Southern California’s two primary life science associations have set their sights on the same group of potential new members — leaders of Orange County’s small but growing biotech cluster.
San Diego-based BIOCOM plans early next year to open an office in the county — “It will be somewhere between Irvine and Newport Beach,” President Joseph Panetta told BioRegion News. The office is intended to link OC executives to the group’s services, including advocacy on state issues and workforce training.
Also looking to Orange County for growth is the Los Angeles-based Southern California Biotechnology Association (SoCalBio), which is merging with Orange County’s 100-member Life Science Industry Council (LINC). SoCalBio says the merger will allow it to improve efforts begun over the past year to improve member services and advocacy.
BIOCOM’s Panetta said that the organization’s expansion is “part of our long-term plan to do more to represent the life science community in Southern California versus simply the life science community in San Diego.”
Orange County members now account for 25 of BIOCOM’s approximately 550 members.
“In a year, we’d like to have that about 50, and we’d like to see that double in the next two years,” Panetta said.
“We’ve never really taken advantage of the fact that we’ve got a powerhouse here in biotech and biomed research and development that extends from Los Angeles south, and from the coast inland,” Panetta added.
As for SoCalBio, the combined 300-member organization will add a yet-to-be determined number of LINC board members to its board of directors, and will extend SoCalBio member benefits to LINC members. That decision, and other details of the merger, will come after SoCalBio holds its 9th Investor Conference on June 7 at the Wilshire Grand Hotel in Los Angeles.
“We’re in the process of taking the necessary steps to make sure the combined organization will have the structure and the right function and the right budget,” said Ahmed Enany, president and CEO of SoCalBio. “We’ll have more resources than before. We’ll be able to hire staff. The most important assets of LINC [are] the networks its members and board of directors have established over the years, that we can tap into to strengthen our position in the southern part of Greater LA,” Enany said.
The Southern California groups are part of a web of biotech associations in California that includes BayBio in the state’s northern region, based in the San Francisco cluster; and the statewide policy research-advocacy group California Healthcare Institute.
LINC chose SoCalBio over two other suitors — BIOCOM and a broader technology organization, OCTANe (Orange County Technology Action Network). Enany said SoCalBio and LINC held similar views on creating an organization centered on member needs and that the Orange County businesses served by LINC were similar to those in Los Angeles served by SoCalBio.
The geographic proximity between Orange County and Los Angeles also helped, he added, as did the historic business link: Many OC companies are spinoffs of the California Institute of Technology in Pasadena, making the LA region a feeder of companies into the county.
“As members of our board became better acquainted with SoCalBio's board and management, it became increasingly clear that the missions and goals of the two organizations are complementary and that together we can be more effective and provide greater service to the life-science industry and our communities,” said Richard Henson, chairman of LINC’s board of directors and CEO of Source Scientific, in a May 22 press release announcing the merger.
Henson did not return a BioRegion News call seeking additional comment on the merger.
SoCalBio has begun searching for a staffer to oversee its Orange County office, and will soon begin advertising the job once a job description is completed, Enany said: “No later than the end of July, that person would be in place.” BIOCOM anticipates launching its office with a single person, then growing that staff to a half-dozen people, Panetta said, “but that’s probably a couple of years away.”
Meanwhile this year, BIOCOM has worked to raise its profile in Orange County with events. Among those under discussion in recent weeks have been a medical technology device event, a reception for chief financial officers, a roundtable for compensation executives set for June 13 in Newport Beach, Calif., and a dinner for CEOs from OC set for June 21.
Competing for Space?
It is still unclear how the two groups will coordinate their activities in Orange County. Asked what impact a BIOCOM office in Orange County would have on his merged group, Enany said: “It creates confusion. You need to have one voice for the region when you’re representing companies and involved in advocacy. So having two organizations sort of competing for one space is not a good idea,” Enany said. “I’m not sure why they want to expand beyond their own comfortable territory. LA-Orange County is more or less the same urban area. The industry structure here is different here than San Diego.”
