California Biomedical Industry - California Healthcare Institute

In analyzing California’s biomedical industry over the past year, beyond access to capital, we have identified four areas wherecompetitive challenges and risks are particularly acute.••The Political Economy of California. Newly elected Governor Jerry Brown presides over an economy that hassuffered a severe financial crisis. With a budget deficit projected between $25 - $30 billion, and unemployment at 12.4percent, it is difficult to see how the state’s fiscal condition could be much worse. Economists forecast a very slow recovery,with high unemployment persisting for years. As a result, state lawmakers are reluctant to approve incentives (e.g. taxcredits) that promote industry growth. At the same time, the real possibility of tax increases clouds the future plans offirms that would add jobs in the state.••The U.S. Food and Drug Administration. The most important government related factor in biomedical companies’success is the FDA. In recent years, however, after a series of high-profile product safety issues, the agency has tendedto discount benefits compared to risks in ways that discourage innovation. Moreover, evidence indicates that reviewershave requested increasingly large amounts of clinical data and have grown more guarded and less communicative intheir dealings with industry. Uncertainty and unpredictability at the FDA have reached serious proportions, resultingin a widespread shift of drug and device clinical trials and product introductions to Europe, with consequences for U.S.competitiveness and patient care.••Commitment to Research and Education. The looming federal deficit places great pressure on Congress to limitscience funding, mainly the National Institutes of Health, which provides core support for California’s research universitiesand private research institutes. Meanwhile, the University of California, California State University and CommunityColleges have reduced staff and raised student fees. Together these institutions have been the cornerstone of the state’scompetitiveness, generating world class inventions and educating a workforce prepared to advance life sciences researchand development.••Healthcare Reform. The new federal law, certain to be challenged in the 112th Congress and in the courts, is likely tochange the landscape for biomedical innovation. Most of the 30 million or so uninsured who will gain coverage will do sounder Medicaid or state programs with historically low reimbursement rates. New taxes on drugs and devices will be asubject for Congress, but in light of federal and state deficits, higher taxes are clearly a risk.Our analysis is more diagnostic than prescriptive. The policy choices in each of these areas are different and complex. Still, ourresearch, extensive interviews and contacts with biomedical industry leaders assure us that these topics should be informingpolicymakers’ thinking about how to preserve and strengthen one of America’s great industries.David Gollaher, Ph.D. Gail Maderis Tracy LefteroffPresident and CEO, President and CEO Partner, National Life SciencesCHI-California Healthcare Institute BayBio PricewaterhouseCoopers LLPCalifornia Biomedical Industry 2011 Report | 3

California Biomedical Industry DefinedCalifornia Biomedical IndustryReport HighlightsNumber of California biomedicalcompanies:2,244Total estimated revenues:$114 billionTotal estimated employment:267,772Total estimated wages and salariespaid: $19.4 billionAverage annual biomedical industrywage: $72,332Total NIH grants awarded:$3.2 billionTotal estimated venture capitalinvestment in California biomedicalcompanies:$2.6 billionTotal biomedical exports:$15.4 billionWhat is an industry? The Googledictionary suggests various definitions:a particular branch of economic orcommercial activity; a domain inwhich a great deal of time and effortis expended; and, simply, “hardwork.” Actually, all of these apply toCalifornia’s biomedical industry, abroad, diverse field that encompassesscientists, engineers, entrepreneurs,manufacturers, marketers and, as thisreport makes clear, almost every typeof professional. What ultimately bringsthe industry together, though, is acommon purpose: innovation of bettermedicines, tests and treatments forpatients in need.Despite the rapid proliferation ofbiotech and medical technology aroundthe world, California remains theindustry’s global leader. Over the pastdecade or so, as other states and nationshave striven to discover the secret tocreating high-tech jobs, California’sbiomedical clusters – from the BayArea to San Diego – have been studiedintensely. How did biotechnologyoriginate in San Francisco? Whatconditions enabled the new science toflourish? How did basic research makethe great leap to successful commercialdevelopment? And, perhaps mostimportant of all, what has made thestate’s biomedical industry sustainablein the face of growing competition?The answers are not simple. Afterall, there was no master plan; theindustry grew organically within theunique conditions of the Californiaenvironment. What is evident inretrospect, however, is that the stateconstitutes an extraordinary ecosystemin which many different elementswork together, spawning at differenttimes Hollywood, Silicon Valley and,most recently, the biomedical industry.Some of the essential elements areeasy to name. Leading-edge science;experienced venture capital; a diverse,well-educated workforce; a group ofserial entrepreneurs. But others aremore subtle. A culture that appreciatesrisk takers and that does not penalizefailure; healthy skepticism about timehonoredinstitutions; freedom to ignoreboundaries.Looking at today’s lifesciences industry, one seesamazing variety and dynamicconvergence.Traditional categories within the lifesciences have blurred because scientistsare venturing into ever more complexspace. What used to be the realm ofchemists and clinicians has expandedto include engineers, mathematicians,biologists, software designersethicists, and architects. Researchersare pursuing diseases to their rootcauses, below the cellular level, tounderstand the molecular triggers forgene expression. Doctors and engineersare collaborating to embed advancedwireless technologies in medical devicesthat can manage diabetics’ insulin levelsor cardiac patients’ arrhythmias moreprecisely, and with better outcomes,than anyone a decade ago could haveimagined.And the players keep changing roles.Physicians become researchers,and scientists become companyfounders. Legislators become patientadvocates, and math majors becomebiostatisticians. Most are driven by apassion to make a difference, and whenthey see a way to make a more lastingimpact or to improve people’s lives, theychange course.Just as technology is closing the gapsbetween people in their daily lives, it isrevolutionizing public health. In a worldwith five billion cell phones, almosteverybody — physicians, researchers,investors, caregivers, patients andinterested bystanders — has access tomore information and more ways toconnect with others who have similarinterests. Patients are taking moreresponsibility for their own treatmentsand health. Specialists are reading MRI4 | California Biomedical Industry 2011 Report

scans from patients a continent away.Volunteers are safely testing for HIV/AIDS and tuberculosis in regions thatnever had established labs. In a worldwhere access to digital information,instant analysis and transmission ofdata are almost free, it is clear thatthe biomedical industry is poised forincredible transformation.At the center of this transformation arethe 268,000 Californians employed inthe state’s basic research institutionsand commercial life sciences companiesTogether they are seeking answers tothe mysteries of diseases, from the mostcommon infections to the rarest tumors.This report describes current work andrecent advances in oncology, centralnervous system disorders, infectiousdisease, immunologic and inflammatoryconditions, cardiovascular disease, anddiabetes and other metabolic diseases.for biotech, has experienced flat ordeclining valuations based on questionsabout its capacity to produce newdrugs. While there is great hope for anew era of personalized medicine, itremains unclear how the changes in thebiomedical industry’s healthcare systemera necessary for its growth will unfold.Meanwhile the state of Californiastruggles with high unemploymentand a massive budget deficit thatconstrain policymakers’ choices. In thecase of the state institutions of highereducation, the financial crisis continuesto worsen. The UC system cut expensesand programs, capped enrollments andimplemented system-wide furloughsto close a $813 million budget gap in2009-2010 — a gap predominantlyopened by the state’s inability tomeet its commitments to the system.According to the California LegislativeAnalyst, the projected UC systemshortfall for 2010-2011 is $1 billion,and there is no relief in sight. The CSUsystem and community colleges aresimilarly stressed, as is California’s K-14education budget.The truth is, there is no long-termsolution to California’s predicamentexcept job creation and a new waveof economic growth. The state’sbiomedical industry has made animportant contribution to the Californiaeconomy and, for reasons this reportexplains, is well-positioned to play aneven greater role in the future. Butthe competition is fierce and growingfiercer. For policymakers, the firststep toward a solution is an accurateassessment of the present situation.And for the life sciences industry, that isthe purpose of this report.As detailed in this report, California’sbiomedical industry has built anamazing array of state-of-the-artresearch facilities and centers. It hasestablished collaborative networksdesigned to accelerate translationalresearch — to put basic researchdiscoveries to work for patients asquickly as possible. It has erectedand continues to build specialfacilities to promote collaborationamong researchers, clinicians andentrepreneurs.Still, as Shakespeare put it, what’s pastis prologue. Whether the remarkable,unplanned success of California’sbiomedical sector can carry on inthe decades to come is an openquestion. The aftershocks of the GreatRecession continue to reverberate.Availability of capital, especially forstartups, is extremely limited as themarket’s appetite for risk is reduced.The business model that producedhundreds of biotech and medical devicefirms – early-stage venture funding,followed by an initial public offering(IPO) of stock – is seriously fractured.And the pharmaceutical industry,which for decades served as an anchorIndustry sectorsThe California biomedical industry spans the full range of innovative research andtechnological development aimed at improving human health and the quality of lifefor patients around the world.Basic research adds to the body of scientific knowledge. California’s universitiesand public and private research centers train scientists, engineers and technicalspecialists. They provide research space, equipment and resources for ongoingresearch. And they fuel the state’s legacy of innovation via technology transfer andthe formation of spin-off companies.Biopharmaceuticals is the product category that includes human therapeutics— drugs — whether small-molecule chemical compounds, biologics (geneticallyengineered proteins) or cell therapies.Diagnostics are technologies that diagnose and characterize patients’ conditions.From simple, “old school” tools such as home test kits to computerized equipmentto map a patient’s genome, diagnostics are essential in providing correct diagnosesand informing treatments for the best possible outcomes.Medical devices are tools for improving or diagnosing human health and mobility.The term medical technology or “medtech” covers everything from medicalprofessionals’ instruments to devices patients use to improve mobility or function, toimplants to replace or reinforce damaged or faulty body parts.Laboratory services are those service providers that test patients’ or researchsamples with precisely calibrated and strictly regulated equipment and proceduresto ensure accurate results.Wholesale trade companies manage the import, export and exchange ofpharmaceuticals, medical devices, diagnostics and research reagents and othersupplies in the global market.California Biomedical Industry 2011 Report | 5

Legislator profileRepresentative Brian BilbrayIt is heartbreaking to lose a parentto disease. It is devastating to losea child. Representative Brian Bilbrayhas suffered both.“I was in 10th grade when I lost myfather to cancer. I watched what thathideous disease can do not just to myfather, but to the entire family.“But I have to say that it was when Ilost my first son to crib death, SIDS,that I received the biggest wakeupcall about how important research is,”Rep. Bilbray said.These experiences inspired Rep.Bilbray’s longstanding commitmentto helping others avoid such tragediesby supporting federal government’sinvestment in biomedical researchthrough the National Institutes ofHealth (NIH). “Some of us have to standup and be willing to take the heat todo the right thing if we want to see themiracles of the future,” he explained.Rep. Bilbray has long held a strongcommitment to fiscal conservatism,which means he usually advocates lessgovernment spending, not more. Butbiomedical research is an exception.The federal government has the scaleand ability and, Rep. Bilbray believes,the constitutional obligation to invest inthe nation’s research foundations. With6 | California Biomedical Industry 2011 Reportan annual budget of more than $31billion, NIH is the cornerstone for thenation’s medical research enterprise.It is from there that private investmentand research institutions may help buildtomorrow’s miracles.The federal commitment must be alsobe consistent over long periods of time.Only sustained investment, says Rep.Bilbray, will allow future generations tolive better. From 1998-2003, Congressdoubled NIH’s budget. But at the endof that period, funding essentiallyflattened. Apart from a one-timeinfusion of Recovery Act funding, it hasremained flat ever since. For this reason,Rep. Bilbray calls the doubling, in whichhe admits his strong involvement, “wellintentioned,” but unsustainable over thelonger-term.Instead, he says, the solution must be acollaborative, non-partisan effort to finda truly long-term, even generationalstrategy, for NIH that will encourage theentire biomedical ecosystem to thrive.“We need to work together, Democrats,Republicans and Independents. Weneed to work as Americans to find thelevel of commitment that the federalgovernment can make so that privateinvestors and researchers can know thatthere is long-term involvement. Andthat in turn allows them to know whatlong-term commitments they need tomake,” said Rep. Bilbray. Additionally,he believes we must reform the federalgovernment to ensure these researchbreakthroughs are translated toinnovative, lifesaving products. Thisincludes reforming the U.S. Food andDrug Administration (FDA) so thatwe can bridge the infamous “valley ofdeath” and translate research frombench to bedside.Those commitments are essentialgoals for the seasoned congressman.There have been great strides in cancertreatment: the overall death rate hassteadily declined since the early 1990sand the five-year survival rate is now68 percent, up from 50 percent in the1970s. And researchers know todaythat cancer is not just one disease, buthundreds, which we must fight withprecision at the molecular and geneticlevels. That said, cancer is expected totake 569,490 American lives this year,just as it took Bilbray’s father. Andwhile significant studies have givenparents strict guidelines on how toavoid SIDS, the leading cause of thisterrible syndrome remains a mystery.In summary, much has beenaccomplished, but Rep. Bilbray believesthere is much more we can do.“I worry that we take our modernmiracles for granted, because thisis something we must not do. Whowould have thought in the ’60s thatour daughters could get a vaccine toavoid cervical cancer? There is a lotof long-term investment and a lot ofgood science that makes these miraclespossible. And that means if we want tosee them in the future, we have got to bewilling to do the research today.”Doing the research starts withsignificant, sustained investments in theNIH. Regardless of political views oreconomic schools of thought, Americansagree upon the need to continueinvesting in biomedical research.Because disease impacts every one ofus – including the men and women inthe U.S. Congress. For Rep. Bilbray,we have a clear call to action for ourcollective future.“It is not an abstract. We are talkingabout real lives, real people, and realopportunity to avoid future tragedies, soit is not what you do in the next year orthe next election. It is what you’ve doneby the time your grandchildren showup. That’s going to be the real test.”This profile was first published in Profiles of Promise.It and other articles about members of Congress whosupport biomedical innovations can be accessed at:http://www.profilesofpromise.com.

Figure 1: Distribution of employmentin California’s biomedical industry bysectorBroken down by sector, the overallbiomedical employment in the stateincluded more than 107,000 peoplein the medical devices, instrumentsand diagnostics sectors — for about40 percent of the overall total jobs.Biopharmaceutical companiesemployed the next largest segment withjust under 81,000 jobs or approximately30 percent of the total. The state’sacademic research centers employednearly 43,000 people in life sciencespositions for approximately 16 percentof the total. Wholesale trade accountedfor more than 31,000 personnelor about 12 percent of the state’sbiomedical employees. The remaining5,500 employees, or just over 2 percent,Figure 2: California biomedical employmentworked in the laboratory services sector.by sector, 200916.0%42,8662.1%5,49311.7%31,40730.1%80,56040.1%107,447Medical devices, instruments & diagnosticsBiopharmaceuticalsAcademic researchWholesale tradeLaboratory servicesSource: Bureau of Labor Statistics Quarterly Census ofEmployment and Wages and Company Specific SEC filings.Figure 2: California biomedicalemployment by sectorWhile the recession was officiallydeclared over in June 2009, the U.S.job market continues to struggle.From June 2009 to October 2009, thenational unemployment rate continuedto rise from 9.5 percent to 10.1 percent,and it remains at 9.8 percent as ofNovember 2010 on a seasonallyadjusted basis. California has beenparticularly hard hit in the recession,with an average 2009 unemploymentrate of 11.4 percent, up from an averageof 7.2 percent in 2008 across allindustries. The biomedical industryin California has fared better than thestate as whole but has still experiencedemployment losses. In fact, 2009marked the first year in the past fivethat biomedical employment numbersdecreased (Figure 3). Overall totalsdeclined statewide by nearly 6,000 jobsto 2006-2007 levels.To put the jobs decline in perspective,it is important to remember thatunemployment is a nationwideconcern. In November 2010, thenational unemployment rate was 9.8percent, seasonally adjusted, andCalifornia reported a 12.4 percentjobless rate. Nationally, California tiedwith Michigan for the second-highestunemployment rate, with only Nevadareporting a higher percentage ofunemployed, seasonally adjusted. Thecurrent economic climate underscoresFigure 4: 3: California biomedical biomedical employmentby employment year by year20092008267,772273,559Careers in theBiomedical Industry• Assembly line supervisors• Medical device engineers• Accountants• Database managers• Heart valve assembly specialists• Human resource directors• Warehouse staff• Lab technicians• Regulatory affairs specialists• Biostatisticians monitoring clinical trials• Molecular biologists and chemists• Chemical process engineers• Facilities maintenance mechanics• Materials handlers• Instrumentation/calibration techs• Quality control inspectors• Library assistants• Glass washers2007270,7912006267,0012005255,808Source: Bureau of Labor Statistics Quarterly Census ofEmployment and Wages and Company Specific SEC filings.California Biomedical Industry 2011 Report | 9

Figure 4: California biomedical vs.other high-tech industries, 2009Computer and Internet-related servicesBiomedicalMotion pictures148,298Computers and peripheral manufacturingTelecommunications110,240Aerospace manufacturing70,783146,759Figure 5: Change in employmentamong California’s high-techindustriesSector 2008 2009%ChangeAerospacemanufacturing 73,135 70,783 -3.2Biomedical 273,559 267,772 -2.1Computer andInternet relatedservices 275,615 259,616 -5.8Computer andperipheral equipment 159,306 146,759 -7.9Motion pictures 163,392 148,298 -9.2Telecommunications 117,539 110,240 -6.2Figure 6: Employment growth inCalifornia’s biomedical industry bysectorBiomedical sector 2005 2009259,616267,772AverageannualgrowthrateAcademic research 39,108 42,866 2.3%Biopharmaceuticals 73,472 80,560 2.3%the biomedical industry’s importance incontinuing to provide work and incomefor Californians.In comparison to other high-techsectors, life sciences companiescontinue to be a key component of thestate’s workforce. Among the GoldenState’s innovative, high-tech sectors,biomedical is second only to computerand Internet-related services andcomputer and peripheral manufacturing(Figure 4). In 2009, the informationtechnology sectors (including computerand Internet related services andcomputer and peripheral manufacturingindustries) employed an estimated406,000 people, compared to thebiomedical industry’s 268,000.The next largest employer was themotion picture industry with 148,000employees. This ranking has held steadyfor the past 15 years.Biomedical employment numbers,however, have been the most resilientamong the high-tech industries (Figure5). At year-end 2009, biomedicalemployment had dropped 2.1 percentas compared to the end of 2008.Aerospace manufacturing lost morethan a percentage point more than didbiomedical and the other sectors sawlosses that were multiples higher.The biomedical industry’s relativestaying power is important not onlyto the sector’s immediate employees.An estimated 655,000 additionalCalifornians are employed either partorfull-time because of the life sciencesindustry. From professionals who servedrug and device companies to thosewho provide goods and services to lifesciences employees — combined withbiomedical personnel — an estimated4.6 percent of the state’s total workershold biomedical industry related jobs.Considering its cumulative growth from2005 through 2009, the biomedicalindustry as a whole remains on apositive track. Overall, biomedicalorganizations added nearly 12,000 jobsover that five-year period. Some sectorsfared better than others (Figure 6).From 2005 through 2009, academicresearch and biopharmaceuticals grewat an average annual growth rate ofmore than 2.3 percent. Wholesaletrade grew at an average annual rateof 1.5 percent, but laboratory servicesand “medtech” companies lost enoughground in 2009 to show actual declinesover the five-year period.WagesNot only has the California biomedicalindustry sustained most of its jobs, itcontinues to compensate employeeswell. In 2009, life sciences employeesearned a total of $19.4 billion. Theaverage annual wage for the industryacross the state in 2009 was $72,332,down slightly from $74,797 in 2007and 2008.Compensation varies among theindustry’s sectors (Figure 8). Atan average of nearly $100,000 inLaboratory services 5,814 5,493 -1.4%Medical devices,instruments anddiagnostics107,846 107,447 -0.1%Wholesale trade 29,568 31,407 1.5%Figure 7: Direct, indirect and induced economic contributions of the biomedicalindustry to the California economy, 2009Employment Labor income ($B) Output ($B) Value added ($B)Direct contribution 268,000 30 114 50Indirect contribution 308,000 22 58 34Source: Bureau of Labor Statistics Quarterly Census ofEmployment and Wages and Company SpecificSEC filings.Induced contribution 347,000 18 52 32Total contribution 923,000 69 224 115Total contribution as a percentof the state economy4.6% 6.0% 6.9% 6.2%Source: Estimates based on the IMPLAN modeling system.Numbers may not add to total due to rounding.10 | California Biomedical Industry 2011 Report

Figure 8: California biomedical industryaverage wages by sector, 2009BiopharmaceuticalsWholesale tradeMedical devices, instruments & diagnosticsLaboratory servicesAcademic researchFigure 9: Change in Californiabiomedical employment by sector(March 2008 to 2009 and March 2009 toMarch 2010)SectorMarch 2008to March2009March2009 toMarch2010Academic research 173 -546Biopharmaceuticals 252 802Laboratory services 4 840Medical devices,instruments & diagnostics-2,216 -1,790Wholesale trade -739 -303Figure 10: Change in Californiabiomedical vs. other high-techemployment sectors (March 2008 to2009 and March 2009 to March 2010)Sector$57,276$57,024$55,159March 2008to March2009March2009 toMarch2010Aerospace manufacturing -733 -3,757Biomedical -2,527 -997Computer programming -11,286 -3,674Computers and peripheralequipment$79,422$99,8290 Source: 20000 Bureau of Labor 40000 Statistics 60000 Quarterly 80000 Census 100000of Employment and Wages and Company SpecificSEC filings.-8,417 -9,371Motion pictures -12,480 -4,914Telecommunications -6,107 -14,753Source: Bureau of Labor Statistics Quarterly Census ofEmployment and Wages and Company Specific SECfilings.2009 — a decrease of approximately$9,000 or 8.4 percent from 2008and it is -7.9 percent from 2007 —biopharmaceutical companies still paidthe industry’s highest average annualwages. Wholesale trade came in secondwith average annual wages of about$80,000, unchanged from 2008 butdown -6.7 percent from 2007 levels.Laboratory services, academic research,and medical device organizations’salaries remained steady in the mid- tohigh-$50,000 range.Adding together the indirect andcollateral impact of the biomedicalindustry on the state, total labor incomefor 2009 was estimated to be $69billion. Moreover, the value added —the additional value created throughemployee compensation, proprietors’income, income to capital owners fromproperty and indirect business taxes —totaled $115 billion.TrendsBetween March 2009 and March 2010,the California biomedical industry shednearly 1,000 jobs (Figure 9). This wasless than half of the number of jobs cutin the same time period the year prior.The nation’s economic recovery remainsanemic, and the prognosis for thestate’s financial health remains unclear.However, a deceleration of job lossesmay suggest that the industryis stabilizing.A hopeful note is sounding more loudlyin some sectors and some clusters thanothers. San Diego County employmentcontinues to grow — off setting much ofthe losses in other biomedical hot spotsaround the state. Sacramento Countyalso showed positive growth in both12-month periods. Riverside and SanBernardino counties, however, continueto shed jobs, which is bad news for aregion also heavily damaged by thehousing crisis and job losses across allincome levels and industry categories.All of the state’s high-tech industriesare feeling the pain. In fact, betweenMarch of 2008 and March 2010, thebiomedical industry appeared to bethe most resilient (Figure 10). Theaerospace, computer and peripheralequipment manufacturers andtelecommunications industries cutmore jobs from March 2009 to 2010than they did in the same period ayear earlier. None of the state’s mostinnovative sectors were able to add jobsbetween March 2009 and March 2010.Uncertainty about future funding israising the anxiety level across thebiomedical industry. From tax issuesto healthcare reform to challengedbudgeting processes at both thestate and federal level, the future oflife sciences organizations and theirpotential returns on investment forinnovative new discoveries remainsuncertain.Despite that uncertainty, a survey of thestate’s biomedical companies revealedthe industry’s resilience and confidence.The 2011 CEO Survey, a joint projectof the California Healthcare Institute,BayBio and PricewaterhouseCoopers(PwC), showed that respondents heldtheir operations steady or expandedduring the year (Figure 11). The findingheld true for all operational categoriesfrom general and administrative(G&A) and total workforces toresearch and development (R&D) andmanufacturing. The highest growthwas recorded in R&D, which bodes wellfor future operations. The biggest cutscame in overall staffing, a trend seenacross the country in every industry inthe current economic climate.California Biomedical Industry 2011 Report | 11

Among the companies that expandedtheir in-state operations, the largestpercentage credited the skilledworkforce for that decision (Figure12). High marks also were given forthe culture of entrepreneurship orinnovation in California. Many also arestaying and growing here because this iswhere their companies were founded.Among companies that cut operationsin California over the past year, 20percent cited “cost-cutting initiatives” astheir motive (Figure 13). The other topcited reasons were business decline andlack or loss of private funding — both at16 percent.Over the past year, the surveyrespondents reported much moreanemic growth in their out-of-state andforeign operations, although growthdid exceed reductions in all categoriesexcept G&A staffing.Looking ahead 24 months, respondentsanticipate solid growth for theirCalifornia operations (Figure 15) andslow or flat growth for their out-of-Figure 11: 2011 CEO Survey: Have the following activities expanded, held steadyor reduced for the company’s operations inside California in the past year?Held steadyReducedExpandedResearchanddevelopment35%22%43%Manufacturing58%13%29%General andadministrative53%24%24%Overallworkforce34%26%40%Figure 12: 2011 CEO Survey: Which of the following are the factors influencingyour decision to locate or expand your operations inside California?Skilled workforce 36%History of founders/California is where the company was founded 31%Culture of entrepreneurship or innovation 31%Access to leading research universities 28%Quality of life 26%Access to pharmaceutical, biotech, device and diagnostics companies 23%Access to funding or capital 21%Pro-business environment or commitment to the industry 9%Tax incentives 8%Cost of doing business 7%Alliance with other leading California industries 6%Other 4%Cost of living 4%State commitment to education funding 1%Figure 13: 2011 CEO Survey: Select the reasons why the company’s operationshave reduced inside California in the past year.Cost cutting initiative 20%Business slowdown or decline 16%Lack or loss of private funding 16%Overall business climate/cost of doing business 13%Expanded new operations outside of California 8%Lack of tax incentives or unfavorable tax environment 6%Cost of living 6%Other 6%Moved existing operations outside of California 4%Qualified workforce elsewhere 4%Sold or consolidated a portion of the business 3%Other regions offering free or less expensive land/infrastructure for expansion 3%Attractive state funding, grants, or investments elsewhere 1%12 | California Biomedical Industry 2011 Report

state operations (Figure 16). For thefirst time in the history of this report,more respondents intend to increasemanufacturing in California versusbeyond the state’s borders —41 percent versus 21 percent. Further,companies are expecting to increasetheir workforces overall and across allcategories.With the world’s most comprehensivenetwork of research and higher learningcenters, entrepreneurs, employers,investors and suppliers in place,California is well positioned to sustainand even grow its highly specializedand well compensated workforce. Thestrength of the biomedical sector’scontributions to the state’s employmentis evident in the number of jobsretained through a significant economicdownturn and the need and desireof the industry’s leading innovatorsto continue to grow their Californiaoperations.Figure 14: 2011 CEO Survey: Have the following activities expanded, held steadyor reduced for the company’s operations outside California in the past year?Will expandWill hold steadyWill reduceResearch anddevelopment60%16%23%Manufacturing71%9%20%General andadministrative76%14%10%Overallworkforce53%16%31%Figure 15: 2011 CEO Survey: Do you anticipate that the following activities willexpand, hold steady or be reduced for the company’s operations inside Californiain the next two years?Will expandWill hold steadyWill reduceResearch anddevelopment62%26%12%Manufacturing41%42%17%General andadministrative45%40%15%Overallworkforce68%19%13%Figure 16: 2011 CEO Survey: Do you anticipate that the following activitieswill expand, hold steady or be reduced for the company’s operations outsideCalifornia in the next two years?Will expandWill hold steadyWill reduceResearch anddevelopment25%59%16%Manufacturing21%69%9%General andadministrative10%76%14%Overallworkforce31%52%16%PerspectiveLife sciences sector construction to build steamThe pace of job creation in Californiawas expected to pick up in the fourthquarter of 2010, according to anindicator published in early Novemberfrom the A. Gary Anderson Centerfor Economy Research at ChapmanUniversity. However, the trends inconstruction spending offer less causefor optimism. California constructionspending, which shrank 30.1 percent inthe third quarter of 2010, was the onlycomponent that continued to be weak.Despite this tough backdrop, on anational basis job creation by U.S. lifesciences employers continues to grow.As the industry continues to grow,so do requirements for laboratoryfacilities, making new life scienceconstruction one of the few bright spotsin the construction world. AlexandriaReal Estate Equities, Inc. — therecognized world-wide leader of labspace development — has continuedto develop life science real estatethroughout the economic downturn,given resilient demand in Alexandria’sbest-in-class adjacency locations. Asan example, the company’s projects inMission Bay, San Francisco continueto move forward, and recently signedleading life science tenants includeBayer, Celgene and UCSF, to name afew. Additionally, Alexandria continuesto work with its general contractors tocomplete site work that will expeditefuture building deliveries oncesignificant pre-leasing is completed.As the industry recovers, Alexandria willstrategically adapt to meet its growingspace needs, and play a pivotal rolesupporting the in creation of future jobsin the life science construction sector.California Biomedical Industry 2011 Report | 13

InvestmentTherapeutic DiscoveryProject Credit Supports SmallEmployers in the State; HelpsFoster InnovationDuring the debate over healthcarereform, CHI and BayBio submitted aletter signed by 50 California-basedfirms to Congress urging supportfor final passage of the TherapeuticDiscovery Project Credit provisionin the new healthcare reform law. In2010, this nascent program provided$1 billion in tax credits and grants tosmall life science companies (thosewith fewer than 250 employees)that showed significant potentialto produce new and cost-savingtherapies, support high paying jobsand increase U.S. competitiveness.California itself received $214 millionrepresenting 278 companies and 1,248projects being funded. Such smallfirms are at the heart of California’sbiomedical industry. Over the past twoyears, though, these firms have faceddifficulty in attracting venture capitaland an unprecedented credit crunch.During these tough economic times,these grants and credits will aide in thedevelopment of the next life saving andlife extending therapies for patientswho need them most. CHI and BayBiowill continue to push for renewal of thecredit in 2011 and for years to come.It takes many millions, and sometimesbillions, of dollars to build and operatea biomedical company. Beyond thecapital-intensive need for specializedequipment and highly trained staff,the expense of meeting the FDA’sregulatory requirements is unique tobiomedical products.At the same time, biomedical companiesare high-risk ventures. Only a smallpercentage of products ever recouptheir investments. Investors, especiallyin a struggling economy, have stringentguidelines for backing potentialproducts and their developers. Potentiallicensees or acquirers — the industry’slarge pharmaceutical companies andmajor medical device manufacturers —are equally discerning.Funding for biomedical companies in2010 seemed to have hit a plateau, withoverall totals essentially equal to thoseof 2009. In contrast to 2009, however,there were several biopharmaceuticalIPOs filed in 2010 as well as increasedacquisition and licensing activity inboth the biopharmaceutical and medicaltechnology sectors. Investors will bewatching the financial results of thoseearly transactions before decidingwhether to return to biomedicalfinancing at a more significant level.Venture capitalVenture capital continues to drivemany of the country’s innovative newcompanies. All told, venture capitalinvestments in the United States totaled$17.7 billion in 2009 (Figure 17). Thattotal was decreased from $28.1 billionin 2008. In the first three quarters of2010, VC investments had reached$16.7 billion, leading to expectationsthat 2010 would be on par with the2009 levels. In all three years, half ofthe national total was put to work byCalifornia companies — a rate that hasremained stable for the past decade.Figure 17: Percent of total U.S.venture capital to California firms and,by percentage, to biotechnology andmedical device companiesU.S. venture capitalinvestments ($M)Percentage of VC inCaliforniaPercentage of CA VC inbiotechnologyPercentage of CA VC inmedical devices2009 2010*$17,680 $16,68950% 50%16% 14%13% 12%Figure 18: Venture capital investmentin California companies by yearYear Companies DealsInvestment($M)1999 1,737 2,197 $21,8342000 2,361 2,935 $41,2552001 1,295 1,527 $15,8832002 930 1,075 $9,0852003 939 1,140 $8,2892004 1,051 1,241 $9,9842005 1,131 1,322 $10,8882006 1,294 1,564 $12,7572007 1,367 1,663 $14,6052008 1,340 1,626 $13,9992009 958 1,137 $8,8582010* 968 971 $8,356Figure 19: Top five industries inCalifornia by VC investmentIndustry 2009 2010*Life sciences $2,597,945,600 $2,175,036,800Industrial/energy$1,213,303,800 $1,610,018,400Software $1,665,063,100 $1,490,932,000Semi-$645,477,100 $719,859,100conductorsIT services $492,269,900 $561,767,900Source: PricewaterhouseCoopers/National VentureCapital Association MoneyTree Report based on datafrom Thomson Reuters. * Includes data through 3rdquarter of 2010.14 | California Biomedical Industry 2011 Report

FigureFigure20.14:VentureVenturecapitalcapitalinvestmentinvestmentininlifelifesciencessciencesbybystatestateState 2008 2009 2010*CA $3,482 $2,598 $2,175MA $1,185 $1,049 $928WA $231 $230 $216NJ $456 $359 $192PA $343 $215 $192TX $148 $128 $185NC $239 $223 $170IL $100 $42 $132MN $288 $181 $111MD $100 $120 $104Figure 21: California life sciencesventure capital investment by sectorDollars in billions$3.5$3.0$2.5$2.0$1.5$1.0$.5$02008TotalBiotech20092010*Medical DevicesIn California, nearly $8.9 billion wasinvested in about 960 companiesthrough more than 1,100 deals in 2009(Figure 18). Those numbers marked asteep decline from VC activity in 2008,but were expected to hold steady in2010. Through the first three quarters of2010, California companies had raised$8.4 billion in venture capital.Life sciences companies took thelargest share of California’s VCinvestments in 2009 and through thefirst nine months of 2010 (Figure 19).The state’s biotechnology, medicaldevices and diagnostics sectors securedapproximately $2.6 billion in VCinvestments in 2009 and an additional$2.2 billion in the first three quartersof 2010.Nationally, VC investment in lifesciences companies totaled $6.0billion in 2009, down from $7.8 billionin 2008. As in the past, Californiacompanies continued to secure thelargest share of U.S. life sciencesventure capital (Figure 20).Figure 15 shows how California’s shareof life sciences VC investments wereFigure 23: Venture capital by stageVenture capital by stage for biotechnologyallocated between biotechnology andmedical device companies over the pastthree years.An historical view of U.S. investmentin biotechnology companies shows thatsupport peaked in 2007 at $5.3 billion.The financial crisis of 2008 continuesto dampen participation in life sciencesinvestment. Year-end 2009 totals of$3.5 billion were 33 percent lower thanat the peak. Recently released data (notshown) indicates only a two percentdecline in 2010.*Dissecting investments by stage ofproduct development may shed light oninvestors’ confidence in and patiencewith the long development time linesof biomedical innovations. Historicallyventure capitalists have funded device,diagnostics and pharmaceuticalR&D firms from startup throughdevelopment and commercialization. Atthe end of 2009, it appeared that VCshad shifted their support to companiesin late-stage development — those thatwould produce returns more quickly.*The fourth quarter and full-year results from the MoneyTreesurvey were released just as this report went to press. Thenumbers indicate that total VC investments in life sciencesfell about 2 percent, from $6.1 billion in 2009 to $6 billion in2010. Investments in life sciences in California fell about 5percent, from well over $2.6 billion in 2009 to $2.5 billion in2010. Note that some of the 2009 totals were also revisedas part of the release. Those changes, however, do notchange the patterns discussed in the report.Figure 22: U.S. biotech venture capitalover past 10 yearsYearInvestments ($M)Numberof Deals1999 $2,031 2702000 $3,987 3532001 $3,359 3392002 $3,212 3152003 $3,602 3482004 $4,233 3902005 $4,047 3982006 $4,611 4712007 $5,287 4942008 $4,351 5012009 $3,543 4062010* $3,149 366YearStart-up/seed stage Early stage Expansion stage Later stageInvestment($ M)Numberof dealsInvestment($ M)Numberof dealsInvestment($ M)Numberof dealsInvestment($ M)Numberof deals2009 $656 94 $1,386 138 $529 61 $973 1132010* $522 89 $1,363 156 $706 62 $558 59Total $1,178 183 $2,749 294 $1,235 123 $1,531 172Venture capital by stage for medical devicesYearStart-up/seed stage Early stage Expansion stage Later stageInvestment($ M)Numberof dealsInvestment($ M)Numberof dealsInvestment($ M)Numberof dealsInvestment($ M)Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree Report based on data fromThomson Reuters. * Includes data through 3rd quarter of 2010.Numberof deals2009 $424 63 $807 99 $372 58 $899 892010* $296 45 $398 73 $353 54 $855 81Total $721 108 $1,205 172 $725 112 $1,753 170California Biomedical Industry 2011 Report | 15

