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California is more than the birthplace of the internet and the latest AI technologies. Life sciences represent a US$450 billion economy, and the state is increasingly relying on an integrated cluster model, rather than single powerhouses.

San Francisco and San Diego: Strides in public/private funding
No wonder why thousands of executives, investors, and scientists fly to San Francisco every January. Beyond the pristine weather at that time of the year, the “Golden Gate City” is also home to the JP Morgan Healthcare Conference, one of the most anticipated events of the year, strategically located in one of the hearts of the VC and biotech communities of the US.

Despite the economic headwinds of the past 18 months, the San Fransisco life sciences cluster, with its over 2,400 biotechs, fared relatively well. In life sciences, the number of leases, megaleases, and square feet used in labs are often good indicators of a hub’s health. In that sense, the Bay Area is not just the tech capital of the world, it is home to thousands of students, VCs, and entrepreneurs that cumulatively occupy 38 million square feet of lab space, a figure that is set to grow by close to 10% in 2024 according to CBRE. Among those players, drugmaker Horizon, stroke startup Imperative Care, and cell-sorting firm Nodexus all announced plans to expand in the Bay in 2023. Lab vacancy remained low compared with other sectors, and new leases and expansions point to the resilience of the sector.

The cluster also remains an investor-favorite at both governmental and private levels. The Bay Area received US$1.3 billion in NIH funding in H1 2023 alone, ranking it third in the country. A decade-long culture of entrepreneurship and risk-taking has made the Bay Area the Eldorado for VC funding in the country, and, boosted by both the AI boom and the biotech revival of H2 2023, San Francisco startups pooled a cumulative US$49 billion in seed financing through growth funding in 2023. That represented 41% of the total US investment, and the highest share in years. Interestingly, sustained record investment in the past years has pushed more science from the early stages to the clinical trial stage, suggesting the potential for future scientific and capital growth.

Despite employment headwinds felt throughout the country amidst fears of a recession, job growth saw a positive growth trajectory in San Diego in 2023, according to Biocom California’s 2023 Economic Impact report. The cluster felt the pinch mostly in the notable decrease in VC funding, with the industry attracting US$2.5 billion in 2022, less than half compared with the year before. Yet, there are early signs to point to a positive 2024 for the other end of the “biotech beach”. 

Los Angeles: Materializing hopes
Compared with its Californian peers, the LA area has been in dire need of a boost to unlock its biotech activity for years. Recent months saw major developments in the cluster’s potential to become a leading biotech hub.

In 2018, the creation of BioscienceLA acted as a catalyst for investment to flow in the greater LA region. Now known among the investor community behind the iconic Hollywood sign, LA grew to over 2900 life sciences establishments. Among them, firms like Kite, Capsida Biotherapeutics or Acelyrin, who registered positive results treating psoriatic arthritis for its lead asset izokibep in March 2024 contributed to the growth of the ecosystem. 

LA is also poised to benefit from the unique ecosystem of collaboration between academia, the state, and private investors in California. In early January, UCLA acquired an empty mall in a US$700 million deal to create the “Research Park” Southern California needed to bolster innovation, discovery, and economic growth. The 700,000 sq. ft property will house the California Institute for Immunology and Immunotherapy at UCLA and the UCLA Center for Quantum Science and Engineering. With this renewed capability, UCLA gave a credible boost to its ambitious goal of building the immunology equivalent of Silicon Valley in LA.

Looking ahead, new biotechs in the C&G, CRISPR, and immunology spaces are expected to sprout around university-funded incubators, such as QB3, again highlighting the positive relationship between the academic ecosystem, made up of UC Santa Cruz, Berkeley, and UCLA notably – and the private sector in California. Importantly, there seems to be a fresh approach to collaboration in California. Incubators are now working across clusters rather than behind their university walls, which reflects a trend seen across industry segments, summed up Joe Panetta: “We are now beginning to see California move forward as not two or three individual clusters, but rather as a powerhouse of integrated clusters.”