Yet, Panetta noted, LINC proposed a merger with BIOCOM in 2000, only to be turned down because the group wanted to focus instead on building itself up in its San Diego home base: “We felt [a merger at that time] was a bit of a distraction.”
This year BIOCOM was the willing merger partner, only to be spurned by LINC.
Panetta insists it could have done more for LINC given its larger size than SoCalBio, and its array of services, including advocacy on state issues and workforce training, such as a program it sponsors with Mira Costa Community College.
“We went to LINC and said, ‘You can team up with us and we’ll give you the infrastructure that you need to have a real organization’,” Panetta said. “The offer we made them to bring them into BIOCOM was a pretty generous offer in terms of giving an organization that had no staff, no resources, and no bank account a pretty good opportunity to be linked up with the largest life science trade association outside of BIO.”
“What [LINC and SoCalBio] are going to have to do going forward is take two organizations that don’t have any structure and build something from the ground up,” Panetta added. “We’ll continue to be here to work with them, alongside them, and hopefully they can put together something that has some substance to it.”
There’s no dispute over which group is larger: BIOCOM has 21 employees while SoCalBio has a single full-time staffer, Enany, with help hired as needed. BIOCOM also has a $5 million annual budget, compared with $235,625 in revenues listed by SoCalBio in its Form 990 tax return filed with the US Internal Revenue Service for 2005; Enany did not return two calls from BioRegion News seeking an updated budget figure.
The tax returns also offer a possible reason why LINC sought a merger. According to 2004 and 2005 returns, LINC finished those two years in the red, though its loss shrunk from $8,512 in 2004 to $4,267 in 2005. Revenues rose slightly during that time from $57,662 to $63,767, despite a near-doubling of unspecified “public” support, from $48,250 in 2004 to $91,150 in 2005.
The extra government money didn’t stop expenses from rising, to $68,034 in 2005 from $66,174 the previous year. While LINC had no paid employees, it did pay Van Weide Group of Laguna Hills, Calif., $19,900 in 2004 and $32,027 the next year for program and management services, including bookkeeping.
“There’s a limit to how much you can achieve using volunteerism. You can reach a certain limit. But if you want to push the organization to the next level, and establish consistency and deliver real programs, you have to hire professional staff,” Enany said.
One bright spot for LINC was a jump in revenue from membership dues and assessments, from $9,675 to $15,539. That income stream should increase even further in future years, Enany said, because SoCalBio charges more in membership fees than LINC did.
SoCalBio memberships range from $500 to $4,000 for biotech executives, depending on their companies’ number of employees; from $500 to $5,000 for vendors and other service providers, also based on number of employees; and a flat $750 a year for nonprofits. LINC offered individual memberships at $380 a year, in addition to its corporate memberships ranging from $1,250 a year for “bronze” level to $5,000 a year for “gold.”
Room for Growth
LINC has struggled during a time when Orange County’s biotech community has blossomed into a healthy, if smaller, cluster compared with Southern California’s top biotech meccas in the San Diego and Los Angeles regions.
“You need to have one voice for the region when you’re representing companies and involved in advocacy. So having two organizations sort of competing for one space is not a good idea.”
A 2005 study prepared for the Orange County Workforce Investment Board by Godbe Research concluded more than 25,000 people worked in 769 companies that comprise the county’s biotech sector — which it defined not only as biotechs and pharmaceuticals but also medical and laboratory device businesses such as Beckman Coulter, and heart valve maker Edwards Life Sciences.
During the first quarter of this year, one Orange County biotech, Orqis Medical, racked up $12 million in VC financing, according to the quarterly MoneyTree Report released by PricewaterhouseCoopers and the National Venture Capital Association. Orqis was one of two Orange County companies reported to have won funding. Last year, MoneyTree showed four Orange County biotech and pharma companies won venture capital funding totaling $14 million, compared with one company receiving $1 million in 2005.