View from the ground2011 CEO Survey resultsRespondents to the 2011 CEO Surveyhad a front-row seat to the financialcrisis and ensuing recession. Althoughthe recession has officially ended, itseffects continue to dampen businessoperations. In fact, over the past year,69 percent of the responding companiesreported that R&D projects had beendelayed. Among the reasons (Figure24), “funding not available” was themost prevalent at 44 percent.As for raising monies through mergersand acquisitions or divestitures,however, the respondents’ strategieswere less transparent. Thoseanticipating participating in an M&Atransaction over the next year werefairly evenly divided at 51 percent veryor somewhat unlikely and 48 percentsomewhat or very likely (Figure 25).On the other hand, only 9 percent ofrespondents said they were very likelyto participate in a sale or divestitureover the coming year, and theremainder were fairly evenly dividedamong very unlikely, somewhat unlikelyand somewhat likely (Figure 26).Although relocating out of state wasnot a strategy cited by respondents (seesurvey data in the Employment section),80 percent of the survey participantshad been courted by other countries,state governments or regional economicdevelopment associations outside ofCalifornia in the past year. Among theother U.S. regions respondents said theywould consider (Figure 27), GreaterBoston ranked highest at 76 percent.With the economy and biomedicalindustry funding environment showingsome initial signs of recovery, the 2011CEO Survey sought entrepreneurs’thoughts on sustaining growth.Perceived threats to growth overthe next five years focused on theworkforce. The threat mentioned most(at 16 percent) as the highest was “lackof innovation/R&D productivity.”The threat that garnered the most topthree placements was “unpreparedworkforce” at 47 percent.California is in good stead to givecompanies confidence in staying orlocating here: As discussed in theEmployment section of this report,respondents noted the state’s workforceand culture of innovation as key benefitsof doing business in California. Themention of those attributes as boththe most beneficial for being hereand the most critical to the industry’sfuture existence reinforces how crucialongoing workforce developmentprograms are.Other high ranking threats point to thecomplexity and difficulty of thriving inthe life sciences sectors. They includelack of data or ability to demonstrateeffectiveness and product liability,with 36 percent and 35 percent ofrespondents, respectively, ranking themin the top three slots. Pricing pressureand government intervention came in at28 percent followed by access to capitalat 25 percent.Workforce development also surfacedas the single most important issuethat the state could address to retainlife sciences research, inventionand investment (Figure 28). Amongissues deemed either somewhat orextremely important, duplication ofregulations was selected by 80 percentof the respondents and workforcedevelopment by 67 percent.Drilling down into the specificcategories, the survey found that alltypes of environmental regulationswere important to respondents (Figure29). Manufacturing restrictions scoredhighest, with 48 percent finding themextremely important and 87 percentcalling them somewhat or extremelyimportant.Not surprisingly, biomedical companiesare in favor of tax incentives of all types(Figure 30). Yet among the respondentsto the 2011 CEO Survey, 67 percentsaid the R&D tax credit was extremelyimportant with only 9 percent saying itwas not important at all.Figure 24: 2011 CEO Survey: Why didFigure the company [G]: 2011 CEO delay Survey: the Why research did orthe company delay the research ordevelopment development project? project?Funding not availableRegulationChange in corporatepriorities or strategyLay-offsClosed facility2%11%18%17%44%Figure 25: 2011 CEO Survey: How likelyis your organization to take part in aFigure [H]: 2011 CEO Survey: How likely ismerger your organization or acquisition to take part over in the a merger next 12months? or acquisition over the next 12 months?Very unlikelySomewhat unlikelySomewhat likelyVery likely14%20%31%34%Figure 26: 2011 CEO Survey: Howlikely is your organization to take partin Figure a sale [I]: 2011 or divesture CEO Survey: over How the likely next is your 12months? organization to take part in a sale or divestitureover the next 12 months?Very unlikelySomewhat unlikelySomewhat likelyVery likelyFigure 27: 2011 CEO Survey: Which ofthe following do you consider to be theFigure [J]: 2011 CEO Survey: Which of themost following attractive do you consider biomedical to be the markets most forresearch attractive biomedical and development markets for research innovationin and the development U.S. outside innovation of California?in the USoutside of California?Greater BostonNorth CarolinaMinneapolis-St. PaulOtherWashington D.C. CorridorWashingtonNew YorkPhoenix9%7%6%31%25%22%20%17%28%30%33%76%16 | California Biomedical Industry 2011 Report

Survey participants also rankedfederal policy issues that impact theiroperations in California (Figure 32). Allwere ranked at higher than 90 percentas somewhat or extremely important.Of the key federal policy issues, thesurvey included more detailed questionsabout two especially timely topics: theFDA (see Figure 42 on page 49) andhealthcare reform (Figure 31). Mostrespondents said that they believed theFDA regulatory approval process hadslowed the growth of their organization— 84 percent agreed or strongly agreed.Asked a different way, 79 percent feltthere are better regulatory approvalprocesses than the FDA’s.The respondents also feared thatother states and other countries aregaining on California and will havebuilt an equally as attractive biomedicalecosystem within the next five years.As for healthcare reform, the futureof which remains unclear in the 112thCongress, respondents predictedincreases in market size and revenuesbut decreases in profit margins,workforce size and pace of innovationas a result. Among the strongestpredictions are decreases (slight or big)in profit margins (77 percent of therespondents) and in pace of innovation(54 percent). In contrast, only 49percent expect similar increases inmarket size.Figure 28: 2011 CEO Survey: Rate the influence each of these state policyissues has on the industry’s ability to keep biomedical research, innovation andinvestment in California.Not at allSomewhat importantExtremely importantDuplicativeregulation(state FDA,CalEPA, etc)19%45%35%Workforcepreparedness32%15%52%Corporatetaxation53%13%34%Taxincentivesforinnovation61%11%27%Access tocapitalFigure 29: 2011 CEO Survey: Rate the influence each of the state environmentalregulations has on the industry’s ability to keep biomedical research, innovationand investment in California.Not at allSomewhat importantExtremely importantChemical bans20%47%32%Manufacturingrestrictions13%39%48%Productstewardship20%62%18%71%9%18%Figure 30: 2011 CEO Survey: Rate the influence of each of the state tax incentivesfor innovation has on the industry’s ability to keep biomedical research,innovation and investment in California.Not at allSomewhat importantExtremely importantSingle salesfactor18%52%30%Net operatingloss13%35%52%R&D tax credit9%24%67%TherapeuticDiscovery Tax CreditFigure 31: 2011 CEO Survey: Indicate the impact you expect U.S. healthcarereform will have on the biomedical industry as a whole over the next five years.Big decreaseSlight decreaseNo changeSlight increaseBig increaseMarket size5%25%22%37%12%Profitmargins22%55%12%11%1%Revenue8%32%15%40%5%Workforcesize10%27%39%23%2%Pace ofinnovation24%32%45%25%29%24%22%1%Figure 32: 2011 CEO Survey: Rate the influence each of these federal policy issues has on the industry’s ability to advancebiomedical research, innovation and investment in California.Scope of FDAmandateFDA resourcesand/orprocessesInternationalintellectualpropertyprotectionDomesticintellectualpropertyprotection(patent reform)Coverage andreimbursementpolicyTax and financeissuesHealth reform/reimbursementNot at allSomewhat importantExtremely important8%13%80%4%11%85%2%48%49%2%38%60%4%25%71%6%38%56%3%29%68%California Biomedical Industry 2011 Report | 17

Special SectionOther states nurturing biomedical industryclusters of their ownIn May 2010, Battelle, an independent,non-profit research operation, and theBiotechnology Industry Organization(BIO) published a report comparingstate policies and programs to promotethe biosciences in their states. Usedwith permission, the following findingshighlight “best practices” that Californiashould consider in its efforts to retainand support its biomedical industry. Atthe least, these findings illustrate theeffort other states are exerting to attractinnovative life sciences companies awayfrom California.State R&D tax creditsThirty-eight states reported offering R&Dtax credits, an increasing number ofwhich expand the credit if the researchis conducted by an in-state university. InNebraska, for example, the state offersa refundable R&D tax credit that is equalto 15 percent of the federal R&D credit.Legislation passed in 2009 increasesthe credit to 35 percent if the research isperformed by a Nebraska university. R&Dtax credits are refundable in seven statesand transferable in four others (Figure 33).State tax credits to encourage earlystage investmentStates also use tax policies to encourageprivate investment in early stagecompanies and/or in funds that makeearly stage investments. Twenty statesoffer tax credits to angel investors whoinvest in technology companies, six ofwhich are targeted specifically to angelinvestors who invest in biosciencecompanies. Twelve states reportedproviding tax credits to individuals whoinvest in early stage venture funds. NewMexico, North Carolina and Wisconsinoffer tax credits to those who invest inbioscience early stage venture funds.Figure 34 summarizes state capital taxcredits to angel and bioscience angelinvestors and investors in early stage andbioscience early stage venture funds.State tax credits to increase the availability of venture capitalStates also use tax credits to increase the availability of venture capital. They cancreate funds that invest directly in companies or invest in privately managed funds thatagree to invest in in-state companies. They also can create a fund that, in turn, investsin private venture capital funds, which is referred to as a “fund of funds” if it involvesmore than one fund. As of 2010, 13 states reported investing in a fund of funds, 10states reported investing state dollars in private venture capital firms, and 14 statesreported making direct investments in bioscience companies (Figure 35).Figure 33: State R&D tax creditsStateR&DTaxCredit Transferable Refundable CommentsAR • •AZ •CA •CT • •DE •GA •HI • •ID •IL•IN •IA • •KS •KY •The refundable tax credit is equal to 6.5% of qualifiedexpenditures, and it may be doubled for bioscience firms.LA • •ME •MD •MA •MI •MN •MS • R&D jobs creditsMT •NE • •NH •NJ • •NM •NC •ND •NY • •OH •OK • •OR •PA • •RI • The R&D tax credit has a carry forward of 14 years.SC •UT •WA •Washington has no state income tax. Instead, a Business& Operating (B&O) tax is levied against businesses. TheR&D tax credit can be taken against the leviedB&O tax.WV • • Investment creditWI • Effective 1/1/201118 | California Biomedical Industry 2011 Report

State tax credits to support the growth of bioscience companiesThirty-four states reported exempting sales tax for equipment used in R&D, including equipment purchased for biomanufacturing,and 33 states reported exempting equipment purchased for biomanufacturing from sales tax. Seven states — Colorado, Missouri,New Jersey, New Mexico, North Carolina, Rhode Island, and Wisconsin — have sales tax exemptions specifically targeted tobioscience firms (Figure 36).Figure 34: State seed capital tax creditsFigure 35: State investments toincrease the availability of locallymanaged, later stage venture capitalFigure 36: State sales tax exemptions forequipment and/or bioscience firmsStateAngel InvestorsBioscience Angel InvestorsInvestors in Early-StageVenture FundsInvestors in BioscienceEarly-Stage Venture FundsAZ • •CO •HI •IN •IA • •KS • •KY • •LA •ME • •MD • •MI •MT • •NM • • •NY •NC • • • •ND • •OH • •OK • •OR•RI •VA•WV•WI • • • •StateInvested in Fundof FundsInvested in PrivateVC FirmsInvested in BioscienceCompaniesDE • • •HIIL • • •IA •KS•KY • • •MA•OtherAppropriated fundsfor contract withprivate non profit toprovide funding forcompaniesThroughMassachusettsTechnologyDevelopmentCorporationMI •MT •NJ • • •NM • • •NC • •OH • • •OK • •OR •PA • •RI•SD•Provides financingfor feasibility studiesin the form of aforgivable loanTN•VA•WI • • •StateSales Tax Exemption forEquipment Used in R&DSales Tax ExemptionSpecifically Targeted toBioscienceSales Tax Exemption onEquipment Purchasedfor BiomanufacturingCO • • •CT • •DE • •FL • •GA • •HI • •IL • •IN • •IA • •KS • •KY • •LA • •ME • •MD • • •MA • •MI • •MN • •MS • •MO • • •NE • •NV • •NJ • • •NM • • •NY • •NC • • •ND • •OH • •PA • •RI • • •SC • •SD • •VA • •WA • •WI* • •California Biomedical Industry 2011 Report | 19

Larta Institute: Accelerating innovation from lab to marketLarta Institute is a leading “innovationhub” and commercialization servicesfirm based in Los Angeles and workingglobally to improve the transitionof scientific and technologicalbreakthroughs from the laboratoryto the marketplace. The instituteoffers a range of services for states,government agencies, and regionalpartners in innovation policy andconsultation, technology andcommercial assessments, and handsoncommercialization programs withentrepreneurs under sponsored clientprograms.The NIH Commercialization AssistanceProgram (NIH-CAP) is designedand managed by Larta Institute inpartnership and under contract withNIH. NIH-CAP is a 10 month mentoringand partnering-oriented effort geared toaccelerate the commercial and marketreadiness of award-winning life sciencecompanies supported by the variousNIH institutes across variety of healthcare areas. More on Larta Institute:www.larta.orgAdvanced Brain Monitoring, Inc.CarlsbadWebsite: http://www.b-alert.comPublic health issue:Obstructive Sleep Apnea (OSA) is oneof the world’s most prevalent, underdiagnosed disorders, responsible formore mortality and morbidity than anyother sleep disorder and recognizedas a major public health concern. OSAis characterized by recurrent failuresto breathe during sleep resulting fromobstruction of the upper airway. OSAcan cause daytime drowsiness andmemory impairment, and has beenassociated with hypertension, increasedrisk of cardiovascular disease, diabetesand stroke. Untreated OSA patients arethree to seven times more likely to beinvolved in industrial and motor vehicleaccidents due to slower reaction timesand impaired vigilance. Despite thisgrowing evidence that OSA threatenspublic health, safety and productivity,current estimates reveal that 93 percentof women and 82 percent of menwith moderate to severe OSA remainundiagnosed.Technology developed:The patented Apnea Risk EvaluationSystem (ARES) is an easy-to-apply,in-home system for diagnosing OSA.The ARES combines a miniaturized,battery-powered device to measureblood oxygen levels, pulse rate,snoring sounds, nasal pressure andhead position/movement with aquestionnaire to assess known riskfactors.The success story:ABM now holds six patents on thesetechnologies and the ARES was clearedby the FDA. Watermark Medical (WM)is now the exclusive distributor of ARESin the United States. Rotech Heathcare’sSleep Central has a national distributornetwork of sales reps selling the WMHome Sleep Testing turnkey homesolution for conducting sleep studies.NIH-CAP’s benefit to the company:With funding from the SBIR program,Advanced Brain Monitoring, Inc.is addressing sleep apnea, memorydysfunction, and alertness monitoringwith instrument systems that combinelaboratory level accuracy with theportability, ease of use and low costof consumer electronics. SBIR fundshave allowed ABM to completecomprehensive multi-site clinicaltrials to establish the validity of thetechnologies. These studies would bedifficult to fund with private sectorfinancing.SAM Technology, Inc.San FranciscoWebsite: http://www.eeg.comPublic health issue:SAM Technology developed IMAGEVUE to visualize and localize the originand spread of epileptic seizures in thehuman brain in planning neurosurgicaltreatment of complex partial seizuredisorders that are refractory totreatment with antiepileptic drugs.Technology developed:IMAGE VUE is a software system,running under Windows XP, for coregisteringelectroencephalography(EEGs) with magnetic resonanceimaging (MRIs), performing patentedDEBLURRING spatial enhancementand several types of source localizationanalysis, and interactive 3-D graphicsvisualization. The patented XCALIPERhardware and associated softwarefacilitates rapid measurement of EEGelectrode positions needed for coregistrationwith MRIs.The success story:IMAGE VUE is marketed toneurologists by Nicolet Biomedical,Inc., a subsidiary of VIASYS Healthcare,and the world’s largest supplier to theclinical neurology market. A number20 | California Biomedical Industry 2011 Report

of competing products worldwide weremodeled on IMAGE VUE platformtechnology.NIH-CAP’s benefit to the company:The SBIR program enableddevelopment of a first-of-its-kind,turnkey software package for animportant medical neurological nichemarket for which the economics didnot justify private sector investment.In the course of developing IMAGEVUE, SAM Technology gainedexperience in making an easy-to-usespecialized system, in developingsoftware in accordance with FDA GoodManufacturing Practices, in registeringa medical device with the FDA, and innegotiating an equitable distributoragreement with a company 100 timeslarger than itself.KeraMed Inc.SunnyvaleWebsite: htttp://www.keramed.comPublic health issue:There is only enough donor corneatissue to treat 1 percent of the 10 millionbilaterally cornea blind patients eachyear. Also, there was not a treatmentprocedure for cornea blindness in thethird world simple enough for noncornealspecialist eye surgeons toperform implantation.Technology developed:KeraMed developed a new type ofartificial cornea, called the KeraKlear,which can be used to treat corneablindness without the need for donorcorneal tissue. This artificial corneacan be implanted using an automatedrobotic device developed by thecompany or with a femtosecond laser.The first two patients who receivedthe implants had remarkably quickrecoveries as compared to standardtransplantation, which typicallyrequires about 12 months before goodvision is obtained. The first patient wasa 93 year old woman who had beenblind for 30 years from an alkali injuryand glaucoma. Before her surgeryshe could only see light, but after thesurgery she was able to read the largeletters on the eye chart and see thefaces of her family. The second patientwas even more remarkable. His visionimproved from only being able to seehand motions before surgery to beingable to read large print (20/80 vision)in one day.The success story:The KeraKlear has received EuropeanCE Mark approval. KeraMed iscurrently organizing a U.S. FDA 510kclinical study to enable use of theproduct in the U.S.NIH-CAP’s benefit to the company:The SBIR program gave KeraMed theseed funding to begin their artificialcornea project. Without SBIR fundingthey would not have been able todevelop the prototypes that proved thefeasibility of the technology.Wave 80 BioSciencesSan FranciscoWebsite:http://www.wave80.com/index.phpPublic health issue:There did not exist a high-performance,compact-form-factor system formeasurement of high-clinical-valuebiomarkers in peripheral blood.A molecular diagnostics systemwas needed to operate across thefull spectrum of environments ofclinical laboratory testing, rangingfrom sophisticated high-throughputlaboratories to small clinics in remoteareas to be applied to infectious disease,cancer, autoimmune disease, and otherhuman health conditions.Technology developed:Wave 80 develops moleculardiagnostic assays and handheld andbenchtop devices for infectious diseasemonitoring. In 2007, Wave 80 initiateda development program combiningnovel nucleic acid assay methods withfluid transport technology adapted fromintegrated circuit thermal managementto address emerging needs for viral loadmonitoring to accompany expandingaccess to antiretroviral therapy amongthe estimated 30 million people livingwith HIV in low- and middle-incomecountries. Wave 80 has developed ahandheld diagnostic device for malaria.It now is working on a more accuratetool to tell physicians if a baby born toan HIV-infected mother is also infectedwith the virus.The success story:In 2009, Wave 80 was awarded a$7.5 million contract by the NationalInstitute of Allergy and InfectiousDiseases, part of the National Institutesof Health, for rapid HIV/AIDS nucleicacid testing systems for use in lowresource settings. The duration of the2009 NIH contract is five years. Thefirst versions of the EOSCAPE-HIVsystem are scheduled to enter betatesting in clinics in Kenya and SouthAfrica in 2011.NIH-CAP’s benefit to the company:Wave 80 received funding for moleculardiagnostics research and developmentunder the Small Business InnovativeResearch program from both NIH, theNational Science Foundation, and theU.S. Department of Defense. Wave 80now has a multimillion dollar contractwith NIH.California Biomedical Industry 2011 Report | 21

FluentialSunnyvaleWebsite: www.fluentialinc.comPublic health issue:Due to the rapid increase of limitedEnglish proficient residents in theU.S., it is becoming more difficultfor healthcare professionals tocommunicate with many of theirpatients and provide the highestquality of care. Unfortunately, thelanguage barrier goes both ways: thereare difficulties in assessing a patient’scondition or progress, and patients findit equally challenging to understandwhat they need to do to aid in thehealing process. Slower progress meansspending more time in the hospital or athome, and more time until the patientis able to get back to work and resumeother normal activities.Professionally trained medicalinterpreters are often required by law,but at $20 to $30 per hour (on site)and $130 to $150 per hour (overthe phone), their services can becost-prohibitive and most insurancecompanies will not cover them. Evenif they did, interpreters are often notavailable when and where they areneeded the most.Technology developed:Fluential provides fast, fluentautomated speech translation forhealthcare providers. The companyhas created one of the most advancedplatforms for speech translationtechnology in the world. Its productsenable people who speak differentlanguages to communicate face-to-facein real time. S-MINDS, an advancedspeech-to-speech translation system,enables healthcare providers to remainin control of communication with non-English-speaking patients.The success story:Fluential’s S-MINDS is the firstinteractive speech translation systemever used in a U.S hospital.Fluential continues to expand the scopeof its applications, providing innovativesolutions and cutting-edge technologyprimarily to the military and healthcareprofessionals. Fluential is currentlyoptimizing systems to enable U.S.service members to train Iraqi soldiersand policemen, nurses to improve safetyand the quality of care for their non-English speaking patients, and physicaltherapists to speed the recovery of theirlimited English-proficient patients.Fluential’s clients are: U.S. SpecialOperations Command (USSOCOM),Defense Advanced Research ProjectsAgency (DARPA), Defense LanguageInstitute (DLI), and El CaminoHospital in Mountain View, Calif. Thecompany partners with Nuance and SRIInternational.NIH-CAP’s benefit to the company:NIH has funded Fluential to evaluatethe potential for its speech translationtechnology to improve the quality ofcare and patient safety for limitedEnglish proficient hospital patients.This research was conducted incollaboration with one of the largestintegrated health organizations in theUnited States with their Spanish- andCantonese-speaking patients.22 | California Biomedical Industry 2011 Report

Sacramento area shows growth and promise for biomedical innovationThe Sacramento Area RegionalTechnology Alliance (SARTA)www.sarta.org is a non-profit 501(c)(3) corporation founded in 2001 witha mission to foster entrepreneurialgrowth and attract investment capitalto the technology business sector inthe greater Sacramento region, throughpublic and private partnerships. Theydo this with tools including education,mentorship, introductions, advice,and access to capital. Their focus isthe nine-county Sacramento region,including Butte, El Dorado, Nevada,Placer, Sacramento, Solano, Sutter,Yolo and Yuba counties.Medical technology employers in the Greater Sacramento RegionIts vision is to develop the Sacramentoregion into a nationally-recognizedcenter of technology and technologicalinnovation, as evidenced by asignificant number of technologycompanies growing, developing andprospering in the region.In February 2010, SARTA was namedone of the six initial iHubs by the stateof California, with MedStart as one ofthe focal areas.SARTA’s MedStart program isfocused on accelerating the growth ofthe Sacramento region’s 70+ medicaldevice and medical technologycompanies, while at the same timemaking healthcare safer, more effective,and less costly through technology.MedStart is engaging med-techexecutives to develop a coalition and astrategy for growing this sector throughcollaborative partnerships. MedStart’sprograms include a monthly CEOForum, a Telemedicine Task Force, aStem Cell Device Task Force, an annualMedStart Connect mixer, and theannual Med Tech Showcase.California Biomedical Industry 2011 Report | 23

Product developmentCalifornia’s biopharmaceuticalpipeline leads the worldThe global biopharmaceuticalindustry had another strong year in2009, despite the economic crisis.Global demand for biotechnology andpharmaceutical products reached $752billion in 2009, reflecting growth of6.7 percent over the prior year. Of thistotal, biologic products contributedabout $127 billion, with faster growththan the overall market with 8.6 percentover the prior year. California is a keydriver of this success with seven of thetop 10 global biologic products fromCalifornia companies. Biologics caninclude products such as vaccines, bloodand blood components, gene therapy,tissues, monoclonal antibodies andrecombinant therapeutic proteins.Figure 37: California companiesare researching and developing876 pipeline productsCalifornia companies are researching and developing 876 products20317517 444433Michael KleinrockMichael Kleinrock is director, ThoughtLeadership at IMS, responsible forleading a team of analysts coveringU.S. and global issues and trends inthe pharmaceutical market. He joinedIMS in 1999 and served in a variety ofroles supporting key pharmaceuticalclients as well as developing productsand services. Since joining IMS’thought leadership team in 2006, hehas taken on increasing responsibilityfor U.S. market analytics, oncology,R&D pipeline analysis and marketforecasts. Named to his current rolein November 2009, he was previouslysenior manager, Thought Leadership.Kleinrock received a master’s degreein journalism from the Universityof London, Goldsmiths College in1996. He also earned a bachelor’sdegree in history and politics fromthe University of Essex, Colchester,England, in 1994.24 | California Biomedical Industry 2011 ReportDespite massive disruptions in otherindustries, the biopharmaceuticalindustry was largely resilient, reflectingstrong demand for its products andreflecting the impact of economicinstability in only limited ways. Thisresilience is fundamentally linked tothe value of innovation in healthcare,which for a generation has deliveredsignificant advances in a wide range ofdiseases. California is at the forefrontof this successful and dynamic industrywith the largest clustering of companiesand clinical development productsof any state in the U.S. and largerthan any other single country in theworld. In fact, at the end of August2010 there were some 876 productsin the California biopharmaceuticalpipeline, including those in pre-clinicaland clinical development throughregistration. The pipeline includesproducts that California companiesoriginated, or remain actively involvedin. The California biopharmaceuticalpipeline represents about 12 percent ofthe total worldwide biopharmaceuticalpipeline of 6,889 products as tracked byIMS Health R&D focus and reflectingbiopharmaceutical products in activedevelopment anywhere in the world.Since January 1, 2009, several newproducts with connections to Californiawere approved and launched in the U.S.:PreclinicalPhase IPhase IIPhase IIIPre-registrationRegisteredSource: IMS Health, R&D Focus , Sep 2010••Denosumab is approved under thename Prolia for use by older womenwith osteoporosis and as Xgeva fordelaying bone fractures in cancerpatients. It will remain Amgen’slargest program for now, while thecompany begins late-stage testing onthree experimental cancer drugs.• • Kristexxa (pegloticase) approvedin September 2010 from Savientwas developed for the treatment ofchronic gout in adults refractory toconventional therapy, and grantedorphan drug status by the FDAback in 2001. Pegloticase wasdeveloped by Duke University andPEGylated versions of this proteinwere produced in collaboration withthe Menlo Park California company,Mountain View Pharmaceuticals, toincrease safety and prolong the halflifeof the protein. Gout is a kind ofarthritis in which unmetabolized uricacid forms crystals that migrate tojoints, causing painful inflammation.Kristexxa is a PEGylated formof recombinant porcine uricase,Uricase is an enzyme that isnot produced in humans, but isproduced by other mammals forthe breakdown of uric acid. Savientexpects Kristexxa to be commerciallyavailable by end of 2010.

Figure 38: California has largest concentration of companies and productsin the biopharmaceutical pipelineCalifornia: 256, 876Massachusetts: 122, 474New York: 47, 399Mid-Atlantic (NJ, PA, DE): 113, 546North Carolina: 32, 87UK: 123, 697Switzerland: 47, 384Germany: 76, 330France: 67, 311Italy: 31,132Spain: 20, 59Japan: 93, 491Key: Companies, ProductsCalifornia’s pipeline is concentratedin six major areas each of whichrepresent significant unmet needs forpatients.Figure 39: California’s productpipeline is concentrated in severaldisease areasDisease focusNumber inCA pipelineOncologics 237Immune system and inflammation 109Central nervous system 107Anti-infectives and anti-virals 96Cardiovascular andblood diseasesDiabetes and metabolics 4756California Biomedical Industry 2011 Report | 25

••Ella (ulipirstal acetate) approvedin August 2010 from French HRAPharma and Corona, California’sWatson. Ella was developed forthe the prevention of pregnancyfor up to 120 hours (five days)post-unprotected intercourse orcontraceptive failure. Waston holdsthe U.S. commercialization rightsto Ulipristal acetate, a selectiveprogesterone receptor modulator,and plans to launch the agentunder the trade name ELLA infourth quarter 2010. The agent ismarketed in the EU as an emergencycontraceptive under the trade nameellaOne.••Fanapt (iloperidone) marketedin January 2010 by Novartis hada California connection for abouta year back in 1997 when SanFrancisco company Titan bought therights from Sanofi-Aventis after theyhad discontinued research. Laterthat year, Novartis acquired therights from Titan, then licensed themto Vanda of Maryland in 2004 whichtook the compound to approval, andthen Novartis reacquired the U.S.and Canada rights to the drug. Ameandering journey to be sure, butnot unusual. Fanapt (iloperidone)is an atypical antipsychotic withmixed dopamine-D2/5HT2 receptorantagonist properties indicated inschizophrenia. The product also haspotential use in bipolar disorder.••Vibativ (telavancin) marketedin November 2009 by Astellaswas developed by San Francisco’sTheravance. VIBATIV(telavancin) isa glycopeptide injectable antibioticfor the treatment of Gram positivebacterial infections and is a potentialnew treatment for methicillinresistantStaphylococcus aureus(MRSA). Originally developedby Theravance, its FDA approvalindicates it for complicated skinand soft tissue infections (cSSTI)in adults. It has also been filed forapproval in the U.S. in the indicationof hospital-acquired pneumonia ornosocomial pneumonia.••Bepreve (bepotastine)marketed in October 2009 by ISTAPharmaceuticals of Irvine, is anophthalmic formulation of a secondgenerationhistamine H1 receptorantagonist that was first developedand launched by Tanabe in Japanin 2000 for allergic rhinitis. Thenew indication for the formulationISTA developed is for the treatmentof ocular itching associated withallergic conjunctivitis in patientsaged two years and older.••Savella (milnacipran) marketedin April 2009 from CypressBioscience of San Diego and comarketedwith Forest Labs is anantidepressant (dual 5-HT andnorepinephrine reuptake inhibitor),approved for the management offibromyalgia.••California companies and researchinstitutions are also waiting forapproval for drugs to treat diseaseswith narrower patient populations:••Lucinactant from The ScrippsResearch Institute for respiratorydistress syndrome••Pharmacyclics’ motexafingadolinium to treat metastasis innon-Hodgkin’s lymphoma and othertypes of cancer.InterMune Inc.’s drug to treat idiopathicpulmonary fibrosis, a fatal lungscarringdisease, received a positiverecommendation from the EuropeanMedicines Agency’s Committee forMedicinal Products for Human Use.The European Commission could acton the recommendation in early 2011which could enable the drug, calledpirfenidone and branded as Esbriet,to be sold in the 27 countries of theEuropean Union.No drug in the United States or Europeis currently approved to treat thedisease, which has no known causeand slowly scars the lungs and makesit increasingly difficult for patients tobreathe. IPF patients typically have twoto five years to live after diagnosis.California’s early start in nurturingand developing the biotech industryis bearing fruit. California has leadingcompanies of all types from largemultinational biotechs like Amgenand Genentech to technology anddevice companies, as well as one of thelargest and best respected collectionsof academic institutions in the world.With the world’s largest, most diverseand most successful biopharmaceuticalecosystem, California benefitsimmeasurably from the contributions ofthe scientists and researchers tacklingour toughest diseases.26 | California Biomedical Industry 2011 Report

OncologyCancers in California, 2010MaleProstate 20,120 30% 3,035 11% 222,400 41%Lung 7,825 12% 6,985 25% 7,200 3%Colon & Rectum 7,200 11% 2,585 9% 55,500 10%Leukemia & Lymphoma 5,675 8% 2,535 9% 46,000 8%Urinary Bladder 4,420 7% 935 3% 38,800 7%All Cancers Combined 67,270 100% 27,855 100% 543,500 100%FemaleBreast 22,385 34% 4,195 16% 283,700 42%Lung 6,855 10% 6,150 23% 20,300 3%Colon & Rectum 6,960 10% 2,490 9% 57,500 8%Uterus & Cervix 5,585 8% 1,220 5% 94,000 14%Leukemia & Lymphoma 4,435 7% 2,035 8% 40,600 6%Source: California Cancer Registry, California Department of Public Health. Excludes non-melanoma skin cancersand in situ cancers, except bladder. Deaths include persons who may have been diagnosed in previous years. Theseprojections are offered as a rough guide and should not be regarded as definitive. Existing cases estimated in this reportreflect a new method of estimating those counts. The old method used prevalence rates from 1994. Because of theimprovements in diagnostic techniques and cancer treatment since 1994, we believe the new method more accuratelyestimates the true number of existingPharmaceuticaladvancementsIn oncology, California companiesare developing various treatments forprostate and breast cancer, NSCLC andmelanoma, all currently in Phase III:••Isis’s custirsen is an antisensetherapy designed to inhibit theproduction of clusterin, a cellsurvival protein that is up-regulatedin response to standard cancertherapies. The agent has potentialuse for various cancers and hascompleted phase II trials in prostate,lung and breast cancers. FDAawarded the product Fast Trackdesignation, in combination withfirst-line docetaxel, for progressivemetastatic prostate cancer inOctober 2009.••Medivation’s MDV 3100 isan orally active small moleculeandrogen receptor antagonist, whichblocks testosterone binding to theandrogen receptor, so impedingnuclear translocation and DNAbinding. In September 2009, a phaseIII trial was initiated in prostatecancer patients in the USA, Canada,Europe, South America, Australiaand South Africa.••Amgen’s motesanib is a highlyselective, oral agent that is beingevaluated for its ability to inhibitangiogenesis and lymphangiogenesisby targeting vascular endothelialgrowth factor receptors 1, 2 and3 (VEGFR1-3). It is also underinvestigation for its potential directanti-tumor activity by targetingplatelet-derived growth factorreceptor (PDGFR) and stem cellfactor receptor (c-kit) signaling,which may also confer direct antitumoractivity.••Genentech’s Omnitarg(pertuzumab) is a humanizedmonoclonal antibody that targets theHER-2 signaling pathway and is apotential treatment for solid tumors.It started phase III trials in 2008 forthe treatment of metastatic breastcancer with a projected filing datein 2011. Evaluations are ongoingfor neoadjuvant breast cancerin combination with Herceptin(trastuzumab) and docetaxel.••NovaRx’s Lucanix(belagenpumatucel-L) is ananticancer vaccine comprisingfour allogeneic nonsmall cell lungcancer (NSCLC) cell lines geneticallymodified to express transforminggrowth factor-beta (TGF-beta)antisense DNA. A phase III trial inadvanced stage NSCLC is ongoing.••Roche and Plexxikon aredeveloping RG 7204 (PLX4032), an oral B-RAF kinaseinhibitor targeting the BRAFV600E gene. The product holdspotential as a personalized therapyin conjunction with bio-responsemarkers and a companion diagnostictest that identify patients with BRAFmutations.• • Onyx Pharmaceuticals saidits experimental drug for treatingmultiple myeloma, a type ofblood cancer, helped extend thelives of those whose cancer wasprogressing in a mid-stage trial.The Emeryville, Calif.-based biotechsaid it plans to file for U.S. Food andDrug Administration approval ofcarfilzomib as early as next year.California Biomedical Industry 2011 Report | 27

