellis, LLP UC Berkeley
Promega Corporation UCSD Connect
Roth Capital Partners UCSD Corporate Relations
Salmedix UCSD Office of Technology Transfer
San Diego City Schools UCSD, Science and Technology Council
SDSU- Entrepeneurial Management Center UCSD VonLiebig Center for Entrpreneurship
SDSU-CSUPERB Validation Technologies, Inc.
San Diego Regional EDC Ventana Global, Ltd.
San Diego Regional Technology Alliance Windamere Venture Partners
San Diego Workforce Partnership Workforce Strategy Center
Scientific American XXSYS Technology, Inc.
Additional acknowledgments are extended to the students and RTA staff members who served as
Recorders for the Summit Working Group sessions:
Chris Draper, Karen Olympia, Daniel Fishman, Sam Chien, Kay Dietze and Christine Hernandez Ang
Monitor Group provided editorial and design assistance with this report. The Monitor team was led by
Matthew Le Merle and Nancy Michels, who are Partners in the firm’s San Francisco Office, and consist-
ed of Marielena Gutiérrez, Ryan Kaiser and Steve Szaraz. Lily Rappoli and the Design Studio at the
Monitor Group illustrated, designed and created the layout of this report.
Report compiled by: San Diego Regional Technology Alliance
SAN DIEGO REGION LIFE SCIENCES STRATEGIC PLAN: Taking Action for Tomorrow ix
x SAN DIEGO REGION LIFE SCIENCES STRATEGIC PLAN: Taking Action for Tomorrow
EXECUTIVE SUMMARY
According to ongoing research conducted by the San Diego Association of Governments (SANDAG),
the Biosciences Industry Cluster— which combines Pharmaceuticals, Biomedical Products, Medical
Devices and Biotechnology— is considered to be an emerging industry which holds critical importance
for the economic growth of the region.1
In May, 2001, when the Council on Competitiveness released its study of San Diego as one of its
Clusters of Innovation Initiative cities, Professor Michael Porter and colleagues recognized that the success
of the San Diego economy grew out of a “decades long process” which had its roots in the local military
presence as well as with the existence of a variety of research institutions.2 This study highlighted the Life
Sciences as one of the two emerging technology clusters that were driving regional productivity and
therefore had a strong potential for increasing the wealth of the community and enhancing San Diego’s
knowledge-based economy. Regional success factors cited by the Porter study included substantial lever-
age of federal research and development funding, high quality universities and research centers, the pres-
ence of a dynamic, entrepreneurial culture, and the availability of linkages between research institutions,
business and professional services.
It is currently estimated that the San Diego region is home to more than 500 biomedical companies
employing nearly 30,000 Californians in high-wage, high-tech jobs. David Hale, President and CEO of
Cancervax and Chairman of Biocom noted in his address to the attendees at the Governor’s Life Sciences
Summit, “the industry has begun to shift out of the cradle and into the growth phase of its lifecycle.... into
the early stages of the golden age of biotechnology.” 3 And while it is easy to see the evidence of the eco-
nomic impact of this cluster— in high wage employment, in patent activity, in venture capital secured and
in regional wealth— the biotechnology industry at its core represents the most advanced scientific efforts
to cure diseases and prevent human suffering.
As the industry has progressed, however, the challenges to growth have also evolved. In addition to the
factors which impact the development of any business or industry cluster— the availability of capital, the
need for sophisticated management, the ebb and flow of markets, and the cost of doing business— the Life
Sciences industry faces unique hurdles, in the form of federal, state and local regulations.
Key issues promising to impact the potential of the Life Sciences industry to grow and thrive in the
region were examined by industry leaders in a Summit, which was convened in May 2003. Participants
focused on those issues which could be addressed at the regional and state level. Among the critical issues
cited for future action were: a pressing need for regulatory reform, especially in areas such as environ-
mental and securities regulations; the dysfunction in the current workers’ compensation insurance
program; the need for reliable sources of water and acceptable solutions for the disposal of low level
radioactive waste; the continuing need for business capital; the need to grow an educated workforce;
and the need to safeguard the quality of life in San Diego’s region.
SAN DIEGO REGION LIFE SCIENCES STRATEGIC PLAN: Taking Action for Tomorrow xi
Recommendations that were generated at this Summit, and have been documented in more detail
within this report, include the following:
• There is pressing need for regulatory reform, especially in areas such as environmental
and securities regulations, where State and Federal mandates combine to create undue
burdens for compliance. In addition, regulatory reform is desperately needed to create
a functional workers’ compensation system, which protects employees but also respects
the constraints of business owners.
• California must ensure a reliable source of water and an acceptable solution for the
disposal of low-level radioactive waste.
• There is an ongoing need for capital for companies of all sizes and development stages,
and, although this is not a problem of the state per se, the business environment within
the state, and the use of state investment funds were cited for action.
• Support is needed by the industry to develop an educated workforce.
• The ongoing collaboration by Life Sciences stakeholders in the San Diego region
should be used as a model to share with neighboring regional clusters.
• All participants expressed the need to safeguard the quality of life in San Diego’s region.
The participants at the Summit were adamant that real reform is necessary in order to foster
the continued growth of the Life Sciences industry in the San Diego region. They called upon
the State government, local government industry associations, and Life Sciences companies to
engage in substantive collaboration efforts in order to effect reform and help California maintain
its competitive edge.
xii SAN DIEGO REGION LIFE SCIENCES STRATEGIC PLAN: Taking Action for Tomorrow
THE IMPORTANCE OF LIFE SCIENCES
1
According to Harvard University Professor and Monitor Group Partner and Co-Founder Michael Porter,
a cluster is a “geographically proximate group of interconnected companies and associated institutions in a
particular field, linked by customer, supplier, or other relationships.”4 By this definition, clusters recognize
the innovative, interconnected environment in which 21st Century businesses — and, in particular, knowl-
edge-based businesses — actually function.
If the cluster definition is applied to companies in the Life Sciences, it would include the various business
specialties, such as pharmaceuticals, medical devices, and agricultural biotechnology as well as the specialized
professional service firms that compliment and support the business processes of these firms. That would
include law firms, architects and real estate developers, specialized capital providers, universities and research
institutions, as well as the industry associations in the cluster as a whole.
In addition, the cluster concept allows related technological disciplines to be considered together. An
information technology firm which provides tools to enable the high-speed screening of chemical com-
pounds — a convergent technology enterprise — would be included in the Life Sciences cluster as well as in
an Information Technology cluster.
Exhibit 1: The Life Sciences Cluster Definition
Source: The Monitor Group,Bay Area Life Sciences Strategic Action Plan: Taking Action For Tomorrow
CHAPTER 1: THE IMPORTANCE OF LIFE SCIENCES 1

There are four regions in California which feature significant Life Sciences clusters: the San Francisco
Bay Area; San Diego; the greater Los Angeles area; and the Sacramento / Central Valley area. According
to the California Technology Trade and Commerce Agency, almost 90% of California’s Life Sciences
industries are concentrated in the first three of these regions, which are among the top ten Metropolitan
Statistical Areas (MSAs) nationwide for biotechnology and pharmaceutical employment.5
San Diego is considered to be a national leader in Life Science Research and Development, and, accord-
ing to the Council on Competitiveness study, the San Diego region has the fastest growth rate in patent
registrations of the top twenty largest U.S. clusters.
While it is easy to focus on the economics of a cluster, the impact of the success of Life Sciences is pro-
foundly greater than the numbers of employees or the impact in regional wealth creation. At its core, the
Life Sciences are focused on the health and well-being of people — on preventing and fighting disease —
and on innovative ways to cure the maladies that affect human beings throughout the world. In 2001,
more than $30 billion was invested, industry-wide, in discovering and developing new medicines. Recent
advances in this industry have produced new therapies for leukemia, asthma, glaucoma, congestive heart
failure, Alzheimer’s, schizophrenia, HIV/AIDS, hepatitis, and many other diseases which are now in the
hands of doctors.6 The cluster of the Life Sciences also includes the scientific tools to conduct research
more effectively — from more sophisticated analytical software to more sensitive instrumentation, and to
produce products more efficiently — through genetic engineering or through innovative agriculturally—
based approaches to manufacturing. Ongoing investments in the Life Sciences — and in the dynamic
components of its cluster — are certain to result in an enhanced quality of life for millions of people,
throughout the world.
OVERVIEW OF THE SAN DIEGO LIFE SCIENCES CLUSTER

The most definitive study of the Life Sciences Cluster in San Diego performed to date is included in
San Diego Clusters of Innovation Initiative, published in May, 2001 by Harvard University Professor
Michael E. Porter, the Council on Competitiveness, the Monitor Group and ontheFrontier.
Exhibit 2: San Diego Biotechnology / Pharmaceutical Cluster
Source: Clusters of Innovation Initiative Regional Survey, Cluster Mapping Project, Institute for Strategy and
Competitiveness, Harvard Business School and Interviews
2 SAN DIEGO REGION LIFE SCIENCES STRATEGIC PLAN: Taking Action for Tomorrow
In addition to citing the innovative capacity of the region — as exemplified earlier in San Diego’s leadership
in new patent activity — the study identified the following key indicators of the region’s competitiveness:7
STRENGTHS
• High levels of R&D investment
• Numerous specialized research and training institutes
• High quality of life
• Good knowledge transfer from institutes to industry
• A large pool of scientists and skilled technicians
• BIOCOM, a quality institution for collaboration
CHALLENGES
• Lack of local manufacturing facilities and expertise
• Underdeveloped relationships with customers and suppliers
• Need for consistency between state and federal FDA regulations, and better
coordination among local political jurisdictions on solving infrastructure issues
• Need for more effective university technology transfer offices
The Porter study identified the historical obstacles, enablers and key events which shaped the industry
locally as follows:8
HISTORICAL OBSTACLES
• Little historical tradition for leadership in biosciences
• Initial hesitancy by universities to participate in public/private partnerships
• Lack of venture capital
• Lack of local, specialized professional support
ENABLERS
• Good quality of life
• Attracting world-class academic research centers
• Government R&D funding
• Success of entrepreneurial firms
• Formation of institution for collaboration
• Culture of cooperation
KEY EVENTS
• Salk’s decision to locate an Institute in the region
• Formation of UCSD and its ambitious research agenda
• Success of Hybritech, and outgrowths of its sale to Lilly
CHAPTER 1: THE IMPORTANCE OF LIFE SCIENCES 3