Orange County medical device makers have fared even better, with seven companies winning a combined $138.2 million in venture capital during the first quarter, on top of eight winning a total of $95.5 million for all of 2006.
“Orange County has an excellent stable of entrepreneurs in medical devices. Los Angeles overall is beginning to develop a pool of biotech entrepreneurs, but more of them are in northern Los Angeles than in OC. Orange County and Northern Los Angeles can feel very far apart,” said Camille Samuels, a managing director specializing in biotech investing at Versant Ventures, which has offices in the Orange County city of Newport Beach, as well as in San Francisco and Menlo Park, Calif.
Tracy Lefteroff, global managing partner for life science industry services with PricewaterhouseCoopers, said the growth of biotech in Orange County has been fueled by spin-off companies led by scientists from Amgen, headquartered in the LA suburb of Thousand Oaks, Calif., as well as from Valeant Pharmaceuticals, based in the Orange County city of Aliso Viejo.
Biotech can grow in Orange County, he said, despite being sandwiched between the larger clusters of San Diego and the Bay Area.
“The research institutions, the experienced entrepreneurs, the venture capital, I think those markets could all grow quite nicely independent of each other, and not by robbing from each other either. There is just tons of venture money around looking for good deals,” Lefteroff added.
According to MoneyTree, Versant invested the highest first-quarter total among firms in Orange County, $15.9 million in two companies, none of them in biotech. Of its first-quarter biotech investments, three were in San Diego companies — Amira Pharmaceuticals, NovaCardia, and Trius Therapeutics — and one each were in Cambridge, Mass. (Helios Biosciences) and Seattle (Seredigm).
“Our biotech investments are generally in San Diego or Northern LA, but we have several [medical] device investments in OC, and we are certainly not averse to investing in an OC biotech company,” Samuels said.
Enany said attracting more investors and their capital to Orange County as well as Los Angeles is one of the top two challenges for the newly merged SoCalBio and LINC, next to attracting more talent. He counts four active investment funds in the region, versus nearly 100 for the Bay Area. The LA region’s biggest firm, Prism VentureWorks in Santa Monica, Calif., is actually a West Coast office of a firm that expanded from Westwood, Mass.
“When you have a company here and you want to raise money, you often have to go out of town to raise it,” Enany said.
Lefteroff disagreed: “A lot of the Silicon Valley funds invest in the Orange County region, as well as some of the San Diego funds. There has always been a focus from the venture capital community.”
As for drawing top executives, Enany acknowledged that will prove challenging for Orange County given Southern California’s high cost of living and housing.
Seeking Help on Statewide Issues
Panetta said BIOCOM’s presence in Orange County is also intended to help it build sway with California officials on quality-of-life issues that impede hiring, as well as more direct industry concerns like increasing state funding for life sciences.
“By putting an office up in Orange County and getting more members up there, we’re looking at hopefully having a lot more clout than we’ve got right now,” Panetta said.
That clout, BIOCOM hopes, will yield not only more subsidies but a role in addressing transportation chokepoints like the Interstate 5 and 15 freeways, as well as high housing costs.
The median price for a single-family home in Orange County was $629,000 in April, down $1,000 from a year earlier, according to DataQuick Information Systems statistics released May 15. OC has the priciest houses in Southern California: medians in Los Angeles are $540,000, down $30,000 from last year; while San Diego medians are $490,000, down $15,000 from April 2006.
“Probably the number one issue that I see in terms of attracting talent and retaining talent in this area is the rapid rate of growth in the cost of housing. Even though a lot of these workers are college educated and so forth, the salaries don’t compensate for that growth,” said Ivor Royston, a pioneer in the development of San Diego’s biotechnology cluster and now a founding managing partner with Forward Ventures in San Diego.
Royston spoke April 20 at “Building Biotechnology,” a conference held by the Chemical Heritage Foundation at its Philadelphia headquarters. Last week he declined to comment on the Orange County expansions of BIOCOM and SoCalBio.