Device innovationMinimally invasiverobotically-assisted surgery;Invalidating the hi-tech =high cost assumptionFor Californians with throat cancer,the traditional treatment is amandibulotomy — surgery in whichthe patient’s jaw is cut in half throughthe cleft of the chin. Until recently,mandibulotomy was essentially theonly option — an option that led someto choose less effective but less invasivetherapies.Fortunately, in 2009, ear, noseand throat (ENT) operations weretransformed — for patients and for thehealthcare system. In December of thatyear, FDA cleared a new approach —the application of minimally invasiverobotically-assisted surgery (MIRS) forENT. Over the course of 2010, use ofthe da Vinci Surgical System, made byIntuitive Surgical Inc., for ENT has beenadopted — enthusiastically — becausesurgeons using it can operate throughthe patient’s mouth, forgoing a massive,visible and complicated surgical cut.Compare mandibulotomy and MIRS’clinical results. The operative time isreduced from 10 hours to two. A MayoClinic study found that the averagehospital stay was 2.3 days with MIRSversus seven-to-10 days for traditionalsurgery. More remarkably, feedingtubes are no longer removed after twoto three months, on average, but injust seven to 10 days. The Mayo study’sauthor, Eric Moore, M.D., wrote, “Theresults of this research were even morepositive than we expected.”The quality-of-life benefits for thepatient are evident. Still to be calculatedis the cost savings for both the hospitaland the healthcare system. However itis believed savings will be substantial,given MIRS’ track record in other areas.Such clinical, quality-of-life andeconomic benefits are being producedby enhancing the surgeon’s naturalabilities: the technology is designedto help the surgeon to see better, andoperate with more precision, whileinflicting less trauma. ISI’s da VinciSurgical System has helped bring aboutthis revolution. While minimallyinvasivesurgery has been around fordecades, these technological advanceshave made it possible for physicians totake it to the next level.Kidney cancer is another area where theda Vinci System is changing treatmentpatterns. Long-term studies show thatretention of a part of a second kidneyis better for the patient; risk of dialysisis reduced. The dexterity the da VinciSystem offers, specifically in suturing,makes a minimally-invasive partialnephrectomy more practical, thusraising the potential for real, long-termcost savings.In addition to the ENT and kidneysurgeries described above, MIRS isused in cardiac, thoracic, urologic andgynecologic procedures. Numerouscomparative studies show that patientstypically experience less pain, bloodloss and a quicker return to normalactivities. Other studies documentsignificant cost savings for public andprivate payers.Prostate cancer treatment is the areain which MIRS is best known — where,in many ways, the da Vinci Systemfirst took hold and its volume ofprocedures is greatest. Yet it is onlytoday, a decade later, that the fullcontours of our understanding of thetechnology’s benefits are being fullyrealized. Over this time more menhave had their cancer treated lessinvasively, most often with equal-tosuperioroutcomes. An Institute forClinical and Economic Review (ICER)review — a meta-analysis of more than100 studies involving 30,000 prostatecancer patients — concluded in 2009that MIRS would offer a net benefit overconventional therapies, including opensurgery. It is hypothesized that therecould be a lifetime savings of $1,700 perpatient compared to conventional opensurgery; both MIRS and open surgeryare already significantly less expensivethan other treatment modalities, suchas radiation. Stanford’s Dr. Alan Garberpicked up this theme in his Demography2010 paper and showed that changingin prostate cancer treatment patternscould have a significant impact onthe nation’s health system, perhapssaving $9 billion to $15 billion over 10years.In healthcare, questions about whether“new is better” or whether “high techequals high cost” are fair. Experts,policymakers, patients and providershave strong interests in getting thesequestions right. Fortunately, high-levelevidence-based medicine suggests thatMIRS is much more than the latestinnovation inspiring headlines inmedical news today. More importantthan how it is revolutionizing surgeryis the way MIRS is improving patients’lives and the bottom line of our nation’shealthcare system.28 | California Biomedical Industry 2011 Report

Diagnostics advancementsNew ovarian cancer testThe FDA cleared a new diagnostic testto monitor ovarian cancer, a diseasethat will strike an estimated one out of71 women in the U.S. in their lifetime.Abbott’s new Architect HE4 (humanepididymis protein 4) assay, the firstautomated test of its kind availablein the U.S. uses a simple blood test toaid in monitoring for the recurrenceor progression of the disease. Diseasemonitoring is crucial 75 percent of allovarian cancer patients will have arecurrence. New monitoring tools mayprovide patients and physicians withcritical disease information to helpmake important treatment and caredecisions.Affymetrix powers cancer diagnosticAffymetrix Inc.’s microarray platformpowers Pathwork Diagnostics Inc.’smolecular diagnostic Origin Test. Thereare an estimated 200,000 patients withuncertain primary tumors, in the U.S.each year. One study concluded thatin particularly challenging cases, theprimary tumor site is identified only25 percent of the time using traditionaldiagnostic tools. The Pathwork Tissueof Origin Test is designed to helponcologists determine the primarysite of a metastatic tumor with greatercertainty.Cepheid and Novartis collaborate onchronic myelogenous leukemiaCepheid and Novartis developed atest for monitoring the BCR-ABLgene transcript in peripheral bloodspecimens from patients diagnosedwith Philadelphia chromosomepositivechronic myelogenous leukemia(Ph+ CML). Together with other labtests, monitoring levels of BCR-ABLtranscripts in Ph+ CML patients will aidin patient management.By moving to a rigorously developed,regulatory-cleared/approved testthe collaboration aims to reduce thevariability that is currently inherent inBCR-ABL testing.Patient profileLynn DowlingUsing personalized medicineto weigh optionsThe winter of 2005 was not a happy one for Lynn Dowling. Her motherdied suddenly from complications of diabetes in October and in Novembershe faced a devastating diagnosis herself: breast cancer. She had a familyhistory of breast cancer — her mother had been diagnosed almost 20years earlier. Her mother had had a lumpectomy and radiation and thatwas the end of it. Lynn’s tumor was small and American Cancer Societyguidelines suggested she would likely not even need chemotherapy. ForLynn, it was obvious mastectomy was a prudent choice.When the tumor was removed,however, it was almost twice as bigas originally thought and Lynn nowfaced the prospect of chemotherapy,including its dangerous side effects:heart damage, neuropathy, gastrointestinalproblems, and cognitivedysfunction.Fortunately, Lynn’s physicians senther tumor to Genomic Health, aRedwood City-based company thatdeveloped the Oncotype DX BreastCancer Test, to analyze the RNA ofher tumor and assign a “recurrencescore,” on a scale of 0 to 100. If herscore was low (

Central nervous systemChronic pain — commonly definedas pain persisting longer than sixmonths — affects an estimated 70million Americans and is a tragicallyoverlooked public health problem.Poorly assessed, unrelieved chronic paincan rob individuals and family membersof a high-quality life, and it profoundlyburdens society as a whole. A 1998 NIHreport concluded that just the economictoll of chronic pain may be estimated at$100 billion a year in the United States.It has increased significantly since then.Estimates state that 26 percent ofCalifornia’s population (37,205,591) or9.7 million are affected by pain.A 2008 study found that care for lowerback pain alone, not including otherpain conditions and not just limited toworkers, amounted to nearly $86 billionper year.Persistent pain:A chronic illnessAcute pain usually goes away after aninjury or illness resolves. But whenpain persists for months or even years,long after whatever started the pain hasgone or because the injury continues,it becomes a chronic condition andillness in its own right. This chronicillness of pain, if inadequately treated,can impede the lives of individuals andfamilies and produce a huge burden inhealth care over-utilization, lost workproductivity and rising costs of painrelateddisability. Prompt effectivetreatment of acute pain is critical. Ifpain becomes persistent, it must beeffectively managed as a chronic illnessnot only to limit long-term humansuffering but also to prevent lostproductivity within our society.PharmaceuticaladvancementsIn CNS, late-stage research anddevelopment by California companies is30 | California Biomedical Industry 2011 Reportfocused on a broad range of indications:••Levadex (dihydroergotaminemesylate) is a redesigned nasalspray for acute treatment ofmigraine headache with or withoutaura. The nasal formulation providesbroad receptor coverage actingon central and peripheral paincomponents in the brain, and hasbeen proven to work at any timeduring a migraine.••Depomed’s DM 1796, extendedreleasegabapentin, formulatedusing AcuForm, Depomed’s gastricretention (GR) oral delivery system,is being developed as a twice-dailytreatment for postherpetic neuralgia,diabetic peripheral neuropathy andmenopausal hot flashes. Abbott,with rights in North America for thetreatment of neuropathic pain, isawaiting approval of the agent as atreatment for postherpetic neuralgia.••Solzira (gabapentin enacarbil),a prodrug of gabapentin, is indevelopment by GSK and XenoPortfor a range of conditions, includingrestless leg syndrome (RLS),neuropathic pain and migraine.Gabapentin enacarbil uses highcapacity transport mechanisms inthe small and large intestines andrapidly converts to gabapentin invivo. FDA and the developers areworking on a revised REMS afterFDA issued a Complete ResponseLetter in February 2010.DeviceadvancementsCareFusion AnnouncedNational Launch of SpinalFracture DeviceCareFusion launched the AVAmaxVertebral Balloon, a minimallyinvasive device expected to enhancethe affordability of spinal fractureprocedures for use during kyphoplasty,a procedure for treating spinalcompression fractures. CareFusion’svertebral balloon product and relatedcomponents cost up to 40 percent lessthan similar kyphoplasty products onthe market today, making the proceduremore cost effective and accessibleto hospitals and outpatient surgerycenters. The AVAmax Vertebral Balloonis part of an all-in-one system thatincludes an eight-gauge or 10-gaugeneedle, bone cement and deliveryinstruments for kyphoplasty orvertebroplasty, an alternate procedureto treat compression fractures. Theall-in-one system gives doctors thechoice and flexibility to perform eitherprocedure at the time of patient care.Spinal compression fractures are oftencaused by osteoporosis, a disease of lowbone strength that affects an estimated10 million Americans, resulting in anestimated 700,000 spinal fracturecases that can cause disabling pain,height loss, balance difficulties and adecreased quality of life. In the U.S.,approximately 50 percent of women and25 percent of men over the age of 50will experience an osteoporosis fracturein their lifetime.During a kyphoplasty, a small balloon isused to create a cavity in the vertebralbody. Bone cement is then deliveredinto the cavity to stabilize the spinalfracture. A vertebroplasty does notinclude the use of a surgical balloonto create a cavity before delivering thecement.St. Jude making progress inneuromodulation marketSt. Jude Medical Inc’s five-columnPenta surgical lead for neurostimulationtherapy, because of its design andability to deliver more electricitythrough smaller electrodes, may enablephysicians to better manage patients’chronic back pain after surgery hasfailed. Last year, St. Jude won Europeanapproval for its Libra deep brainstimulation device to treat Parkinson’sdisease. St. Jude is conducting clinicaltrials on a deep brain stimulation deviceto treat depression.

Patient profileBill Walton striding back from the brinkBill Walton, the NBA great whoplayed for John Wooden at UCLA,has never forgotten the play thatwrecked his back — and changedthe arc of his basketball careerand life.On a frigid January night in 1974, theBruins traveled to Washington Stateout on the Palouse in southeasternWashington. A rowdy sellout crowdlusted for victory against a proud andmighty UCLA team that had won anNCAA-record 84 consecutive gamesover the previous three seasons.During the hotly contested game, Bill— a spirited and rangey 6’11” center— soared high above the rim whenan opposing Washington State player“low-bridged” him, flipping Bill upsidedown and sending him hard to thetartan floor.“It was a despicable act of intentionalviolence and dirty play,” Bill wouldreflect 35 years later. “I broke twobones in my spine that night, andthings were never the same for meagain.”Bill received treatment but was not athis best when UCLA traveled to NotreDame 12 days later. The Fighting Irishsnapped the Bruin’s 88-game winningstreak, and an injured Bill Waltonwas about to embark on a long, slow,downward spiral that would cause himtrouble and grief for the next three-anda-halfdecades.Since his life was exercise and sport, Billworked diligently off the court. Corestrengthtraining, yoga, acupuncture,stretching, physical therapy, weighttraining, massage, swimming, biking —as well as taking prescribed medicineand nutritional supplements — kept himplaying basketball, but never withouta struggle. “It was always there,” hesaid. “That pain. That discomfort. Thatlimitation. That restriction.”That pain and discomfort is the mainreason why Bill — called one of thegreatest players in collegiate basketballhistory — set an NBA record he neverwanted: the most games missed duringa playing career. His knees, feet, ankles,wrists, and aching back rebelled atthe demands he placed on them andcontinued until his playing days wereover.Bill eventually transitioned into abroadcasting career, where the constanttravel and lifestyle — 200 nights ayear on the road — compounded theproblems with his deteriorating backcondition.“I lived in this increasingly unbearableworld of pain and disability,” hesaid. “I ate my meals on the floor,face down. I couldn’t get sleep. Icouldn’t get dressed.” After 30-plus different orthopedic surgeries,however, including having both anklessurgically fused, nothing could stopthe debilitating nerve pain emanatingfrom his back. At one point, feeling likethere was no hope, he stood atop a highbridge and contemplated jumping. Atleast his troubles and the pain wouldfinally be over. The turnaround beganwhen Bill was introduced to Dr. StevenGarfin, chairman of the Departmentof Orthopedics at the University ofCalifornia, San Diego who practices thenew surgical technique of operatingon the spine by entering throughthe side, using a Neurovision probe.The instruments are developed byNuVasive, based in San Diego. “I justwanted my life — any life — back,”remembers the 57-year-old formerbasketball star,” and I was hoping andpraying that Dr. Garfin could be theguy to do it for me.”Bill underwent eight-and-a-halfhours of surgery and was amazedby the near immediate relief fromthe unrelenting, excruciating, anddebilitating nerve pain that ranthrough his back, into his groin, anddown his legs.“I had to stay in the hospital a week,though. Mine was not an easy case,”Bill said. “For my spine, walkingwas the best therapy. But for mypermanent knee, ankle, and footproblems, walking was the worst thingfor me. I took longer than normalto recover, but what is normal in asurgery like this? Nothing has beeneasy or straight.“Slowly things got better, and I beganto do things again I hadn’t been ableto do in years, like put on my ownshoes and socks and bend over andpet the dogs. But it was right aroundthe seven-month mark when I turnedthe corner and found freedom again,pedaling my bike with no limitations.Riding on the open road, the windand the sun in my face — that was thegreatest outcome in the world for me,”Bill said with a smile.Basketball legend Bill Walton has amessage for anyone contemplatingspine surgery: “I had lost everything.I had a life that was not worth living.But thanks to the precisely skilledmind, hands, and soul of Dr. Garfin,now I’m eternally grateful to be backin the game of life. And my life willnever be the same again. There isnothing left to do but smile, smile,smile.”California Biomedical Industry 2011 Report | 31

Alzheimer’s diseaseLegislator profileRep. Linda Sanchez andRep. Loretta Sanchez confrontAlzheimer’s diseaseThe United States, like many othercountries, has an aging population withnearly one in five residents expected tobe 65 years or older in 2030. Even nonlife-threatening age-related conditionsare expected to put unprecedentedpressure on private insurers and publicprograms, including Medicare andMedicaid. Yet what concerns manyanalysts most is the imminent increasein dementia caused by Alzheimer’sdisease and other conditions. Anestimated 660,000 Californians willbe living with the condition in 2025— a 50 percent increase over thenumber of cases in 2000 — and 16million Americans are expected to haveAlzheimer’s by 2050.The costs of caring for those withdementia will be enormous. In 2010,total payments for healthcare andlong-term care services for people aged65 and older with Alzheimer’s diseaseand other dementias are expected tobe $172 billion. And those numbers donot include the contributions of unpaidcaregivers, which also total in thebillions of dollars.Few have a better appreciation forthe impending healthcare crisis thando two sisters from Orange County.Representatives Loretta (47th district)and Linda (39th district) Sanchezrepresent their respective districts inthe U.S. House of Representatives. Assuch, they are responsible for leadingthe country in a fiscally responsibleand sustainable way while addressingtheir constituents’ concerns. Giventhe economic and political climate,legislators and policy makers inWashington and at the state and locallevels are seeking ways to cut spending,which makes addressing future costs ofdementia a particular challenge.Raising the issue further for theSanchez sisters is the fact thatAlzheimer’s disease is about 1.5 timesmore prevalent in the Latino populationthan among Caucasians. It also tendsto manifest nearly 10 years earlier inLatinos than in other ethnic groups.The legislators represent heavily Latinoconstituencies.At the same time, the sisters havelearned firsthand the costs andchallenges that families face when aloved one is living with dementia.“We started to notice that things werewrong in late 2002, early 2003,” LindaSanchez said of her father, Ignacio. “Hewas having to write notes for himself— Post-its — for tasks he’d alwaysautomatically done. He started losinghis keys…and he would get angry overminor irritations, which was not at alltypical for him.” The father of seven andthe owner and operator of a machineshop, Ignacio “Nacho” Sanchez hadbeen a patient and reasonable man,Linda Sanchez said.Loretta Sanchez said that their fatheralso grew paranoid. “He was suresomeone was coming into his house tosteal things. He’d hide his toothbrushso no one would take it.” Later, whenit was not where it belonged, he wasconvinced someone had stolen it.The Sanchez family was fortunate, thesisters said, that they have had both thefinancial means to care for their fatherand the built-in manpower. With hiswife, seven children and their familiesclose by, Ignacio Sanchez was able tolive in his own home for the first fiveyears. “We took turns on weekly chores”such as shopping, cleaning and laundry,Linda Sanchez said, and made a pointof checking on him as they could duringthe week.“When it became clear that he couldn’tbe alone,” Linda Sanchez said, “hemoved in with our brother [Mike], andwe took turns on ‘weekend duty.’” Shesaid that among Latinos, families areculturally obligated to take care of their32 | California Biomedical Industry 2011 Report

families themselves; to institutionalizean elder is seen as shameful. But whenIgnacio began to slip out of the housewhen no one was watching, the familyrealized that his disease had progressedbeyond their ability to keep him safe.The decision to move their father intoa nursing home was not the first toughreality the family had encountered ashis condition worsened.Loretta Sanchez said that getting basicinformation on Alzheimer’s was achallenge. “We didn’t know anythingabout Alzheimer’s,” she said. They metwith a counselor who specializes incaring for loved ones with dementiaand were surprised by how little of whatthey could do came instinctively. Forinstance, they had installed securitycameras at Ignacio’s home in hopes ofmaking him feel safer. Yet the counselorscolded them for “feeding his paranoia.”Linda Sanchez said it was particularlydifficult to take over decisions for theirfather, who had always been so capableand independent. Establishing suchlegal arrangements as deciding whowould have power of attorney, makemedical decisions and oversee thefinancial planning are tough steps. Bothsisters mentioned the financial toll ofthe disease and the time commitment— time taken away from work, children,friends and other activities.So what does a legislator who has afiscal responsibility to her country,a leadership commitment to herconstituency, and firsthand knowledgeof the debilitating realities of dementiarecommend?Both Sanchez sisters acknowledge thatfunding is a hard sell in Washingtonnow. In 2009, Linda Sanchezintroduced the Cure and Understandingthrough Research for Alzheimer’s (LaCURA) Act. The bill sought to increasefunding for the NIH and the Centersfor Disease Control and Prevention(CDC) to conduct adequate Alzheimer’sresearch, outreach and education.“It was, unfortunately, a victim offinancial constraints,” Linda Sanchezsaid. “People are concerned about‘unnecessary spending.’” She reiteratedthat she believes that the impendinggrowth in the number of Alzheimer’spatients will “create an emotional,financial and economic crisis that willnecessitate action,” and that upfrontinvestments would be less costly andmore effective than the expensesincurred by waiting.There are steps that can and should betaken now that would not necessitatesignificant new government spending,the Sanchezes said. One would be toensure that the available informationreaches a wider audience, a task thatcould include translating materials intoother languages, making them moreculturally sensitive and disseminatingthem more effectively to underservedpatient and caregiver populations.Similarly, consolidating information onavailable resources would be helpful tocaregivers, who often are overwhelmed.Another important step would be toensure that more minority subjects areincluded in Alzheimer’s and dementiastudies and clinical trials.Ignacio Sanchez was one of thefew Latinos enrolled in an memoryand aging trial at the University ofCalifornia, Irvine. Studies also areongoing at the University of SouthernCalifornia Memory and Aging Center.With their proximity to ethnicallydiverse and underserved populations,the universities’ commitment toinvolving more Latinos and other ethnicgroups is feasible and appropriate,Linda Sanchez said.Both congresswomen applauded thecooperative efforts of researchers,industry and government in seekingnew understanding of Alzheimer’s aswell as new therapies for the disease.Supporting that work into the futurewill require added funding, which couldcome in the form of government grantsand, Linda Sanchez suggests, throughprivate-public partnerships.Looking aheadLinda Sanchez notes that societyneeds to be gearing up right now forthe increased demand for care forAlzheimer’s patients. “The [Alzheimer’scare] industry is expected to doubleas the Baby Boomers age,” she said.“There are no standards for care, nostandards for training. There is a highvacancy rate for care providers anda high turnover rate.” She said thatregulators and employers need toestablish training programs, pay scalesand working environments to ensurethat Alzheimer’s care staff stay in thefield and are prepared to provide thenecessary care as the patient population“explodes.”California Biomedical Industry 2011 Report | 33

Infectious diseasesPharmaceutical advancementsThere were various anti-infectivetherpaies for HIV, hepatitis B andbacterial infection:••Gilead’s combination ofelvitegravir + emtricitabine +tenofovir disoproxil + cobicistatis a once-daily single tablet of fourdrugs investigated for the treatmentof HIV infection and is colloquiallyknown as the ‘quad pill’. Theproduct combines the company’sTruvada (emtricitabine + tenofovirdisoproxil) with its experimentalintegrase inhibitor elvitegravirand the cytochrome P450 3Ainhibitor and pharmacoenhancercobicistat/GS 9350. Phase III trialsare comparing the quad regimenwith Atripla and ritonavir-boostedReyataz plus Truvada, respectively.••Dynavax is developingHeplisav (V 270), a vaccine forthe prevention and treatment ofhepatitis B virus infection. Theproduct consists of Dynavax’sproprietary immunostimulatorysequence that targets Toll-likereceptor 9 (TLR9) combined withHBV surface antigen, HBsAg,to stimulate an innate immuneresponse. The ISS technologyfacilitates switching from a Th2immune response to a Th1 responseto the antigen, thereby evokingstrong cytotoxic T-cell activityagainst the pathogen.••Optimer’s fidaxomicin is anarrow-spectrum macrocyclicantibiotic which inhibits thebacterial enzyme RNA polymerase.Paradigm shift: Managingpublic health through ourschoolsFor years, the Centers for DiseaseControl and Prevention (CDC) urgedonly those whose health could bemost compromised by a bout of flu— toddlers, pregnant women and theelderly — to be vaccinated. Then, in2008, the federal agency altered itsstrategy to not only prevent the worsteffects of the seasonal viral infection butalso to curtail its spread. Consequently,CDC now encourages all Americansolder than six months to get vaccinatedannually.California is heeding the call andrecognizes that no subset of thepopulation is more exposed or exposesothers more frequently than children.The California Department of PublicHealth, in conjunction with the state’sschool districts and county healthdepartments, has dispensed tensof thousands of flu vaccines in the2010-2011 flu season. An estimated125,000 of those doses were FluMist,an intranasal spray manufacturedby MedImmune. The biotechnologycompany maintains facilities inMountain View, Santa Clara, andHayward.FluMist has been clinically proven to bemore effective than injected vaccines inschool-aged children and, anecdotally,to be less stressful for children toreceive. While contraindicated forpeople with asthma or other respiratoryconditions, FluMist is appropriate for85 percent of all children.Chris Ambrose, senior director ofmedical affairs at MedImmune, notedthat over the past several years morethan half of California’s countieshave instituted school immunizationprograms, making the state a “definiteleader” in flu prevention. The effortwas aided when Assembly Bill 1937(Ch. 203 of 2010) was signed into lawin August 2010. The bill, introduced byAssemblyman Nathan Fletcher of SanDiego, authorizes public health officialsto supplement the work of school nursesand allows other nursing professionalssuch as registered nurses, nursepractitioners and licensed vocationalnurses, to staff the school-basedinfluenza immunization programs.The change is that school programs nolonger have to be implemented solely byschool nurses.“AB 1937 gave schools a bigger pool ofhealthcare professionals from whichto draw,” Ambrose said, “which is asignificant benefit to schools and schoolnurses.” He added that the ability to usea wide variety of nursing professionalsenables districts to complete theirvaccination programs more quickly.While set up specifically for seasonal flu,the bill would enable health officials torespond quickly to pandemics and otherhealth emergencies, if needed.34 | California Biomedical Industry 2011 Report

HIV and AIDS statisticsby stateAn estimated 470,902 people wereliving with AIDS in America in 2007.The highest numbers were in California,Florida, New York State and Texas.Among the 50 states, the lowestnumbers were in Vermont, SouthDakota, Wyoming and North Dakota.In 2007, the District of Columbiareported a far higher rate of AIDSdiagnoses than any other area (thoughthe rate in the wider Washington areawas surpassed by other metropolitanareas). A 2009 local government reportfound the capital city’s HIV prevalencewas 3 percent, including figures as highas 7.2 percent for 40-49 year olds, and6.5 percent for black males.AIDS diagnosis rates in Florida,Maryland and Louisiana were muchhigher than the national average of 12.3cases per 100,000 population per year.Patient profileLorraine S.Lorraine was struggling to finishhigh school and living in fostercare when she gave birth to herdaughter in 1997. Then, just oneweek later, she received someunexpected news – she was HIVpositive. The diagnosis hit her likea ton of bricks; just months earlier,she had tested negative for HIVinfection. Lorraine assumed thatHIV was a death sentence, andeven contemplated committingsuicide.Initial tests indicated that herdaughter had also been born HIVpositive,but any signs of HIVinfection disappeared by the timeshe was a year-and-a-half old.Lorraine quickly decided to makeher health a top priority so she couldcare for her daughter, and begantaking antiretroviral medicines tohelp control her infection. It was noteasy; the drug cocktails that wereavailable at that time were comprisedof many pills that needed to be takenat various times throughout the day,and often came with debilitatingside effects. At times, her doctoradvised her to take breaks from themedication to relieve the pain.Thankfully, the biomedicalcommunity has made greatadvancements in treating HIVinfection, and in 2008, Lorrainebegan taking a simplified regimenthat includes Truvada made by FosterCity-based Gilead Sciences. Oncedailydosing and fewer pills made thisregimen convenient for Lorraine totake, and she experienced fewer sideeffects.Today, Lorraine is feeling healthierbecause her viral load is undetectable,thanks to her strict adherence toher medication. Lorraine lives withher two daughters and fiancé, whois also HIV positive. His family haswelcomed Lorraine and her daughterswith open arms, giving Lorraine thesupport system she never had growingup.In addition to caring for her family,Lorraine gives back to the communityby actively volunteering at the AIDSService Center in New York City. Shemaintains a positive outlook on life,continuously educating herself aboutthe disease and working closely withher doctor to manage her infection.She remains hopeful that somedaythere will be a cure for HIV.California Biomedical Industry 2011 Report | 35

Device advancementsLeading the charge to reduce the spread of infections inhealthcare settingsIn March 2010, BD launched a new surveillance system that generates realtimeinformation designed to reduce the spread of infections. The BD ProtectInfection Surveillance and Data Management System is a portfolio of healthcaremanagement software solutions that tracks infections and helps prevent theirtransmission at three levels – from patient to patient, between patients andhealthcare workers, and from community sources to healthcare settings.The software provides real-time tracking and analysis of potential infection-relatedevents to improve infection prevention workflow, communications and responsetime. Robust report capability enables analysis of infection rates, evaluation ofpatient risk factors, monitoring of preventive processes, and measurement ofprogress toward infection prevention and patient safety goals.The Centers for Disease Control and Prevention (CDC) has identified healthcareassociatedinfections (HAIs) as one of the top 10 causes of death in the UnitedStates. Designed by CDC-trained epidemiologists, the BD Protect system addressesmultiple issues confronting healthcare administrators and public health officers,including the transmission of multidrug-resistant organisms in healthcare settingsand escalating costs related to HAIs.The portfolio includes three modules. BD Protect Infection Prevention targetsreduction of HAIs in patients. BD Protect Healthcare Worker Safety monitorsemployee vaccinations, testing, in-service education, injuries and illnessesto protect both employees and patients. BD Protect Syndromic Surveillancecontinuously analyzes emergency department patient data for reportable diseasesand symptoms that could signal a possible community outbreak. It also can be usedat a health department to collect and analyze community-wide data from multiplehospitals.Diagnostics advancesImproved Group BStreptococcus diagnostics fornewborn healthIn June 2010, BD received 510(k)clearance from the FDA to market theBD MAXTM GBS Assay for Group BStreptococcus (GBS) on the BD MAXSystem.GBS remains one of the leading causesof morbidity and mortality amongnewborns, with maternal colonizationserving as a major risk factor for earlyonset GBS disease. However, GBS ispreventable with antibiotics duringlabor, which prevents transmissionfrom mother to infant. The CDCrecommends universal prenatalscreening for GBS colonization andintrapartum chemoprophylaxis forcolonized mothers in order to preventtransmission to infants. The currentstandard of care for preventing neonatalGBS disease is screening pregnantwomen at 35 to 37 weeks of gestationusing culture methods, which arelimited by sensitivity, turnaroundtime and the need for highly trainedtechnologists to interpret the results.The BD MAX GBS assay on the BDMAX System represents a significantadvance in neonatal healthcare bystreamlining the GBS screening processand addressing the limitations ofcurrent culture methods by providingrapid, objective results. With no visualinterpretation required, the BD MAXGBS assay identifies GBS in just overan hour, which can help ensure thatcolonization status is available in thecase of preterm delivery. By automatingsample lysis through polymerase chainreaction detection, the BD MAX Systemoffers walkaway convenience for up to24 samples in approximately two and ahalf hours.36 | California Biomedical Industry 2011 Report

Researcher profileDr. Samuel So addresses an epidemic of a preventable diseaseCalifornia Hapatitis B & CFiguresUp to 5.3 million Americans – 2 percentof the U.S. population – are living withchronic HBV or HCV.Viral hepatitis is the fourth leadinginfectious cause of death.California is home to about 40 percent(or 6.7 million) of the nation’s AsianAmerican population and 150,000people of Pacific Islander ancestry.San Francisco and Santa Claracounties experience some of thehighest rates of chronic HBV and livercancer in the United States.Unaware that they have been infectedwith hepatitis B, one of 10 Asians andPacific Islanders lives with the chronicinfection — the leading cause of livercancer.Liver failure from chronic hepatitis C isone of the most common reasons forliver transplants in the United States.In 2007 alone, HBV and HCV-relatedhospitalization costs in Californiatotaled $2 billion.Samuel So, MD, FACS, Director of theAsian Liver Center, Director of theLiver Cancer Program, and the LiuHac Minh Professor of Surgery at theStanford University School of Medicine,was recruited to California as a livertransplant surgeon, an ambition he hadworked hard to fulfill. Yet he was notfar into his practice in the Golden Statewhen he found his true calling.“We were spending hundreds ofthousands of dollars to save one life[through a liver transplant],” he said,“when we could spend far less to savethousands and thousands of lives.”He explained that the preponderanceof his transplant patients had chronichepatitis B virus (HBV), an infection forwhich there has been a safe, effective,and inexpensive vaccine for morethan 30 years. And, yet, an estimated800,000 to 1.4 million Americans havechronic hepatitis B. Approximately onein 10 Americans of Asian and PacificIslander descent have chronic HBVinfection as compared to one in 1,000 ofwhite Americans.One challenge to stemming thespread of HBV is that many peopleare symptom free and do not knowthey have the disease until they havesignificant liver damage. Anotherchallenge, especially in the U.S., isthat neither at-risk groups nor theirhealthcare providers recognize that theyshould be screened and vaccinated forHBV.The at-risk groups include individualsborn in countries with high incidencesof HBV and hepatitis C (HCV), andanyone who might be exposed tocontaminated blood by handlingneedles or other sharp objects. Thesecond group includes healthcareproviders, tattoo artists or clients, andillegal drug users. Individuals born inthe U.S. before 1990, when HBV vaccinewas added to the infant immunizationschedule, and whose mothers wereborn in another country, also should bescreened, So said.Screening for the disease requires asimple blood test, “like the one theRed Cross uses before accepting blooddonations,” So said. In fact, beingturned away at the Blood Mobile ismany patients’ first indication that theyhave a hepatitis infection. If the bloodtest comes back negative, the patientshould be vaccinated. If the test comesback positive, the patient should bescreened periodically for changes in hisor her liver health. People with chronicHBV should also protect their livers bynot drinking alcohol and take measuresto ensure that they do not infect others.To raise awareness of HBV and livercancer, especially among the AsianAmerican communities in the Bay Area,So founded and became director of theAsian Liver Center at Stanford Schoolof Medicine in 1996. The center focuseson outreach and education, researchand advocacy, and it is reaching wideraudiences every year. For instance,the center’s Jade Ribbon Campaign isworking with Asian communities thelength of California as well as across thecountry and around the world.The center is drawing on the energyand creativity of youth members withprograms such as the Jade RibbonYouth Council (JRYC), which movesHBV awareness and discussion intohomes, churches and other gatheringplaces. One cultural factor in the fightagainst HBV is that having the diseaseis a stigma in Asian countries. Youngfamily members who have accurateinformation and a passion to makea difference in the health of theircommunities can change perceptionsand behaviors, So said.On the policy front, So has been anactive supporter of state legislation thatwould help eradicate the disease here.He has worked with AssemblywomanFiona Ma in drafting a couple ofHBV-related bills. Ma, who herselfhas chronic HBV, in 2008 introducedCalifornia Biomedical Industry 2011 Report | 37