The study also tracked recent economic performance within the cluster. Following are some excerpts
from the Porter study with representative facts which underscore the economic value of the industry to
the region:9
Employment Growth
• In 1997, the San Diego MSA had 27,299 biotechnology and pharmaceutical workers, making it
the nation’s ninth largest MSA with 2.5% of the nation’s biotech/pharmaceutical employment.
• As measured by location quotient, the San Diego cluster was the fourth most concentrated
of the 20 largest clusters in the United States.
• From 1988 to 1997, San Diego’s biotechnology and pharmaceutical cluster had an annual
growth rate of 3.9%, fifth fastest among the 20 largest U.S. MSAs.
Wages
• In 1997, the average wage in the San Diego biotech/pharma cluster was $48,700, roughly 7%
above the national average for the cluster.
• Between 1988 and 1997, San Diego’s average wage increased at an average annual rate of
5.3%, versus 4.7% annually.
Patents
• In 1997, the San Diego biotech/pharmaceutical cluster registered 360 patents, or 13.17
patents per 1,000 employees. This per capita patent registration was tenth highest out of the
20 largest clusters in the United States.
• Over the 1988 to 1997 period, patenting grew at an average annual rate of 19.5%. The next
fastest growth rate among the 20 clusters was Seattle with 16.9%.
• The biotech/pharma cluster in San Diego does well in terms of cited patents as well. It had
13 cited patents per 1000 employees, which was roughly 18% above the national average for
the cluster. Thirty-eight percent of San Diego’s biotech/pharma patents registered from 1993
to 1997 were cited in 1998.
Venture Capital
• According to PricewaterhouseCooper’s Money Tree, San Diego’s biotechnology firms
received $421 million in VC funding from 1995 to 1999. This was 9.9% of the national
total, well above San Diego’s 2.5% of national cluster employment.
• Although capital markets have been a challenge since 1999, the industry seems poised for
renewed IPO activity during 2003 and into 2004.
The Porter study identified the key components of the cluster in terms of their support for the region’s
competitive position:
The San Diego biotechnology/pharmaceutical cluster is focused on research, having one of the strongest
critical masses of R&D and clinical testing institutions in the nation. The cluster has particular strengths
in agricultural bio-science, cancer therapy and bio-informatics. Many local firms focus on providing intel-
lectual capital and services to larger pharmaceutical companies. In the 1990s, Agouron, IDEC and Ligand
received FDA approval for drugs, and some were acquired by major pharmaceutical firms. Leading
international firms like Novartis and Dow [and more recently, Pfizer] have set up major research and
development operations in the region.10
However, like all industries navigating the difficult markets of the early 2000s, there are challenges fac-
ing this industry which threaten not only the success of its products and services but, by implication, the
economic well-being of the region.
Recognizing that the challenges facing the Life Sciences industry were of statewide concern, in January
2003 the Office of the Governor of the State of California inaugurated the Life Sciences Initiative. One
component of this Initiative was a series of local Summit meetings to be convened in the key cities which
host this industry. The second of these Summits was held in San Diego, with the support of key industry
associations and the leaders of the local Life Science industry.
CHAPTER 2: CRITICAL ISSUES FACING THE SAN DIEGO REGION 5

CRITICAL ISSUES FACING THE SAN DIEGO REGION
2
On Friday, May 30, 2003, the Office of the Governor of the State of California and the Technology,
Trade and Commerce Agency, with the support of San Diego BIOCOM, the California Healthcare
Institute, the San Diego Regional Chamber of Commerce, the San Diego Workforce Partnership and the
San Diego Regional Technology Alliance hosted a Working Summit on “Promoting the Life Sciences in
the San Diego Region.” This was one of several Working Summits to be held throughout the State to assist
in the development of the Life Sciences Initiative (LSI), which was introduced by the Governor at the
beginning of 2003.
The purpose of the San Diego symposium was to bring industry leaders together to focus on key areas
of significance to the Life Sciences community in San Diego. In addition to keynote speakers who
addressed economic and public policy-related subjects of interest to attendees, the Summit included six
breakout sessions, attended by 15-20 industry leaders, focusing on the following subjects:
• Physical and Information Infrastructure: A Critical Foundation for Growth
• Intellectual Infrastructure/ Technology Transfer: Strengthening Research & Development
and Maintaining Competitive Advantage
• Workforce Training: A Region’s Most Strategic Advantage
• Critical Factors to Sustaining an Entrepreneurial Climate: Access to Capital, Managerial
Skills, Technological Innovation
• A Business Perspective: Public Policy and the Regulatory Environment for the Life Sciences
• Quality of Life/Place: Attraction and retention of skilled people and innovative companies:
Cost of Housing, Quality Education, Culture and Recreation
In order to ensure the State’s success in building a thoughtful Life Sciences road map, feedback was
sought from industry leaders, each of whom participated in one of these working group sessions. It was
the intention of event organizers that the perspectives of industry leaders be incorporated into statewide
efforts to keep California at the forefront of the global Life Sciences industry.
The remainder of this document summarizes and synthesizes the discussions which took place in the
six working groups. Although the topics of each were focused on a variety of community and industry-
specific issues, there were some concerns which surfaced in several of the working groups and which can
be identified as uniformly recommended by the attendees as critical to the Life Sciences industry. Many
of these issues were considered to be within the State’s authority to address or resolve. It is recommend-
ed that these particular concerns be given special consideration as the Life Sciences Initiative progresses:
CHAPTER 2: CRITICAL ISSUES FACING THE SAN DIEGO REGION 7

• There is a pressing need for regulatory reform, especially in areas such as environmen-
tal and securities regulations, where State and Federal mandates combine to create
undue burdens for compliance.
• The workers’ compensation system is in urgent need of reform, especially as it
impacts small business owners.
• For continued growth, the Life Sciences industry in California must have reliable
sources of water and acceptable solutions for the disposal of low level radioactive waste.
• Access to capital is difficult at all levels of company development. The ability of
Southern California venture firms to partner with CalPERS in venture funding and
the re-authorization of State funding for start-up companies through CalTIP
(California Technology Investment Partnership) were both pressing matters for work-
ing group participants.
• Summit attendees underscored the need to safeguard the quality of life in San
Diego’s region.
• Educational institutions, private industry and state government must continue to col-
laborate in order to develop the educated workforce required by the Life Sciences at
nearly all levels. Academic centers, in concert with state community colleges and
industry, must continue to spearhead the joint development of clinical science and
laboratory programs.
• The state should work to align tax programs — including targeted credits, deductions
and net loss carryovers — to foster and sustain the growth of new Life Sciences busi-
nesses in California.
• State agencies, regional Life Sciences organizations and University licensing and
technology transfer offices must work together to accelerate and strengthen new
business formation.
INTELLECTUAL INFRASTRUCTURE/TECHNOLOGY TRANSFER:
Strengthening Research & Development and Maintaining Competitive Advantage
3
DESCRIPTION
Research and development is at the heart of innovation and technology-based economic development.
Many of today’s leading technology companies can be found concentrated around major research uni-
versities and federal labs performing cutting-edge basic research. Breakthroughs in this type of research
eventually led to a wide range of technology applications that became major drivers in the economy dur-
ing the 1990s. Although research institutions are at the heart of innovation, unless this research can be
transferred to the marketplace there is no benefit to the regional economy. Successful technology clusters
use both formal and informal mechanisms to transfer this knowledge to the marketplace.
IDENTIFIED ISSUES
• One of the goals of university tech transfer is to actually have the technologies transferred to
industry for commercial purposes. The genesis of tech transfer in the Bayh-Dole Act,
enacted in 1980, very clearly delineates this as one of the goals of a university that receives
federal research funding.
• Building relationships between the university and business is a key to meeting tech transfer
goals and is a component of academic success at UCSD.
• The university expects to earn a fair return from licensing technology. Among the chal-
lenges to successfully implementing tech transfer programs is the potential for lawsuits from
inventors whose intellectual property has not been adequately protected. This requires that
universities invest additional funds into patent protections during the early stages of devel-
opment.
• The university recognizes its obligation to taxpayers as a public institution and that must be
balanced with any technology enterprise activity.
• It is estimated that approximately 150 companies owe their origins to UCSD, which is a tes-
tament to at least partial success of technology transfer from UCSD to the private sector
entrepreneurs.
• The University of California is aware of criticism from businesses that have had difficulty in
working within the academic structure. A university white paper has been developed which
demonstrates a commitment to easing difficulties.
CHAPTER 3: INTELLECTUAL INFRASTRUCTURE/TECHNOLOGY TRANSFER 9

