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Biotech Jobs Could Flee State

More incentives are needed to encourage manufacturers to stay, an industry study says.

June 23, 2004|Denise Gellene | Times Staff Writer

California stands to lose thousands of manufacturing jobs in the biotechnology and medical device fields in the next two years to lower-cost regions around the globe, according to a report Tuesday by the California Healthcare Institute.

The industry group said California needed to streamline regulations and improve tax incentives to compete with places such as North Carolina, Puerto Rico, Ireland and Singapore.

The study, prepared by PricewaterhouseCoopers, said California's biotechnology industry was at a crossroads because many homegrown companies in the maturing business were preparing to produce and sell their first drugs. "With few incentives offered in California," the report said, "there is little to stop companies from leaving the state, taking their revenues, export dollars and jobs with them."

Still, the outlook is far from grim. The report said that though 90% of companies surveyed planned to expand outside California, 70% of companies figured on adding manufacturing capacity within the state.

"California will get its share of manufacturing," said Matt Gardner, president of Bay Bio, a biotechnology industry group for companies near San Francisco.

The biomedical industry plans to use its study to lobby for restoration of state manufacturing tax credits, which expired last year. There are two bills in the Legislature to restore the credits. But industry representatives say the measures have garnered lukewarm support from lawmakers busy whittling down the state budget.

Industry leaders are looking for backing from Gov. Arnold Schwarzenegger, though they were disappointed that he didn't show up at the biotech industry's recent conference in San Francisco, a business recruitment fest attended by governors of Massachusetts, Minnesota and at least four other states.

Still, Schwarzenegger wrote a foreword to Tuesday's 36-page study in which he touted his administration's workers' compensation reforms but acknowledged that "our biomedical industry faces enormous challenges."

California has much to lose in the global competition for biomedical jobs. The report doesn't quantify the number of jobs at stake, but David Gollaher, president of the California Healthcare Institute, said the figure was in the thousands.

California is the largest biotechnology state, with 450 companies, twice the number of second-ranked Massachusetts. California also ranks as the No. 1 state in medical devices, employing 19% of all U.S. workers in an industry that produces such items as insulin pumps, heart valves and breast implants. The two industries employ 154,000 Californians, more than the 127,500 people who work in aerospace and close to the 169,000 in the motion picture industry.

Young companies prefer to keep their manufacturing facilities near their headquarters, and that is to California's advantage. But established firms take incentives into consideration, and in that area, California is outmatched.

For example, Edwards Lifesciences Corp., a producer of cardiac devices based in Irvine, now has more manufacturing employees in Puerto Rico and in the Dominican Republic than in Orange County. The company said it was discouraged recently when it put out feelers to California cities about building a 500-employee factory. Few communities in the state responded, but representatives of Ireland and Singapore are competing aggressively for the facility.

Still, California can't expect to garner all manufacturing jobs being created by its biomedical firms, people in the industry say. Incentives can't entirely make up for higher wage and operating costs associated with doing business in the Golden State.

For all its drawbacks, California is not an easy mark in the eyes of some global competitors. "Companies will continue to build factories there, why not?" Singapore economic development official Beh Swan Gin said. "Everyone wants to live there."

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