Assembly Bill 158 to require theDepartment of Health Care Services(DHCS) to apply for a federal waiverto expand Medi-Cal eligibility forindividuals with chronic hepatitisB. AB 158 did not make it throughthe legislative process due to costsassociated with the bill. In 2009, Maintroduced a resolution declaring May2009 as Hepatitis B Awareness Monthin California. The resolution supportscollaborating with all interested partiesto raise public awareness about HBV.It also supports the development ofa comprehensive, statewide HBVprevention and treatment plan. So saidthat “profiling” by physicians in the caseof Asian and Asian-American patientscould save lives. “In a lot of cities inCalifornia, more than 50 percent of theresidents are Asian,” So said. “Doctorspracticing in those cities everyday missopportunities to save a life.” He addedthat physicians may automatically checkcholesterol, blood sugar, blood pressure,weight, and mass. “For Asian patients,they should add a hepatitis test.”So is acting globally as well as locally.As the founder and executive secretaryof the Asia and Pacific Alliance toEliminate Viral Hepatitis, he is buildinga public private partnership to eliminatethe transmission of viral hepatitisand to increase access to anti-viraltreatment. Using seed money from theClinton Global Initiative, the coalitionhelped fund a WHO epidemiologist tobe stationed in China to oversee theprogram.“That action alone doubled the WHOstaff committed to hepatitis,” So said.“One in 12 people in the world haschronic hepatitis, and WHO had onlyone full-time employee dedicated to thedisease.”The China project that So workedwith provided catch-up vaccinationsfor children. The program vaccinatedmore than 600,000 youngsters under16 years old. Moreover, through theprogram the group was able to educatethe youth about HBV so that they coulddispel some myths and, perhaps, lessenthe stigma within their own homesand villages. The program was carriedout in a remote, sparsely populatedprovince of China, where 50 percent ofthe residents are Tibetans and Muslims,making it a diverse and potentially morecomplex region in which to implement apublic health program.“The idea was that if we could conduct asuccessful program there, China shouldbe able to implement an immunizationprogram across the whole country.”Indeed, in June 2009 the ChineseMinistry of Health announced a catchupprogram to protect another 85million children. The CDC estimatesthat less than 1 percent of childrenunder five are infected with HBV ascompared to 10 percent a decade ago.In his work with the Institute ofMedicine (IOM), So helped author arecent report, “Hepatitis and LiverCancer: A National Strategy forPrevention and Control of Hepatitis Band C.” Through the report, the IOMrecommends increased knowledgeand awareness about chronic viralhepatitis among healthcare providers,social service providers, and the public;improved surveillance for hepatitis Band hepatitis C; and better integrationof viral hepatitis services.For a transplant surgeon, success iswatching a patient recover and thrive.For Dr. Samuel So, success would beeliminating HBV as a cause of livercirrhosis, cancer, and failure altogether.38 | California Biomedical Industry 2011 Report

Immunology and inflammatory disordersLupus• It is estimated that approximately1.5 million Americans suffer fromvarious forms of lupus, includingSLE.• Lupus can occur at any age, butappears mostly in women betweenthe ages of 15 and 45.• Current statistics indicate thatlupus affects women approximately10 times more frequently than men.• African-American women are aboutthree times more likely to developlupus, and it is also more commonin Hispanic, Asian and AmericanIndian women.• Both African Americans andHispanics/Latinos tend to developlupus at a younger age and havemore symptoms at diagnosis(including kidney problems). Theirlupus tends to be more severe thanthat in Caucasians. For example,African American patients havemore seizures and strokes, whileHispanic/Latino patients have moreheart problems.• More than half suffer symptomsfor four or more years, and havevisited three or more doctorsbefore being diagnosed with lupus.Delayed diagnosis can result in lifethreateningdamage to vital organs.• No new medicines specificallyfor lupus have been approvedin several decades. However,if diagnosed early, medicationsare available that can treat lupussymptoms in most patients. Forthe vast majority of people withlupus, effective treatment canminimize symptoms, reduceinflammation, and maintain normalbodily function.Lupus is a highly variable chronic inflammatory autoimmune disorder in whichantibodies are formed against the person’s own body proteins or tissues andcan involve a variety of organ systems. Lupus can cause severe joint and musclepain, kidney failure, heart failure, psychosis, seizures, skin lesions and extremeexhaustion. As reported in the May 1998 issue of Arthritis & Rheumatism, lupusaffects an estimated 239,000 people in the United States. Life expectancy forlupus patients has improved over the past three decades, but is still significantlyshorter than the average for the U.S. population. The course of the disease is oftenunpredictable, with periods of increased activity, known as flares, alternating withclinical stability. The causes of most lupus flares are unknown.Pharmaceutical advancementsAn anti-inflammatory therapy, Traficet-EN (CCX 282), is in development byGSK and ChemoCentryx for the treatment of inflammatory bowel disease (IBD),including Crohn’s disease, ulcerative colitis and celiac disease. It was in phase II/III trials in 2010 for Crohn’s disease. Traficet-EN is an orally-active chemokinereceptor 9 (CCR9) antagonist.Diagnostic advancementsManaging lupus patientsXDx recently initiated a large multi-center study designed to collect samples anddata for developing a gene-expression test to monitor disease activity in individualswith systemic lupus erythematosus. The goal of this study is to enable developmentof a new blood test method for clinicians to accurately predict which individualswith lupus will flare, when the flare will occur, and flare severity. Ultimately sucha newly derived test could possibly allow treating physicians to start pre-emptivetherapy early, with the goal of achieving remission quickly and with a shorterduration of treatment; identify individuals who will have less severe flares and willthus require less aggressive treatments; or intensify and lengthen treatment forthose individuals who will need such therapy. To learn more about this trial, pleasevisit clinicaltrials.gov• Unfortunately, some drugs cancause other health problems fromlong-term use. There is no cure forlupus.California Biomedical Industry 2011 Report | 39

Patient profileGerardo Becerra: Living with lupusIn the summer of 1981, GerardoBecerra was at the top of his game.He was working fulltime in thecirculation department at the UnionTribune in San Diego. He wasbetween his junior and senior yearsat San Diego State University, wherehe was earning his bachelor’s degreein social work. He was completing aninternship at a local nursing home,and he had been notified that hisapplication for U.S. citizenship hadbeen approved. He felt as if nothingcould go wrong.Until one day, he knew somethingwas not right when he began hittingthe snooze button. “I couldn’t wakeup,” he said. “It was taking me longerand longer to get out of bed, and Iwas exhausted all day.”So Becerra, who had “barely goneto a doctor ever,” sought help. “Fivedoctors and six months later,” hesaid, “in August of 1982, I wasdiagnosed with lupus.” He had neverheard of the condition and said theinformation he found at the library wasfrightening. He learned that lupus is achronic disease with no cure, and hisdoctor told him, “If you’re lucky, youmight have 15 years” of life expectancy.Lupus is an autoimmune disease thatcan damage any part of the body andmost commonly affects skin, joints and/or organs. It is a disease that “flares”between periods of relative remission.An estimated 1.5 million Americanshave lupus, with the majority of newpatients being women between the agesof 15 and 44.Complicating diagnosis and treatment,the disease progresses differently ineach patient and responds differentlyto medication from patient to patientand from year to year in the sameindividuals. Becerra said that he wasfortunate to have work that kepthim indoors and at a desk — withsupervisors who supported him. Foryears, only his immediate family andco-workers knew of his diagnosis. Thenhe became more actively involved inthe Lupus Foundation of SouthernCalifornia, a San Diego-based patientinformation, support and advocacyorganization.He established the foundation’s firstsupport group for men with lupus,which still meets quarterly. Concernedthat information about the diseasewas not reaching patients of color —African-Americans, Hispanics, NativeAmericans and Asians — he helpedorganize community outreach activitiesthat work through ethnic groups’churches and civic centers. He alsohas become a frequent and poignantspeaker who is called upon oftento address legislators, researchers,industry, community groups, patientgroups and potential supporters aboutlupus.Now president of the organization,Becerra’s message is that patientscan live “as normal a life as possible”if they are diagnosed early, take careof themselves and work closely withtheir physicians to fine-tune andmonitor their therapeutic regimens.He also advocates for funding forfurther research, healthcare parity,and commercialization of newtherapies.Becerra believes the day couldcome when a cure for lupus isfound. He also believes that SanDiego institutions are playing asignificant part in that progress. Helisted Scripps, The Salk Instituteand the biotech company, La JollaPharmaceuticals, among key localplayers. He also believes thatstem cell research holds particularpromise. “Stem cell research fundingis important,” he said, “becauseif we find a breakthrough for oneautoimmune disease, we’ll be closerto finding breakthroughs for the restof us.”It may have been 28 years sinceBecerra felt nothing could go wrong.Yet he is still focused on all that is ripeto go right.40 | California Biomedical Industry 2011 Report

Cardiovascular diseaseAs is the case nationally, cardiovasculardisease (CVD), including heart disease,heart failure, and stroke, is the leadingcause of death in California, accountingfor more than 73,000 deaths, or almostone-third of all deaths in 2004.In 2004, the number of deaths fromCVD exceeded the number of deathsfrom malignant neoplasms (cancer),diabetes, chronic liver disease/cirrhosis, suicide, homicide, and HIV,combined.The burden of CVD is experiencedacross the California population,although some groups experiencethe burden disproportionately. Offurther concern, given the changingdemographics in California, is that therisk of death from heart disease, stroke,and heart failure increases with olderage.As the average length of life extends,the numbers of deaths from heartdisease, stroke, and heart failure willincrease in future years. With an everincreasingnumber of heart diseaseand stroke events, amidst a healthcaresystem that is struggling againstshrinking resources, the felt burden willnot be insignificant.In 2004, the state recorded morethan 775,000 CVD-related hospitaldischarges, including nearly 200,000stroke-related hospital discharges.Device advancementsMedtronic heart valve offers minimally-invasive treatment optionMedtronic’s novel medical device addresses the effects of a dysfunctionalpulmonary valve without opening the chest for surgery. The pulmonary valveconnects the heart to the lungs, where blood is enriched with oxygen beforebeing pumped to the rest of the body. The FDA’s Circulatory System DevicesPanel recommended conditional approval of a Humanitarian Device Exemption(HDE) for the Melody Transcatheter Pulmonary Valve, by Medtronic, Inc. for thetreatment of children and adults with congenital heart disease.“This Melody valve is an enormous breakthrough – and an enormous relief – forpatients with congenital heart disease,” said pediatric cardiologist Dr. William E.Hellenbrand of the NewYork-Presbyterian Morgan Stanley Children’s Hospitaland professor of clinical medicine at Columbia University Medical Center. “Thedevice offers the potential to break the cycle of open-heart surgery after open-heartsurgery. If the FDA follows the advice of its expert panel, physicians and patientswill have a powerful new option for these very sick and hard-to-treat patients.”Transcatheter valve (TCV) technology provides a less invasive means to replacea failing heart valve. It is designed to allow physicians to deliver replacementvalves via a catheter through the body’s cardiovascular system, eliminating theneed to open the chest. TCV technology can thereby delay open-heart surgery forvalve replacement. Medtronic is committed to leading the development of TCVtechnology for all four valves of the heart: aortic, mitral, pulmonic and tricuspid.The Melody Transcatheter Pulmonary Valve is the first transcatheter heart valve tobe approved for commercial use anywhere in the world and the first to be reviewedby an FDA panel. It received Conformité Européenne (CE) mark, the Europeanregulatory approval, in October 2006, and has been approved for sale in Canadasince December 2006.As is the case with mortality,morbidity from CVD is experienceddisproportionately across the state’spopulation: males and AfricanAmericans have elevated rates, ascompared to other population groups.Reynen DJ, Kamigaki AS, Pheatt N, Chaput LA.The Burden of Cardiovascular Disease in California:A Report of the California Heart Disease and StrokePrevention Program. Sacramento, CA: CaliforniaDepartment of Public Health, 2007.California Biomedical Industry 2011 Report | 41

Patient profilesJohn Grigsby: Breakthrough heart valve benefits patient in clinical trialIn January 2010, Grigsby washospitalized again with severe aorticstenosis, a dangerous narrowingof the aortic valve in the heart.The condition is debilitating andfrequently deadly. In the hospital,Grigsby got an unexpected yet timelyvisit from Dr. Craig Miller, professorof cardiothoracic surgery at Stanford.“He came to El Camino Hospital onhis own time,” said Grigsby, who fita stringent set of inclusion criteriafor a clinical trial for which Millerwas an investigator. “He explainedthat my aortic valve was about thesize of a pencil eraser,” Grigsby said,“when it should have been one inchin diameter.” Because of Grigsby’sage and health, another open heartprocedure was out of the question.“He [Miller] told me I had two to sixmonths’ life expectancy,” Grigsbysaid. “Then he told me about theclinical trial.”The trial was set up to demonstratethe efficacy of an experimentaltreatment for older, high-risk patientslike Grigsby. The device, designed andmanufactured by Edwards LifesciencesCorp., of Irvine, is made of cow tissueand sits inside a metal frame. Thedevice is crimped onto a ballooncatheter, which Miller would threadthrough the femoral artery to Grigsby’sheart. After positioning the artificialvalve inside the old valve, Miller woulduse the balloon to open it up.“It was a no-brainer,” said Grigsbyabout enrolling in the trial. As a retiredengineer, Grigsby also appreciated thecontribution his participation couldmake toward proving — and perhapsimproving — an experimental medicaldevice.The device, called the Edwards SAPIENTranscatheter Heart Valve, has beenmarketed in Europe since 2007, andEdwards is working toward FDAapproval in the United States. Thecompany anticipates that the valvecould be introduced to the U.S. marketin 2011.Grigsby said he underwent the hourlongprocedure on January 12, 2010,a Tuesday, and was walking aroundthat evening. He said he experiencedno pain and went home the followingSaturday.“Everything has worked fine,” saidGrigsby, who walks a mile to a mileand a half three days a week andworks out at the gym on alternatedays. “I had check-ups at one monthand six months, and they told meto come back in a year” for the nextexam.Grigsby said, “I don’t have thestrength that I’d like to have, butI credit that to the hospital stays”in 2010, sedentary spells that costmuscle mass and stamina. “But justsitting and talking, I’d never knowI’d had a problem,” he added.“There is no question that withoutit, I’d be a dead man.” Instead, he’sworking to help his grandson wina bet: The youngster is betting thatGrigsby will live to be 102.Abbott’s investigational MitraClip System: Evelyn Osenda’s storyFor Evelyn Osenda, 93, a suddenslowdown in her usually activelifestyle came as a surprise. Shenoticed the change while hiking theYosemite trails.“One day out of the blue sky I couldn’twalk, couldn’t eat, I couldn’t breath— it came on just overnight,” says theSunnyvale, Calif. resident.A visit to her doctor soon identifiedthe cause: severe mitral regurgitation,a condition that occurs when theleaflets of the mitral valve in the heartdo not close properly, decreasingblood flow to the body. This causesshortness of breath and fatigue and,for some patients, can lead to heartfailure.Evelyn was scheduled for open-heartsurgery to repair the leaky valve, butthe afternoon before the scheduledsurgery her doctor called to tell her thatshe might be a candidate to participatein a clinical trial of Abbott’s MitraClipdevice, a minimally invasive treatmentfor mitral regurgitation that is deliveredvia a catheter to the heart.She leaped at the chance. In July 2009,Dr. Chad Rammohan of El CaminoHospital in Mountain View, Calif.,performed the procedure.“I woke up and didn’t have any painfrom the procedure. I felt really great,”recalls Evelyn. “I could breathe muchbetter.”The tiny MitraClip device that clippedthe leaflets of her mitral valve togetherhad reduced the leaking in Evelyn’sheart.Previously, even running the vacuumhad been difficult for Evelyn, requiringa stop to rest.“I don’t have to stop any more,” shesays. “Even mopping the floor — itdoesn’t bother me.”Evelyn continues to do well, and feelsgrateful that she was able to participatein the clinical study of the device.“I really can’t believe it,” she says.“I was lucky.”The MitraClip system is developed byAbbott’s vascular division, which hasfacilities located throughout the state.Approved in Europe two years ago, theMitraClip system has benefited morethan 2,000 patients worldwide. Thedevice is currently under review by theFDA.42 | California Biomedical Industry 2011 Report

Diabetes and metabolic disordersPharmaceutical advancements• The epidemic of obesity and diabetesaffects all races, ethnicities, andeconomic and geographic segmentsof the state, according to theresearchers. Although AmericanIndians, African Americans andLatinos are particularly affected byboth obesity and diabetes, theseconditions increased among all racialand ethnic groups between 2001 and2007.• Similarly, while both conditionsdisproportionately affect the poorestCalifornians, there were upwardtrends in prevalence among allincome groups during the sametime period. California’s youth arealso affected: More than a quarterof California adolescents — some970,000 children — are obese oroverweight.• The study specifically recommendsthat policymakers and othersseek ways to increase access torecreational facilities and parks,as well as promote policies thatencourage farmers markets andimprove access to food outlets thatstock fresh fruits and vegetables andother healthy fare.• California is falling far short of thetargets for obesity and diabetes setby Healthy People 2010, a nationalhealth-promotion and diseasepreventionplan. Obesity amongCalifornia adolescents is more thantwice as high as the national targetof 5.0 percent, while the rate ofdiabetes among California adults ismore than three times the federalgoal of 2.5 percent of the population.• In California, the total annual costof diabetes is estimated to be $24billion, with $17 billion spent ondirect medical care and $7 billionon indirect costs associated withthe disease. The cost of obesity tofamilies, employers, the healthcareindustry and the government isequally steep: $21 billion. As obesityand diabetes continue to morepeople, the associated costs willcontinue to balloon.Several products are currently at thefinal regulatory approval stage includingthree that are for antiobesity, but recentregulatory results suggest the goalremains elusive:••Vivus had their phentermine +topiramate fixed dose combinationrejected in its current form by theFDA in October, citing concernsabout danger to fetuses and potentialcardiovascular side effects associatedwith elevated heart rates. The FDArequested a revised submission toinclude data from a trial completedby Vivus after the submission of theoriginal application. Vivus intends tosubmit studies to address both safetyconcerns in a revised application bythe end of 2010.••In October, Arena received acomplete response letter forlorcaserin, in which the FDA did notapprove the drug largely becauseweight loss data for patients who donot suffer from type II diabetes wasmarginal and requested additionalclinical trial data from a trial intype II diabetes patients (the trialreferred to as BLOOM-DM). Arena,and partner Eisai announced resultsof that trial in November citingstatistically significant results inthe type II diabetes patient group,Both companies continue to pursuedevelopment and are working withthe FDA to address the concernsraised in the letter.••Orexigen Therapeutics’investigational drug Contravereceived a positive recommendationfrom the FDA’s Endocrinologicand Metabolic Drugs AdvisoryCommittee, which voted 13 to 7that the available data adequatelydemonstrated that the potentialbenefits of Contrave (naltrexonesustained release (SR)/bupropionSR) outweigh the potentialrisks when used long-term in apopulation of overweight andobese individuals and supportapproval. The Committee alsovoted 11 to 8 that a dedicatedstudy to examine the drug’s effecton risk for major adverse cardiacevents should be conducted asa post-approval requirementversus pre-approval. Contrave isan investigational combinationtherapy for the treatment ofobesity. The two components of thiscombination therapy, naltrexoneSR and bupropion SR, appear toact in a complementary manner inthe central nervous system and arebelieved to address both biologicaland behavioral drivers of obesity.California Biomedical Industry 2011 Report | 43

California companies are also pushingdevelopments in diabetes:••Bydureon is Amylin’s extendedrelease version of Lilly’s Byettawhich received a complete responseletter from FDA in October isexpected to be resubmitted by theend of 2011.••Afrezza is MannKind’s inhaledinsulin (with device) product,which was resubmitted in July, andwhich is still the most advanceddevelopment for inhalable insulinsafter Pfizer/Nektar’s high profilediscontinuation of Exubera in 2008.DiagnosticadvancementsWith proper diet and exercise, thetrajectory toward diabetes can beslowed or even reversed. And patientswho are given a results printout with adefinitive risk score are more motivatedto make the tough changes than thosewho are told their risks are “high.”Tethys also is developing similar riskprofiletests for cardiovascular diseaseand osteoporosis. The company hopesto have the first one, a test for heartattackrisk, ready for market within thenext two years.Tethys Bioscience: Predictingchronic diseases five yearsbefore onsetAn estimated 57 million people in theUnited States have pre-diabetes, with10 to 15 percent of them at most risk ofdeveloping full-blown Type 2 diabetes.The challenge for physicians is todetermine which of their pre-diabetespatients are in the highest risk group.Emeryville-based Tethys Bioscience hasdeveloped a simple blood test to helpdoctors address that question. Usingstandard amino assay analyzers, thecompany’s PreDx evaluates proteinsand lipids in blood to detect biologicalchanges that occur at or near the initialonset of the disease. The results, whichare available in about 72 hours, helpphysicians determine which of theirpatients most need — and can mostbenefit from — intervention treatments.44 | California Biomedical Industry 2011 Report

Researcher profileFrancine R. Kaufman, M.D.: Fighting Type 2 diabetes where it often starts: childhoodFrancine Ratner Kaufman, M.D., hashad a distinguished 30-year career indiabetes care, research and advocacy. In2009, she became chief medical officerand vice president of global clinical,medical and health affairs at MedtronicDiabetes (Northridge, Calif.). Diabesity,her 2005 book, explores the ravages ofthe obesity and diabetes epidemics asthey spread across the globe. “From thecavemen until the mid-’70s,” FrancineR. Kaufman, M.D., said, “we spent ourentire collective experience securingfood.” She said humans worked at theproblem from both sides — gettingenough food to eat and reducingpersonal energy output so the foodwould nurture bodies longer.She pegs the mid-1970s as the turningpoint. That is when the efforts expendedon better preservation measures,more effective transportation,and overall production made foodabundantly available in most of thedeveloped world. That also is aboutthe time that people had maximizedenergy-saving devices for work andtransportation, and began making moresedentary activities their first choice inentertainment as well.The observation is not merelyanecdotal. The CDC’s National Healthand Nutritional Examination Surveyshows that the percentage of adultswho are obese (body mass index 30)doubled from 15 percent in the late1970s to 33.8 percent in 2010. Amongpre-school age children two to five yearsof age, obesity increased from 5 percentin 1976-1980 to 10.4 percent in 2007-2008. For six to 11 year olds, thosenumbers increased from 6.5 percent to19.6 percent over the same period, andyouth aged 12 to 19 saw obesity increasefrom 5 percent to 18.1 percent over thethree decades.The trends were evident in California,too. In 1985, less than 10 percent of thestate’s population was obese. In 2009,that portion had grown to 20 percent to24 percent.Between the mid-’70s and now, thecondition commonly referred to as“adult-onset diabetes” became Type2 diabetes in everyday vernacular.Healthcare providers are finding moreand more children with Type 2 diabetes,a disease that used to be diagnosed inadults aged 40 years or older.“Now we have to redefine progress,”Kaufman said. “It’s no longer about,‘Can I get enough?’ Now we have towork on ‘How do I get the right balancebetween energy expended versuscalories?’”More challenging than helping people,especially children understand thatbalance, is getting them to make theright choices. They are up againstnumerous systemic factors steeringthem toward oversized portions of foodhigh in fat, sugar and/or salt. At thesame time, they exercise less.To see the factors at work, “just look atLos Angeles,” said Kaufman. She liveson the western side of the metropoliswhere side-street traffic is often snarledby the volume of pedestrians andbicyclists. There, “tennis, biking andjogging clothes may as well be the dresscode at Starbucks,” she said. “In easternand central LA, it’s the opposite.”High crime makes outdoor exercisedangerous, parks are often locked,and peer pressure is rarely targetedat fitness and health. Worse, thecommunities with the fewest optionstend to be home to ethnic groups moreat risk than Caucasians for diabetes andother metabolic disorders.Kaufman’s voice is among a growingnumber that want to address the issueat the environmental level. “First,we have to demand that we live incommunities where it is possible tomake healthful choices.” That includesaccess to fresh, healthful foods and safeplaces to walk, run and play.While Kaufman says that theresponsibility for maintaining healthfulhabits and body weights begins withindividuals and their families, shebelieves communities should be regearedto support healthy lifestyles, too.“California is at the forefront,” of thateffort. “We also have a lot going on inthe policy realm.” She cited the 2003ban on sodas in Los Angeles UnifiedSchool District facilities and the 2008regulations requiring nutritionalinformation on chain restaurant menusas policy changes that Californiamodeled for the rest of the country.San Francisco, in November, passed anordinance requiring meals that includedtoys with their purchase to meet specificnutritional guidelines. The action,which targets food items with excessivecalories, sodium and fat, has beendubbed the “Happy Meal Ban” becauseof its immediate impact on McDonald’s.Kaufman notes that California lifesciences companies also are workingtoward new therapies for diabetes andother metabolic disorders. MedtronicDiabetes, where she is chief medicalofficer and vice president of globalclinical, medical and health affairs, isdeveloping a technology that blendsglucose sensing and insulin delivery inCalifornia Biomedical Industry 2011 Report | 45

a device that would serve as an artificialpancreas for Type 1 diabetes patients.Bariatric or Lap-Band surgery has,Kaufman said, a “huge effect on insulinsensitivity. It begins to amelioratediabetes symptoms even before thepatients begin to lose weight.” Sheanticipates that other less invasive,possibly reversible means for alteringgastrointestinal function will bedeveloped as the “next-generation”therapy.On the technology front, innovationsare being developed to help peopleadopt and maintain healthy practices.Social networking, real-time wirelessglucose testing and Internet accessto nutritional information are just afew possibilities of ways that peoplemight one day use their phones to helpmanage their behavior.started practicing medicine,” Kaufmansaid, “there were cigarette vendingmachines in hospitals, and you couldsmoke anywhere in the building. Andeveryone did smoke.”Kaufman, who reads and makesphone calls from her treadmill so shecan fit exercise into her demandingschedule, said that she hopes most ofthe necessary changes come voluntarily.She also said that she believes thatwhatever therapies for prevention,intervention or treatment are developedin the future, all must “push toward ahealthy environment for everyone.”While noting that budget concernschallenge continued diabetes andobesity research and developmentefforts, the economic climate mightalso hasten societal changes. Nearly17 percent of U.S. medical costs, orapproximately $168 billion, can beblamed on obesity, according to astudy that examined 2005 medical caredata. The results also suggested thatobesity adds more than $2,800 to apatient’s annual medical bill. A similarearlier study found that approximatelyhalf of the costs attributable to beingoverweight or obese were paid byMedicaid and Medicare. Preventivemeasures now that eliminate orsignificantly reduce healthcare costsand ensure productivity in the futuremay prove to be a fiscally necessaryapproach.Kaufman said that reversing the trendsin obesity, diabetes and all weightrelatedchronic conditions will requirefundamental changes. Yet she points toearlier societal shifts as evidence thatthe challenge can be met. “When I first46 | California Biomedical Industry 2011 Report

_____________________________________________________________________________________Johnson & Johnson Diabetes Institution: Transforming diabetes care through educationOn February 29, 2008, the Johnson& Johnson Diabetes Institute, LLC –Silicon Valley opened its first trainingcenter in the United States to improvehow practitioners deliver diabetes carein local communities.With a vision of transforming diabetescare through education, the Instituteworks to address the needs generatedby the diabetes epidemic by providinghealthcare professionals with themost up-to-date information andskills training to help improve patientoutcomes at the community level.The mission of the Institute is toimprove the paradigm of diabetescare by transforming the bestpossible outcomes — from managingdiabetes to mastering diabetes — toenhance the quality of life for peoplewith diabetes, their families, and thecommunity.Since opening its doors, the Institutehas provided class instruction to morethan 2,580 students. In addition tohands-on product training, instructionincludes:• Guidelines and Standards ofDiabetes Care• Decision Points in Therapy• Chronic Care Model• Communication Techniques andBehavior Change• Reimbursement for Diabetes CareIn 2010, the Institute held webinars thatreached more than 820 participants.The Institute also has a robust onlinecommunity that offers additionaleducational opportunities such asinstitute faculty blogs, webinars anddiscussion forums to more than 6,300members.www.jjdi.comCalifornia Biomedical Industry 2011 Report | 47

Special sectionCalifornia’s biomedical industry and the FDA:A looming crisisBy David Gollaher, Ph.D., presidentand CEO of CHI-California HealthcareInstitute and Simon Goodall, Partnerand Managing Director, The BostonConsulting GroupSurvey research, interviews with industryexecutives and analysis of publisheddata confirm a common view of theFDA: namely, that the agency’s policiesand process represents a serious, andgrowing, barrier to innovation. In 2012,reautherization of the Prescription DrugUser Fee Act (PDUFA) and MedicalDevice User Fee Act (MDUFA) willcome before Congress, presenting anopportunity to reexamine key questionsabout the agency:• How FDA regulation influencesprivate-sector investment;• How the policies and actions of theFDA influence job creation and U.S.competitiveness;• How the agency is funded – the mixof industry user fees and governmentappropriations;• How FDA performance affectsAmerican patients.Over the past decade, the FDA’s scopehas been expanded as the agency hasbeen assigned new responsibilities (e.g.tobacco, eggs). At the same time, theFDA has faced intense scrutiny fromCongress, consumer groups and thepress. Not surprisingly, this has led toheightened caution in drug and devicereviews, and a tendency to focus lesson benefits than on potential risksof new products. Whereas drug anddevice approval timelines had improvedsince the 1980s with the establishmentof user fee programs, in recent yearstimelines have slipped.Longer review times andunpredictability within the FDAregulatory process would in themselvesbe cause for concern. But in the heatedinternational competitive environmentof 2011, the FDA does not operatein isolation. Since the late 1990s, forexample, authorities in the European48 | California Biomedical Industry 2011 ReportUnion (EU) have viewed regulatorypractices for drugs and devices as a wayto regain competitive advantages in thebiomedical industry. And EU regulatorsexplicitly redesigned their processes tooutperform the FDA in order to attractU.S. biopharmaceutical and medicaldevice firms. The past several years haveseen the wholesale movement of clinicaltrials abroad, with many biomedicalcompanies (especially medical devicemanufacturers) deciding to launch theirproducts in Europe first.There are real long term risks in thisglobal shift. The offshoring of clinicaltrials, early stage commercialization,scaling and manufacturing offersinternational competitors an edge overthe U.S. This is compounded becauseearly clinical experience with innovativeproducts leads to incrementaltechnological improvements. In someinstances, companies are introducingsecond and third generation versionsof a medical device (e.g. cardiovascularstent) in Europe while they are waitingfor FDA approval of the original devicein the U.S. Moreover, pushing productdevelopment offshore fosters thegrowth of innovation clusters in foreigncountries, enabling them to buildinfrastructure to support additional newdevelopments. Unintentionally, U.S.regulation enables foreign competitorsto gain the chain of experience essentialto technological innovation.The financial crisis of 2008, reducedaccess to capital for startup biomedicalcompanies, and continuing aversionto risk help explain why the financialrisk posed by regulatory uncertaintyhas increased sharply in the past fewyears. With less capital available forproduct development, the risk of FDAuncertainty is compounded, causinginvestors to shy away from whole fieldsof otherwise promising technologies(e.g. diabetes). Meanwhile, inefficienciesat the FDA cause companies to createmirror inefficiencies of their own.Costs for regulatory affairs staff andconsultants, for example, are growingFigure …And a 40. consequent A consequent slowdown in slowdown the time taken in to the review time new taken drugs to and review devicesnew drugsand devicesNMEs/NBEs 1Ave. no. months to approval302010014.682003–2007+28%18.852008Submission fiscal year510(k)s 2Ave. no. months to clearance64203.142003–2007+43%Clearance fiscal year1. By fiscal year of submission date. Only includes NMEs and NBEs. 2008 includes estimated figures for applicationswhich received a Complete Response Letter (CRL) and have not been withdrawn, using historical averages of CRL2nd Cycle times. Source: FDA drug database, EvaluatePharma. 2. By fiscal year of clearance date. 510(k)s clearancesonly includes original clearances. Source: FDA devices database. 3. By fiscal year of approval date. PMA approvalsonly includes original approvals. Source: FDA devices database.4.482010PMAs 3Ave. no. months to approval40302010015.482003–2007+75%27.082010Approval fiscal year

Figure 41. Since 2007 there has been a sharp change in the relative approval ofdrugs in the U.S. and the EU.Since 2007 there has been a sharp change in the relative approval of drugs in the US and the EU…Mean U.S. new drug approval delay (by US submission year)% of approvals100500-5070%+5.8-30%FY 2004Mean lag (months)Figure 42. 2011 CEO Survey: Select the extent to which you agree to each of thefollowing statements.Strongly disagreeDisagreeAgreeStrongly agree+9.182%FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 SubmissionyearEU First81%+4.8-18% -19%U.S. FirstThe current FDA regulatory approvalprocess has slowed the growth of ourorganization4%23%23%51%67% 64% 62%-1.9-33%U.S. lag (months)EU approval date—U.S. approval dateThe US FDA regulatory approvalprocess is the best in the world28%41%26%5%Approvalin U.S. first0Approvalin EU firstNote: Sample comprises only drugs being reviewed in both the US and EU, data are categorized by US submissionyear. Where drug has not been approved in one jurisdiction delay is counted as difference between first approval and1/23/2011. Difference between 2004–2006 and 2007–2009 found to be statistically significant at the 5% significancelevel. See methodology for more information. Source: FDA drug database; EMA drug database; BCG analysis.-0.6-2.5-36% -38%70%-1.9-30%105-5to the point where they are nearing andin some cases, exceeding spending forR&D in smaller biomedical companies.*A strong, efficient, effective FDA isequally in the interest of industry,the American public, and patients. Inlight of the upcoming congressionalreauthorization of user fees forbiopharmaceutical and medical devicecompanies, there is an opportunity toreinvigorate the relationship betweenFDA and industry. In addition torestoring stable, consistent andappropriate review times (like thosein the mid-2000s), the goals for animproved FDA should include:••Increasing transparency, consistencyof standards, and predictabilitythroughout the application andreview process at the reviewer,manager and agency leadershiplevels;••Encouraging the FDA to provideclear early guidance on clinicalstudy and data requirements, andto communicate regularly withsponsors on approvability;••Enhancing standards with respect toprocess and timing for approvals;••Reestablishing an appropriatebalance between benefit and risk –clarifying the impossibility of zeroriskas a standard, and explainingbenefit-risk assessment criteria tostakeholders.Owing to its preeminence inbiomedical innovation andunmatched concentration of lifesciences companies, California hasthe greatest interest in ensuring that theFDA encourages continued investmentin biopharmaceutical and medicaldevice innovation. An efficientFDA will produce benefits equallyfor the California economy andpatients worldwide.* “FDA Impact on U.S. Medical Technology Innovation,”Aabed Meer and Josh Makower, MD, Stanford UniversityCalifornia Biomedical Industry 2011 Report | 49