PRIORITY ISSUES AND RECOMMENDATIONS
The risks and rewards of identifying and facilitating technology commercialization is a com-
plex process that should be further analyzed to minimize delays and inefficiencies. Timeframes
are lengthy and there are costs to doing business with the university that can be prohibitive. From the per-
spective of the university, protecting its patent portfolio is an expensive proposition. Approximately 40%
of all ideas are patent protected, which means that 60% leave the university unprotected or are not pur-
sued. Of the ideas patented, approximately 70% actually find successful development partners. The costs
to the university for patent protection represent a significant percentage of research funds. However, this
is a worthwhile effort since the IP position is a major factor in assessing the value of a technology to a
prospective business partner. Specific issues relative to the valuation and ownership of licensed intellec-
tual property should be clarified and resolved in order to lower the barriers to the process.
The relationship of industry to faculty in the commercialization process should be facilitat-
ed through greater communication and realistic expectations. Industry leaders recognize that,
while academic researchers may be the source of innovative science, they generally do not “make things”
or produce “life saving products” per se. Furthermore, they at times may have unrealistic expectations
about the commercialization process. While there are many roadblocks to efficiency, the combination of
the university and business partners can be credited with making science move faster.
Communicating between industry and the university regarding the availability of technologies
should be a higher priority for technology transfer offices. “Marketing” scientific products would
benefit with more attention from the university. The Tech Transfer departments in public universities — like
UCSD — are under funded, tend to have high staff turn-over, and lack direct experience with industry.
Private companies do not necessarily know how to find the “front door” for tech transfer opportunities.
The funding gap between the scientific development and business creation phases should be
filled through a combination of federal, state, university, and private sector sources. Once fed-
eral funding has been used for scientific concept development there is still often a need of from $200,000
to $300,000 per year for approximately three years in order to move the product from academia to com-
mercialization. UC does offer the Discovery Grant as one program, but it requires matching funds.
Existing federal grants do not cover this gap. Private investors will not generally get involved until after
the business and markets have been better defined, which is not always possible at that point in the com-
mercialization process. Furthermore, investors may at times not perceive the scientific credentials of UC
faculty to be prestigious enough to warrant early investment. Another cost consideration in transferring
Life Sciences technologies is the cost of clinical trials. Identifying funding sources at this stage of devel-
opment are always a major challenge. While San Diego has several organizations supporting early stage
funding, this is still a significant challenge.
The overall technology transfer process should be carefully monitored for quality “customer
care” so that it can facilitate, strengthen, and accelerate new business formation. Internal com-
munications may not move smoothly, agreements may not be properly tracked, and there is no central
management of the progress of a licensing deal. Programs are developed based on the university’s needs,
not those of the “customer” business, which impacts the success of tech transfer as well.
Universities should reevaluate their policy on risk in the case of technology commercialization.
Universities are not necessarily concerned about financial risks (as industry partners might be) but are
more focused on the public relations risks associated with the development of technologies. Furthermore,
universities are generally cautious about compromising their images as academic institutions relative to
being a source of entrepreneurial enterprises. Conflicts of interest — real or perceived — are also risks to
the university. In addition, there is a lack of standardization in the documentation required to commer-
cialize university technologies, which also slows down the process.
University representatives acknowledged that the following issues should be addressed by the university
in order to increase technology development by the private sector:
• Recognize the need to recruit and retain more capable people to participate in the tech trans-
fer process.
• Implement better tracking processes, especially where the IP rights or research sponsors are
concerned.
• Find ways to make the documentation process more time-sensitive.
• Become less risk averse.
• Be more realistic about the value of university technology and better manage expectations
about the process.
CHAPTER 3: INTELLECTUAL INFRASTRUCTURE/TECHNOLOGY TRANSFER 11

WORKFORCE TRAINING:
A REGION’S MOST STRATEGIC ADVANTAGE
4
DESCRIPTION
In today’s fast-changing global economy, the lifecycles of new technologies and their related skill sets
quickly become obsolete. Consequently, many companies are constantly searching for a ready supply of
workers with a strong foundation in the sciences and the newest skill sets. Successful regions are able to
meet this need through a steady supply of college-educated workers, particularly in science and engineer-
ing fields, agile community colleges that are responsive to changing skill sets needed by its companies, and
targeted workforce training and development programs.
IDENTIFIED ISSUES
• Life Sciences firms need to establish and communicate current and future industry employ-
ment needs by skill category in order to drive education and training activity. Life Sciences
firms in San Diego are transitioning from drug discovery and development to manufacturing
and marketing, so there is a need to train executives and science managers in many aspects
of clinical trial development skills, quality control, process and product development, regula-
tory affairs, etc.
• Firms are NOT having difficulty finding qualified scientists to assist with drug discovery;
rather, the need is for skilled managers to navigate the transition from basic science to man-
ufacturing. In addition, biotechnology firms in San Diego are generally not able to define
the skill sets required for manufacturing jobs since most firms are not yet at that stage.
• The focus of curriculum developed should be to address the transition of the industry from
the development phase to the management of clinical trials. This should include an under-
standing of the various standards for process controls as well as regulatory requirements for
early manufacturing of the clinical trial material.
• Training in regulatory affairs, quality systems, public speaking, project and leadership man-
agement, finance and budget areas is especially needed for existing employees who may take
on new jobs within the company as the company develops and these responsibilities become
increasingly important.
• Scientists need supervisory and management skills training in areas such as program evalua-
tion and project/budget management.
CHAPTER 4: WORKFORCE TRAINING 13

Employers need help in making training available to their existing employees. Biotechnology
employers need and want to provide training for employees, however there is a retention and growth issue
implicit in that process. Employers must presume that if they can train their employees to grow into new
positions within the company, those employees will want to remain with the company longer. It was also
recommended that, as a regional industry, employers and workforce experts look at ways in which the Bay
Area biotechnology firms — who are about ten years ahead of San Diego in their maturity — addressed
these problems. This type of analysis might help guide educators in designing training appropriate to San
Diego biotechnology firms’ current and future needs.
The current ETP program model should be modified to better meet the needs of the biotech-
nology industry. To this end, however, industry leaders believe that reforms to the ETP — the State of
California’s Employment Training Panel — program would be of significant benefit. The ETP provides
funding for various types of employee training, and would potentially be an excellent source of training
funds if it could actually be utilized by local biotechnology firms.
The following issues with ETP were identified:
• Administration of contracts is too onerous, especially for small companies.
• Biotechnology is not considered “advanced training” by ETP, so therefore the training needs
of biotechnology firms cannot be approved by ETP.
• ETP does not easily allow for consortium-style training (aggregation of employees from
multiple employers).
• Industry leaders believe that companies would make better use of this resource if there were
more flexibility in the operation of the programs.
Provide support for local labor market intermediaries as facilitators. Companies are often asked
by educators about their training needs but are seldom approached with concrete solutions. Labor mar-
ket intermediary models in the Bay Area have put together comprehensive training projects for employers
in which they have (1) identified specific funding resources for the training project, (2) identified the train-
ing providers, and (3) approached the employers. Employers have been highly responsive to labor market
intermediaries that have been able to accomplish this because employers do not have time to do this on
their own. There needs to be a more systemized way for local intermediaries to be able to take on such
projects on behalf of employers. In San Diego, this effort is likely to be best led by the San Diego
Workforce Partnership.
Support system-wide marketing of local training resources available to employers. Local com-
munity colleges actually offer training programs in areas of demand (as identified by employers), but
biotechnology employers do not know about them. Also, community colleges are misperceived by
biotechnology employers who see them merely as schools for undergraduate students who intend to trans-
fer to four-year schools or are working towards an associate’s degree. In reality, community colleges can
and have already begun to serve as employee training centers for biotechnology professionals in need of
very specific niche skills. These programs and corporate relationships should be expanded. Community
Colleges and the Life Sciences companies face the challenge of doing a better job in communicating, clear-
ing misperceptions and coordinating efforts to create employee training resources.
Prioritize discretionary WIA (the federal Workforce Investment Act) State funding for work-
force development. Choose three specific issue areas (such as the current nursing shortage) towards
which funding should be directed. Biotechnology is an ideal area of focus since the industry has a high
percentage of entry-level jobs that pay relatively high wages, and it has “easy” career pathways that lead to
higher level opportunities.
The H1-B Visa system should be supported and safeguarded against fraud. The process is easier
than it used to be, but abuses of the system are putting it at risk. Unless and until there is adequate local
workforce to fill available positions in the Life Sciences companies, this method of recruitment will remain
important. Efforts to develop educational and training programs to develop a local workforce, however,
must be continued in partnership between regional intermediaries, industry leaders and the various edu-
cational institutions.
CHAPTER 4: WORKFORCE TRAINING 15

SUSTAINING A COMPETITIVE BUSINESS CLIMATE:
Public Policy and the Regulatory Environment for the Life Sciences
5
DESCRIPTION
Small and emerging technology-based and technology-driven businesses are among the major genera-
tors of employment and technological innovation in the state. Key policy initiatives and the collaborative
roles of elected officials are critical in supporting the growth of the Life Sciences cluster and in fostering
prosperity in the San Diego region. From the perspective of the business community, certain policy issues
need to be urgently addressed by government officials in order to sustain and develop the Life Sciences in
San Diego. Of course, industry leaders recognize that the lead for fiscal reform must come from the State
and anticipate that meaningful fiscal reform will help California recover its economic leading edge.
IDENTIFIED ISSUES
• Duplicative or redundant state and local regulations increase the cost of doing business and
set up critical hurdles for new and growing Life Sciences businesses.
• The high cost and dysfunction of California’s Workers Compensation system is a matter of
serious concern to all industry leaders, not just those in the Life Sciences.
• Difficulties in capital formation faces the Life Sciences industry at every stage of business
development — from seed stage to growth — and San Diego has significant challenges in
capitalizing development and expansion — challenges that are increased by the disappear-
ance of state-sponsored programs to aid early stage companies.
• Government-imposed price control on drugs would have the potential to choke the entire
industry and should be avoided at all costs.
• The State needs to review its tax policy, including incentives and credits, to enable new Life
Sciences businesses to grow and thrive — the state should align state and federal NOL stan-
dards in carry forward and carry back issues, extend the sunset date for the Manufacturers
Investment Credit and tie it to job creation.
• Industry leaders are concerned that the current health care policy, especially the prevalence
of ‘lowest cost equals quality’ thinking, along with current Medi-cal reimbursement policies,
may negatively impact innovation.
• Access to world markets is an industry-wide need which includes the need to communicate
globally and to maintain security in information systems.
CHAPTER 5: SUSTAINING A COMPETITIVE BUSINESS CLIMATE 17

• California’s legal environment challenges the growth of innovative businesses and the need
for tort reform was identified as a particularly pressing issue.
• Environmental regulations (power, water, radioactive waste disposal), should be more closely
examined to find a balance between environmental and business concerns that can sustain
the growth of the Life Sciences.
• Land use planning, especially the need to provide land for manufacturing in biotechnology,
must be undertaken by regional leaders.
• The factors that lead to the shift of manufacturing activities away from the State should be
investigated.

