January 12, 2012 – Access to capital, a burdensome and uncertain regulatory environment, and lack of innovation and productivity in research and development are the biggest threats to the biomedical industry's growth over the next five years, according to biomedical company CEOs surveyed by CHI-California Healthcare Institute, BayBio and PwC U.S. The CEO survey found:
- Nearly three quarters (74 percent) of biomedical industry CEOs surveyed said their companies have had to delay a research or development project in the past year.
- Lack of funding was the top reason for project delays cited by private company CEOs, and accounted for more than one-third (40 percent) of delays by all public and private companies in the survey.
- Eight in 10 CEOs surveyed agreed or strongly agreed that the current U.S. Food and Drug Administration (FDA) regulatory approval process has slowed the growth of their organization.
Findings of the CEO Survey reflect issues being discussed throughout the biomedical industry by executives gathering in California this week, and provide an early glimpse into the 2012 California Biomedical Industry Report, due in February. The report, published annually by CHI, BayBio and PwC, provides a snapshot of the biomedical industry in California, the largest biomedical cluster in the world and the source of the greatest number of products in clinical development.
"As the center of biomedical innovation in the U.S., California's biomedical industry is a national treasure," said Gail Maderis, president and CEO of BayBio. "But the pace of R&D productivity and its global leadership position hang on the availability of capital to fund future innovation and a regulatory framework that is based on consistency and innovative technologies."
Biomedical Access to Capital
The CEO Survey found that biomedical companies in California have been resourceful over the past year in seeking diverse funding sources, divided almost evenly among government grants, angel investors, venture capital and licensing agreements and partnerships.
"Biomedical companies have long relied on government grants and venture capital to finance innovation, but funding sources are shifting and companies will need to adapt to a new reality," said Tracy Lefteroff, national life sciences partner, PwC. "While venture capitalists and angel investors will continue to be an important source of funding, it has become increasingly difficult for biomedical companies to gain access to them. Alternative sources of funding are emerging, which highlight shifting opportunities and dynamics in life sciences innovation."
The CEO Survey found:
- Forty-four percent of biomedical CEOs surveyed said they will look to licensing agreements and corporate partnerships as a source of finance in the next 12 months, double the number of CEOs who last year said their companies are using this avenue for finance.
- Corporate venture funding, the investment of corporate funds into external endeavors, is expected to become a much more crucial source of funding to the industry, with 30 percent of CEOs surveyed saying they will tap corporate venture capital as a finance source in the next 12 months, versus only 10 percent who did so in the past 12 months.
- Though still only a small contributor to the finance equation, disease foundations/non-governmental organizations are growing as a funding source for 11 percent of CEOs who plan to use these funds in the next 12 months, versus only 4 percent who did last year.
- Access to capital is seen by CEOs as the most influential state policy issue to keep biomedical research, innovation and investment in California. Nearly three-quarters (72 percent) of CEOs said that access to capital is extremely important, followed by (in order of importance) tax incentives for innovation (60 percent), corporate taxation (51 percent), workforce preparedness (47 percent) and duplicative regulation among various state and federal agencies (37 percent).
Regulatory Environment will Determine R&D Productivity
According to CEOs surveyed, FDA and regulation are the key issues affecting research and development. Eighty-one percent of CEOs also said that coverage and reimbursement issues are extremely important to the industry's ability to advance biomedical research, innovation and investment in California.
In addition, 80 percent of CEOs surveyed do not believe that FDA has the best regulatory approval process in the world, and three-quarters believe that within five years, another country could conceivably recreate the ecosystem that has made the United States the leading biomedical region in the world.
"Sound public policy and managerial and operational improvements at FDA, along with responsible congressional oversight, will encourage biomedical innovation and, ultimately, job growth here in California," said David L. Gollaher, Ph.D., president and CEO of the California Healthcare Institute. "Working collaboratively with other stakeholders, Congress, FDA and the biomedical industry can maintain the high standards of safety and effectiveness that address patients' need, while improving our ability to attract investment and grow in 2012 and beyond."
Methodology
CHI and BayBio worked with PwC to collect and administer data for the 2012 CHI, BayBio, PwC California Biomedical Industry Survey. The survey was conducted in November 2011 and targeted approximately 100 companies that conduct business in California in the areas of pharmaceuticals, biotechnology, medical devices, diagnostics or medical equipment.
For more information: www.pwcglobal.com
December 03, 2025 