Special sectionWireless technology promises to rein in costswhile improving healthcareEric J. Topol, M.D. is the director ofthe Scripps Translational ScienceInstitute, a National Institutes ofHealth funded program of the Clinicaland Translational Science Award(CTSA) Consortium focused onadvancing individualized medicine.He is the chief academic officer ofScripps Health, a senior consultantcardiologist practitioner at ScrippsClinic, and professor of translationalgenomics at The Scripps ResearchInstitute.Digital devices, such as smart phonesand the iPad, have changed the worldin a single generation. The technologyhas rearranged human routines, popculture, marketing and politics.Those transformations, however, arelikely to be dwarfed by the imminentadvances wireless technologies will offerto healthcare.Eric J. Topol, M.D., vice chairman ofthe board and chief innovation officer ofthe West Wireless Health Institute, said,“We will all be connected to cell phonessoon.” Indeed, more than 5 billion cellphones already are in use worldwide,and half of all Americans are expected tohave smart phones by the end of 2011.As mobile devices have grown smallerand smarter, so has technology formonitoring vital signs. Sensors on thewrist can collect blood pressure, heartrate, oxygen concentration in the blood,breathing rate, body temperatureand more. Combining the sensors’capabilities and people’s comfort withand access to cell phones, Topol said,“has huge implications for healthcaredelivery.”Topol illustrated the potentialby explaining that smart phoneapplications can be developed tomonitor any physiologic metric. Themeasurements can be taken remotely,making it possible for patients toadhere to their regular work and familyschedules and for healthcare providersto assist them from miles away.A more continuous gathering of dataalso better indicates the state of one’shealth than does the “snapshot”approach of collecting key measuresonly during office visits. That isespecially true for cardiovascularpatients, Topol said, where the trueindicator of heart attack or stroke riskis not high blood pressure but, rather,swings in blood pressure from high tolow. Frequent or continuous monitoringmay pick up the signs of an imminentincident — such as a heart attack —triggering the patient to take immediateaction to prevent it.Cardiovascular disease is one indicationfor which California-developed wirelesshealth products already are available(see side bar on page 52).Diabetes is another condition in whichwireless technologies could play a keyrole. Nearly 20 million Americans areat risk of developing the disease and 30million already have. Worldwide, 300million people have diabetes. Topol,who has monitored his own glucose outof curiosity, said that managing diabetesis a highly complex and delicateendeavor.“Most diabetics don’t have a cluewhat’s stressing their pancreases,” hesaid. With new wireless devices, theywould “have the technology to helpthem pinpoint what’s knocked them offbalance.”The overarching objective is to preventdisease, Topol said. Using a continuousglucose monitoring “app,” individualsat risk of developing Type 2 diabetescould more easily determine their bestfood, exercise and lifestyle choicesfor attaining optimal blood sugarresults — as measured by their device.By incorporating their findings intotheir daily lives, they could prevent thedisease from ever occurring.By empowering patients with real-timeinformation and immediate feedbackto help them manage their disease,wireless technology could make asignificant and positive difference inpatients’ and their caregivers’ quality oflife. At the same time, the cost-savingspotential is enormous.“The U.S. spends $2.5 trillion dollarsin healthcare annually,” Topol said.“And one-third of the costs are diabetesrelated.” With the CDC estimating thatup to one in three Americans will havediabetes by 2050, wireless technologythat lessens the costs could not comesoon enough.Topol said that social media could beharnessed to create competitivenessamong community members to adoptmore healthful behaviors. As evidence,Nike sells a wristband for runnersthat tracks such data as distance,pace, time and calories burned duringa run. That data can be uploaded tonikeplus.com, where users can charttheir personal progress and shareit with others in the Nike+ onlinecommunity. The technology also can beused to publish results on individuals’Facebook, Twitter or other social mediaaccounts. Having friends — actualor cyber — to show off for or to offersupport increases one’s commitment tohealthful behaviors.“California is the center of socialmedia,” he added, “which is going to bebigger for healthcare than anyone hasenvisioned.” He said that at the same50 | California Biomedical Industry 2011 Report

time that wireless technologies can helpone patient and his or her physicianmanage the individual’s health, theycan be contributing new data to betterdescribe the symptoms, managementand outcomes for the entire populationof patients with that condition. A socialmedia company based in Cambridge,Mass. — Patients Like Me — iscompiling integral data from patientpopulations globally toward betterresearch and management of a longlist of prevalent and rare diseases. Theorganization also connects patients toone another and to information andresources to help them manage theirconditions.Another area that is being equippedwith wireless technologies is sleepdisorders. Topol said, “Tens of millionsof people are living with undiagnosedsleep disorders,” conditions thathave been linked with poor workperformance, driving accidents,relationship problems, and moodproblems like anger and depression.Chronic sleep loss also has been shownto increase the risk of heart disease,diabetes and obesity. Currently, to bediagnosed, many patients check into“sleep labs,” where they are fitted withmonitors to measure such metrics asbrain activity, heart activity, changes inblood pressure, and blood oxygen levels.They sleep a night at the facility to bediagnosed and then again to monitorthe therapy.“We could, today, attach a sleep sensorto your phone,” Topol said, “which youcould sleep with in your own bed, whereyou’re going to sleep most normally.”The device would record the metricsnecessary to diagnose sleep disorders.As with any disruptive technology,however, there are challenges tocommercializing wireless technologies.One, Topol said, is that the medicalcommunity is very resistant to change.It takes time to learn and trust newtechnologies enough to recommendthem to patients, time that cliniciansmay not have.Another issue concerns reimbursement.In the sleep disorders example, theability of prospective patients toadminister their own diagnostics intheir own homes would immediatelyand significantly reduce the demand forservices at specialized sleep clinics.Topol, a cardiologist, has seentechnology’s effect on his own practice.In February 2010, GE introduced apocket-sized ultrasound device. CalledVscan, it produces high-resolutionvideos of the heart in minutes. Topolsaid that he uses the Vscan with all ofhis patients and has markedly reducedthe number of full echocardiograms heorders.The latter, a “full echo,” is a test thatcosts more than $1,500, takes 40 to45 minutes to perform, and requiresan appointment and return visit. Eachfull scan that is not required “costs”the physician a share of the diagnosticfee and an added patient visit. Yet 8million heart echoes are done yearly inthe United States at a combined cost ofwell over $10 billion. “If we can cut thatat least 10 percent to 20 percent,” Topolsaid, “it has enormous potential.”In other indications, Centers forMedicare & Medicaid Services (CMS)reimbursement parameters wouldhave to be adapted to compensatefor wireless devices. Complicationsin getting reimbursed could delayphysician and/or patient interest in thenew products.Topol said that while there is ashorter development time betweendiscovery and filing for FDA approvalwith wireless technologies than withpharmaceutical products or implantabledevices, the process remainscomplicated. “Part of the challenge isthat there are no studies yet to provethat wireless glucose monitoringimproves health or saves lives,” he said.The sector has the added complexityof also having to satisfy FederalCommunications Commission (FCC)requirements.Another challenge is the lack ofstandards and coordination across thesector. Ideally, wireless technologieswould all be aggregated on one’sphone. Otherwise, patients could findthemselves hooked up to multiplemonitoring devices, which would becumbersome.“All of these challenges aresurmountable,” Topol said. “And if thetechnology helps people and lowerscosts, it’s just a matter of time before itis adopted.”Topol said that wireless access,the Internet and the growth ofsocial networking have made oursa consumer-centric world. Today’spatients have access to and are morelikely to seek out information abouttheir conditions. With that knowledgeand involvement comes demand forbetter, more effective therapies andmore access to them.“From the time that the first clotdissolving agent for stroke victims wasproven to work, it took more than sevenyears for it to be used in patients,” Topolsaid. “Patients’ tolerability for waitinghas completely changed.”“The next couple of years will put us ina powerful position,” Topol said of theWest Wireless Health Institute, whichwas founded in 2009 in La Jolla, andthe wireless health technology industryin California. “There are literally morethan 100 wireless companies in SanDiego alone,” he said. A leader amongthem is Qualcomm. Silicon Valleypillars such as Dell and Google arepotential partners as well.“We would love to work with Apple,”Topol said. He suggested that patientsmay one day use devices like Apple’shandheld wireless iPad to download andstudy their own X-rays, ultrasounds,and other imagery.Given the life- and health-improvingbenefits, the cost-cutting potentialsand innovation’s ability to spawnnew breakthroughs, Topol knows theconversation has only just begun.California Biomedical Industry 2011 Report | 51

Emerging wellness health companies and productsDevices and productsin the wireless healthtechnology space include“end-to-end” systemssuch as wearable sensorsthat transmit personalhealth and activity datato physicians, caregivers,and fitness coaches. Otherbreakthroughs includetagging medications toensure proper dosageand patient complianceand coding and trackingsystems to preventmistakes in dispensingmedications.Here are a few of the manywireless innovations thatCalifornia companiesare developing towarddelivering better healthcareto more patients at a lowercost.Bayer HealthCare Pharmaceuticals,which has manufacturing facilities inSunnyvale, Emeryville and Berkeley, inJune 2010 launched FactorTrack, thefirst customizable mobile application forpeople with hemophilia A. FactorTrackis a free, personal and interactive mobileapplication that helps make it easier totrack and record hemophilia factor VIIIinfusions.CareFusion Corporation, of San Diego,offers a line of medication managementservices designed to ensure thatmedications are stored, prepared,dispensed, prescribed and used safelyand efficiently. Through its bar-codingsystem and standardized practices,CareFusion provides large pharmacieswith medication dispensing practices,order management, and point of careverification, enhancing patient safetyacross the entire continuum of care.Corventis, Inc. is the San Josebaseddeveloper and manufacturer ofcardiovascular devices that combinemedical device, telecommunication andinformation technologies. The companymarkets two products that providecontinuous monitoring of key metrics.Both look like adhesive bandages,are waterproof and last for a week,transferring data back to the physician inreal time.The UVANT Mobile Cardiac TelemetrySystem, approved in January 2010,monitors symptomatic and asymptomaticcardiac abnormalities to help physiciansdiagnose and treat cardiac arrhythmias.The AVIVO Mobile Patient ManagementSystem, launched in 2009, collectskey vital signs to help physicians trackpatients’ health status and detectpotential health risks or worseningconditions.iRhythm, which is headquartered in SanFrancisco and also has a HuntingtonBeach facility, has introduced a familyof products to gather and evaluate ECGdata in order to improve the diagnosisof cardiac arrhythmias. The company’sproduct line includes long-duration,single-lead, continuous recordingdiagnostic devices such as The ZioPatch. The prescription-only, singleuse,continuously recording ECGmonitor records the heart’s electricalactivity via a patch that can be wornfor up to 14 days. It was approvedin May 2009 for use on patients whomay be asymptomatic or who maysuffer from transient symptoms suchas pre-syncope, syncope, palpitations,shortness of breath, dizziness,lightheadedness, fatigue or anxiety.Philips Healthcare, which hasfacilities in Milpitas, Oxnard andBrisbane, provides home healthcaresolutions for sleep and respiratorydisorders, independent living, andremote monitoring. Maker of Lifeline,the emergency alert pendant, Philips’is the only such device that canautomatically call for help if the wearerfalls or is disoriented, immobilized orunconscious.Proteus Biomedical of Redwood Cityis developing an ingestible sensor smallenough to be imbedded in pills. Thesilicon and metal sensor is designed tobe activated by stomach acid and emita faint radio signal to a small receiverpatch worn on the patient’s skin. Thesystem can document that medicationis taken, while also recording vital signs.In addition to ensuring compliance withthe therapeutic regimen, the system willenable physicians to adjust dosagesand timing to customize their patients’treatments.ResMed Corp of San Diego develops,manufactures and markets products todiagnose and treat sleep disorders. Thecompany’s ResTraxx product providesphysicians with web-based monitoringof all of their patients with sleepdisorders. More specifically, the devicealerts doctors to which of their patientsare not using their CPAP machinesor whose machines are not providingsufficient relief from the sleep disorder.That enables the physicians to workmore efficiently and to provide addedcare to the patients who need it most.52 | California Biomedical Industry 2011 Report

Workforce developmentA thriving entrepreneurial communityand highly skilled workforce are key tothe success of the biomedical industryin California. The synergies betweenCalifornia’s public and private collegesand the companies launched by theirfaculties and graduates led to the thriving“clusters” of schools, firms, investors andsuppliers in the Bay Area, Sacramento,Los Angeles, Orange County, Riversideand the San Fernando Valley, andSan Diego.As universities and companies havegrown, and the clusters have matured,the boundaries separating academicaand business have become morefluid. The same academic systemsthat inspired young researchers tolaunch their own companies, begantraining workers to perform technical,specialized and highly regulatedfunctions for those companies’development programs. In turn,companies supported the universities’foundations and helped shape theircurricula. Industry hired labs withinthe university system to do contractresearch and licensed additionaltechnologies or discoveries to improvetheir productsand writing competencies. Of the fourcategories queried, only computerskills were given promising scores.Respondents said that 50 percent hadsomewhat or completely adequateskills and none replied that they werecompletely inadequate.At the basic education level, thereremains the need to interest California’syouth in math and science at earlierages. In fact, 73 percent of the 2011 CEOSurvey respondents said that improvingK-12 education was the critical key toworkforce development in California(Figure 44).From an operational perspective,biomedical employers are lookingfor prospective employees who areprepared and committed to contributingto the organization’s activities and goals(Figure 55). There, too, respondentsfound the emerging workforce illpreparedin the functions that requireinquisitive thinking, with 35 percentsaying prospective employees wereleast prepared to conduct research.Manufacturing skills came in second at27 percent.The challenge and the opportunity ofensuring a strong biomedical workforceare both huge. California’s learninginstitutions and life sciences industrycontinue to respond in ways designedto enable the state’s ongoing dominancein biomedical innovation. The followingdescriptions illustrate the collaborativeways that industry and academia arereinforcing the state’s dominance in thelife sciences industry.Figure 43: 2011 CEO Survey: Rate the adequacy of California’s emergingworkforceCompletely inadequateSomewhat inadequateNeutralSomewhat adequateCompletely adequateMath Science Computer skills Reading & writing2%31%38%22%8%2%29%35%26%8%0%12%38%35%15%2%27%52%14%5%The science also became morecomplex with each new breakthrough.Researchers from different disciplinesbegan working together. Each appliedtheir expertise toward solving seeminglyintractable problems and madeheadway in brand new fields such asgenomics, gene therapy, personalizedmedicine, nanotechnology, stem cellresearch and more.Figure 44: 2011 CEO Survey: Whichof the following key area neededimprovement in educating theworkforce in California?19%Post universitytrainingFigure 45: 2011 CEO Survey: Of thefollowing choices, select the primarycapacity in which the workforce inCalifornia is least prepared.14%5%Education and training collaborationsare paying off, with companies citingthe local workforce as a key benefit andcritical consideration for locating andsustaining operations in California.Yet much work remains to be done.In fact, respondents to the 2011 CEOSurvey found the skills of the emergingworkforce — new high school andcollege graduates — lacking (Figure43). Their shortcomings are not only inmath and science skills, where the baris set especially high, but also in reading17%Post highschool training73%Kindergarten -12th gradeSource: Bureau of Labor Statistics Quarterly Census ofEmployment and Wages and Company Specific SEC filings.35%ComplianceManufacturingQuality assurance15%27%RegulatoryResearchVocational trainingSource: Bureau of Labor Statistics Quarterly CensusSource: Bureau of Labor Statistics Quarterly Census of Employment and Wages and Company Specific SEC filings.ofEmployment and Wages and Company SpecificSEC filings.3%California Biomedical Industry 2011 Report | 53

Through the first decade of this century,analysts looked at healthcare deliveryin the United States and consistentlyfound shortages of doctors and nurses,especially in rural or blighted urbanareas. They also predicted imminentcrises in specialty practices, such asgerontology.“When you have money,” said John D.Stobo, MD, senior vice president forhealth sciences and services for theUniversity of California (UC), “you buildmore medical schools and create morenursing programs” to correct a shortageof healthcare workers.“When money is an issue,” hecontinued, “you look at the situationmore pragmatically.” If people can’tget the care they need, the underlyingproblem may not necessarily be ashortage of doctors or nurses. “Theproblem is access to healthcare,” Stobosaid.Stobo cited the California TelehealthNetwork (CTN) as a technology-drivensolution that is more effectively andefficiently filling the need for healthcareaccess to those who live in California’srural areas. Led by the Center forInformation Technology Research inthe Interest of Society (CITRIS) andresearchers at the UC Davis MedicalCenter, CTN is a groundbreakingstatewide “medical grade” network. Itlinks 863 sites throughout California— hospitals, teaching and researchinstitutions, clinics, and other providers— for patient care and research usingtelehealth technology. The systemenables a few specialists to servepatients across large geographic areas,something they could not physicallymanage.In 2007, Gov. Arnold Schwarzeneggerasked the University of California toserve as the lead agency in developingand managing the CTN project. On Aug.17, 2010, the governor and U.S. ChiefTechnology Officer Aneesh Chopralaunched the network at the UC DavisCancer Center in Sacramento. Thenetwork is the result of a $30 millionjoint funding effort between the FederalCommunications Commission (FCC),the California Emerging TechnologyFund (CETF), the California HealthCareFoundation, UnitedHealthcare, theNational Coalition for HealthcareIntegration, the University of Californiaand other private and public entities.In such large initiatives as CTN,Stobo said, UC is able to leverage itstechnology, ingenuity and connectionsto put together effective teams and tobring projects to fruition. As part ofthe CTN development, UC establishedthe 501(c) organization responsible foroperating the network going forward,freeing UC Davis’ health IT experts totackle other public health challenges.Stobo’s story does more than illustratethe enormous role that the UC systemplays in addressing systemic societalchallenges. The example also serves asan analogy for the UC system itself.For most of its history, the UC systemhas had money. It first opened its doorsin 1869 with 10 faculty members and 38students. Today, the UC system includesmore than 220,000 students and morethan 170,000 faculty and staff on 10campuses (see sidebar page 67).All of the system’s resources, facilitiesand programs, however, have beenunder extreme stress since thefinancial crisis began in 2007. Facinga $24 billion budget deficit in 2009-2010, California made drastic cuts toits education, healthcare and socialservices. That was a debilitating turnfor the state’s educational institutions,which depend on the state for theirlargest single source of salary funding.UC received 20 percent less statefunding for fiscal year 2009-2010 thanit had just two years earlier, leavinga budget shortfall of $813 million.Approximately 100,000 nonunion UCemployees had their pay cut throughunpaid furlough days, starting Sept. 1,2009. The furloughs amounted to payreductions of between 4 percent and 10percent, depending on the employee’ssalary range. In addition to cuttingprograms, staff and faculty recruitment— and reducing freshmen enrollmentby 6 percent — the UC system raisedstudent fees by 9.3 percent for the2009-2010 school year. The regentsapproved an additional 3.2 percentincrease in student fees to be fully inplace by the fall 2010 term.The crisis is not over. The statecontinues to face budget deficits withno obvious permanent solutions. Forfiscal year 2010-2011, UC anticipatesa budget gap of $1 billion. The UCRegents approved an additional 8percent tuition and fee increase inNovember 2010. The increase of$822 for all UC students will raise theundergraduate cost to $11,124 per year(a system-wide average of $12,150 whenindividual campus fees are included).Other 2010-2011 cost-cutting measureshave included a paring down of theOffice of the President, an action thatis part of system-wide administrativereforms that could save $500 millionannually. UC has restructured debt,cancelled some bonus and incentiveprograms, cut energy use on itscampuses, implemented staff reductionsand continued to reduce course andprogram offerings.For longer-term solutions, the systemin 2009 formed a Commission onthe Future. The commission’s fivework groups assessed the size andshape of the system, its education andcurriculum, access and affordability,and funding and research strategies.The commission found that UCcontinues to meet its 1960 Master Planfor Higher Education obligations toprovide a place for California residentsin the top one-eighth of each graduatinghigh school class and spots for eligiblestate community college transferstudents. At the same time, the boardoffered recommendations (see sidebarpage 67) to help the university preserveCalifornia Biomedical Industry 2011 Report | 55

access and quality while addressingthe fiscal challenges of reduced statefunding.In addition to its operationalrecommendations, the commissioncalled on UC president Mark G. Yudofto develop two resolutions. The first,would reaffirm UC’s commitment to itsadmission responsibilities under themaster plan. With that plan, Californiaopened college to all residents andhelped make the state an engine ofeconomic growth and technologicalinnovation.The second resolution would reaffirmUC’s commitment to the 1994University of California FinancialAid Policy, which states that financialconsiderations must not be aninsurmountable obstacle to a student’sdecision to seek and complete a UCdegree.In line with Stobo’s healthcareaccess analogy, however, the effect ofCalifornia’s financial crisis on the UCsystem might better be viewed as asymptom than the problem. From thatperspective, Stobo and William Tucker,UC’s executive director of innovationalliances and services, say manyprograms and research centers withinUC already are seeking ways to maketheir operations more self-sustainingwhile advancing their missions.Stobo said that individuals within theUC system continue to pool resourcesto offer better care to patients andrevolutionize approaches to research,technology and healthcare delivery. Asan example, he described the ATHENABreast Health Network. Launched inSeptember 2009, the groundbreakingproject will initially involve 150,000women throughout California whowill be screened for breast cancer andfollowed for decades through the fiveUC medical centers. The project isexpected to generate a rich collectionThe UC Commision for the Future RecommendationsAmong the working groups’ proposed recommendations for the UC’s future werethese short- and mid-term actions designed to cut costs, increase revenues and/orenhance efficiencies:• Expedite system-wide administrative reforms that could save $500 millionannually (already underway).• Adopt strategies to enable some students to earn a bachelor’s degree in lessthan four years.• Develop ways to streamline the pathway for transfer students.• Continue to explore expanded use of online instruction.• Increase the enrollment and cap the number of nonresident undergraduatestudents.• Enhance the ASSIST website, which provides course articulation information totransfer students (A redesign of the system already is underway.)• Work in conjunction with other major research institutions to increase efforts torecover more of the operational, or indirect, costs that many research grants donot fully cover with the goal of capturing an additional $300 million annually.• Facilitate multi-campus research and doctoral/post-doctoral training, andimprove policies, processes, technology and facilities in this area.• Increase the proportion of graduate students from 22 percent of total enrollmentto 26 percent by 2020-2021 as a way to adequately support UC’s research andinstructional missions.• Explore the expansion of self-supporting degree programs to expand accessand generate up to $250 million a year in additional revenue.• Develop ways to expand private donations and increase the amount of gifts thatcan be used for unrestricted uses, such as to support academic and researchoperations (approximately 95 percent of the $1.3 billion raised in endowmentsin 2008-2009 is restricted for specific programs or objectives; only $25 million isunrestricted.)• Develop a multiyear advocacy campaign to foster public and political supportfor UC.• Lobby the federal government for an augmentation to Pell Grants that wouldfund core operations.56 | California Biomedical Industry 2011 Report

of data and knowledge that will shapebreast cancer care in the way therenowned Framingham heart studychanged the care of patients with heartdisease.The ATHENA project is headed byprincipal investigator Laura Esserman,MD, MBA, professor of surgery andradiology, director of the UCSF CarolFranc Buck Breast Care Center andco-leader of the breast oncologyprogram at the UCSF Helen DillerFamily Comprehensive Cancer Center.In addition to compiling essential andunprecedented data from breast cancerpatients, the collaboration of UC’s fivecancer centers also enables them tomore easily conduct breast cancer trials.Using a common information centerand one investigational review board(IRB), the coalition is more attractive totherapeutic developers seeking clinicaltrial investigators. The arrangementalso enables the UC cancer centers tomore quickly identify trial candidatesand to place their patients intoinvestigational new drug programs theymight not otherwise learn about.“We are looking at using the multicampusapproach to conducting clinicaltrials in other specialty areas,” Stobosaid, “and at whether a system-wideIRB would make sense.”In the biomedical arena, Tucker said,key initiatives include incubators —structured arrangements that enablefaculty, graduate students and postdoctoralfellows to begin the processof transforming their early stagediscoveries into marketable products.From providing lab space and accessto university equipment to connectingwould-be entrepreneurs with theinvestment, business and legal mentorsthey would need to succeed, U.S. ispaving the path to business formations.In a related area, Tucker said that somediscoveries require more testing to bemade attractive to industry. “We arestarting a ‘proof-of-concept fund,’” hesaid, “to facilitate tech transfer by takingideas with market potential to the nextlevel.” Demonstrating that a basicresearch discovery offers measurablebenefits would make the intellectualproperty more attractive and valuable topotential partners. Tucker added that bycreating a comprehensive database ofthe discoveries available for technologytransfer across the system, we hope toalso accelerate transactions.Tucker said that the UC systemalso is investigating and comparingbest practices in other states to findnew avenues to pursue for revenue,grants or other funding. He said thatincentives have been instituted inWisconsin, Minnesota and other statesthat give taxpayers — individuals andcorporations — tax credits for investingin their state’s emerging biomedicalcompanies. The approach providessmall companies with more moneyto invest in technology transfer fromuniversities and research centers.Both Stobo and Tucker are proponentsof reevaluating the UC system’s role inthe state’s economy, service structureand still-growing innovation legacy.“We need to have a fundamentaldiscussion, involving industry,government and universities, about thekey societal functions of each,” Tuckersaid. The three entities all impactemployment, healthcare, education, andquality of life, each working in their ownway. “We need to create places wherewe can meet and talk at C-levels aboutwhat each brings to the table and to besure that, at the least, we are not puttingobstacles in one another’s way.”California Biomedical Industry 2011 Report | 57

California State University SystemReaching out to California students of all agesAccording to the California MasterPlan for Higher Education, theprimary mission of the California StateUniversity (CSU) system is to provide“undergraduate education and graduateeducation through the master’s degreeincluding professional and teachereducation.”The plan has evolved since it wasimplemented in 1960, and so has CSU’soutreach. Today the system providesprograms designed to inspire andinstruct Californians of all ages andbackgrounds to pursue higher educationand training in the state’s innovativeindustries. The following threedescriptions help illustrate the diversityof CSU’s learning opportunities as wellas the university system’s awareness ofthe workforce needs in California.IMPACT L.A.Among middle-school students,engineering excitement can becontagious, especially when theyhave hands-on exposure to buildinghomemade lava lamps and solvingcrimes with ink chromatography.The findings come from the IMPACTL.A. Graduate Teaching FellowsProgram at California State University,Los Angeles. Funded by a five-year,$3 million grant from the NationalScience Foundation, it stands for“Improving Minority Partnerships andAccess through Computer/InformationScience/Engineering-related Teaching.”The program (impactla.calstatela.edu )trains graduate students as teachers andcommunicators. They serve as visitingscientists and engineers at three LosAngeles-area schools, partnering withteachers for 10 hours per week for anentire year.First, however, the fellows organize atwo-day summer camp for more than70 sixth- through eighth-graders. Then,in class during the school year, theyengage students with activities andlead research projects on topics such ascholesterol transport, cancer-preventingproteins, wind turbines, and telescopesin space.The program seeks to improve theperceptions that teachers, K-12 studentsand parents have of engineers; toencourage more young people to pursueengineering and research careers; andto enhance the communications skills ofthe IMPACT L.A. graduate fellows.According to one fellow – electricalengineering major Jessica Alvarenga– “Creativity and dedication go a longway in this field, and it’s important tolet kids see that you don’t need to beEinstein to make a difference in theworld.”The impact? Over the course of theschool year, the middle-school studentssaying “I think engineering is fun”jumped more than 50 percent (from32.1 to 49.1 percent among more than200 students).Channel Islands ProfessionalScience Master’s ProgramLife sciences industry leaders have longarticulated the need for business-savvyscientists and engineers. In answer, theCSU initiated the largest ProfessionalScience Master’s (PSM) program in thenation in 2007 with funding from theAlfred P. Sloan Foundation.Across the CSU new, two-year PSMprograms were developed withindustry partners. Life sciences PSMprograms focus on topics from medicalproduct development to biostatistics,incorporate business knowledge intocourses, and offer real-world, teambasedproject experiences. Today 18PSM programs on CSU campuses enrollover 500 students and have awardedover 150 degrees statewide.CSU Channel Islands (calstate.edu/psm/) first offered a Master ofScience degree in Biotechnology andBioinformatics in 2005, followed by adual master’s degree in biotechnologyand business administration in 2007.The two PSM programs arrayedan impressive network of industry,research institute and academicpartners, including Amgen, Baxter,Ceres, Stellar Biotechnologies, KytheraBiopharmaceuticals, UC Santa Barbara,USC, and City of Hope BeckmanResearch Institute.As a result Channel Islands PSMstudents are offered internships thatimmerse them in product-focusedprojects and provide hands-onexperience with sophisticated researchtechniques. After earning their degrees,nearly 80 CSU Channel Islands PSMgraduates have transitioned to jobsin life sciences companies or entereddoctoral programs.In the last two years Amgen extendedits support for PSM students at CSUChannel Islands with a $125,000donation. As Ching-Hua Wang,PSM director, explains, “As soon aswe mention the Amgen support tointerested students, their eyes light up.It’s a great incentive!”Professional ScienceCertificate and master’sprograms for veterans andactive duty militarySan Diego State University andMilitary Education Services Officersfrom Southern California havelaunched the CSU Professional ScienceInitiative consisting of online courses,certificate programs, and professional58 | California Biomedical Industry 2011 Report

master’s programs. These programsare designed to enable veterans andactive duty military to prepare for orto advance in careers in high growthscience, technology, engineering, andmathematics (STEM) fields.The programs, which qualify forveteran’s benefits, tuition assistance,and other sources of financial aid, areintended to enable active duty militarywho hold bachelor’s degrees to furthertheir educations while serving theircountry — and prepare for a highpaying,secure career once they havecompleted their commitments.To make it easy for participation fromanywhere in the world, all of the coursesoffered in the SDSU ProfessionalScience Certificate and Master’sPrograms are available 24/7 througha highly interactive online deliverysystem.A variety of programs is available. Oneexample is a certificate program forregulatory affairs. Beyond preparingparticipants for life sciences jobs inpharmaceutical, biotechnology andmedical devices and diagnosticscompanies, the course credits canbe applied toward master’s degreesin bioinformatics, biostatistics,biotechnology, medical productdevelopment, or regulatory affairs.To be admitted into one of thecertificate programs, participantsneed to hold an undergraduate degreewith a major in science, technology,engineering, mathematics, computerscience, or a related field. Individualswho hold an undergraduate degree ina non-STEM major and/or those withextensive and appropriate science/technology experience may also apply.All enrollees must successfully completeindividual course prerequisites, whichvary by program.For the master’s programs, participantsmust have earned an undergraduatedegree in science, technology,engineering, mathematics, computerscience, or a related field. They mustalso meet any additional requirementsspecified by the program.Professional science certificate andmaster’s degree program graduates arean important source of employees forsuch California life sciences companiesas Abbott Laboratories, Allergan,Amgen, Baxter Healthcare, BD-Biosciences, Biogen Idec, Genentech,Gen-Probe, Gilead, GlaxoSmithKline,Novartis, Pfizer Labs and RocheMolecular.All of CSU’s professional scienceprograms are designed with theflexibility to meet a range of industryand individual needs. Participantsmay start with a four-course certificateprogram and work toward a master’s,or they might start on a master’s andearn a certificate en route. Othersmay enroll in and complete only anindustry relevant certificate program.Course credits also are transferable,should students elect to pursue theiraspirations further at one of CSU’s 23campuses or at a four-year university.California Biomedical Industry 2011 Report | 59

StanfordSummer research program re-energizes teachersStanford’s Summer Research Programfor Teachers offers eight-week researchfellowships for middle school, high schooland community college teachers workingin the San Francisco Bay Area. Teacherswork in a Stanford lab four days a week,and meet once a week as a group forscience and engineering lectures byStanford faculty, lab tours, and seminarson teaching.The purpose of this program is tore-energize teachers, expose them toa broad array of scientific fields, givethem in-depth, hands-on researchexperience, and send them back to theirclasses filled with more confidenceand enthusiasm and increasedknowledge about the world of scienceand engineering research and itsapplications.Teachers receive a stipend of $7,200and are eligible for five units of StanfordContinuing Studies credits and anadditional $1,000 in grants. This isan intensive program that requiresparticipants to be on campus 40 hoursper week.Beginning in summer 2010, anResearch Experiences for Teachers(RET) Site award from the NationalScience Foundation will fund eightadditional teachers per summer ina complementary program calledSERET-Stanford Engineering ResearchExperience for Teachers. SERETteachers will be incorporated intothe Summer Research Program forTeachers but may have slightly differentplacements and program requirements.Since 2005:••Stanford has sponsored 117 SummerFellowships involving 77 individualscience teachers.••Stanford has hosted teachers from66 schools (54 public, 12 charter orprivate) in 29 districts in the BayArea.••Forty-two percent of these Fellowsteach in high-needs schools with alarge proportion of educationallydisadvantaged students historicallyunderrepresented in STEM.••Stanford Summer Fellowships havereached over 40,000 students.••Teacher retention has been quitehigh. A 2008 survey found that 94percent of all program alumni arestill in education, representing only2 percent annual attrition fromteaching.Community colleges provide avenue to biotech careersWhen AndreaCortezimmigratedto the BayArea from thePhilippines10 years agoat age 33,imaginedworking at a prominent biotechnologycompany like Genentech. But with nolocal network, a limited understandingof biotechnology and only a desire tosucceed, she could not land the job ofher dreams.All that changed after she tookher first courses at City College ofSan Francisco. Now a Senior PilotPlant Technician at Genentech’sSouth San Francisco facility, Cortezfirmly believes that her course workat the community college laid thegroundwork for her employment.“I tried several times to get a job in abiotech company,” said Cortez. “TheCity College courses were very helpful inunderstanding how the biotech industryworks.”The City College of San FranciscoProgram has educated and certifiedthousands of students who have gainedemployment in the biotech sector. Itssuccess is enhanced by San FranciscobasedBio-Link, a National AdvancedTechnology Education Center ofExcellence focused on biotechnologyand life sciences. Bio-Link has receivedmajor funding from the NationalScience Foundation since 1998. Bio-Link connects students and job seekers,it connects instructors and communitycolleges, and it connects biotechemployers to other programs. Nearly100 biotechnology programs acrossthe Nation have provided professionaldevelopment for faculty who serve morethan 40,000 students per year.“Bio-Link provides opportunitiesfor students to get networked,” saidCortez. “I was benefitting from theBio-Link activities.”Several biotechnology programs inCalifornia have utilized a numberof different industry interactions toprovide more hands on learning forstudents. At Contra Costa College,four specialized biotech courses aretaught by industry representativesfrom Bayer, Bio-Rad, Novartis andGenentech. Similar courses aretaught at other colleges includingCity College of San Francisco,Foothill College, and OhloneCollege. Skyline and Solano Collegeinstructors interned at Genentechand several programs regularlyvisit the Department of EnergyJoint Genome Institute and othermanufacturing facilities throughoutthe region.60 | California Biomedical Industry 2011 Report