Conflicting and duplicative state and federal regulations should be clarified or eliminated as
they threaten the growth of innovative technology enterprises. Life Sciences companies currently
operate under four levels of regulatory requirements: federal, state, county and city. State regulations often
duplicate or expand upon federal requirements, thereby creating the need for costly duplication in
compliance. Industry leaders encourage state legislators to bring regulations into parity with federal
regulations, and are willing to serve on advisory committees in order to make elected leaders aware of
business issues before new laws are enacted.
For example, in reaction to the major corporate scandals such as Enron, the government (both federal
and state) has tightened securities regulations. While federal legislation is helpful to the industry to
prevent future abuses, many of the California state regulations will have detrimental consequences,
especially to emerging Life Sciences companies. The state government, along with industry leaders,
should send a clear message to our elected representatives that federal securities regulations are suffi-
cient, and additional state regulations are not necessary. Some pending regulations could affect the
ability of companies to raise capital by raising the cost of capital or could discourage senior executives
from serving on boards of directors by making them additionally liable for company outcomes. The
same need for simplification applies to state and local zoning and permitting processes. Providing a
single local zoning and permitting contact and insuring communication between local processes and
those at the state level (ideally with an electronic standard) will remove duplication and reduce the
administrative costs of managing these processes.
Industry leaders recognize the need to be more proactive in influencing the legislative process so that
the information about the costs of new legislation can be disseminated more efficiently and effectively to
lawmakers prior to policy being established.
The worker’s compensation system in the State should be overhauled. Worker’s compensation
rates have risen to the point of crisis in the State. The high cost and dysfunction of this system is a mat-
ter of serious concern to all businesses, and this problem was considered to be a major threat to California’s
competitive position. There is clear consensus among biotechnology industry leaders for the need for
massive reform of the current system. Current initiatives seem to be focused on the provider side of this
issue, and the State government is urged to consider the problem from the perspective of businesses.
California is the most expensive state for worker’s compensation. Companies average $5.23 per 100
employees, as compared to other states in which the costs are under $3 per 100 employees. Furthermore,
other states have fewer claims, have stricter rules for claims enforcement and still provide better care to
injured workers than California. Over the past three years, there has been a 69% increase in the cost of
processing worker’s compensation claims. The increasing cost of worker’s compensation is a huge burden
on companies, especially during the current economic downturn. Because of high costs in California,
some businesses are moving to other states. The result is a migration of jobs out of the state, resulting in
the loss of skilled workers and/or jobs. These losses are multiplied by spouses and families who also move
away, thus causing an economic ripple effect throughout the community. California needs more stringent
fraud laws to prevent false claims. Directing energy toward preventing false claims, rather than limiting
true claims, might help solve the problem. A few high profile State prosecutions might be valuable in dis-
couraging fraudulent use of the system.
Capital formation issues facing the Life Sciences industry at every stage of business develop-
ment — from seed stage to growth — should be addressed through a combination of federal, state,
and private funding. San Diego has significant challenges in capitalizing development and expansion.
Current economic conditions are extremely difficult with capital markets practically shut down, negative
returns for most venture capital funds and venture capital funding being directed into existing portfolio
companies rather than new startups. Coupled with longer due diligence and later-stage funding criteria,
far fewer startups are receiving capital.
State funding (e.g., CalTIP- the California Technology Investment Partnership) is very important in
stimulating the growth of early stage biotechnology companies. Unfortunately, this funding was removed
from the State’s budget for 2003-04. Federal funds pay for R&D only, but it takes more than just R&D to
start and grow a company; thus a gap exists between research and the consequent development into mar-
ketable products (which can then qualify for venture investment). CalTIP funds are available strictly for
commercializing technology. Copying the success of the CalTIP model, other states are now initiating
similar funding programs in order to attract business; thus, it is increasingly important for California to
continue its efforts to provide seed capital for Life Sciences companies in order to stay competitive with
other states and regions.
Currently there is stratification among the venture capital firms, with large funds becoming more like
money management firms and only smaller funds truly investing in early-stage or startup companies.
Small venture funds are having trouble raising money from major public source such CalPERS due to
institutional criteria that favor larger funds. For example, the UC retirement fund allocates a portion of
its money into an asset class known as “alternative investments,” which in turn invests a disproportionate
amount of money into certain large VC funds. These large VC funds often concentrate their investments
into certain geographical regions. In fact, southern California has not received any major funding from
CalPERS. The state government should help with the flow of venture money or help initiate SBA/SBIC
type programs to support increased capital formation for growth companies.
Government-imposed price control on drugs would have the potential to choke the entire
industry and should be avoided at all costs. In comparison to other industries, the biotechnology/phar-
maceutical industry is very unique due to the large capital investment needed, the very long time horizons
in order to achieve profitability and investment returns, and the high risk of product failure, due in part to
stringent FDA regulations. Given these constraints, the incentives needed to justify investments in
biotechnology must be based on the prospect of future profits. Thus, any type of government-imposed
price control on drugs would have the potential to choke the entire industry and should be avoided at all
costs. Although drug prices may seem high, in the long run the public actually saves money because of
the high health care costs associated with not having these same drugs available to treat certain diseases.

The State should extend the sunset date for the Manufacturer’s Investment Credit (MIC) to
help stimulate capital purchases at a time when the economy is so desperately in need of incen-
tives. As more companies transition from R&D to product launch, an indefinite extension of the MIC
will help retain manufacturers in California and send a clear message that the State is moving towards
becoming more competitive. As more Life Sciences companies transition to manufacturing, they will be
able to utilize this tax credit to create jobs for Californians.
The State should conform to federal NOL standards in carry forward and carry back issues.
Early stage and growing companies sustain many years of losses, and the inability to carry these losses for-
ward impacts not only the attractiveness of doing business in California but also detracts from companies’
ability to raise additional capital. A policy resulting in 100% of losses to be exercised with a carry forward
and carry back period of twenty years would significantly benefit this industry. These is particularly
important with regard to maintaining California’s competitiveness, since 39 other states offer this kind of
incentive and are aggressively trying to attract Life Sciences and technology growth industries.
Cross border relations should be strengthened to facilitate the growth of manufacturing, par-
ticularly biotechnology manufacturing. Manufacturing is an important component to the region’s
economy, and San Diego in fact has a special niche in biotechnology manufacturing. While biotech-
nology manufacturing should be able to grow in San Diego and in the U.S. overall, there is concern that
manufacturing might leave for Mexico and other lower wage countries. Although more of an issue to
be addressed between state and federal leaders with regional support, strengthening cross border rela-
tions may permit the industry to take advantage of San Diego’s proximity to Mexico for lower labor
costs in manufacturing.
Tort reform should be enacted to prevent frivolous lawsuits. Even the most prudent of companies
can be caught up in time — and resource — depleting activities that are often caused by opportunistic law-
suits. The State is urged to enact Tort Reform in order to address the process of judicial due diligence or
discovery and to prevent frivolous lawsuits from continuing to burden industry. If a company is sued, for
example, investigators in the discovery process may seek and publish all relevant information from a com-
pany, including the company’s trade secrets. These risks to intellectual property, coupled with the high
costs of litigation, lead companies to prefer to settle — thereby increasing overall costs and offering a temp-
tation to some trial lawyers.
Reliable sources of water should be available for the region and its industry clusters. In addition
to being a regional quality of life issue, water is essential to all laboratory processes. Better policies for the
allocation of water resources are needed BEFORE conditions become critical. Coordinated efforts by the
State and local governments, as well as with the federal government, are needed in order to ensure reliable
sources of water for the region. This regional problem must be addressed by industry leaders and stake-
holders or the future may include a need for costly de-salinization or other solutions externally imposed
on the industry. Industry leaders must make certain that the California Department of Water Resources
and the Metropolitan Water Administration understand their urgent needs for solving this problem, espe-
cially now, when complex water purchase and distribution agreements are being negotiated both statewide
and between states in the western region.
The standards for decommissioning low-level radioactive waste (LLRW) sites should be clari-
fied as soon as possible as they are posing an urgent problem for life science companies.
Temporary standards are needed urgently to provide immediate relief, at least until the end of the CEQA
process. The State should immediately establish working groups that include all decision-makers and
stakeholders, including environmental groups, to find ways to reduce the burden of compliance on Life
Sciences companies. The industry needs certainty in site licensing and termination requirements.
Furthermore, California does not have a low-level radioactive waste disposal site, leaving companies with
few options for disposing of the waste generated through product research and development. The indus-
try perceives that environmentalist groups are determined to shut down every facility that uses radioactive
materials. Help is needed from elected representatives to respond to urgent requests from the industry to
help balance the environmentalists’ concerns with those of businesses, especially since the use of these
radioactive materials is dedicated to improving the health of society.
Elected officials should take more courageous positions relative to regional land use and plan-
ning, while addressing problems from a longer-term perspective. Regional self sufficiency is con-
sidered to be a regional responsibility; however industries need help to combat NIMBYISM (“Not In My
Backyard” syndrome). Possibly the San Diego Economic Development Corporation (Regional EDC)
could take the lead in this area as well by helping industry to build awareness about the importance that
industry represents to the regional economy.
The factors that lead to the shift of manufacturing activities away from the State should be
investigated. Since the Life Sciences industry has many reasons to conduct manufacturing operations
in the U.S. and has fewer incentives to move off shore than other industries, the state government
should include a commitment to retain and expand manufacturing jobs in the Life Sciences as a part of
the Life Sciences Initiative.
The dialog between the Life Sciences and state government should be strengthened and sus-
tained. The state should appoint a senior Administration official as a liaison with the Life Sciences to
insure communication on issues relevant to both sides. A California CEO advisory group for Life
Sciences should be established to present a shared voice for the industry in the state. Regular advisory
panels and summits should include key Life Sciences stakeholders (companies, entrepreneurs, govern-
ment, investors, and researchers).

