Silicon Valley's biotech sector is still going strong
Silicon Valley's tech companies have struggled with mass layoffs in the past year, but the biotech industry hasn't suffered quite the same fate.
Why it matters: The Bay Area's biotech hub has been in the national spotlight in recent years amid pandemic-era breakthroughs and cautionary tales like Theranos' fall from grace.
- Yes, but: The sector has in many ways served as an anchor for the local economy despite concerns about a recession.
What's happening: The region produced over $100 billion in economic output in 2021, new data from California Life Sciences' 2023 sector report shows.
By the end of Q2 2023, local employment in the field rose to nearly 153,000, according to real estate and investment company CBRE.
- The need for expansion has led many developers to repurpose office buildings as life sciences facilities, per CBRE.
What they're saying: The Bay Area — and California in general — has remained well-positioned to support life sciences innovation because of its access to research institutions, a high-skilled workforce and networks of investors, Brent Fisk, a senior vice president at industry organization California Life Sciences, said in a statement to Axios.
- "It had a number of early tech winners that built this substantial presence ... [and] really fueled an environment where there is a huge amount of talent that you want to tap into," Sujal Patel, co-founder and CEO of proteome development company Nautilus Biotechnology, told Axios.
Context: The Bay Area is considered the "birthplace of biotech," Fisk said.
- It dates to 1976, when Genentech was first incorporated. The company revolutionized the pharmaceuticals market with its pioneering gene-splicing technology.
- Today, South San Francisco alone is home to the largest biotech cluster in the world, boasting over 200 companies and a life sciences workforce drawn from nearby academic institutions.
- Other prominent companies headquartered in the Bay Area include 23andMe, Vir Biotechnology and Gilead Sciences.
The big picture: The Bay Area, Boston-Cambridge and Seattle were the fastest-growing life sciences markets last year, with employment in the U.S. reaching a record high at the start of 2023.
Yes, but: It's not all smooth sailing.
- A slowdown in venture capital funding, triggered by the Federal Reserve's policy moves in the past year, has been "the leading contributor to a contraction in demand," CBRE notes.
- Fisk also warned that pricing provisions in the Inflation Reduction Act could lead to cuts in jobs and cures.
What to watch: With advancements in machine learning and AI, Patel believes there will be "even more energy" fueling biotech innovation.
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