Biotech Academy opens biotechnology doors todisadvantaged youthThe power of scienceto advance mankind’sunderstanding of the universeand to spur innovationsto improve human life hasbeen proven over and over.A public/private partnershipin the Oakland area isdemonstrating how aninterest in science also canchange the course of a youngperson’s life in powerfulways.Biotech Partners, formerly known asBerkeley Biotechnology Education, Inc./BBEI, is on a mission to connect youthto the world of biotechnology — and toopportunities they might not otherwisehave discovered. Established in 1993as part of a development agreementbetween Bayer HealthCare and the Cityof Berkeley, Biotech Partners reachesout to disadvantaged high schooljuniors at Berkeley High School andOakland Technical High School andguides them through their first year ofcommunity college.The program serves 150 to 200 studentsannually and combines classroom studywith on-the-job training to prepareyoung people for careers in the biotechindustry. Students take academic andscience classes while also learninglaboratory skills based on current bestpractices and isspecifically tailored tothe needs of the biotechnology industry.Most of the high school BiotechAcademy students are placed in paidsummer internships with local lifesciences companies to build their skillsin a real-world laboratory setting.After high school graduation, academyparticipants advance to the BioscienceCareer Institute for Community CollegeStudents, which is offered throughPeralta Community College District.The one-year commitment includescourses in biology, microbiology,organic/inorganic chemistry andbiochemistry in a demanding schedulethat requires good time managementskills. It also includes a 12-month,part-time job in industry. Between theirsummer internships and year-long jobs,Biotech Partners students receive 1,300hours of hands-on, workplace training.Completion of the program leads to aCertificate of Achievement in Bioscienceand the credentials to apply for skilledentry-level positions in the life sciencesindustry — positions that pay anaverage of $35,000 to $45,000 per year.More than 900 students have beenplaced in internships and co-op workpositions through the Biotech Partnersprogram. Among program graduatesdesiring work in biotechnology afterearning their certificate, 100 percenthave found and retained full-timepositions.“The transformational power of thisprogram is incredible,” said DeborahBellush, executive director of BiotechPartners, the organization that runsthe program. She said the difference ismost startlingly apparent when the highschool students come back for theirsenior years, fresh off their summerinternships. “They are so much easier towork with in the classrooms,” she said.“Their self-confidence is high, and it’sall a reflection of the respect they weregiven in their summer workplaces.”Their grades and classroomparticipation rise along with their selfesteem, Bellush added.The results do not come without hardwork by numerous partners, supportersand volunteers.“We offer wraparound services,” shesaid, which means extra tutoring,personal and academic counseling,resume writing tips and mockinterviews and discussions of possiblecareer paths. “We help prepare them fora career in a professional environment,all the way down to coaching them onthe words they choose.”As required for entry into the academy,most of the students come from lowincomehouseholds, and the salariesfrom their summer internships andyear-long co-op jobs are often usedto help support their families. Sosometimes, Bellush said, the academyalso helps the students with basic needslike clothing and meals during school.The training relies on mentors, whoare life sciences professionals whovolunteer to teach and advise thestudents. They, like employees withinthe partner companies where thestudents intern or work, have beensqueezed by the current economy.“They’ve experienced layoffs at theircompanies,” Bellush said of theprofessionals who work with academystudents. “They’ve maybe been doingdouble jobs for the past two years andfeel they can’t take on another thing.”She said recruiting industry partnerswas a challenge even when the economywas more robust. “They’re reticentto put 16 year olds into their highlyregulated facilities,” Bellush said, aconcern she said she fully appreciates.Industry partners also are asked to paythe salaries of the interns and co-opparticipants. The summer interns workeight weeks at 20 hours per week for$9 per hour. That costs $1,400 if thecompany pays the interns directly. Forthe work co-ops, the companies areresponsible for $10,000 per participantpaid directly or $15,000 compensatedthrough an agency.Industry continues to step up. BayerHealthCare, Kaiser Permanente,Lawrence Berkeley Lab, UC BerkeleyGenomics Sequencing and Stem CellLabs, Libby Laboratories, TethysBioscience, and others hired BiotechAcademy interns in 2010.California Biomedical Industry 2011 Report | 61

Bellush said that bringing BiotechAcademy students into the labs doesbenefit the companies in a number ofways. “Employee morale goes up,” shesaid, as professionals feel good abouthelping a young person along his or herchosen path. “They also are inspired bysharing science with students.” Also,the students contribute to the bottomline, especially the community collegestudents who are “very reasonablypriced temporary workers.” And theinternship and work co-op provide thecompanies with the chance to get toknow and to help train potential futureemployees.The key benefit of the program toindustry partners, Bellush said, is that“the graduates are turnkey. They hit theground running and are better preparedfor an industry career.” In fact, theretention time for Biotech Academyalumni is six years as contrasted with 16months for other entry-level hires. Withthe longer retention rate, turnover andtraining costs are reduced.“We are working with young people whomay not see their peers, or even peoplewithin their communities, working inprofessional environments,” Bellushsaid. As a result, the students have ahard time envisioning a professionalcareer for themselves. Many of the paststudents have been the first in theirfamilies to graduate from high school,and most are the first to enroll in a postsecondaryeducation program.Yet the attention and guidance theyreceive through the Biotech Academyclearly is making a difference in theirlives:••Approximately 98 percent of thestudents (100 percent over the pastfive years) who complete the highschool component, including thesummer internship, graduate fromhigh school. That compares to anestimated 71 percent in Californiaand approximately 49 percent in theOakland Unified School District.••To date, 59 percent of BiotechPartners students who have enrolledin the community college componenthave earned a Certificate ofAchievement in Bioscience, which ismore than twice the national averagefor similar certificate level trainingprograms for high school graduates.••Nearly all graduates seeking jobsin the bioscience arena have foundemployment within three monthsafter graduation.••A full 97 percent of Biotech Partnersstudents pursue post-secondaryeducation.“Even if they don’t continue in science,”Bellush said, “they do so much betterthan they would have.” And so do theircommunities, whose next generationwill benefit from a new kind of rolemodel.Bio-Community.org: Bringing passion and expertise to the classroomThe need for continued innovation inthe life science industry requires a newgeneration of science professionalsarmed with the education and trainingneeded to be both technically informedand able to embrace change. Life sciencecompanies are stepping up to thischallenge and responding to the growingcalls from educators of cash-strappedclassrooms for industry connectionsthat will significantly augment students’learning.“This was such a gratifying opportunityand one that I strongly encourage mypeers and colleagues to experience. Forthose of us within industry, we owe aresponsibility to give back to educatorsand to pay forward to students, whowill one day advance the research thatwe perform today” Dr. Alex R. Muci,Ph. D., Senior Scientist, MedicinalChemistry, Cytokinetics.Bio-Community.org is a grassrootsprogram that mobilizes life scienceprofessionals, bringing their passionand expertise into the classroomto provide quality STEM (science,technology, engineering and math)-focused interactions to students ofdiverse backgrounds. A cornerstone ofthe program is a web portal developed bythe BayBio Institute in partnership withNational Lab Network.The Bio-Community.org web portalallows teachers to post needs, andfor volunteers to sign up for activitiesthat correspond to their expertise andavailability. The origins for the projectgrew out of the belief that what oftenignites a student’s passion for science isthe opportunity to interact with an actualscientist. Unveiled during the second halfof 2010, Bio-Community.org is providingimportant support to educators from acoalition of professionals who are eagerto pass their love of science on to thenext generation of innovators. Internships,company tours, in class labs, judges forposter presentations, mock interviewsand guest lectures are only a few of theconnections that are occurring.“Science education is vitally importantto California’s future. Bio-Community.org is going to help us revolutionizethe way we deliver science educationin South San Francisco. It is a terrificexample of an innovative way in whichour public school systems and privatecompanies can work together to ensurethat California provides its studentswith the best education available.”Howard S. Cohen, Ed.D., South SanFrancisco Unified School DistrictSuperintendentThis industry-driven response is exposingstudents to real-life STEM applicationsand careers. It is also providing educatorswith the resources and training neededto equip students with life science careerand technical knowledge. Life scienceprofessionals – in addressing concernsabout the pipeline for ongoing innovationin the industry - are experiencing therewards of “giving back” and supportingstudents and teachers.www.Bio-Community.org62 | California Biomedical Industry 2011 Report

Industry supported programs for STEM educationAbbottAbbott offers dynamic science-basedinternship opportunities to collegestudents that provide hands-onexperience while promoting personaland professional growth. The PrincetonReview ranked Abbott as one of thetop three companies with a five-starrating for internship work assignmentsdirectly related to a field of study andcareer goals.www.abbott.com/global/url/content/en_US/50.40:40/general_content/General_Content_00166.htmlAffymetrixAffymetrix offers Summer internshipsfor students and entry-level positionsfor new college graduates. Internsparticipate as members of a projectteam in a research, development,manufacturing or business area that willbring relevance to their college work.Affymetrix offers new college graduatesexperience in real-life assignmentswhile receiving practical, on-the-jobtraining.www.gene-chip.com/corporate/careers/university_relations.affxAllergan FoundationThe Allergan Foundation has awardedthe Discovery Science Center with agrant to assist in their Making the GradeProgram, an educational program forCalifornia’s underserved students fromkindergarten through 12th grade.www.allergan.comAmgen FoundationAmgen Fellows — The AmgenFoundation’s $5 million, five-yearpartnership with Teach For Americais specifically designed to dramaticallyimprove math and science education,especially in low-income communities.The Amgen Foundation will support50 new Amgen Fellows each year. Thegrant will support their recruitment,training and development and willprovide each Fellow with a signingbonus.www.amgen.com/media/teach_america_annual_summit.htmlAmgen-Bruce Wallace BiotechnologyLab ProgramThe Amgen-Bruce WallaceBiotechnology Lab Program is aneducational outreach program fundedby the Amgen Foundation that providesequipment, curriculum assistance andsupplies to high schools and colleges.The program integrates a handsoninquiry-based molecular biologycurriculum designed to introduce,with extensive teacher support, theexcitement of scientific discovery tothousands of students.www.amgen.com/citizenship/foundation.htmlMBA recruiting programThe MBA Leadership Program atAmgen is an opportunity to use businessskills and experience to dramaticallyimprove people’s lives. Participantshave the chance to play a crucial rolein the success of the organization andwork with some of the industry’s topindividuals. Recent business schoolgraduates can experience a sciencebased,high-performing environmentthrough full-time positions in Amgen’sfinance and marketing organizations.www.amgen.com/careers/mba.htmlInternship & Co-OpsThrough Amgen’s internship andco-op programs, the company sharesknowledge and builds relationshipswith qualified students from a variety ofmajors, including chemistry, computerscience and biology.InternshipsPaid internship assignments aredesigned for undergraduate andgraduate-level students. Studentswork under at least one practicingprofessional who provides guidance andmentorship during the 10- to 12-weekinternship.Internships Cooperative EducationStudents complete an assignment overthe course of more than one semesterfor academic credit. The normalschedule is composed of paid, full-timework for one semester, followed by afull-time semester at school.www.amgen.com/careers/Amgen ScholarsAmgen Scholars is a $25 million, eightyearprogram that provides pivotalresearch experiences for studentsinterested in pursuing a graduatedegree and a career in science. Theprogram was launched in the Summerof 2007 with approximately 250undergraduate students from nearly100 different colleges and universitiesacross the nation. The Amgen scholarswill have the opportunity to meet eachother and learn about drug discoveryand development at a mid-Summersymposium in California.http://www.amgenscholars.com/California Biomedical Industry 2011 Report | 63

Amylin PharmaceuticalsSummer Internship ProgramThe internship program provides anexciting educational opportunity forthose exploring a career at Amylinas well as in the biotech/life sciencesindustry.www.careers.amylin.com/internships.aspBayer HealthCareMaking Science Make SenseBayer begins investing where the STEM(Science, Technology, Engineeringand Math) pipeline truly begins — atelementary school — and then continuesrefining the pipeline with middle andhigh school programs that provideexperiential STEM education in bothformal and informal learning settings aswell as internship opportunities.High School ProgramsBayer supports many programs thattarget underserved students:Project SEED. Project SEED is adynamic nonprofit organization thatworks in partnership with schooldistricts, universities and corporations.Founded in 1963 with the goal of usingmathematics to increase the educationaloptions of urban youth, the program isstill on the cutting edge.www.projectseed.org/California State University East BayMathematics, Engineering, ScienceAchievement (MESA) Center. MESA,founded at U.C. Berkeley in 1970, is awidely respected program providing arigorous hands-on curriculum in thesciences to underserved K-12 schools.Student and family support, and collegeand career preparation, are integralparts of the program.www.bayer.com/en/Education-and-Research.aspxCollege and University SupportAt numerous colleges and universitiesaround the country, Bayer supportsthe education of undergraduate andgraduate students who choose to pursuestudies in STEM (science, technology,engineering and math) disciplines byproviding scholarships, fellowships andinternships. Bayer also provides fundingto organizations such as the NationalConsortium for Graduate Degreesfor Minorities in Engineering andScience, Inc., and the National ActionCouncil for Minorities in Engineeringwhich, in turn, provide scholarshipsand fellowships to talented minoritystudents.www.bayerus.com/CSR/CSR_EWD.aspxBristol-Myers SquibbFoundationBLAST Pre-K Kits — The six BLASTPre-K kits address phenomena thatare familiar to young children andare everyday things at which childrenmarvel. All of the kits include manyhands-on science explorations,children’s trade books to connect thethemes to literature, suggestions forrelated art, music and free-choiceactivities, and a notebook to guide theteacher, parent or childcare provider.The kits also include a take-homeFamily Connection activity to providea bridge between home and school orchildcare.www.bms.com/sr/foundation/communities/science_education/content/data/science_current_grants.htmlGenentechIntershipsGenentech’s paid internshipassignments entail intensive 10- to12-week summer programs forundergraduate and graduate-levelstudents. Interns work side-by-sidewith some of the most talented peoplein biotechnology on project teams intopics related to research, development,manufacturing processes and corporatebusiness groups, complimenting his/her university curriculum with relevant,hands-on experience. Target Degrees:BSc, MSc, MBA, Ph.D, JD.www.gene.com/gene/careers/university/internships/Co-Op ProgramGenentech’s co-op program providesundergraduate and graduate studentsoutstanding opportunities to gainvaluable industry experience under theguidance of a Genentech professional byworking full-time during the Summerand part-time during the academic year.Some universities may grant academiccredit for eligible students. TargetDegrees: BSc and MSc.www.gene.com/gene/careers/university/coops/Postdoctoral ProgramThe post-doctoral program allows forthe collaboration with world-classscientists both at the company andbeyond. Fellowships typically last fouryears and offer the chance to do cuttingedgeresearch.www.gene.com/gene/careers/64 | California Biomedical Industry 2011 Report

GenzymeGenzyme’s College RelationsProgramAs an active sponsor and participantin the Biomedical Science CareersProgram, Genzyme provides mentoring,internships and educational scholarshipawards to outstanding minoritystudents from high school throughpostdoctoral levels.www.genzyme.com/corp/careers/intern_positions.aspJohnson & JohnsonRxeSEARCH - An Educational Journey(In partnership with PhRMA, theMuseum of Contemporary Science, andother pharmaceutical companies)The RxeSEARCH curriculum teachesstudents about the process ofdiscovering a new medicine, and howto move through the developmentstages and regulatory review processes.It is an integrated learning modelencompassing science, mathematics,communications and societal andgovernment issues. By providingstudents a glimpse of how the sciencethey learn in school is applied inscience-based industries, the programgives students a head start on theircareers.www.jnjpharmarnd.com/jnjpharmarnd/rx-search.htmlBe a NurseTo address the nursing shortage,Johnson & Johnson has developeda nationwide campaign in supportof the nursing profession. Workingwith healthcare leaders and nursingorganizations like the National StudentNurses Association, the National Leaguefor Nursing, the American NursesAssociation, the American Organizationof Nurse Executives, and Sigma ThetaTau International, Johnson & Johnsonhopes to bring more people intonursing, develop more nurse educators,and retain the talent already in theprofession.www.discovernursing.com/jandj.aspxMedImmuneMedImmune is committed tosupporting science education andattracting youth and minorities into thefield. The company supports ScienceBuddies, a unique online organizationthat assists students with science fairideas, expanding the possibilities inthe area of biotechnology. In 2005 and2006, MedImmune began sponsoringregional science associations for fourcommunities: Montgomery County,Maryland; Frederick County, Maryland;Philadelphia, Pennsylvania; and SantaClara Valley, California. The regionalfairs run by these organizations recruitwinners who go on to the country’slargest and most prestigious science faireach year.www.medimmune.com/about/us_community.aspMedtronicMedtronic Foundation Science Matters- A free 24-page booklet sponsored bythe Medtronic Foundation was designedas a tool for parents and educators tohelp K-6 students unlock the worldof science and discovery at home andschool.www.medtronic.com/foundation/Even before they graduate, students canget a taste of the innovative, missiondrivenMedtronic culture while gainingmeaningful work experiences andimproving lives. Medtronic’s SummerAssociate Program offers business andtechnical internships to top studentsaround the world.www.medtronic.com/careers/studentopportunities/PfizerSummer Internships & Co-OpPrograms- Interns at Pfizer can puttheir education and talent to workimmediately. Across their operatinggroups, Pfizer offers value-added, highimpact internship opportunities inresearch and development, marketing,finance, human resources, production,sales and legal. Pfizer recruits from adiverse pool of top-ranked candidateswho are currently enrolled in graduateand undergraduate programs in the U.S.and Puerto Rico.www.pfizer.com/careers/working_for/summer_internships.jspPfizer-Summer Internships & Co-Op Programs — Interns at Pfizer canput their education and talent to workimmediately. Across their operatinggroups, Pfizer offers value-added,high-impact internship opportunities inresearch and development, marketing,finance, human resources, production,sales and legal. Pfizer recruits from adiverse pool of top-ranked candidateswho are currently enrolled in graduateand undergraduate programs in the U.S.and Puerto Rico.High School Curriculum — Pfizercontinues to lead in the science of greenchemistry, and in its partnership withBeyond Benign, has developed the highschool program, Solutions in GreenChemistry: An Introduction to GreenChemistry in the High School. Thecurriculum is designed for high schoolstudents and teachers and is intendedto introduce teachers and their studentsto the topic of green chemistry, exploregreen chemistry technologies and toprovide a hands-on inquiry-basedunit in which high school studentscan explore this emerging approach tochemical manufacturing. To learn moreabout the curriculum unit availablefrom Beyond Benign, please visit www.beyondbenign.org.California Biomedical Industry 2011 Report | 65

Bringing Science to Life in OurSchools — Pfizer offers much moreto schools than financial assistance.Pfizer employees — who have a wealthof expertise, talent, commitment andpassion for science and learning —volunteer their time at local schools.Pfizer also provides partner schools withlab equipment and supplies and the useof facilities.The Pfizer Education Initiative(PEI) — To work with schools incommunities where Pfizer people liveand work, helping to revitalize scienceand math programs, and enrich thelearning experience of all involved.More than 1,700 Pfizer employees— from scientists and engineers tomanufacturing workers and supportstaff — serve as volunteers in theprogram. In its first decade of operation,the PEI created school partnerships in20 Pfizer communities, resulting in thetraining of thousands of teachers andthe creation of 18 new or renovatedscience labs.www.pfizer.com/responsibility/education/school_partnerships.jspSchering-PloughSchering-Plough FoundationThe education of children, particularlyin the area of science, has always beenan important part of the Foundation’sphilanthropic activities. Schering-Plough provides leadership inscience education by investing in theconstruction of science and technologylaboratories at high schools andcolleges, and by sponsoring studentand teacher mentorship programs andSummer camps.www.schering-plough.com/schering_plough/corp/foundation_education.jspThermo Fisher ScientificLeadership Development ProgramsFinance Leadership DevelopmentProgram — Four rotations overtwo years are designed to acceleratecareer development and developfuture generations of finance leadersfor Thermo Fisher Scientific. Recentundergraduates will have theopportunity to interact with seniorfinance leaders and executives andparticipate in various key financialinitiatives.MBA Leadership DevelopmentProgram — Three rotations overtwo years are designed to developcandidates to be ready to take onmanagement positions at any ThermoFisher location at the completion of theprogram. MBA graduates from top-tierprograms will participate in rotationsdesigned by senior management, attendleadership training and work with amentor throughout their two years inthe program.MBA Intern Program — The 10-week program, which takes place overthe Summer, enables MBA first-yearstudents to work on assignmentsselected by senior management whileparticipating in leadership training andnetworking events. The goal of the MBAintern program is to provide a pipelineof talent for the MBA LeadershipDevelopment Program.www.thermofisher.com/global/en/about/careers/mba_in.aspThis section has been excerpted from Building California’sBiotechnology Workforce A Guide to California’s CareerTechnical Education Programs with permission from TheCalifornia Biotechnology Foundation.Desired skill sets• Cellular biology• Engineering• Molecular biology• Math• Applied lab skills• Chemistry• Quality Control• Computer science• Heavy equipment operation• Safety• Communication• Collaboration66 | California Biomedical Industry 2011 Report

Government funding fueling innovationin CaliforniaBiomedical research theworld over is funded bycorporations, governmentand charitable foundations.Generally, industry researchis devoted to productdevelopment; governmentfunding supports basicresearch; and charitablefoundations strive toadvance basic sciencetoward therapies for specificdiseases.The U.S. government pays for anestimated 36 percent of the country’smedical research. Conducted primarilyby university and independent researchlabs, government-supported researchoften leads to important discoveriesthat add to basic understanding ofthe natural world. University-drivendiscoveries also often are key toidentifying promising targets fortreating or curing diseases, unravelingmysteries of how diseases or the humanbody work, or inspiring new approachesto difficult problems.Critics of government funding ofbiomedical research contend that suchresearch is often too basic, and doesnot contribute an adequate return oninvestment to taxpayers. Innovatorsfrom all industries would disagree.As the gaps in the body of scientificknowledge are filled in, incrementalfindings combine to illuminate andclarify the workings of the mostcomplex systems, enabling scientistsand clinicians to suggest preventivemeasures and offer treatments or cureswhere none were previously available.An advantage of government fundedresearch is that the results are madepublic. Scientists, researchers andclinicians build on one another’sfindings and learn from one another’smistakes.Because government grantspredominantly go to university faculty,post-doctoral fellows and graduatestudents, they ensure a continuingopportunity for young researchers tocomplete their training and pursue theirpassions — experience that serves asthe foundation for long and productivecareers.Studies show that governmentinvestment in research leads tothe formation and success of newcompanies. Startup firms create jobs,produce new therapeutic products,and pay taxes and salaries. Withoutgovernment funding, the Californiabiomedical industry would not bethe innovation powerhouse that it istoday — nor would the state have theinfrastructure, capacity and potentialit has to continue to lead the world inimproving human health and quality oflife.Grants from the NationalInstitutes of HealthBeginning in the 1950s, the NationalInstitutes of Health (NIH) has beena major source of grant funding touniversities and other researchers.Comprised of 27 institutes and centers,the NIH covers the full range of humanhealth issues. Its specialties includeoncology, cardiology, respiratoryconditions, mental health, allergies,infectious diseases, aging and diabetesamong others.By encouraging cross-functionalresearch teams, the NIH has broughttogether experts from the fields ofmedicine, engineering, math andinformation technology to devise newmeans for preventing, diagnosing,treating and curing disease.Beyond improving the understandingof human biology and the pathogenesisof disease, NIH grants haveempowered young scientists, engineers,mathematicians and others to buildsuccessful careers in academia and inCalifornia Biomedical Industry 2011 Report | 67

the private sector. NIH funding enablesuniversities and research centers toinspire their students and postdoctoralfellows to advance basic research;to build and utilize capacity in theirfacilities; and to train faculty and staffto teach future generations.Grants awarded by the NIH toCalifornia grew by 87 percent between1999 and 2004, the peak year thusfar. Since then, however, funding hasdropped back to an average of $3.2billion annually (Figure 46).No other state has garnered as muchNIH funding as California (Figure 47).In 2009, California collected NIH grantsworth more than $3.2 billion. That was38 percent more than Massachusetts,the next highest recipient.Each of the 50 states receives someNIH funding every year. California hasaveraged approximately 15 percent ofthe total over the past decade, and wasawarded 15.1 percent of the total againin 2009.The bulk of California’s NIH awardssupport research projects. In 2009,7,082 applicants were selected forfunding that totaled $3.2 billion. Yet,$119.7 million in NIH funding enabledfellowships as well as training grants— money that is critical to the ongoingtraining of faculty for tomorrow’smedical science programs.Figure 46: California’s NIH funding, fiscal years 1999-2009 ($M)Figure 25: California’s NIH funding, fiscal years 1999–2009 in millions of dollarsCalifornia’s NIH Funding$4000$3500$3000$2500$2000$1500$1000$500$0199819992000 2001 2002 2003 2004 2005 2006 2007 2008 2009Source: National Institutes of Health, Office of Extramural Research.Note: Data excludes R&D contracts and projects funded by the American Reinvestment and Recovery Act.Figure 47: Top 10 NIH grant funding recipient states, 2009 ($M)Figure 26: Top 10 NIH grant funding recipient statesCaliforniaMassachusettsNew YorkPennsylvaniaTexasMarylandNorth CarolinaWashingtonIllinoisOhio$1,070$1,009$948$785$739$641$1,381$1,940$2,331Source: National Institutes of Health, Office of Extramural Research.Note: Data excludes R&D contracts and projects funded by the American Recovery and Reinvestment Act.Figure 48: California’s share of total U.S. NIH grand fundingFigure 27: California’s share of total US NIH grant funding, fiscal years 1999–2009Share of US NIH Funding17%16%15%14%15.1% 15.3% 15.0%15.3% 15.6% 16.0%14.3%$3,21415.1% 15.0%15.1% 15.1%13%1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Source: National Institutes of Health, Office of Extramural Research.Note: Data excludes R&D contracts and projects funded by the American Recovery and Reinvestment Act.68 | California Biomedical Industry 2011 Report

Figure 49: California’s NIH grantsby type, 2009Grant TypeDollarAmount(millions)GrantsAwardedTotal $3,213.6 7,082Research grants $3,087.3 6,240Training grants and fellowships $119.7 813Training grants $98.5 305Fellowships $21.2 508Construction grants $1.0 2Other awards $5.5 27Figure 50: NIH Grants, total and training ($M)Figure 29: NIH Grants, total and training ($M)1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009United StatesTotal grants$12,804 $14,721 $16,701 $18,947 $21,669 $22,552 $23,117 $20,813 $21,067 $20,876 $21,483Training grants and fellowships$513 $546 $593 $657 $722 $749 $765 $758 $778 $776 $780Training as a percent of U.S. total4.0% 3.7% 3.6% 3.5% 3.3% 3.3% 3.3% 3.6% 3.7% 3.7% 3.6%CaliforniaTotal grants$1,933 $2,248 $2,497 $2,905 $3,386 $3,613 $3,301 $3,143 $3,163 $3,151 $3,214Training grants and fellowships$81 $83 $89 $97 $108 $114 $116 $111 $118 $117 $120Training as a percent of California total4.2% 3.7% 3.6% 3.3% 3.2% 3.2% 3.5% 3.5% 3.7% 3.7% 3.7%Source: National Institutes of Health, Office of ExtramuralResearch.Note: Data excludes R&D contracts and projects fundedby the American Recovery and Reinvestment Act.Training awards can be used to provideresearch training for young scientistswho may seek careers in biomedicaland behavioral sciences, whetherin academia or industry. They alsocan be used to establish or enhancecontinuing education programs foralready established researchers andfaculty. Training grants and fellowshipshave long been a key component in theexcellence of California’s biomedicalinstitutions’ programs.Since 1999, such funding has accountedfor an average of 3.6 percent of theoverall NIH funding. Nationally, thefunding in 2009 of 3.6 percent of thetotal was only a tenth of a percent lowerthan the previous two years and thesame as in 2006. In California, traininggrants and fellowships have made up anaverage of 3.5 percent of the state’s totalshare of NIH funding over the past 11years. In 2009, such grants comprised3.7 percent of the total, continuing athree-year streak at that level.Source: National Institutes of Health, Office of Extramural Research.Note: Data excludes R&D contracts and projects funded by the American Recovery and Reinvestment Act.Nine of the top 15 California institutions receiving NIH grants in 2009 wereuniversities — including seven of the 10 UC campuses. Stanford University wasamong the top five recipients. Of the top 10 recipients in 2009, three are in ornear San Diego. Those three (UC San Diego, the Scripps Research Institute andthe Burnham Institute for Medical Research, now the Sanford Burnham MedicalResearch Institute) make the 53rd Congressional District the largest beneficiary ofNIH funding in the state (Figure 51).Figure 30: 51: Organizations in California in California that recieve that NIH receive funding NIH (by Congressional funding (by District) congressional ($M)district), 2009 ($M)UC San Francisco (CD 12)UC Los Angeles (CD 30)UC San Diego (CD 53)Stanford University (CD 14)The Scripps Research Institute (CD 53)USC (CD 33)UC Davis (CD 1)UC Berkeley (CD 9)UC Irvine (CD 48)BIMR (CD 53)$67$114$112$175$172$206$306Source: National Institutes of Health, Office of Extramural ResearchNote: Data excludes R&D contracts and projects funded by the American Recovery and Reinvestment Act.$367$384$463California Biomedical Industry 2011 Report | 69

Small Business AdministrationprogramsGovernment funding to fuel thestate’s biomedical industry alsocomes from the U.S. Small BusinessAdministration’s (SBA) Office ofTechnology. The SBA’s two grantprograms were implemented to increasethe competitiveness of small, hightechnologyfirms.The first, the Small Business InnovationResearch (SBIR) program, providescritical seed capital for biomedicalentrepreneurs and occasionally providesinitial funding for startup companies.Under the SBIR program, federaldepartments and agencies with annualextramural R&D budgets exceeding$100 million must reserve at least 2.5percent of those budgets for awards tosmall U.S. high-tech firms.The second program — the SmallBusiness Technology Transfer (STTR)— reserves 0.30 percent of the funds offederal departments and agencies withannual extramural research budgetsexceeding $1 billion for awards to smallU.S. high-tech firms. These awards aresmaller than the SBIR grants and fundcooperative R&D projects involvingsmall business and a nonprofit researchinstitution.The SBIR and STTR dollars remaincritical for the development of newbiomedical products, especially in thecurrent economic climate. Californiacompanies have been successful inobtaining the highly competitiveawards, and, in 2009 again took thelargest share of the grants. Californiaentities received SBIR and STTR awardstotaling more than $117 million. Thattotal amounted to 27.1 percent of thecollective funds received by the top 10recipient states.Figure 31: 52: Top Top 10 10 recipients recipients of NIH of NIH SBIR SBIR and STTR and STTR Funds ($M) Funds, 2009 ($M)CaliforniaMassachusettsNew YorkMarylandNorth CarolinaPennsylvaniaWashingtonOhioColoradoTexas$20.5$19.3$25.4$24.2$32.2$29.8$38.0$44.1$81.4Source: National Institutes of Health, Office of Extramural ResearchNote: Data excludes R&D contracts and projects funded by the American Recovery and Reinvestment Act.American Recovery and Reinvestment Act fundingCalifornia also was a significant beneficiary of the American Recovery andReinvestment Act (ARRA) grants, many of which were administered through theNIH. Figures 53 and 54 below show the totals and the state’s percentage of thosegrant programs.Figure 53: NIH grants funded by the American Recovery and Reinvestment Actof 2009Recovery ActProjects(FY 2009)Funding(FY 2009)Recovery ActProjects(FY 2010)$117.0Funding(FY 2010)California 1,706 $636,616,123 1,217 $689,513,934Share of National Grants 13.3% 14.6% 13.9% 14.9%Figure 54: NIH grants funded by the American Recovery and ReinvestmentAct of 2009 - Top 10 recipients by funding in FY 2009Recovery Act Projects (FY 2009) Funding (FY 2009)California 1,706 $636,616,123Massachusetts 1,237 $501,767,963New York 1,142 $379,928,579Pennsylvania 812 $278,484,448Texas 670 $213,074,281North Carolina 558 $192,847,747Maryland 478 $172,663,253Washington 388 $170,069,481Illinois 505 $143,930,276Michigan 394 $129,423,91070 | California Biomedical Industry 2011 Report

California NIH Funded Research and InnovationUniversity of CaliforniaPartnering with NIH to advance medical science and improve healthcareUC: An economic engineand innovator in California• UC research has been essentialto the development of many ofCalifornia’s leading industries—from biotechnology to informationtechnology to telecommunications.• Nearly 400,000 jobs in Californiadepend on UC operations. Thatincludes non-university jobs thatuniversity expenditures create.• UC contributes more than $14billion in California economicactivity and more than $4 billion instate and local tax revenues eachyear.• More than 1,000 California biotech,high-tech and other innovativeR&D-intensive companies put UCresearch to work every day.• One-third of California’s biotechfirms were founded by UCscientists, and one-fourth ofbiotech firms in the U.S. are within35 miles of a UC campus.• UC researchers produce, onaverage, four new inventions a day,and UC develops more patentsthan any other university in thenation.William Tucker, executive director ofInnovation Alliances and Services atthe UC Office of the President, states,“NIH’s commitment to basic life scienceresearch at universities over the past30 years, combined with the ability ofuniversities to patent and license relatedinventions, has resulted in the U.S.creating and leading the biotechnologyindustry. We are pleased that theObama administration has publiclyrecognized the importance of, and isactively looking for ways to enhancethe impact of federally-funded researchon the nation’s technology-drivenbusiness sectors, such as the biomedicalindustry.”UC researchers garnered more than$1.95 billion in NIH funding in 2009-10, accounting for 43 percent of UC’stotal research budget. UC sciencetouches our daily lives, allowingphysicians to identify medicalconditions early and provide hope forsignificant medical challenges.They include:••Artificial lung surfactant, whichallows premature infants to breathe••Herceptin to treat breast cancer••The nicotine patch for smokingcessation••A catheter to treat aneurysms••A chochlear implant to help the deafunderstand normal speech••Hepatitis B vaccine••MRI and PET technology to detectdiseaseIn addition to these advances, UChas untangled the building blocksof many complicated diseases, fromAIDS and Alzheimer’s to cancer andcardiovascular conditions.Among important discoveries by NIHfundedUC researchers:••Proto-oncogenes, or normal genesthat have the potential to convertto cancer genes. The discoverytransformed the way that scientistslook at cancer and is leading tonew strategies for detection andtreatment.••The prion, an infectiouspathogen that causes certain fatalneurodegenerative diseases, such asbovine spongiform encephalopathy,commonly known as mad-cowdisease. This discovery could provideinsights into the prevention ofAlzheimer’s disease.••Telomerase, an enzyme that playsa key role in normal cell function.The discovery provides a new targetfor treating age-related diseases andcancer and for measuring the impactof stress on cells.••Insight into HIV. UC researcherswere the first to identify and describeHIV, a watershed discovery in AIDSresearch.Funding from NIH also supports thelocal and regional economy that it fuelsvia the patents and scientific advancesthe research generates and the relatedindustries, such as biotechnology.Top five products based on UCtechnology by revenue for FY2009($M)Hepatitis-B vaccine $15.909Treatment of intracranial aneurysms $11.427Interstitial cystitis therapy $8.723EGF receptor antibodies $5.947Bovine growth hormone $5.488UC inventionsInventiondisclosuresU.S.patentsissuedTotal UCU.S. patentportfolio2005 1,304 310 3,2752006 1,308 270 3,3162007 1,411 331 3,4252008 1,497 224 3,5462009 1,482 244 3,617Start-up companies formed with UCtechnologiesNumber of UC start-ups2005 232006 422007 412008 482009 47Overall, 461 start-up companieshave been formed with UC campusinventions since 1976.California Biomedical Industry 2011 Report | 71