QUALITY OF LIFE/PLACE:
Attraction and Retention of Skilled People and Innovative Companies,
Quality K–12 Education and Community Colleges, and Living Environment
6
DESCRIPTION
Today’s skilled workforce and biotechnology companies can choose where to locate. These decisions
are largely based on the quality of life in a region, including such factors as housing, the availability of
competitive school districts, a tradition of arts and culture, and vibrant civic and social activities. The key
quality of life issues and the challenges in the San Diego Region include: affordable housing, quality K-
12 education, the diversity of art programs, etc. Regional growth is approximately 55,000 people per year,
driven by jobs and natural increase, and the pressures and demands on the quality of life will continue to
increase as a result.
IDENTIFIED ISSUES
• The high cost of living, especially housing costs, is a regional problem which impacts com-
panies’ abilities to attract top scientists.
• The general state of health of the region’s educational systems has a direct effect on the
attractiveness of the region to Life Sciences workers.
• Regional traffic and transportation issues need to be confronted. In particular, the industry
leaders underscored the need for a larger airport, which has been a perpetual regional issue,
and indicated that this will become increasingly more critical as the regional economy and
population grow.

More affordable housing should be built in San Diego. Residents need about 20,000 new housing
units per year; however, only 14-16,000 units are being built per year. The result is that local employees
are living in Riverside County and Tijuana, causing a major transportation crisis. The housing shortfall
absorbed by Riverside County and Tijuana translates into revenue loss since approximately 4,000 people
spend their money in those regions as opposed to in San Diego. The daily commute for residents in
Tijuana who work in San Diego has made the San Ysidro to Tijuana border the most active land-based bor-
der crossing in the U.S. Simply, the challenge is how to build housing for all the people who actually work
in San Diego.
To purchase a house in San Diego it currently requires a household income of at least $100,000, which
is more than twice the average income for San Diegans. The most likely option is densification (increas-
ing population density in housing), and the impetus for this change must come from the State. San Diego
may be underutilizing its land, since on average there are 4 housing units per acre when it is possible to
CHAPTER 6: QUALITY OF LIFE/PLACE 23

have 8 housing units per acre. Sustainable development studies and projections have consistently con-
cluded that sustainable development is dependent upon densification. It was noted, however, that two
thirds of all San Diegans have no children living at home. This remarkable statistic may ease the burden
on schools somewhat but creates other kinds of housing needs. Only a slight imbalance can cause land
prices to escalate dramatically. This creates a dilemma for recruiting employees. When potential and cur-
rent employees factor in the cost of living, especially given the high housing costs, they are demanding
higher salaries.
The affordability of housing by different levels of workers should be examined to determine the
impact on recruitment. In response to concerns that some people cannot afford to move to San Diego,
discussion centered on the types of employees being recruited. If out-of-towners are indeed well-paid
professionals with salaries starting at $75,000 annually, then they can afford high-priced homes. It is a dif-
ferent challenge, however, for people starting out in their careers in the $30,000 salary range.
The community should be better educated about the importance of the Life Sciences to the
health and well-being of people. Industry leaders and regional stakeholders face the ongoing challenge
of communicating the value of the Life Sciences industries and their importance to the region to the com-
munity at large. The Life Sciences industry needs to do a better job of articulating the realities of the
industry and addressing public concerns when they surface. Regional economic development organiza-
tions such as the San Diego Economic Development Corporation (Regional EDC) could take the lead in
generating support and collaboration among industry leaders.
Improvements should be made to the public school system as California currently ranks
nationally in the lowest third in education. According to Education State Rankings for 2002–2003 and
as cited by the National Education Association, California’s pre K–12 public education system ranks 44th
out of the 50 states. In this region there is a great disparity between different communities. There are
good schools in wealthier communities and poorer schools for those who are not as well-off. Diversity is
a significant educational challenge in urban districts. The difference in quality between public schools and
independent/private schools is very stark. It is important to keep in mind that funding, per se, does not
equal success, but that the uses of funding might be differentiators.
The drivers of the current crisis include teacher placement by seniority, leading to the concentration of
inexperienced teachers in one area and insufficient training support for teachers. Although SD Unified is
in the middle of cutting edge reform, concerns were raised, for example, about the institutionalization of
a data-driven focus on student achievement in the district. Summit attendees noted the difficulty of
implementing the system due to diversity, with site-based decision making often leading to failure.
Recommendations for actionable steps included addressing the problems that are within the purview of
the school district itself:
• More professional development for teachers is needed. Increased resources are needed for
this, but specific attention should be paid to helping teachers reach students in the bottom
quartiles.
• Once uniform, macro-level systems are established, modify on-site systems, with attention
to disabling entrenched special interests.
• Address and account for differences between small districts and the big urban district.
• The urban district’s administration is one of the smallest in the state, yet the urban district’s
site-based employment is one of the highest. This disparity must be addressed.
• Remedies must be considered for ensuring teacher performance and accountability.
• Alternative and charter schools have had mixed results but must continue to be monitored
and, where results are positive, investigated for potential opportunities for system
improvements.
• San Diego is also a very educated community that values arts and culture, however large
employers often fund arts and culture. In San Diego, where there are few large employers
other than institutions and the Navy, this is not an option, and ways to address this gap must
be considered.
The San Diego region should implement the Regional Transportation Plan to deal with
growing traffic and transportation problems. The traffic congestion problem is primarily due to the
need for employees to live further away from their workplaces in order to be able to afford housing. With
no new freeways being planned and public transit usage at about 20% of all travel, this problem is likely to
increase with no solution on the horizon. This issue reinforces the need to solve the affordable housing
crisis and for the need to implement the Regional Transportation Plan that is currently in development,
including the development of a high speed light rail network.
CHAPTER 6: QUALITY OF LIFE/PLACE 25

ONGOING RECOMMENDATIONS FOR ACTION
7
It was the intention of event organizers that the perspectives of industry leaders be incorporated into
statewide efforts to keep California at the forefront of the global Life Sciences industry. This Summit
was one of at least four such events scheduled statewide, which was intended to establish the basis for
the development of a Ten Year Strategic Plan to support the growth of Life Sciences in California.
This document provides a summary of the concerns facing industry leaders in the San Diego region.
Many of these issues were considered to be within the State’s authority to address or resolve. It is rec-
ommended that, as the Governor’s Life Sciences Initiative progresses, special consideration be giving
to issues which industry leaders believe to be within the State’s authority for action:
• The pressing need for regulatory reform, especially in areas such as environmental and
securities regulations, where state and federal mandates combine to create undue burdens
for compliance. In addition, regulatory reform is desperately needed to create a function-
al workers’ compensation system, which protects employees but also respects the con-
straints of business owners.
• The need for reliable sources of water and acceptable solutions for the disposal of low
level radioactive waste.
• The ongoing need for capital for companies of all sizes and development stages.
• The development of an educated workforce.
• The need to safeguard the quality of life in San Diego’s region.
Finally, the Summit participants were adamant that real reform should be enacted. Based on all these
pressing issues, the state government should work closely with the local entities and the private sector
in resolving these issues.
And in conclusion, while a focus on the economics of this dynamic cluster serves to underscore the
potential impact of public policy issues, it is critical to remember that the Life Sciences are focused on
the health and well-being of people — on preventing and fighting disease — and on innovative ways
to cure the maladies that affect human beings throughout the world. By squarely addressing the issues
facing the Life Sciences, these actions have the potential to result in an enhanced quality of life for mil-
lions of people world-wide.
CHAPTER 7: ONGOING RECOMMENDATIONS FOR ACTION 27

