What is the relationship between California's life sciences industry and Silicon Valley?
California's life sciences industry and Silicon Valley share a close and synergistic relationship, especially in the realms of funding and technological innovation. The proximity to Silicon Valley, a hub for venture capital, benefits life sciences companies seeking investment. This sector increasingly looks to AI to accelerate innovation, especially in streamlining clinical trials and managing healthcare data. Collaborations with tech companies in Silicon Valley are fostering new innovations, particularly in AI's application to life sciences. For example, California life sciences companies are now using AI to accelerate drug discovery by combing through vast libraries of potential therapeutics to identify which molecules have the ideal chemical and structural properties to treat specific conditions, shaving years of time in research and development, thus bringing down the very high cost of drug development. Likewise, other companies are using AI to predict which diseases a patient is most vulnerable to based on their unique genetic and lifestyle data, giving doctors the chance to prevent those diseases before they ever strike.
Do you see California becoming a hub for the intersection of digital health, AI, and life sciences?
Absolutely, California is a global powerhouse, ranking as the fifth-largest economy worldwide and on track to become the fourth. The state is a central hub for both biotech and technology, including AI, primarily centered in Silicon Valley. This unique positioning enhances the integration of these industries, creating a dynamic environment conducive to innovation and advancement in both fields. I believe California will set both the national and global stage for the future of AI in healthcare and the life sciences. Where California AI and life sciences companies innovate, other companies will soon follow. And where California regulators set AI policy, national and global regulators will follow. Seeing how California’s privacy policies are becoming the national norm, I believe the future of AI in healthcare will be written here in California.
Can you highlight some top innovators from the 20th annual California Life Sciences Pantheon Awards?
The 20th annual Pantheon Awards showcased remarkable achievements in life sciences. For instance, Verge Genomics won the Pantheon Award for Emerging Innovation. They are a clinical-stage biotech in South San Francisco developing therapeutics for diseases with high unmet need--like ALS and Parkinson's—using human tissues and AI. Another standout is the Innovative Genomics Institute in Berkeley, which won the Pantheon Champion of Health Equity award for their groundbreaking work in genomic engineering. They are creating affordable and accessible solutions in human health, climate, and agriculture. These awards reflect the diverse and impactful innovations happening within California's life sciences community.
What is California Life Sciences doing to promote innovation, particularly through programs like FAST California?
FAST California is a pivotal program promoting innovation by providing advisory services to early-stage companies. Hundreds of advisors volunteer to assist these companies in areas like pitching and strategic direction. Alumni of this program have shown remarkable progress, evolving from startups to significant players in the industry. For instance, Colleen Cutcliffe, CEO of Pendulum Therapeutics, is a FAST graduate that has achieved notable success, exemplified by her recent collaboration with Halle Berry. This program demonstrates our commitment to nurturing and propelling innovation within the life sciences sector.
How is the Inflation Reduction Act (IRA) impacting smaller biotech and digital health companies in California?
The IRA has introduced significant challenges for innovation in our sector, particularly in financing. Biotech projects are lengthy, costly, and risky. There has been a noticeable decrease in available capital since the IRA's implementation, affecting investment decisions. Beyond establishing arbitrary price controls on medications, the legislation presents a unique dilemma for biotech companies, especially when choosing between high-risk, high-return biotech investments and more stable tech investments. Aside from financing, specific provisions like the rare diseases exemption and the small molecule penalty significantly impact companies' strategic choices and funding opportunities.
What is California Life Sciences doing to address these issues?
We continue to educate elected officials about the negative consequences that the IRA is having on innovation in the life sciences sector. By collaborating with member companies and other state and national partners, we aim to inform policymakers about the detrimental effects, especially on rare disease research and investment trends. Educating officials is crucial to ensure they understand the full implications of the IRA and consider adjustments to support the industry better and maintain our country’s, and California’s, position as the global leader in life sciences innovation.
What are the other major obstacles for the California life sciences industry?
The California life sciences industry is currently facing significant challenges in terms of funding availability and capital access. While downturns have been a recurring part of our industry's history, the current situation is particularly taxing, with a slow recovery anticipated.
Another critical issue is the recent changes in R&D tax amortization policies by Congress. The shift from an annual R&D deduction to a five-year amortization has substantially increased tax liabilities for companies. Smaller and early-stage companies without a product on the market typically direct most of their funds into R&D, and this new tax liability reduces the already-shrinking pool of capital available to these critical innovators. We are actively advocating for Congress to restore the immediate expensing of R&D expenditures and remove this tax on innovation. In California, we are very aware of the $68 billion budget deficit, which means that critical R&D tax incentives like the R&D tax credit and the net operating loss deduction may be suspended or paused, which will have a disproportionately negative impact on the life sciences’ massive R&D infrastructure in California. The consequences of pulling back the state’s R&D tax incentives is even more devastating when layered on top of the negative impacts of the IRA and shrinking of venture funding.
Can we speak of a post-pandemic slump for biotech? If so, may this sobering up of the market be a positive development?
The pandemic brought unprecedented attention and investment to the biotech industry, highlighting its crucial role in addressing global health crises. However, the post-pandemic period is seeing a cooling of investment enthusiasm, which poses a risk to ongoing innovation. I am not sure this is positive, since the biotech sector thrives on aggressive innovation, crucial for developing new treatments and drugs. Despite the current challenges, it is essential to maintain investment in this field, recognizing that biotech will continue to play a vital role in addressing future health crises, including potential pandemics and ongoing battles against diseases like cancer.
Looking ahead, what are your aspirations for California Life Sciences in the next three to five years?
Over the next three to five years, our foremost goal is to minimize the potentially devastating impact of the Inflation Reduction Act on the life sciences industry. It is vital to ensure a healthcare system that prioritizes patient needs and addresses access barriers. As an organization, we aim to grow and support our membership, fostering a thriving, inclusive ecosystem. Our focus will be on advancing life sciences innovation through policy advocacy, nurturing emerging ideas and technologies, and providing resources like the FAST program. Ultimately, our mission is to contribute to a world where people can live longer, healthier lives.