Promising UC research fundedby NIHBattling Alzheimer’sUCSF neuroscientists direct a largeNIH-funded nationwide project, whichfollows hundreds of older people —healthy, with mild cognitive impairmentand severe dementia — who undergoperiodic tests, including MRI and PETbrain imaging, to learn how their brainfunctions and structures change overtime. Researchers hope to discoverindicators — or biomarkers — to notonly track progression of Alzheimer’s,but perhaps diagnose the disease earlyon, when it may be treatable. At thesame time, UC San Diego houses theAlzheimer’s Disease Cooperative Study,an NIH program that coordinatesdozens of clinical trials for potentiallypromising Alzheimer’s treatments.Proven biomarkers can help drugdevelopers target treatments for specificstages of the disease and let researchersknow if and how a drug is working.Finding clues and treatments forautismThe UC Davis MIND Institute is one ofthe nation’s leading research centersfor neurodevelopmental disorders,including autism. Researchers areevaluating families and children,uncovering the interplay of geneticsand the environment, defining subtypesof autism, uncovering early signs ofthe disorder and developing effectivetargeted treatments.Advancing personalized medicineUCSF has two major NIH grantsto investigate how genes affect anindividual’s response to medication.One award expands a nationalcollaboration of scientists, known as thePharmacogenomics Research Network,with the goal of paving the way forpersonalized medicine. Another studyoversees a global alliance of researchers,focusing on genomic studies of drugstargeting cancer, asthma, cardiovasculardisease and diabetes.Forging a faster path from lab toclinicThe Institute for Clinical andTranslational Science at UC Irvinehas a new five-year award to speedscientific discoveries into medicaladvances for patients. It fosters researchinvolving the community in a widerange of fields — such as genetics,gerontology, pediatrics, cancer andinfectious diseases — and funds effortsto overcome impediments to biomedicalinnovation. The institute supportsdevelopment of novel technologies,such as devices that can detect diseaseslike diabetes in exhaled breath, andinnovative studies, such as one for theearly identification of cerebral palsy inbabies.Health disparitiesUC Merced’s Center of Excellence forthe Study of Health Disparities in Ruraland Ethnic Underserved Populationfocuses on diseases and conditions thatare prevalent in the San Joaquin Valley,such as cancer, cardiovascular disease,HIV, obesity and diabetes. What setsthis center apart from others is thatresearchers will also home in on thesocioeconomic and cultural factors thatinfluence health disparities. The centerwill also train students interested inhealth-related careers.Bacteria studies could lead toimproved vaccinesUC Berkeley researchers areinvestigating how bacteria that causeillnesses such as tuberculosis andfood-borne ailments evade the body’simmune system. The research couldlead to entirely new vaccine marketswithin the biotech industry. Already,the NIH-funded study has spurredthe move of one start-up company inBerkeley to collaborate with a UC team.Tackling oral cancerThe UCLA School of Dentistry isamong the country’s top dental schoolsin NIH funding, and new grants willcreate the Yip Center for Oral/Head &Neck Oncology Research, which willconsolidate and expand the school’stranslational research in the biology,detection and treatment of oral cancer.Stopping a worldwide killerCell biologists and computer scientistsat UC Riverside team to study how themalaria parasite invades and replicatesin red blood cells. Understanding thisprocess could lead to new and effectivestrategies to combat a disease that eachyear kills hundreds of thousands ofpeople worldwide.The tiniest tools to detect and treatdiseaseAs part of its Program of Excellence inNanotechnology, the NIH has awardedgrants to UC Santa Barbara researchersto develop tools based on materialsdesigned at the molecular level to detectand deliver treatments for heart, lungand blood diseases.Climate change and mosquito-bornediseaseResearchers at UC Santa Cruz areinvestigating the effects of climate andclimate change on the transmission ofWest Nile virus in North America andits impact on public health. A goal ofthe study is use climate projections topredict and prepare for transmission ofthe virus, which is spread by mosquitoesand can cause inflammation of thebrain.BioinformaticsUC San Diego scientists received majorNIH grants to develop new ways togather, analyze, use and share thevast and ever-increasing amounts ofbiomedical information. Among theprojects of a new biomedical computingcenter, called iDash, are: a nationwideeffort to monitor the safety of anticoagulationmedications; and a wirelessmonitoring system to profile sedentarybehavior and develop interventions toprevent obesity and heart disease.72 | California Biomedical Industry 2011 Report

California State UniversityThe California State University systemis the largest university system in theworld. It is a primary state resourcefor the technical workforce thatstaffs the biomedical industry and forundergraduates who go on to medicalschools and doctoral programs. Aswith other California institutions, CSUcampuses have benefited from NIHfunding.National Institutes of Health fundingat CSU, 2009NIH FundingUniversity2009California State Polytechnic$1,271,133University PomonaCSU Bakersfield $287,434CSU Dominguez Hills $826,431CSU Fullerton $1,317,408CSU Fresno $967,868CSU Long Beach $2,264,798CSU Los Angeles $5,651,207CSU Northridge $4,705,293CSU Sacramento $ 206,774CSU San Bernardino $2,037,315CSU San Marcos $2,248,982Humboldt State University $209,795San Diego State University $25,877,271San Francisco State University $6,938,489San Jose State University $2,016,4732009 Total $56,826,671The CSU confers 44 percent ofCalifornia’s life science and healthprofessions bachelor’s degrees,approximately 45 percent of itsbachelor’s degrees in engineering,and nearly 37 percent of the state’shealthcare and life sciences degreeholders at the graduate level. CSU iscommitted to developing a professionalbiomedical sciences workforce bymobilizing CSU campus resources,advancing CSU faculty research, anddeveloping innovating educationalpractices that respond to and anticipatethe needs of the life science industry.CSU highlights: Contributionsto the state’s economy••CSU’s direct economic impact on thestate of California is $7.96 billion.••CSU generates $17 billion in thestate’s economy due to secondaryeffects.••The result is some 150,000 jobsin California and more than $995million each year in state and localtaxes.••More than half of all undergraduatedegrees granted annually to Latino,African American and NativeAmerican students in Californiahave been awarded by the CSU; 56percent of all undergraduate degreesto Latinos••The CSU graduates more than89,000 students each year.••More than 1.96 million CSU alumniare working in California andearning over $122 billion annuallyin income, of which $42 billion isattributable to their CSU degrees.••When the additional impact ofenhanced alumni earnings is takeninto account, CSU’s total economicimpact reaches $70.4 billion.••For every dollar the state invests ina CSU student, it receives $5.43 inreturn.Preparation of a diverse lifesciences workforceCSU has nearly 40,847 undergraduatesand 6,940 graduate students in lifescience degree programs, includingagriculture.Compared with all university systems inthe nation, CSU has one of the largestgroups of underrepresented students inits life sciences degree programs.More than half of its students in thelife sciences are females, 22 percentare Hispanic, 5 percent are African-American, and more than 1 percent areAmerican Indian or Pacific Islander.CSU offers industry-focused lifesciences graduate degrees inbioengineering, bioinformatics,biostatistics, biotechnology,computational sciences, and medicalproduct development management.CSU is the state leader in the creationand implementation of ProfessionalScience Master’s degrees inbiotechnology and related fields.Fourteen CSU campuses areproviding research training in stem celltechnology designed to advance thefield of regenerative medicine throughsupport from the California Institute forRegenerative Medicine (CIRM). Likeother CSU educational programs in thelife sciences, these Bridges to StemCell Research projects provide handsontraining in both academic andindustrial research settings.CSU Extended University programsoffer certificates in fields critical to thestate’s biomedical industry, includingbiotechnology, clinical laboratorysciences, medical technology, qualityassurance, pharmaceutical engineering,health IT, and allied health.California Biomedical Industry 2011 Report | 73

University of Southern California“The research funded by the NIH atUSC leads to a rich pipeline of emergingtherapies and products,” said KrisztinaHolly, vice provost for innovation andexecutive director of the USC StevensInstitute for Innovation. “It forms the basisfor many exciting new companies that webelieve will improve the lives of millions.”She added that historically, 50 percentof USC licensing income comes from lifesciences inventions, while 45 percent oflicensing deals in 2009 were from the lifesciences.Start-ups••Syntouch (www.syntouchllc.com) has developed a novel, robusttactile sensor array that mimicsthe mechanical properties anddistributed touch receptors of thehuman fingertip. Initial applicationsbeing developed include tactilesensors for prosthetic hands. NIHfunding from: National Instituteof Child Health and HumanDevelopment (NICHD)••Tocagen (www.tocagen.com)is a biopharmaceutical companypursuing the discovery, developmentand commercialization of productsfor the treatment of cancer. Theinitial focus is on treatments forpatients with very advanced cancerfor whom no adequate treatmentcurrently exists. Tocagen’sControlled Active Gene TransferTechnology (CAGT) platform is aunique viral based technology that isdesigned to carry a therapeutic geneand selectively kill cancer cells whilenot harming healthy tissue. Tocagenhas recently commenced a Phase Ihuman clinical trial evaluating thecompany’s first candidate in thesetting of Glioblastoma Multiforme,the most common aggresive primarybrain cancer. NIH funding from:National Cancer Institute (NCI) andNational Institute of NeurologicalDisorders and Stroke (NINDS)••Anergix, LLC (www.anergix4ms.com) is developing a therapythat triggers the body’s naturalmechanisms to turn offmalfunctioning immune cells,effectively addressing a widerange of autoimmune diseasesincluding multiple sclerosis. InMS, malfunctioning immunecells (T-lymphocytes) attack anddamage the myelin sheaths coveringnerves in the brain. USC scientistsdiscovered that presenting immuneregulatory cells in the body withfragments of myelin activated themto turn off the malfunctioningT-lymphocytes in the brain. Todeliver these myelin fragments,or peptides, Anergix sequestersproprietary peptide-secreting cellsin a small device implanted underthe skin. Thus continuous, low dosetherapeutic levels of the peptide aregenerated on a systemic basis. NIHfunding from: National Institute ofNeurological Disorders and Stroke(NINDS)Research HighlightsConnecting scientists to spurmedical innovationBiomedical Informatics ResearchNetwork (BIRN) CoordinatingCenter funded by NCRR/NIH. CarlKesselman, principle investigator (PI).The coordinating center for BIRNcollects biomedical imaging datafrom institutions all over the country,currently with a heavy emphasis onneuroscience. The BIRN coordinatingcenter has the task of facilitatingcollaboration and data sharing betweenthe research centers. BIRN helpsconnect scientists with their colleaguesnationwide to share data and refineanalytic tools that can be used for multisitedata integration. BIRN partnersare essential to advancing technologiesincluding new software-based solutions,which are crucial to discoveries thathave broad applicability to biomedicalresearch.Innovative cancer modelingPhysical Sciences-Oncology Centerfunded by NCI/NIH. W. Daniel Hillis,PI and David Agus, Senior ScientificInvestigator. This is one of 12 centersfunded nationwide under a programthat promotes greater understandingof cancer through the applicationof methodologies from the physicalsciences. The overall goal of this centeris to thoroughly understand therapeuticresponse in cancer. Investigators willestablish a predictive model of cancerthat they can utilize to determine tumorsteady state growth and drug response,particularly those involved in thehematological malignancies of acutemyeloid leukemia and non-Hodgkin’slymphoma. Furthermore, multi-scalephysical measurements will be unifiedwith sophisticated modeling approachesto facilitate the development of amodel that can derive the tumor’s traitsduring its growth and after any distress,such as chemotherapeutic treatment.Overall, the predictive tumor responsemodel developed in this effort shouldenable clinicians to determine the mostefficacious therapies a priori and reducedeleterious side effects.Moving research from bench tobedsideLos Angeles Basin Clinical andTranslational Science Institute. Thomas74 | California Biomedical Industry 2011 Report

Buchanan, PI. This is one of 55 NIHClinical and Translational ScienceAwards funded nationwide. Theconsortium shares a common vision toreduce the time it takes for laboratorydiscoveries to become treatments forpatients and to engage communitiesin clinical research efforts. It also isfulfilling the critical need to train a newgeneration of clinical researchers. Thegoal of the USC center is to transformhow clinical and translational researchis conducted, ultimately enablingresearchers to provide new treatmentsmore efficiently and quickly topatients. The program is committedto providing new methods and tools tomeet the opportunities and challengesin translational research. The centerwill support the development of newtranslational tools and resources andmatch them to translational projects toaccelerate improvements in health. USChas partnered with leading academic,clinical and community organizations incentral Los Angeles to establish a centerthat will improve health in this diverseurban environment and, in doing so,gain knowledge that we can share withothers to improve health in urbansettings and megacities across the globe.The science of medicare reformFunded under the NIH Director’sFive Themes program solicitation andled by principal investigator DanaGoldman, this research collaborationwill design and conduct Medicarerelatedresearch, policy simulation, andwelfare analysis. A multidisciplinaryteam spanning four institutions atthe forefront of health economics andpolicy research — Stanford University,USC, RAND Corporation, and the UCBerkeley — will focus on solutionsto ensure Medicare continues itslegacy of success. Specific goals areto: develop optimization models ofplan choice in the Medicare Part Dmarket, understand competition in theMedicare Part D marketplace, examinethe consequences of formulary andbenefit design for utilization, health,and spending, apply comparativeeffectiveness analysis to identify clinicalareas for potential savings in Medicareand build a research network to supportMedicare-related research and policy.Improving prescription practicesThe three-year, $11 million grant willutilize psychology and behavioraleconomics to improve physicians’prescribing practices, particularly howto dissuade physicians from prescribingantibiotics unnecessarily. The grantwill be led by Dr. Jason Doctor of theUSC School of Pharmacy; Doctor’sgroup aims to improve prescriptionpractices for common acute respiratoryinfections, which include bronchitisand influenza. Aggressive antibioticprescribing is a major public healthconcern for its suspected link to thespread of antibiotic-resistant bacteria.Targeting cancer therapiesUltrasensitive Nanolasers forEpigenetics Investigations. AndreaArmani, PI. One of 52 projects fundednationally, this work is funded underthe NIH Director’s New Innovatorprogram that is designed specificallyto support unusually creative newinvestigators with highly innovativeresearch ideas at an early stage of theircareer. The objective of this project isto develop a new nanolaser capableof detecting and quantifying DNAmethylation. This proposed researchwill develop a completely novelsensor platform with unprecedentedcapabilities for detecting epigeneticchanges, and applies it to early ovariancancer detection and monitoring, andto study the fundamental underlyingmechanisms of cancer progression.California Biomedical Industry 2011 Report | 75

Stanford UniversitySince its founding, Stanford Universityhas been a pioneer in cross-disciplinarycollaboration among faculty, studentsand researchers, producing innovativebasic and applied research in all fields.The university is unusual among its peerinstitutions in having seven schools onone campus, and all of them possessexceptional breadth and depth ofexcellence. This naturally facilitatesmultidisciplinary collaboration.In 2009, Stanford researchers and labssecured nearly $307 million in NIH grantssupporting multi-disciplined programs,some of which are described on thefollowing pages.NarcolepsyInstitute: National Institute ofNeurological Disorders and SleepTen years ago, Stanford researchersmade headlines when they identifiedthe culprit behind the sleep disordernarcolepsy. Now they have shown forthe first time that a specific immunecell is involved in the disorder —confirming experts’ long-held suspicionthat narcolepsy is an autoimmunedisease. The work could lead to bettertreatments for the sleep disorder andhelp immunologists understand other,more common autoimmune diseases,such as multiple sclerosis and juvenilediabetes.HearingInstitute: National Institute onDeafness and Other CommunicativeDisordersScientists thought they had a goodmodel to explain how the inner eartranslates vibrations in the air intosounds heard by the brain. It lookslike parts of the model are wrong. Aninternational team led by Stanfordresearchers found that the ion channelsresponsible for hearing are notlocatedwhere scientists previously thought.The discovery turns old theoriesupside down, and it could have majorimplications for the prevention andtreatment of hearing loss.Stem cellsInstitute: National Institutes of Healthtraining grantStanford scientists have succeededin the ultimate switch: transformingmouse skin cells in a laboratory dishdirectly into functional nerve cells withthe application of just three genes. Thecells make the change without firstbecoming a pluripotent type of stemcell — a step long thought to be requiredfor cells to acquire new identities. Thefinding could revolutionize the future ofhuman stem cell therapy and recast ourunderstanding of how cells choose andmaintain their specialties in the body.Brain tumor developmentInstitute: National Institutes of HealthStanford researchers studyingglioblastomas, a deadly brain tumor,in mice have found a way to stop thecancer cells from growing back afterradiation by blocking its access tooxygen and nutrients. The discoveryhappened when the researchersrealized that irradiated tumors turn toa little-known, secondary pathway togenerate the blood vessels necessaryfor regrowth. Although the researchersfocused their study on glioblastoma,other tumors use a similar mechanismto evade radiotherapy.Genome sequencingInstitute: National Institutes of HealthDirector’s Pioneer AwardStephen Quake, Stanford professorof bioengineering, sequenced his owngenome for less than $50,000 with ateam of just two other people. His wasthe first demonstration that you don’tneed a genome center and millions ofdollars to sequence the human genome.Reducing sequencing costs is criticalbecause the more examples scientistshave of the whole human genetic code,the more they can discern about howspecific genes and mutations result inthe traits that make us all different,the diseases that plague us and ourresponse to medicines.76 | California Biomedical Industry 2011 Report

Using bioinformatics to detectenvironmental factors thatcontribute to diabetesInstitutes: National Institute ofGeneral Medical SciencesThose who have diabetes know thatthe adult-onset form of the disease canbe triggered by, among other things,obesity and a diet high in fat. You arealso more likely to develop diabetesif other family members have it. Buta study by Stanford found that youshould also begin looking suspiciouslyat other aspects of your life — like yourpast exposure to certain pesticides orchemicals and even one form of vitaminE. In fact, the association of some ofthese so-called “environmental” cueswith diabetes surpasses that of thebest genetic markers scientists haveidentified for the disease.Breast cancer markerInstitute: National Institutes of HealthWomen with breast cancer whosetumors express high levels of aparticular genetic marker aresignificantly more likely to die fromtheir disease than are those with morenormal levels, according to Stanfordresearchers. The finding implies thatblocking the action of the marker — anewly recognized type of RNA — couldone day be an effective way to preventmetastasis and improve survival forthese women, who make up about onethirdof all breast cancer patients.Antibodies and nerve repairInstitute: National Institutes of HealthAntibodies — warrior proteins theimmune system makes to defend thebody against invading pathogens suchas viruses and bacteria — have a gentlerside nobody knew about until now: Theyfunction not only as soldiers but alsoas nurses. And Stanford researchersnow think antibodies’ absence in thecentral nervous system (the brain andspinal cord) may be a key part of thereason why nerve damage there doesnot get naturally repaired in humans.That insight could someday lead to newtreatments for stroke and spinal-cordtrauma.Tissue regenerationInstitute: National Institutes of HealthStanford scientists have taken a big steptoward being able to confer the capacityto regenerate tissue on mammalianmuscle cells; they accomplished this featin experiments with laboratory mice inwhich they blocked the expression ofjust two tumor-suppressing proteins.The finding may move us closerto future regenerative therapies inhumans — surprisingly, by sending usshimmying back down the evolutionarytree.Lymphoma treatmentInstitute: National Institutes of HealthMore than half of laboratory mice withhuman non-Hodgkin’s lymphoma arecured by a treatment involving justtwo monoclonal antibodies, Stanfordresearchers have found. The therapycombines the activity of rituximab, anantibody currently in use to treat thedisorder, with another that blocks amolecule called CD47 on the surfaceof the cancer cells. Together the twoantibodies synergize to trigger the host’sown immune system to eliminate thecancer.California Biomedical Industry 2011 Report | 77

The Scripps Research Institute (TSRI)Scripps Research scientists have lednumerous seminal studies. To highlightonly a few, over the last decades theinstitute’s investigators have madedozens of breakthroughs:••Malaria, discovering a promisingnew drug candidate that representsa new class of drug to treat thewidespread tropical disease, whichkills nearly 1 million people a year.Clinical trials for the drug candidateare planned. (Winzeler lab, 2010)••“Swine flu,” solving the structureof a key protein from the virus thatcaused the recent H1N1 influenzaepidemic. The structure revealsthat the virus shares many featureswith influenza viruses commonin the early 20th century, helpingto explain why, in general, olderindividuals have been less severelyaffected by the recent outbreak thanyounger ones. (Wilson lab, 2010)••Obesity, showing for the first timethat the same molecular mechanismsthat drive people into drug addictionare behind the compulsion to overeat(Kenny lab, 2010).••HIV/AIDS, elucidating thestructure of a number of humanantibodies that neutralize manydifferent strains of the virus — workthat may one day contribute to anHIV vaccine. (Wilson, Burton labs(with Ollmann Saphire), 2001 –2010).••Mad cow disease, determiningfor the first time that prions, bitsof infectious protein devoid ofDNA or RNA that can cause fatalneurodegenerative disease, arecapable of Darwinian evolution.(Weissmann lab, 2009)••Regenerative medicine,reporting a breakthrough in whichscientists successfully created livemice from mouse skin cells, withoutusing embryonic stem cells orcloning techniques that require eggs.This milestone opens the door to thedevelopment of exciting therapies,such as using a patient’s own cells togrow replacement organs. (Baldwinlab, 2009)••Deafness, elucidating the actionof a protein, harmonin, which isinvolved in the mechanics of hearing.Defects in such genes can causedevastating diseases, such as Usher’ssyndrome, which is characterizedby deafness, gradual vision loss, andkidney disease. (Mueller lab, 2009)••Huntington’s disease, developingan agent that reversed Huntington’sdisease symptoms in mice, withminimal toxicity. (Thomas,Gottesfeld labs, 2008)••Addiction, providing evidence thatthe drug gabapentin affects certaincomponents of the alcohol addictioncycle in the brain, supporting theidea that the medication, which isapproved by the FDA for treatingseizures and pain, also holdspotential for the treatment of alcoholdependence. (Roberto, Koob, Sigginslabs, 2008)••Blindness, achieving completeinhibition of new blood vesselgrowth in animal models ofneovascular eye diseases and avascular brain tumor with little or noeffect on normal tissue. (Friedlanderlab, 2007)••A large class of medicallyrelevant compounds known as Gprotein-coupled receptors (GPCR),determining the first humanstructure of this type of receptor,called β2-adrenergic GPCR. Sciencemagazine named the work as one ofthe top 10 breakthroughs of the year.(Stevens lab, 2007)••Amyloid disease, developingthe first disease-modifying agenttargeting the underlying cause of thistype of disorder, a class that includesAlzheimer’s disease. A drug based onthis finding (tafamidis by FoldRX,a company to be acquired by Pfizer,Inc.) is currently undergoing clinicaltrials for a type of inherited diseaseknown as Transthyretin amyloidosis.(Kelly lab, 2003)• • Cancer drug synthesis,completing the total synthesis of theanti-cancer drug Taxol, approved bythe FDA for the treatment of ovariancancer. Before the synthesis, Taxol,whose active compound was firstisolated from the bark of the rarePacific yew, demonstrated greatpromise as a cancer treatment, butits full impact was prevented by theproblem that treating one patientrequired the destruction of morethan three of these precious trees.Another example of a remarkablefeat of synthesis includes developingan inexpensive and in many waysastonishing new method foreconomically synthesizing cortistatinA. This steroid, which was isolatedin 2006 from a marine spongediscovered over 100 years ago, hasshown huge promise for treatingconditions ranging from maculardegeneration to cancer. (Taxol,Nicholaou lab, 1994; cortistatin A,Baran lab, 2008)78 | California Biomedical Industry 2011 Report

The Gladstone InstitutesIn 2009–2010, Gladstone scientists werechosen to lead or participate in majornationwide collaborations initiated by theNational Institutes of Health to acceleratetranslational research in several diseaseareas.The iPrEx study is a major internationaleffort to study whether a pill containinganti-HIV medications can preventacquisition of HIV using a conceptcalled pre-exposure prophylaxis orPrEP. Gladstone scientists, led byRobert Grant, are collaborating withscientists in Peru, Brazil, Ecuador,Africa, Thailand, and the U.S. onthis project. The primary analysisindicated that two oral antiretroviralagents, emtricitabine and tenofovir,decreased the acquisition of HIVinfection among men who have sexwith men by 44 percent overall, and73 percent among those who reportedtaking the pill consistently. The studyis being extended to learn how this newinformation about PrEP safety andefficacy might affect people’s use of thepills, and their sexual behavior. Theoriginal iPrEx study cost $43 millionand was sponsored by the U.S. NIH withco-funding from the Bill and MelindaGates Foundation and drug donatedby Gilead Sciences, representing apioneering partnership between public,charitable, and private agencies. TheNIH recently provided an $13 million toextend the study.Scientists at the Gladstone Institute ofNeurological Disease and its Taube-Koret Center for Huntington’s DiseaseResearch are leading a $3.6 millionconsortium to use stem-cell technologyto better understand Huntington’sdisease and to develop potentialtherapies. The consortium laboratoriesare located at the University ofWisconsin, Massachusetts GeneralHospital, UC Irvine, Johns Hopkins,and the Gladstone Institutes. Theresearchers will use induced pluripotentstem (iPS) cell technology, pioneeredby Gladstone and Kyoto University’sShinya Yamanaka, to develop humanneurons with Huntington’s diseasecharacteristics. iPS technologygenerates stem cells from adult skinsamples.The National Heart, Lung and BloodInstitute (NHLBI) funds severalcollaborations studying heart diseaseand regenerative medicine. Forexample, scientists at the GladstoneInstitute of Cardiovascular Disease andStanford University School of Medicinewill develop stem cell and regenerativemedicine therapies. Gladstoneinvestigators, led by Deepak Srivastavawill collaborate with a Stanford teamto determine how iPS cells can repairdamaged heart muscle. Each researchteam will receive approximately $10million.As part of NHLBI’s “Bench to Bassinet”program, Gladstone scientists willreceive $10 million over six yearsto find genetic causes of congenitalheart disease. The team, led by BenoitBruneau, focuses on the gene networksand regulatory factors related tocongenital heart defects. Cuttingedgegenome-mapping techniqueswill identify and define the functionof transcription factors with knownroles in cardiac development andhuman disease and so-called epigeneticregulators that open up chromosomesto allow access for transcription factors.California Biomedical Industry 2011 Report | 79

Sanford-Burnham Medical Research InstituteSanford-Burnham Medical ResearchInstitute is dedicated to revealing thefundamental molecular causes of diseaseand devising the innovative therapies oftomorrow.With operations in California and Florida,Sanford-Burnham is one of the fastestgrowing private research institutes inthe country. The Institute ranks amongthe top four institutions nationally forNIH grant funding and among the top25 organizations worldwide for itsresearch impact. Sanford-Burnhamuses a unique, collaborative approachto medical research and has establishedmajor research programs in cancer,neurodegeneration, diabetes, infectiousand inflammatory and childhooddiseases. The Institute is known forits world-class capabilities in stemcell research and drug discoverytechnologies.CancerOne of the many challenges of creatingeffective cancer treatments is gettingenough medicine to the tumor to killit. Many treatments are administeredintravenously and blood flow insidetumors is often limited at best. Inaddition, tumors generate a naturaloutward pressure, which forcesanticancer drugs to “swim upstream.”As a result, treatments must be givenin large doses to get more medicine totumors.However, researchers have developed apeptide (a chain of amino acids) callediRGD that helps co-administered drugspenetrate deeply into tumor tissue. Thepeptide has been shown to improvetreatment efficacy against humanbreast, prostate and pancreatic cancersin mice, achieving the same therapeuticeffect as a normal dose with one-thirdas much of the drug. Erkki Ruoslahti,M.D., Ph.D., founding member of theUC Santa Barbara-Sanford-BurnhamCenter for Nanomedicine, KazukiN. Sugahara, M.D., Ph.D., TambetTeesalu, Ph.D., and fellow researchersat the Center for Nanomedicine andthe Cancer Center of Santa Barbaracollaborated on this research.Rare diseasesChildren with multiple hereditaryexostoses (MHE), a rare inheriteddisease, suffer from multiple growthson their bones that cause pain,disfigurement and stunted growth.At the moment, the only treatment issurgery to remove the growths, whichsometimes number in the hundreds.MHE research has long been hamperedby the lack of a good model that wouldanswer questions about the underlyingcause and allow scientists to test newtreatments. Recently, Yu Yamaguchi,M.D., Ph.D., and his collaboratorsunveiled a mouse model that does justthat.Earlier attempts at creating a mousemodel of MHE successfully replicatedthe human disease on a genetic level,but failed to reproduce the symptoms.In this new study, Dr. Yamaguchi andcolleagues, including Sanford-Burnhamscientists Dr. Kazu Matsumoto andDr. Fumitoshi Irie, took a differentapproach. Instead of deleting the genein the entire mouse, they targeted thegene in only bone cells. What’s more,they removed the gene in only a smallfraction of these cells.Surprisingly, this approach led to amouse with all the symptoms of MHE,including bony protrusions, shortstature and other skeletal deformities.Further investigations into the cellularmake up of the bone growths answeredsome long-standing questions abouthow they develop.Neurodegenerative diseasesNeurodegenerative diseases suchas Alzheimer’s, Parkinson’s andHuntington’s all have one thingin common: the untimely death ofnerve cells. New research at Sanford-Burnham shows that these diseases alsoshare the molecular mechanism thatleads to cellular death, a finding thatidentifies new targets for diagnosis andtreatment of these diseases. The study,which appeared in Molecular Cell, wasled by Dr. Stuart Lipton, director ofSanford-Burnham’s Del E. Web Centerfor Neuroscience, Aging and Stem CellResearch, and Dr. Tomohiro Nakamura,research assistant professor.Together with their collaborators, Drs.Lipton and Nakamura showed how agaseous molecule known as nitric oxide(NO) can throw a molecular switch toturn a cell from the path to survival tothe path to death. Scientists have long80 | California Biomedical Industry 2011 Report

known that under certain conditions,NO binds to and reacts with caspases,a series of enzymes that are importantin cell death. When NO interacts withcaspases in this way, it inhibits theiractivity and prevents nerve cells fromdying. But in an entirely unexpectedway, the Sanford-Burnham team hasnow found that an inhibitor of caspases– called XIAP – can also bind to NO. Ina process known as transnitrosylation,NO jumps like a “hot potato” fromcaspases to XIAP. The hot potatoinhibits XIAP function, which wouldnormally turn off caspases.Heart diseaseIt is no secret that being overweight ishard on the heart – many studies haveshown that heavier people are morelikely to suffer from heart disease. Butwhy, exactly? What does fat have to dowith your heart?There are numerous causes of obesityand other risk factors for heart disease,making it difficult to tease them apart.So a team led by Drs. Sean Oldham,Rolf Bodmer and Ryan Birse createda simple model to study the geneslinking high-fat diet, obesity and heartdysfunction. Using fruit flies, theydiscovered that a protein called TORinfluences fat accumulation in the heart.Their study, published in the journalCell Metabolism, also demonstrates thatmanipulating TOR protects the heartsof obese flies from damage caused byhigh-fat diets.In this study, flies fed a high-fat dietof coconut oil became obese andexhibited many of the same secondarysymptoms as obese humans, includingheart dysfunction. Then, to determinehow TOR regulates the effects of fat onthe heart, Dr. Oldham and colleaguesgenerated flies that lowered thisprotein’s activity. TOR normally keepsa damper on an enzyme that breaksdown fats. By inhibiting TOR (orboosting the fat-digesting enzyme), theresearchers reduced fat accumulationin the heart and improved the cardiachealth of otherwise obese flies. Theheart-protective results were the samewhether TOR was blocked in the wholefly, just in fat tissue or just in heart cells.This fruit fly model will now allowresearchers to answer many otherquestions about diet, obesity and theheart. “One thing we would like toknow next is if fats themselves are toxicto the heart, or is it the byproducts oftheir metabolism that are harmful?”explained Dr. Birse, post-doctoralresearcher and first author of the study.California Biomedical Industry 2011 Report | 81

small biotechnology companies as theydevelop new therapies that could reducehealthcare costs as well as generate newjobs and stimulate the U.S. economy.“It’s not the space” that enables theyoung entrepreneurs to succeed, Kellysaid. “It’s that they talk to each other.”They offer one another advice andreferrals. They brainstorm on scientificquestions and hold one anotheraccountable for staying focused on theirgoals.Increasing the connectivity amongresearchers, clinicians and industryis one of Kelly’s personal missions.The QB3 administrative offices as wellas the UCSF facilities are located inMission Bay, a 303-acre neighborhoodin San Francisco. The city designated ita redevelopment project in 1998, andto date the university has completedand occupies six buildings there.Construction of the new UCSF MedicalCenter at Mission Bay, a significantcomponent in the $1.5 billion hospitalsystem planned for the site, isunderway. The community also includesresidential, restaurant and retail space,and Kelly trusts that the future willbring biomedical industry operations aswell.He envisions the site as “the academichealth center of the 21st century.”He said pulling in entrepreneursand investors will bridge the gapsbetween unmet medical needs and thecommercialization of breakthroughproducts to address them.“The notion of a physician andresearcher having a spontaneousconversation in an elevator andconceiving an idea for a new therapeuticagent is a fallacy,” Kelly said. Physiciansand scientists not only think differently,they are working at opposite ends ofcomplex puzzles. They need the privatesector to do the expensive and high riskproduct development work in between.In addition to locating the threegroups closer together, Kelly has ideasfor improving communications andfunctions among them as well. Oneis to change the university’s goals intechnology transfer from generatingmoney for the university to improvingsociety. Moving ideas out of academiclabs and into the private sector createsjobs, increases tax and sales revenues,and ensures better therapies andapproaches for public health.Second, Kelly said that society isnot served by viewing industry as avillain. Without investors and privatesector companies, ideas stagnate, jobopportunities are lost, and innovationflounders.Third, Kelly would like to see an effortamong researchers, clinicians andindustry to catalog society’s biomedicalneeds. “The major weakness ofacademia,” he said, “is that studentsand post-docs don’t know what societyneeds.” When they ask their professors,they are steered toward the professors’chosen areas of focus.“Industry and venture capitalists arevery good at identifying what the needsare,” Kelly said. “And clinicians knowwhat the needs in their specialties are.”He said turning young minds loose onthe list would speed innovation. Thosewho already had a discovery or deviceapplicable to a market need wouldbe positioned to solicit technologytransfer office assistance with patentapplications and out-licensing. Otherscould focus their research on addressingold needs in new ways, increasing therelevance of their work to public health.Working together, researchers,industry and clinicians could acceleratebiomedical innovation. And isn’t thatwhat the process of technology transferis all about?California Biomedical Industry 2011 Report | 83