LIFE SCIENCES PUBLICATIONS AND RESOURCES
appendix a
Prepared for attendees of San Diego Life Sciences
Working Summit, May 30, 2003
Online Resources
RTA Cluster Data website
Biomedical Products
Biotechnology and Pharmaceuticals
Trends in the San Diego region’s Biomedical, Biotechnology and Pharmaceuticals product industry clus-
ters. Includes the number of firms, the number of employees, the payroll per person, the Employment
Concentration Factor, and an industry description.
www.sdrta.org/research.php?action=clusterdata_biomedical&menu=2
www.sdrta.org/research.php?action=clusterdata_biotech&menu=2
San Diego Workforce Partnership’s Quick Facts
Biomedical Industry
Biotechnology Industry
These Web sites provide critical labor market information on the Biomedical and Biotechnology Industries
(respectively) in San Diego. Includes industry growth rates and the structure of industry workforce, as well
as occupational growth rates, wages, and skill requirements.
http://www.workforce.org/quickfacts/biomedical/
http://www.workforce.org/quickfacts/biotechnology/
Biotechnology Industry Organization
Industry Statistics - (1992-2001)
This web site includes the top 5 companies with U.S. Biotechnology revenues (1992-2001), U.S.
Biotechnology employment (1992-2001), and the number of Biotechnology firms.
http://www.bio.org/investor/signs/200211.asp
BIOCOM
BIOCOM is a nonprofit organization dedicated to providing accurate information pertaining to the
Biotechnology Community of San Diego to the public. BIOCOM provides information regarding pub-
lic policy which will affect the Biotechnology community, up to date Biotechnology news, as well as a list-
ing of events of interest to the biotechnology industry among other services.
http://www.biocom.org/
APPENDIX A 29
Biotechs.com
An affiliate of Worldnews.com, biotechs.com compiles up to the minute news stories affecting the
Biotechnology Industry worldwide.
www.biotechs.com
BIO
The Biotechnology Industry Organization (BIO) provides biotechnology information, advocacy and busi-
ness support in a nationwide database format.
www.bio.org
UC Biotech.org Links Page:
An extensive listing of weblinks related to biotechnology. Catalogue includes lists of worldwide, domes-
tic as well as California-based biotechnology organizations, and a large listing of research studies and
organizations.
http://ucbiotech.org/links/
Online Reports
San Diego’s Biosciences Industry Cluster: A Regional Employment Study — (2000)
Profiles employment trends of the region’s Biosciences Industry Cluster. Includes an analysis of the gaps
of the Cluster’s workforce supply and training and recommendations of appropriate strategies for work-
force training.
http://jobs.sandiegoatwork.com/sdaw/emjw_cr.jsp
Biomedical Products Industry Cluster: A Labor Market Survey — ( 2001)
Biomedical Products industry reports on a 2001 survey of industry growth and workforce structure; occu-
pational growth, wages, and skill requirements; and the use of H-1B Visas.
http://jobs.sandiegoatwork.com/sdaw/emjw_cs.jsp?BV
Biotechnology and Pharmaceuticals Industry Cluster: A Labor Market Survey — ( 2001)
Biotechnology and Pharmaceuticals industry reports on a 2001 survey of industry growth and workforce
structure; occupational growth, wages, and skill requirements; and the use of H-1B Visas.
http://jobs.sandiegoatwork.com/sdaw/emjw_cs.jsp?BV
Strategic Workforce Development Plans — ( 2002)
Biosciences Industry Cluster
Blueprints for meeting the workforce development needs of San Diego’s key industry clusters.
http://jobs.sandiegoatwork.com/sdaw/emjw_ics_2002.jsp?BV
San Diego: Clusters of Innovation Initiative
Council on Competitiveness
The study contains a conceptual framework for assessing the competitiveness of regional economies. The
report includes an analysis of the San Diego region overall, as well as detailed assessment of two repre-
sentative clusters (biotechnology/pharmaceutical and communications.)
http://www.compete.org/publications/clusters_reports.asp
30 APPENDIX B: SELECTED SOURCES

Developing High Tech Communities: San Diego
United States Small Business Administration
The SBA report presents the history of San Diego’s tech and biotechnology economy, its evolution and
how it came to be.
http://www.greatvalley.org/access/pdf/sandiego_report_mayor_teb_1.pdf
Signs of Life: Growth of Biotechnology Centers in the U.S.
The Brookings Institute
This report provides an analysis of biotechnology activity in the 51 largest U.S. metropolitan areas. By
comparing the 51 metro areas on their research and commercialization capacities, this report can help
inform regions seeking to capture a share of the nation’s biotechnology growth.
www.brook.edu/dybdocroot/es/urban/publications/biotech.htm
Regional Indicators of Federal Research and Development Capacity — (2002)
This research was conducted by UCSD Extension on behalf of the San Diego RTA to assist the state in
recognizing trends in technology innovation based upon federal research and development awards grant-
ed throughout the State of California.
www.sdrta.org/downloads/ca_rd_activity_0402_final.pdf (study)
www.sdrta.org/downloads/appendices_0402_final.pdf (appendices)
Meeting the Challenge: U.S. Industry Faces the 21st Century
Department of Commerce Office of Technology Policy
This in-depth report is a series produced by the Department of Commerce’s Office of Technology Policy
that assesses the competitive position of a number of major U.S. industries, including Biotechnology, and
the factors influencing their growth.
www.ta.doc.gov/Reports/biotechnology/cd93a.pdf
CalTIP Impact Analysis: A Survey of Companies Highlighting Their Utilization of the California
Technology Investment Partnership — (2002)
This study provides an objective analysis of the contribution of the California Technology Investment
Partnership Program (CalTIP) to the San Diego technology community, and an assessment of the quality
of its administration in San Diego.
www.sdrta.org/downloads/caltip_report_sandiego_2002.pdf
Listings Prepared By: San Diego Regional Technology Alliance
APPENDIX A 31
appendix b SAN DIEGO LIFE SCIENCES SUMMIT CONTENT
– AGENDA
– KEYNOTE SPEECHES AND PRESENTATIONS
SAN DIEGO LIFE SCIENCES SUMMIT: Event Agenda
Friday, May 30, 2003

UCSD Faculty Club
Registration
8:00 AM – 8:30 AM Registration and Breakfast
Plenary Session
8:30 AM – 8:45 AM Welcome Message — Secretary Lon Hatamiya, California Technology,
Trade and Commerce Agency
8:45 AM – 9:00 AM Keynote Address: Life Sciences Challenges in the San Diego Region —
Duane J. Roth, Chairman and CEO, Alliance Pharmaceutical Corp.
9:00 AM – 9:15 Presentation of the Clusters of Innovation Theory and Life Sciences —
Fred G. Cutler, Director, UCSD Connect
Break
Simultaneous Breakout Sessions
9:30 AM – 11:30 AM Participants attend pre-arranged breakout sessions
Plenary Session
Lunch
11:45 AM – 12:20 PM Luncheon Address by the Governor of the State of California (via videotape)
David Hale, President/CEO, Cancervax and Chairman, Biocom
12:20 PM – 1:15 PM Panel Discussion with leaders of the breakout session
Joe Panetta, President, Biocom — Moderator
KEYNOTE REMARKS — EXCERPTS
Life Sciences Challenges in the San Diego Region

Duane J. Roth, Chairman and CEO, Alliance Pharmaceutical Corporation
San Diego exemplifies a true economic development success story: the county has developed a world-
class biomedical industry and become one of the most advanced centers in the U.S. for Life Sciences
research and development. The region is home to more than 500 biomedical companies employing near-
ly 30,000 Californians in high-wage, high-tech jobs.
Growth in this sector is not surprising, considering the high concentration of premier research centers,
including the Salk Institute for Biological Studies, The Scripps Research Institute, The Burnham Institute and
UCSD. These leaders in broad-based, early-stage, basic research attract sustained investment by the National
Institutes of Health and the National Science Foundation, and are essential to private sector innovation.
San Diego’s large biotech and medical technology community is a formidable enterprise and has con-
tributed to a dynamic economy and excellent quality of life. Importantly, the ultimate beneficiaries of
breakthrough medical research in our region are patients with unmet medical needs.
By sponsoring these regional summits, the Governor has asked for our help in developing strategies that
will foster long-term momentum in the Life Sciences sector.
First, the Governor should be commended for a series of programs designed to encourage biomed-
ical R&D:
In December 2000 [the Governor] created the California Institutes for Science and
Innovation. Taken together, the four institutes are a billion-dollar, multidisciplinary effort to
focus public and private resources on research. The institute dedicated to biotechnology —
QB3 — seeks to harness breakthrough science and translate discoveries into new products and
technologies for the benefit of human health.
Early this year, the Governor launched a new “Life Sciences Initiative” to strengthen collab-
oration among biotech and medical technology entrepreneurs, venture capital interests and
government. Beyond the regional summits, the initiative called for addressing workforce
development needs in the industry, improving technology transfer systems at the University of
California and capitalizing on federal grant programs that fund Life Sciences research and com-
mercial development.
While these are important public gestures and commitments, it’s critically important that we use this
forum to weigh in with . . . representatives from the Administration.
The future of San Diego’s Life Sciences community is far from secure. From sustaining capital support
during a long and costly journey through regulatory approval, to federal and state policies that impede med-
ical innovation, biotech and medical technology companies are facing strong challenges.
Regions across the country were recently rated according to the cost of running a biotech R&D com-
pany and California did not fare well. In fact, the state’s main centers of biomedical activity ranked the
most costly.
California is losing its competitive edge in creating and retaining these critically important businesses.
Skyrocketing workers compensation premiums — the highest in the nation — are forcing many local firms
to move out of the state. Of great concern is that the $38 billion budget shortfall will lead to more taxes
and fees, thus adding to the already high cost of doing business in California.
APPENDIX B 33
With respect to the regulatory climate, San Diego’s biotech community is committed to public health and
environmental safety is a priority for us. As such, we support reasonable and scientifically based regulations
and guidelines. However, proposals being considered by the legislature would further delay the safe dis-
posal of low-level radioactive waste and hinder a biotech companies’ ability to expand research operations.
Constantly shifting and uncertain regulatory requirements make it extremely difficult to run a biotech
business and in many cases do not increase public health protections. For example, a Sacramento Superior
Court judge last April blocked a Department of Health Services regulation that would allow research facil-
ities to progress with clean up efforts and move to new locations.
Another challenge facing the industry includes renewed efforts in the legislature to force public disclo-
sure of trade secrets and other intellectual property information. In a very recent development, the state
Senate correctly rejected legislation yesterday that would discourage many from joining the boards of
California companies by exposing corporate directors to needless litigation.
San Diego’s Life Sciences industry strongly supports proposals to create targeted benefits for early-stage
entrepreneurial biomedical companies and a renewal of the NOL deduction.
Today’s working summit presents a unique opportunity to deliberate these issues and strengthen collab-
oration between San Diego’s Life Sciences industry and government. We understand that the Governor and
legislature are dealing with an unprecedented budget shortfall and must make extremely difficult decisions
on taxes and state spending for health care, education and other vital programs. At the same time, we cau-
tion against policies that are disincentives for medical innovation and undermine the industry’s ability to
create jobs, invest in research and develop breakthrough technologies for patients. Our community of
leading-edge biotech and medical technology companies, and universities and research institutions look
forward to . . . a strategic plan that will secure the future of a thriving and growing Life Sciences enter-
prise in San Diego.
PRESENTATION OF THE CLUSTERS OF INNOVATION THEORY AND LIFE SCIENCES
Fred G. Cutler, Director, UCSD Connect
Synopsis of slide presentation:

