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San Diego Biotechs Suffer the Pains of Recession


One of the bright spots of San Diego's economy in recent years has been biotech sector. But the local life science industry has caught a cold in this recession. KPBS health reporter Tom Fudge looks at an industry that struggling with layoffs and a serious shortage of investor capital. It's the "second" part of our series: Rough Water: Navigating San Diego's economy.

San Diego's economy has evolved in recent decades from a military industrial complex to one that's based on tourism and high technology. And one of the stars of that story is biotechnology. It's a knowledge industry that's been spun off of the intense academic focus on science at UC San Diego. Marney Cox is chief economist for the San Diego Association of Governments. He says San Diego companies that develop drugs, medical therapies and medical devices have grown substantially.

Cox: They grew from about five thousand or so odd jobs in the late 80s, and today they employs close to thirty thousand jobs, total, in the region.

Those 30 thousand jobs are good ones too. Cox says the average salary in biotech exceeds 80 thousand dollars. That's twice the regional average. But the industry has taken a lot of hits as the recession has taken hold. Metabasis is developing several drugs, including one that inhibits adult-onset diabetes and over the past year, that company has laid off half its workforce. A financial report, released late last year, showed a commensurate cut in company revenues, which were down by 4.7 million dollars.

Paul Laikind is the former president of Metabasis who still serves on the corporate board.

Laikind: There's no doubt about it. This is a very tough time. The biotech industry is a cyclical industry in the best of times. And overlaid over that is the larger economic problems, that's made it even more difficult.

The life of the local biotech industry is sustained by grants and venture capital. Joe Panetta is president of Biocom, a trade association that represents life science companies in Southern California. He says many local companies have managed to keep going with cash they already have in hand. But Panetta says those companies are getting concerned.

Panetta: What going to begin to happen here is we're going to see a little bit of a… a significant drain in the next six months unless we see a new infusion of venture capital and a new infusion of investment in the public markets.

Roth: We've been through these kind of cycles before. You know I remember one not so long ago called the nuclear winter.

Duane Roth says he's heard doomsday scenarios for biotech more than one. Roth is the CEO of Connect, an association that works to get high-tech companies off the ground. And he says he's optimistic about the future.

Roth: Research institution funding from the federal government, it's not going to go down, it's going to go up in these kind of times. Which means we're going to have more innovation, more discoveries taking place. That will lead us out of this recession.

Even today, innovation has its rewards. One San Diego success story is a company called Sequenom, which has designed a new prenatal test for Down Syndrome. In-house trials show the company's test for Downs is nearly as accurate as the painful and invasive procedure called amniocentesis. In the past year the value of the company's stock has tripled.

But cutbacks are a more common story. Along with Metabasis, many local firms have announced major layoffs ranging from 43 jobs lost at Biogen Idec to 340 at Amlyn pharmaceuticals.

And even if good times are around the corner, the downsizing of biotech firms may not go away. Duane Roth says the industry is changing. It's moving from one in which all functions took place under the same roof, to one in which many tasks are outsourced. The continued success of the local biotech sector may depend on whether the work that's no longer done in-house is still done… in San Diego county. Tom Fudge, KPBS News.

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