The San Diego Life Sciences Clusters of Innovation — What did Michael Porter really tell us?
What's changed?
Summary Assessment of San Diego’s Innovative Capacity
Competitive Position of the San Diego Biotechnology / Pharmaceutical Cluster
APPENDIX B 35
Overall Competitiveness and Innovative Capacity:
San Diego Biotechnology / Pharmaceutical Cluster
New Cluster Analysis Implications

Regional clusters are in a constant state of change
San Diego cluster dynamics have changed
A new set of big challenges
• Access to capital
• Cost of living
• Cost of doing business
• Other regions coming on fast
State government can best help by focusing on 2–4
KEYNOTE REMARKS — EXCERPTS
David Hale, President/CEO, Cancervax and Chairman, Biocom
I’m sure that everyone in this room knows that California is a powerhouse — is the powerhouse — of
the biotechnology industry. Approximately 40% of all biotechnology companies in the world are located in
California. Four of the ten top, largest biotech companies — Amgen, Genentech, Chiron and Idec — are
located here. And San Diego and San Francisco are, as mentioned earlier (by Tal Finney) Number One and
Number Three in terms of biotech and Life Sciences companies in the world.
California became the cradle of the biotechnology industry because of the investment in biosciences in
the 1960s and 70s. The legacy of that investment has been a powerhouse of basic research within the UC
system and at private research institutes in this state that is the envy of the United States and the world.
These universities and research institutes have spawned a significant biomedical industry in this state and
are the source of a continuing string of new biomedical companies that are being started each day.
It is entirely appropriate, I believe, to focus on the Life Science industry because this exciting industry is
bringing about monumental changes in our lives today. Its use is allowing the development of powerful
new products for the diagnosis, treatment and prevention of human disease, the development of superior
crops to meet the food demands of an ever increasing world population, providing new biomaterials, and
reversing the ravages of pollutants. Biotechnology is changing the quality of our lives and the environment
in which we exist.
As we all know, as our Life Sciences industry moves into this century — after years of promise — we are
finally developing a number of very important products that are in the market today. And we are poised to
deliver even more in the future. Patients around the world have benefited and are befitting today from
breakthrough products for the diagnosis and treatment of diseases such as Diabetes, Cystic Fibrosis,
Cancer, Non Hodgkin’s Lymphoma, Rheumatoid Arthritis, Anemia, heart problems, Hepatitis, Multiple
Sclerosis — and the list goes on and on.
I have had the opportunity to be involved with California’s biotechnology industry since 1981. For it
was in 1981, sitting in my office in Baltimore, Maryland, watching it sleet and snow, that I received the third
call from the headhunter trying to convince me to come out to interview with a biotechnology company
called Hybritech — San Diego’s first biotechnology company.
Hybritech is a company that was actually founded by a clinician and a scientist from the University of
California San Diego. The headhunter told me it was 75 degrees and sunny in San Diego — and that I
should bring my wife and treat it as a vacation. He was very convincing. At that time I was running a $70
million profitable diagnostic business that was a part of a $5 billion healthcare company. And I’d just been
offered a major job to go back to J&J, one of the world’s largest healthcare companies — to run one of their
divisions. It was certainly an interesting contrast. When I arrived in San Diego to visit Hybritech, it was
located in trailers in the parking lot of a building in La Jolla. There were only a few people working in the
company at that time, but they were doing the stuff that sold me on the opportunity. They were applying
the science of biotechnology to the development of healthcare products. Even though people told me that
I was crazy, that I was losing my mind, and that I’d be back very shortly, I made the decision to come to
APPENDIX B 37
Hybritech. And we went on to build Hybritech into one of the first successful biotechnology companies,
which was sold to Eli Lilly in 1986.
As I became involved in the San Diego community, it was apparent to me, and to many others, that San
Diego had the potential to be a major center of the biomedical industry. It had a concentration of premier
research centers, including UC San Diego, the Salk Institute, Scripps Research Institute, the Burnham
Institute and other small research entities. It had access to capital — because the venture capitalists that
lived and worked in San Francisco and on the east coast loved to come to San Diego to get away from the
cold and the rain and the snow. And many of them also liked to vacation here — so we had lots of visi-
tors to the biotechnology industry in the early days!
San Diego also was blessed with a number of entrepreneurs who were willing to start companies — will-
ing to take risks based on developing companies devoted to new science. In fact, after Hybritech was
acquired by Eli Lilly, the most recent surveys indicate that over 70 companies were founded by the senior
management of Hybritech! I’ve watched this industry grow from the one biotech company to more than
200 companies today, employing over 30,000 people in high paying jobs. And as many companies transi-
tion from research and development to manufacturing, that number of employees should continue to
grow.
But this miracle of economic development has not happened by itself. It has been supported by a num-
ber of organizations such as the San Diego Regional Economic Development Corporation (EDC), UCSD
Connect, Biocom, California Healthcare Institute, the San Diego Regional Technology Alliance (RTA)
and many other organizations that have realized the significant potential that this industry has for San
Diego and California. It is also enhanced by the willingness of biotechnology entrepreneurs to work hard
with the City, the County, the State and at the national level to make people understand the issues that are
important for this industry’s continued growth and development, and to work hard to make San Diego a
business-friendly environment for the growth and development of biomedical companies.
As we sit here today, however, the biotechnology climate Californian be characterized as the “perfect
storm.” The nuclear winter of financing has been very difficult for our industry. Reimbursement reduc-
tion for breakthrough products, aggressive regulatory legislation and regulatory bureaucracy, higher taxes,
frivolous lawsuits, ever-overreaching environmental issues are all contributing to this perfect storm. And
these issues, I believe, have the potential to significantly impact the growth and development of our indus-
try in the future.
I know that at the sessions this morning a number of these issues were discussed, and I’ll just mention
them in passing. First of all, Workers Compensation continues to be a major issue for all employers in
California. Our system is one of the most expensive in the United States, while actual payments to injured
workers is near the bottom. In fact, Trindl Reeves (of Marsh USA) gave me some statistics that indicate
that our costs have increased 69% in the last 2 years — $6.3 billion in new costs. In California, our cost
per 100 employees is $5.23, while over 40 other states have costs of less than $3 per 100. The system, as
we all know, appears to be fraught with bureaucracy and an inability to identify and prosecute fraudulent
claims.
I continue to be concerned that the legislative and regulatory environment and bureaucracy threatens to
choke our economic growth and to kill the goose that has laid the golden egg in California. The trial
lawyers continue to introduce bills (or have bills introduced into the legislature) that would provide for
the release of confidential, trade-secret business information. This is information that is absolutely critical
to our intellectual property positions. We could not exist if the confidentiality of this information were not
available to us.
There is also the matter of lawsuits that would prevent most reasonable business persons from serving
as a member of the board of directors of companies in our state. I’m sure that we all support good cor-
porate governance. And I believe that most biotechnology and biomedical companies operate with good
corporate governance, but these bills would have a significant negative effect on our businesses. This
especially true for biotech and biomedical as well as other high tech industries, because of the uncertainty
of the processes that we go through in the development of our products.
Another area of importance is low level radioactivity. We all know that this has played a key role in the
development of most of our biotechnology products. Without low level radioactivity, most of the prod-
ucts that are so important — to us and to people who have these diseases — would not have been developed.
Yet continuing regulations are imposed, and have become more stringent as to acceptable levels and dispos-
able levels of low level radioactive waste, and these regulations also hinder the decommissioning of sites that
have used low level radioactive waste in their research. This is an ongoing concern for our industry.
Because of the significant time involved in the development of biotechnology products — as we all
know 10–12 years from the laboratory here at UC San Diego to a product in a patient — and at a cost
of hundreds of millions of dollars, we generate huge net operating losses as well as large R&D invest-
ments. And we would hope that California would continue to work to conform California’s standards
to the federal standards for the treatment of these NOL carry-forwards. California today, I believe, is
only one of four states that has not adopted a federal conformity standard, and I think there are studies
that have show that states who have adopted aggressive NOL provisions have shown economic benefit
as a result of this action.
Another incentive that is important to biomedical companies in their transition from research to
manufacturing is the California Manufacturing investment tax credit, and I hope that we in Californian
continue to keep that credit in the future.
This morning there were several discussions about the importance of a continued focus on infrastruc-
ture for California — especially the water problems in San Diego, which is the reason that Biocom was
formed in the first place. At that time we were having a drought and we were worried that they were going
to turn off all of our water! However the availability of water remains a concern for the biotechnology
industry in California.
And finally, California has a big tax burden, which is something that we need to continue to addresses
if industry is going to succeed in the future.
This is all happening at a time when other states in the country, states that envy the biomedical indus-
try in California, have woken up and realized that this is a great opportunity to induce companies from
California to expand or to build research and development and manufacturing facilities in their states or
countries. And let me tell you they are flocking here! Not a week goes by without some country or some
state or some city contacting one of our CEOs about moving or relocating or building our future facilities
in their state.
I certainly am not smart enough to offer a solution to these issues in the context of the enormous prob-
lems of our state. I understand that the sessions this morning were very productive in identifying these
and other issues and proposing solutions that hopefully will be implemented over time. But in conclu-
sion I would like to respectfully suggest the following:
APPENDIX B 39
• That the Governor make a key component of building in California a dedicated program to
create a business-friendly environment. Let’s make California the most business-friendly
state in the nation for biomedical and other high tech companies. And I believe that would
go a long way towards creating the jobs that he so recognized in his State of the State
speech.
• Let’s establish a standard for new regulations that would require an economic impact state-
ment before their implementation. The statement would be required to assess the impact of
any new regulation on our economy and on jobs — jobs that we have today, and on jobs that
we could create in the future.
• Lets find a way to conform our NOL standards in the State to federal standards, and to
make California one of the first states to monetize the NOL for private biomedical and high
tech companies. That alone would cause significant increases in the location and growth of
biomedical industry companies in our state.
• Lets ask the Governor to take a strong stand for good governance but a strong position
against the expansion of frivolous lawsuits by the trial lawyer industry.
• Let’s work with government to resolve the water situation in San Diego, which is so
important to all of us, so that companies will continue to want to grow here.
• And finally, it is critical that we continue to fund programs that increase funding for bio-
medical research at research institutions across the state, like the California Institutes for
Science and Innovation initiative taken by the Governor. I believe that these initiatives,
along with others that have been discussed this morning, would help our exciting industry
continue to grow and develop in the future. I believe that they would also have an effect on
the creation of jobs by other industries in the state, and get our economy growing again.
As I said earlier, California was the cradle of the biotechnology industry. Our industry today has moved
out of the cradle and into the growth phase of its lifecycle. There are hundreds of products under clin-
ical development today. Many of the products and clinical approaches that are being developed are for
diseases which are untreated or incurable today. We are now moving into the early stages of the golden
age of biotechnology. If we all work together in addressing the issues that have been identified and dis-
cussed this morning, and which are affecting our ability to grow and develop the industry, San Diego and
California should and could continue to lead this tremendous opportunity.
I continue to be very excited about the potential of this industry and believe that with appropriate lead-
ership from government and biomedical industry leaders, California and Californians can continue to be
the epicenter of the tremendous growth and development of the biomedical industry of the future.
Thank you.
appendix c BIOTECH FAMILY TREE
Excerpt from “A Magical place | Hybritech launched San Diego’s biotech industry; even today, its
entrepreneurial legacy is found throughout the region”
Penni Crabtree. The San Diego Union — Tribune , San Diego, California, September 14, 2003. pg. H.1
Copyright SAN DIEGO UNION TRIBUNE PUBLISHING COMPANY Sep 14, 2003
Reprinted with permission
Former employees of Hybritech, San Diego’s first big biotechnology success story, have gone on to start
several dozen biotech companies. Here are some of the companies and the years they were founded
1983 1990 Urogen
Gen-Probe Dura Pharmaceuticals Nereus Pharmaceuticals
Genesys
1985 1996
Idec Pharmaceuticals 1991 Metabasis Therapeutics
Clonetics Nanogen Women First Healthcare
Pacific Rim Bioscience
1992 1997
1986 Sequana Therapeutics Tandem Medical
Gensia Somafix
1998
Immune Response Cypros
CancerVax
Cortex Novadex
Genicon
Applied Genetics
1987
2000
Ligand Pharmaceuticals 1993
GenStar Therapeutics
Amylin Pharmaceuticals Gyphen
Favrille
Viagene Cyphergen
Ambit Biosciences
Lipotech
1994
Corvas 2002
Combichem
Cytel Corautus Genetics
Digirad
Pyxis Verus
Chromagen
Vical TargeGen
Novatrix
Kemia
1988
1995
Biosite 2003
Collateral Therapeutics
Somaxon
1989 Maxia Pharmaceuticals
AnalgesX
Epimmune Triangle Pharmaceuticals
Medmetric GenQuest
First Dental Health
APPENDIX C: HYBRITECH FAMILY TREE 41

endnotes
1. SANDAG: San Diego Regional Employment Clusters: Engines of the Modern Economy, produced in 1998 and
updated in 2001.
2. Professor Michael E. Porter, Council on Competitiveness, Monitor Group and ontheFrontier:
San Diego Clusters of Innovation Initiative, May, 2001, pg 39.
3. David Hale: see Keynote address, page 40.
4. Porter et.al., pg 71.
5. Porter et.al., Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School, pg 46.
6. The Monitor Group, Bay Area Life Sciences Strategic Action Plan: Taking Action For Tomorrow, December, 2002.
7. Ibid., pg 17.
8. Ibid., pg 69.
9. Ibid., pgs-70-73 (excerpt formatted for this report).
10. Ibid., pg 74.
NOTES
NOTES 43
NOTES

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TAKING

Introduction to the California Life Sciences Initiative . . . . . . . . . . . . . . . . . . . . . iii

1. The Importance of Life Sciences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. Critical Issues facing the San Diego Region . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

3. Intellectual Infrastructure/Technology Transfer . . . . . . . . . . . . . . . . . . . . . . . 9

5. Sustaining a Competitive Business Climate . . . . . . . . . . . . . . . . . . . . . . . . . . 17

7. Ongoing Recommendations for Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

A: Life Sciences Publications and Resources . . . . . . . . . . . . . . . . . . . . . . . 29

Life Sciences Challenges in the San Diego Region

Clusters of Innovation Theory and Life Sciences

C: Hybritech Family Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Joan Dean Dr. Richard Attiyeh

ABF Enterprises, Inc. Digirad Imaging Solutions

Agouron Institute East County EDC

Alliance Pharmaceutical Corp. Economic Development Network

Arena Pharmaceuticals, Inc. EGen Corporation

Arnold & Porter EKM Corporation

Baker & McKenzie Employment Development Department

BIOCOM Fallbrook Engineering

Biologics Process Development Ferris & Britton

BMS— BioMedical Strategies Fleishman Hillard

CA Assemblywoman Patricia Bates (rep) Forward Ventures

California Department of Transportation Heller Ehrman White & McAuliffe

California Healthcare Institute Human BioMolecular Research Institute

California Manufacturing Technology Center IBM Life Sciences

CA Senator Denise Moreno Ducheny (rep) Idun Pharmaceuticals, Inc.

California Technology Ventures Inglewood Ventures

Canji, Inc./Schering-Plough Inotech Medical Systems

City of Los Angeles Japan External Trade Organization

City of Los Angeles, Mayor Hahn’s office La Jolla Bioengineering Institute

City of Lompoc Ledford Enterprises, Inc.

City of San Diego Ligand Pharmaceuticals

Comerica Bank (Technology and Life Science Division) Marsh, USA

Commission of the Californias Market Point Reality Advisors

Conforma Therapeutics Metabasis Therapeutics Inc.

Consul of Sweden Mira Costa College

Monitor Group Siegfried Ventures

Morgan Stanley Slayton International

Morrison & Foerster LLP Southern California Biotechnology Center

NovaRx, Inc. Spencer Stuart

Pacific Biopsciences Center The Staubach Company

Perlan Therapeutics, Inc. Strategic Investor

Perry Scientific Relations, Inc.

Pfizer Symbion Research

PGE, LLP U.S. Senator

Posco Bioventures Barbara Boxer (rep)

Prediction Sciences UC Discovery Grant

Preston Gates & Ellis, LLP UC Berkeley

Promega Corporation UCSD Connect

Roth Capital Partners UCSD Corporate Relations

Salmedix UCSD Office of Technology Transfer

San Diego City Schools UCSD, Science and Technology Council

SDSU- Entrepeneurial Management Center UCSD VonLiebig Center for Entrpreneurship

SDSU-CSUPERB Validation Technologies, Inc.

San Diego Regional EDC Ventana Global, Ltd.

San Diego Regional Technology Alliance Windamere Venture Partners

San Diego Workforce Partnership Workforce Strategy Center

Scientific American XXSYS Technology, Inc.

Exhibit 1: The Life Sciences Cluster Definition

CHAPTER 1: THE IMPORTANCE OF LIFE SCIENCES 1

OVERVIEW OF THE SAN DIEGO LIFE SCIENCES CLUSTER

Exhibit 2: San Diego Biotechnology / Pharmaceutical Cluster

CHAPTER 1: THE IMPORTANCE OF LIFE SCIENCES 3