Researcher profileRonald M. Evans, PhD, is a professorand March of Dimes Chair inMolecular and Developmental Biologyin the Gene Expression Laboratory atthe Salk Institute.How did you become interestedin diabetes and other metabolicdisorders?My interest has been in energyhomeostasis — how food is acquired,stored and burned. The underlyingproblem is that we are in the midst ofa pandemic of inactivity marked byan absence of movement or exercise.In our national state of sedentarybehavior it is a challenge for mostpeople to get the exercise they need.The result is increased weight gainand insulin resistance, which increaseobesity, diabetes, heart disease andhypertension.We began looking at nucleic receptors— a class of genetic switches thatcontrol transcription of the genesthat control the energy-burningnetwork of processes. That network isusually triggered by exercise, but wehypothesized that small molecules maygenerate the network to trick the musclecell into thinking it is being exercised.Genomic exercise, if you will.What are the fundamentalquestions in researching“genomic exercise.”We are trying to understand whatmuscle activity triggers at a metaboliclevel….The end chemical product ofexercise is the AMP kinase (AMPK),which is the master energy switch thatstarts to suck more sugars and fatsfrom blood into the muscle. In exercise,the kinase leaps into the nucleus [ofthe muscle cell] and activates the genenetwork, triggering a genetic cascade. Inthis way, AMPK converts stored energyinto chemical energy. The first challengewas to determine whether the genenetwork differentiates between physicaland nuclear effect. That is, could a smallmolecule trigger the same gene networkto behave in the same way as it reacts tophysical exercise?What have you found so far,and what might it mean forhuman applications?We have tested a few smallmolecules in sedentary mice for aperiod of one month. We showeddramatically improved performance —improvements that were about the sameas daily exercise. The treated mice hadlower blood sugars and lipids, improvedvascular performance and improvedmitochondria numbers.I think the work clearly demonstratesthat in mice, it is possible to developdrugs that have the capacity to enhancemuscle performance with out actuallyexercising. That is a major advance.It also identifies two key drug targetsfor which the next generation of moreeffective muscle-enhancing drugs canbe produced for people. In fact, thedrugs that we used have already beenin people. So now I would say it is goingto take a large pharmaceutical companyto develop the right type of program inmuscle biology.The challenge in bringing this forwardis getting the FDA to agree that frailtyand obesity can be treated with muscleenhancingdrugs. You have to curedisease to get a drug approved. Wethink we can make people a lot morehealthy. But making people healthy isnot an FDA approval end point. Weneed to educate the public and themedical community to move the FDAtoward accepting the benefits that canbe achieved by this kind of program.In your career so far, whathas been the discovery thathas fascinated you most?The growing realization that so muchof body physiology, endocrinology andbehavior is really about the controlof gene networks. My initial interestsin the early ‘80s were to study themechanics and logic of how the genomeis controlled. Our interests in cloninghormone receptors ultimately providedus with a key to unlock the secrets ofthe genome. In the beginning, science isabout overcoming technical challenges,which in the end open new avenues ofapproaching complex problems.What keeps you passionateabout science?Science to me is like the ultimate chessgame where the opponent is MotherNature. You’re trying to win secrets in anever-ending duel. There’s nothing thatis more thrilling than pitting yourselfagainst problems that are not yet solved.On working at The Salk Institute:The level of work and standards are veryhigh, and if you are not on the cuttingedge, you are not going to survive forlong. It’s not for everyone, but it is veryexciting and attractive to me. The Salkand La Jolla is a privileged place to be.We have a unique mix in the researchenvironment, with Salk, Scrippsand Sanford-Burnham, and a highconcentration of biotechnologyand pharmaceutical companies in avery tight zone.84 | California Biomedical Industry 2011 Report

The Salk Institute celebrates 50 years of excellence inbiological science researchToday, the institute has 61 seniorfaculty members and a scientific staffof more than 850. The latter groupincludes visiting scientists, about 285postdoctoral trainees, approximately130 graduate and rotation students, andmore than 90 undergraduate students.Although not a degree-grantinginstitution, the Salk has trainedmore than 2,000 scientists, many ofwhom have gone on to positions ofleadership in other prominent researchcenters worldwide. Five have won theNobel Prize. Four of the Institute’scurrent resident faculty members andthree nonresident fellows are NobelLaureates.After developing the vaccine for polio,a scientific accomplishment that madehim and his collaborators internationalheroes, Jonas Salk, M.D., embarked ona new dream. He wanted to establish aninstitute that would enable biologistsand other scientists to collaborate onresearch that would improve humanhealth. A New York virologist, Salktoured the country for more than ayear to find the perfect location for hisresearch center. At the same time, heshared his concept of free-flowing labsand collaborative spaces with worldrenownedarchitect Louis Kahn. Healso secured initial financial supportfrom the National Foundation/March ofDimes.When Salk discovered a 27-acre siteon Torrey Pines Mesa in La Jolla,overlooking the Pacific Ocean, heand Kahn were ready to proceed.The citizens of San Diego gifted theland to the institute in 1960, andgroundbreaking took place in 1962.Completed in 1967, the original institutebuildings were made to Salk’s order:spacious, unobstructed laboratoryspaces that could be adapted to theever-changing needs of science. Thebuilding materials had to be simple,strong, durable, and as maintenancefreeas possible. The facility wasdeclared an historic landmark in 1991.The institute houses 60 laboratoriesthat support research to expand thescientific understanding of cancer,aging, Alzheimer’s disease, diabetes,birth defects, Parkinson’s diseaseand AIDS. Researchers at Salk applyneuroscience, genetics, cell and plantbiology and related disciplines to probefundamental life science questions.The institute has been supported byfunds awarded to its members in theform of research grants, most fromNIH, and from private foundationsand individuals. The March of Dimes,which provided funds for the originalstructure, has contributed significantlyto the Institute’s financial needsannually ever since.California Biomedical Industry 2011 Report | 85

Researcher profileClodagh O’Shea, Ph.D., is an assistantprofessor in the Molecular Celland Biology Laboratory at the SalkInstitute and a recipient of The SontagFoundation’s 2009 DistinguishedScientist Award, which includes a grantof $600,000 over four years to developnew viral therapies to treat brain tumors.O’Shea is an expert on oncolytic viruses.Explain how your lab isdeveloping viruses that targetspecific tissues in the body.The virus is an incredible nanomachine that can be re-engineered onseveral levels for cancer. One way is tomanipulate how the virus binds to a cell.If you can imagine the virus as a rocketship with spikes, it uses these points tomake contact with the cell’s surface andthereby enters specific cells. The virusthat has been used in research naturallyenters the cells in our airways. But thereare 52 human adenoviruses and eachtargets different tissues. If you are goingto treat cancer in the colon, we believeyou should use a virus that has evolvedto target that tissue. And now that iswhat we are doing for the first time, andwhich no one has been able to do.How did you become interested inthis area of research?I earned my doctorate in immunologyin London’s Imperial Cancer ResearchInstitute and was pursuing a career intumor immunology. But as a student Iheard (UCSF cancer researcher) FrankMcCormick, who I did my postdoc with,come through and give a talk on thisidea of making a mutant virus that canactivate p53 and then kill tumor cells.(Called the “Guardian of the Genome,”the p53 gene is almost always foundto be inactive in all human cancers.)The idea that you depend on the loss ofthe p53 gene just fascinated me. Howdo you activate something that is justgone? I just thought, “I’ve got to workon this.”What has been the scientificdiscovery that has fascinatedyou the most during your career?The cell is a scale-free network, whichis like the World Wide Web. By thatI mean that not all nodes or points ofcontact in a network have the samenumber of connections. Some nodes, forexample, are hubs, they have thousandsof connections, but many others haveonly a few. This explains many things.Think about a tumor. There have nowbeen 100,000 mutations identified incancer. Many of them are probablyirrelevant. You can lose about 5 percentof the genes in your cell and your cellwill be fine. And that is because they arenot connected to major processes. Butsome of these genes are hubs, which iswhy they have profound effects in somany pathways.That for me explained why the genetictargets the virus is hitting and why theones the tumor is hitting are the same.Even though there are 26,000 genesin a cell, the virus has just 20, so that’sprobably the number you need to hitto control the cell. If you can controlthe hub you can control many differentprocesses. The same holds true forcancer. You can take all these mutationsand still survive. But if you hit just thecritical target, that’s it. And that’s whatwe need to understand in cancer. Weneed to understand those (genetic) hubsand how those connections have beenperturbed.What fuels your passionfor science?Science is knowledge, and knowledgeimproves the human condition in itspurest sense. It is not so much aboutbeing published in scientific journals.For me, it is about that one momentwhen you know you are the only personwho has ever discovered this one thing— it’s extraordinary. It is a celebrationof life at its deepest level. To understandeven a fraction of how it can be andthen to share it with others is really justamazing.It can never be negative because you canonly add to knowledge, and for me thatis a very powerful thing. Also knowingthat I can actually help someone beyondme by wielding that knowledge toalleviate suffering through therapieskeeps me passionate about science. Andfinally, just seeing that joy of knowledgein my postdocs is also extraordinary.On working at The Salk Institute:I had not focused on brain cancer untilI came to the Salk and breaking intothe field would have been very difficultwithout their support. I am extremelyexcited to be able to translate thegenetic understanding of brain cancerinto transformative treatments forpatients suffering from this terribledisease. To achieve this, we willcombine new viral vectors, tools andmouse models in a way that has neverbeen done before. It is high risk but itreally could change things.86 | California Biomedical Industry 2011 Report

Bayer HealthCare establishes U.S.Innovation CenterBayer HealthCare openedits U.S. Innovation Centerin the growing Mission Baylife sciences hub in SanFrancisco and announced anew master agreement withthe University of California,San Francisco.Through the new center, Bayer isexpanding its U.S. research strategywith a new “Science Hub” connectingU.S. life sciences firms and researchinstitutions with Bayer’s global researchnetwork to advance new medicinesto patients through collaborativedrug discovery. Bayer seeks to workwith U.S. scientists who are makingnovel discoveries — technologies,targets or product candidates — indiagnostic imaging; specialty medicinein therapeutic areas such as oncologyand ophthalmology; general medicinefields such as cardiology and pulmonarymedicine; and women’s healthcare.The U.S. Innovation Center will behome to two core research teams:••Hematology Research: Scientists areadvancing projects through one ofBayer’s deepest specialty medicinepipelines — hemostasis. Their workfocuses on evaluating potentialrecombinant therapeutic proteins(and other therapeutics) includingthe identification and evaluation ofimproved coagulation factors such aslong-acting formulations.••Biologics Research: Scientistsare responsible for identifyingand developing novel nextgenerationbiologics and providebioanalytical, pharmacokinetic andimmunoprofiling expertise andsupport for research teams aroundthe world.The Bay Area is a global center for BayerHealthCare’s biotechnology research,process development and commercialmanufacturing. Bayer is the secondlargest biotechnology employer in theSan Francisco Bay Area with operationsalso in Berkeley and Emeryville.Buck Institute: New approaches to Alzheimer’slead to industry collaborationIt is commonly thought thatplaques of the peptide betaamyloidaccumulating inthe brain is a key cause ofAlzheimer’s disease. But atthe Buck Institute for AgeResearch in Novato, DaleBredesen, M.D., and his teamare learning that the plaquebuild-up is an effect of thedisease and not a cause.Such a novel approach to the discoveryhas led to a new collaboration withNovato-based BioMarin PharmaceuticalInc. and hopes to transform theresearch many are conducting aroundthe world.Bredesen’s team focuses on Alzheimer’sdisease, including the genetic form ofthe disease that affects people ages 30 to65. The Bredesen Lab has demonstratedin multiple forms of cell culture andmice that Alzheimer’s is a disease basedon biochemical imbalance and not adisease of toxicity. In other words, thereis an imbalance in the normal signalingin the brain that leads to the disease. Apredicted and observed consequence ofthis imbalance is the build up of theseplaques. This theory has really takenoff over the last two years as moreattention is given to potential causes ofAlzheimer’s other than beta amyloid.Bredesen is one of 17 principalinvestigators and 140 support staffat the Buck Institute working ina collaborative environment tounderstand the mechanisms of agingand to discover new ways of detecting,preventing and treating age-relateddiseases such as Alzheimer’s andParkinson’s disease, cancer, stroke, andarthritis.In August 2010, the Buck Instituteand BioMarin entered into a researchcollaboration to evaluate therapeutictreatments for Familial Alzheimer’s.BioMarin has a record for developingtreatments for serious diseases andmedical conditions that have hadprofound impacts on the lives ofchildren and other small populations.Targeting Familial Alzheimer’sDisease represents a good strategic fitwith BioMarin’s core competenciesin developing therapeutics for raregenetic diseases.California Biomedical Industry 2011 Report | 87

Novartis: Changing the blood and bone marrowdonation landscape to address healthcare disparitiesIf you know of someone whohas undergone treatmentfor cancer, experiencedheart surgery or survived atraumatic injury, you probablyknow of someone who hasrelied on donated blood. Butfor many seriously ill patients,multiple blood transfusions —and, ultimately, a transplantof donated bone marrow,peripheral blood stem cell, orcord blood — are necessaryto their survival.And yet, despite this need, only aboutone in five African American patientswho need a bone marrow transplantwill actually receive one, simplybecause African Americans are todayunder-represented in the national bonemarrow registries. These all-volunteerregistries are a critical link betweenpatients and potential donors. They areespecially important for patients whoseimmediate family members (who havethe highest likelihood of being the bestmatch) are not the right match.To help raise awareness, NovartisDiagnostics, the global leader in nucleicacid amplification technology (NAT)blood safety, and BloodSource, a leadingnorthern and central California bloodbank, partnered to fund a communityoutreach campaign in Sacramento.The outreach efforts were guided by anAdvisory Board and Clergy AdvisoryPanel that included leaders and churchpastors from Sacramento’s African-American community.The campaign, which rolled out in early2010, encouraged Sacramento-areaAfrican Americans to donate bloodand register as bone marrow donors,a simple process that requires only aquick, painless collection of cells froma cheek swab. The outreach highlightedthat the process for both is safe andeasy, and, most important, could savea life.The campaign was very successful,resulting in higher numbers of AfricanAmericans agreeing to donate blood,and, at the same time, register for thenational Be the Match bone marrowregistry (www.bethematch.org).Equally important, the campaign set aregional example of how to reverse anational trend that leaves thousandsof African Americans with little hopeof receiving effective treatments forleukemia, sickle cell anemia and otherlife-threatening diseases.A few great reasons to be ablood and bone marrow donorDarnell and Darnay are twins. Darnay(right) has sickle cell anemia. Darnell(left) does not. Today, Darnay surviveswith regular blood transfusions. But oneday, transfusions may not be enough.She may need a bone marrow or stemcell transplant to stay alive. “If I needa transplant, I hope there’s a matchfor me.”Debbie MeadorLeukemia survivor“You can save someone like me.Exactly like me.”88 | California Biomedical Industry 2011 Report

UC Merced: Addressing healthcare disparitiesImmunology andmicrobiology major AparnaPasumarthi wants to makesure the world-class researchconducted in the labs atthe University of California,Merced, is applied in waysthat improve people’s lives.“Research is a powerful tool in learningabout the various health disparities thatexist in the community,” Pasumarthisaid. “It provides an opportunity tocollect presentable data to help bridgegaps between the scientific society andthe local community.”Pasumarthi, of Fremont, is one of 10undergraduate students conductingresearch through the Center ofExcellence for the Study of HealthDisparities in Rural and EthnicUnderserved Populations. The centerwas established with a grant given toUC Merced in September 2009 by theNIH’s National Center on MinorityHealth and Health Disparities.The center’s goal is to increase thenumber of UC Merced students whoare knowledgeable about disparitiesin healthcare and health outcomes,improve the number of students fromunder-represented and disadvantagedgroups performing research in thisarea, and expand the capacity of theuniversity to conduct health sciencesresearch that addresses disparities thisregion.The center has four main components.There is a program for graduatestudents to share their knowledgewith community groups, a programfor undergraduates to do hands-onresearch with professors, a speakerseries to engage community membersabout health issues and a minor onpublic health and health disparities.Pasumarthi immediately wanted to jointhe center after she learned about it in aclass. She was drawn to the opportunityof doing research that could also servethe community. She joined the lab ofProfessor Jinah Choi, who is studyinghepatitis C.“We can shape the future of the UC andserve the community,” Choi explained.Hepatitis C is blood borne andmost often transmitted throughcontaminated needles, though it canalso be passed through unprotectedsex. The virus, first discovered in 1987,does not directly cause liver cancer.Instead, it causes a chronic infection,which over time causes cirrhosis of theliver and damages a person’s DNA.Overtime, that damaged DNA may leadto mutations and cancerous cells in theliver. A person can carry hepatitis C foryears without knowing it.Choi is looking for ways to limit virusreplication or at least the virus’ abilityto ultimately cause cancer. Antioxidantscan reduce oxidation and DNA damage,but they are not likely to be as effectivewhen consumed in food, drinks orsupplements. Choi said one optioncould be directly inhibiting the sourceof oxidants in the infected cell, makingits effect more potent. In the paper inHepatology, Choi described a sourceof oxidants that can be targeted by apharmacological approach.Another option is to increase theefficacy of antiviral drugs or facilitatethe development of a vaccine thatprevents someone from receiving thevirus or blocks it from replicating.Choi recently published a paper abouther research in Hepatology, the leadingjournal in the field of liver disease.“It is really exciting that all the piecesare coming together,” Choi said.“Whatever we find in the lab hasconsequences. It has the potential toreally impact people.”California Biomedical Industry 2011 Report | 89

Stem cell research facilitiesThe California Institute forRegenerative Medicine (CIRM)accelerates stem cell research in thestate through grants, loans and matchingfunds. Through its major facilities fundinginitiative, CIRM has awarded $271 millionto 12 institutions: UC Santa Barbara,Stanford, USC, UCSF, UC Santa Cruz,UC Merced, UCLA, UCI, UCB, SanfordConsortium for Regenerative Medicine,and the Buck Institute for Age Research.Each recipient was required to raisemore funds through private donations.Altogether, CIRM’s investment broughtin an additional $800 million in financialcommitments and created constructionjobs throughout the state at a time whenthose jobs were very much needed.With CIRM funds allocated in 2008, fiveof the premier new stem cell researchcenters opened in 2010, and constructionis well underway on a sixth:UC Davis Institute for RegenerativeCurres. The first of the major CIRMsupportedstem cell research laboratoriesto open, the UC Davis facility is locatedon the university’s Sacramento campus.The 54,000 square feet of renovatedspace includes Northern California’slargest academic Good ManufacturingPractice (GMP) laboratory, a stateof-the-artsuite of rooms that willenable scientists to safely prepare andmanufacture cellular and gene therapiesfor clinical trials. Designed to maximizeresearch collaboration and innovation,the facility is a centralized space forresearchers from departments andprograms throughout UC Davis as wellas a shared-research facility for otherinstitutions to use. The initial phase of theproject provides space for approximately20 senior scientists and 115 otherresearchers and technicians; plannedbuild-outs will expand the facility to servemore than 200 personnel. The $62 millionfacility opened on March 10, 2010.Sue & Bill Gross Hall: A CIRM Institute.The first major stem cell center inSouthern California, and the state’sfirst such facility built from the groundup, UCI’s stem cell research centeropened on May 14, 2010. The four-story,100,000-square-foot building serves asa regional hub for stem cell researchand education. It houses the Sue & BillGross Stem Cell Research Center, dozensof lab-based and clinical researchers,a stem cell techniques course, and amaster’s program in biotechnology withan emphasis on stem cell research.Funding for the $80 million centerincluded $10 million from Sue and BillGross as well as funds from other privatedonors and the University of California.UCLA Broad Stem Cell ResearchCenter-California Institute forRegenerative Medicine Laboratory.Located on the third floor of the newTerasaki Life Sciences Building, theBSCRC provides crucial facilities forstem cell scientists and cutting-edgecore resources in about 21,000 squarefeet. Research conducted in the newspace will range from basic stem cellinvestigations to preclinical translationalscience and, finally, clinical research.Partially funded by a $20 million donationby The Eli and Edythe Broad Foundation,the new research space opened on Oct.25, 2010.Lorry I. Lokey Stem Cell ResearchBuilding. Stanford cut the ribbon onthe largest of the CIRM buildings — agleaming 200,000-square-foot, stateof-the-artfacility — on Oct. 27, 2010.The building, which serves about 550researchers, is the largest dedicated stemcell research building in the country, if notthe world. In addition to CIRM funding,the building was developed with a $75million gift from Lorry I. Lokey.Eli and Edythe Broad CIRM Centerfor Regenerative Medicine and StemCell Research at USC. The five-story,87,500-square-foot, green-certifiedbuilding is designed to house 18 principalinvestigators and their research teams.The new stem cell research center willbe a cornerstone in the biomedicalresearch corridor on the USC HealthSciences campus. Conceived in 2005,the building’s development was fundedthrough the $30 million gift from theBroad Foundation in 2006, a $27 milliongrant awarded by CIRM in 2008 andprivate donations. The building wasdedicated on Oct. 29, 2010.Sanford Consortium for RegenerativeMedicine. Among the CIRM-funded stemcell research facilities under construction,this world-class facility will enablefour of the world’s leading biomedicalresearch institutions — Salk, Scripps,UCSD and Sanford-Burnham — topursue collaborative research projects inregenerative medicine. Scheduled to becompleted in September 2011, the facilityis being developed with $43 million fromCIRM and a $30 million donation from T.Denny Sanford.92 | California Biomedical Industry 2011 Report

Executive profileDr. Ed Holmes, President andCEO of the Sanford Consortiumfor Regenerative MedicineQ: Tell me about the origins ofthe Sanford Consortium.We came into being after the bond issue(Prop. 71) was passed and CIRM wasformed….I think the four institutions(UCSD, Salk, Scripps and Burnham)and the scientists within them allworking together is really what got usstarted. And that is continued to be thefoundation of what we do.Q: We are at a dynamic time forstem cell research — especiallywith the first human trial onspinal cord injury. What excitesyou most about the researchabout to happen here?We have begun to engage a wide groupof scientists from all four institutionsand you can see the genuine excitement.We have also begun to identify threetheme areas to work in. Neurosciences,because that is an important areafor stem cell research. Also, in thearea of cancer biology we have got atremendous amount of strength, and incardiovascular disease.But what we have discovered is thereiss so much more and we do not wantto exclude people, so we will probablyconcentrate on these three areas butembrace, though special projects, otherthings that would be important to bringinto this.We are in the position to choose amongthe very best people, but, at the sametime, we envision the consortium tobe more than this building. It is thescience but it is also all four institutions.Just because you are not located in thebuilding does not mean that you arenot a part of the Sanford Consortium.So, they have come up with some cleverways to engage people who might not bein the building long-term with specialprojects.Q: A lot of this depends on theleveraging of federal funds andright now this is still up in the air,with stem cell research held up inthe courts. What concerns do youhave there?Nobody can predict what is going tohappen in Washington and obviouslyit is an up and down situation. But Iwould say the disquiet in Washingtonhas been a boon for California. Youfind people who want to come anyway,but they want to come even more now.It would be really nice if the federalgovernment gets it sorted out — andI, personally, think they will. I amoptimistic the federal government willstraighten itself out and begin to makeinvestments.Q: What are the designconsiderations for enablingcollaborative work?For collaboration to work, first you needopportunity. We have rooms intendedto reduce certain types of behaviorand encourage collaboration. We haveteam rooms so six people at a time canhook up computers. It is a smartboard,so they can write on the screen so itcaptures the image plus what theyannotate on their screen.The building calls for wide openstaircases and large open spaces thatconnect. It should allow people to morevertically circulate.Q: Did you model this buildingafter any other facilities in thecountry?The exterior was designed toacknowledge that it has to fitcontextually with the iconic structurethat is the Salk. It started with thescientists back in 2007. This is a LEEDgold building. We are using chilledbeams throughout. We are also takingadvantage of the fact that we live ina great part of the world. We face theocean here on top of the Torrey PinesMesa, which allows for some fantasticviews. We plan to build an open-airreception space and fully take advantageof the Southern California climate.California Biomedical Industry 2011 Report | 93

Stem cell science: Putting the tools to excellent use“Problems in human medicine andhuman biology are just plain hard,” saidLawrence S.B. Goldstein, Ph.D., directorof the UC San Diego Stem Cell Programand a key leader in the San DiegoConsortium for Regenerative Medicine.“They take many years of effort to solve.They take many scientists and staffpeople working together to solve them.And they take money.”For all of those reasons, Goldsteinbelieves that California is the place to befor stem cell researchers today.Goldstein was co-chairman of thescientific advisory committee forthe campaign to pass California’sProposition 71, and he said that CIRMhas delivered on its potential. “For thefirst five years, CIRM was tool building,”he said. “The second five years — now —is tool utilization.”The institute has accelerated stem cellresearch — and cemented California asthe innovative leader in the emergingfield — in four key ways, Goldstein said.“First, CIRM is absolutely supportingscientific projects that would not haveotherwise been supported,” he said.“Stem cell research projects are soinnovative that they would not haveattracted federal funding.” For the NIHand other granting federal agencies,“Innovative equals controversial, andcontroversy splits votes on reviewpanels.” Given the intense competitionfor NIH grants, it is understandableand perhaps even appropriate forthe institutes of health to select moretraditional and incremental projects tosupport.Among the projects to receive CIRMgrants has been under John Zaia’sdirection at City of Hope. His teamplans to modify hematopoietic stemcells from HIV patients to make thecells more resistant to HIV. Whenre-infused, these altered cells mayreconstitute the patients’ immunesystems. A similar project throughMichele Calos’ lab at Stanford willattempt to add a missing gene to musclestem cells from boys with Duchenemuscular dystrophy (DMD). The goalis to create new, healthy muscle cellsin the bodies of DMD patients, whosedisease is invariably fatal. If successful,the technique could be applicable inthe treatment of other degenerativedisorders and, perhaps, in degenerativeconditions that occur in normalaging. Another CIRM-funded project,conducted by J. William Langston’slab at The Parkinson’s Institute, aimsto develop iPS cells from patientswith Parkinson’s disease and use theresulting cell lines for Parkinson’sresearch and drug discovery.These investigations, and many othersunderway, are expected to yield newscientific knowledge that could proveuseful to all stem cell researchers.More importantly, CIRM is drivingtranslational development projects tomake breakthrough new treatmentsavailable to patients as soon as is feasible.The second way CIRM has catapultedstem cell research forward has beenthrough a number of financing roundsdesigned to draw new researchers to thefield and to provide the training theyneed to not only get up to speed but tolead the science forward. In fact, theinstitute’s first round of funding was fortraining grants that enabled Californiapublic colleges and universities andnon-profit academic and researchinstitutions to provide stem cellresearch training to pre-doctoralstudents, post-doctoral students andclinical fellows. The programs were tobe available and applicable to studentsfrom scientifically and ethnically diversebackgrounds. Further, the programswere to offer one or more classes instem cell biology as well as a requiredcourse in the social, legal and ethicalimplications of stem cell research.Another round of training financingunderwrote stem cell techniquescourses. Two new faculty roundsfocused on bringing new instructorsinto stem cell programs. The firstfocused on funding young medicalstudents and doctoral scientists asindependent investigators and asfaculty members establishing their ownlabs. The second round paid particularattention to recruiting new physicianscientistsinto the field.Not only are these recruits inspiringundergraduate and graduate studentsto pursue stem cell research, Goldsteinsaid, “These are people who are going tostart and run companies.”Goldstein was instrumental in UC SanDiego being awarded a $1.2 millionCIRM grant to train the next generationof stem cell researchers. The programis providing interdisciplinary trainingin stem cell biology and medicine for16 scientists — six doctoral students,four postdoctoral fellows and six clinicalfellows — enrolled at the School ofMedicine, Division of Biological Sciences,Division of Physical Science, SkaggsSchool of Pharmaceutical Sciences,Jacob’s School of Engineering at UCSD,or at the Salk or Burnham Institutes.94 | California Biomedical Industry 2011 Report

“Only by lowering the barriers to entryinto this important field, can we attractthe very best scientists, ethicists,students, physicians, and fellows tostem cell research,” Goldstein said.At the same time, Goldstein is workingon a research project team with aphysician scientist who moved fromprivate practice to research by wayof a CIRM New Faculty grant. “She isworking at the very nexus of science andclinical practice,” Goldstein said, whichis where she wants to be. Further, hercontributions and insights already areproving invaluable to the team’s work.Third among CIRM’s catalyst roles,Goldstein said, was the formationand issuance of Disease TeamResearch Awards. Established to fundmultidisciplinary teams, these grantsenable teams to conduct the researchand regulatory activities necessaryto prepare and file a complete, wellsupported investigational new drugapplication (IND) with FDA.Goldstein is co-principal investigator ona Disease Team Award aimed at treatingamyotrophic lateral sclerosis (ALS)(see sidebar). He said that the teamsubmitted their idea when it really wasjust an idea. On the wall of his office atUCSD is a Gantt chart that illustratesevery key task to move that idea to theIND delivery date, four years from theproject’s start.“We’re working within incrediblyaggressive timelines,” Goldsteinadmits. “But sometimes things areas slow as you allow them to be.”There is no allowance for slow on theDisease Team projects: should theteam miss a milestone, or run into aninsurmountable research problem, thegrant ends and the remaining fundsrevert to CIRM. If the project succeedsand results in a commercializedtherapy, the grant converts to a loan, tobe paid back to CIRM through royalties.Either outcome ensures some fundingas well as invaluable data for futureresearch programs.The grant’s requirements ensurethat the teams have the businessand management tools they need tosucceed. For instance, CIRM insiststhat the Disease Team Award recipientshire experienced project managers.Goldstein said his team secured onewho insisted that they start talkingto the FDA as early as possible.Considering the agency’s needs andconcerns in the earliest stages of theresearch planning both guides the teamin addressing real-world considerationsand informs the FDA on issues to beprepared for as the programs reachfruition.The interactions have been sovaluable, Goldstein said, that he hasencouraged CIRM to work with thetop administrators at the FDA, toshare collective experiences and beginassembling the regulatory frameworkfor stem cell-related products.The final way that CIRM is ensuringthe commercial future of stem cellbreakthroughs, Goldstein said, isputting researchers and companiestogether on the same teams. Although“that piece is just getting started,”he said, it is a vital component to theemerging sector’s success.“Just getting started” is how Goldsteinalso describes the current state of stemcell research as a field. “There is nocomparison between the early daysand now,” he said, “and we’ve onlyscratched the surface.”The said the technology has becomevery powerful. It will need to be toenable scientists to reach their goal:“To take stem cells and command themto become something and producethem in quantity and at quality toallow for the safe and efficacious use bypatients.”He said the researchers are “gettingcloser” to meeting that goal. Goldstein’sresearch is focused on understandingthe molecular mechanisms ofmovement inside brain cells and howfailures in the movement systems maylead to neurodegenerative diseases. Hislaboratory has discovered importantlinks between transport processesand diseases such as Alzheimer’s andHuntington’s diseases. Given his focus,he may be biased when he says, “Thebrain is really where you see enormousprogress and potential for stem celltechnologies.”Yet given the list of neurologicaldisorders covered by the brain —Alzheimer’s disease ALS, Parkinson’sdisease, Huntington’s disease, lupus,multiple sclerosis, muscular dystrophy,myasthenia, autism, chronic pain,dyslexia, traumatic brain injury, and somany more — one hopes Goldstein iscorrect.Beyond the difficulties inherent infiguring out human biology and waysto use human stem cells to correctmedical problems, Goldstein sees somechallenges yet to be addressed. Yet theone that concerns him most is funding.“It’s always about the money supply,”he said. “As a nation, we woefullyunder-invest in scientific research. Wespend far more on things of far lessconsequence to ourselves. We spendmore on cigarettes as a nation than wespend on scientific research.”For this moment in time, however,California is demonstrating all thatcan be accomplished when expertise,passion, curiosity and, yes, cash, areleveraged to solve scientific puzzles.California Biomedical Industry 2011 Report | 95

Stem cell research innovation: Scientific breakthroughs coming one after anotherReverting adult cells to anembryonic-like stateWhile other researchers were focusedon triggering embryonic stem cells tobecome specific replacement tissues,Shinya Yamanaka M.D., Ph.D., figuredout a way to reprogram adult skin cells tobecome embryonic-like stem cells.Yamanaka’s discovery of inducedpluripotent stem cells (iPS cells)circumvents two disadvantages ofembryonic stem cells. Using iPS cellsharms no embryos and, because theycan be derived from the patient’s owntissues, iPS cells should not pose a riskof immune rejection when transplantedinto the patient’s body. In addition,iPS cells are an effective research toolfor modeling drugs, screening drugcompounds and testing for side effectsor toxicity. One day, iPS cell-derivedfunctional cells may serve as the sourcefor cell transplantation therapies.In addition to his primary lab at KyotoUniversity in Japan, Yamanaka is asenior investigator at UC San Francisco’sGladstone Institute of CardiovascularDisease, where he was a postdoctoralfellow in the 1990s. He also is a professorof anatomy at UCSF. Although Yamanakais not personally supported by CIRMfunding, the Gladstone Institute does haveshared lab space supported by CIRM forcarrying out stem cell research.Yamanaka, who in June 2010 received the$610,000 Kyoto Prize for his stem cell work,continues to study iPS cells and ways toimprove the safety and predictability of theprocess for making them.Fighting leukemia and otherblood disordersOne type of human stem celldifferentiates to become either red orwhite blood cells. In a small subset ofthe population, however, the cells areable to bypass the regulation process.Consequently, the bone marrowproduces excessive numbers of redblood cells, leading to problems withblood clotting, heart attacks and, in somecases, leukemia. More than 100,000Americans have been diagnosed with theresulting class of blood diseases calledmyeloproliferative disorders (MPD).Catriona H.M. Jamieson, M.D., Ph.D.,and her research team used humancord blood stem cells to show that themutation in the JAK2 signaling pathwaywas responsible for overproduction ofred blood cells. In 2006, Jamieson, whois an assistant professor of medicine atthe University of California, San Diegoand Director for Stem Cell Research atMoores UCSD Cancer Center, identifiedan inhibitor that can stop the overproliferationof blood cells in people withMPD. The work was funded in part by aCIRM grant.Acting on Jamieson’s findings, San Diegopharmaceutical company TargeGendeveloped a selective JAK2 inhibitorcalled TG101348. This therapy wasshown in animal studies to halt overexpressionof the gene and reverseexcessive production of red blood cells.The company completed a multi-centerPhase I clinical trial of its oral compoundin October 2009 in patients withmyelofibrosis. Although TargeGen hassince been acquired by Sanofi-Aventis,Phase II trials had been expected tobegin in late 2010.Jamieson’s stem cell research continues.In October 2010, she received a $3.34million CIRM grant toward her work ontargeting stem cells in leukemia patientsthat can evade chemotherapy treatmentand turn into malignant cells after a periodof remission. That follows a $20 millionCIRM grant that she and a UCSD colleaguereceived in October 2009 to develop newdrugs to fight leukemia stem cells.Seeking a treatment for Lou Gehrig’sdiseaseStem cell-based therapies carry specialpromise for the more confoundinghuman diseases and disorders. Amongthese conditions is Amyotrophic LateralSclerosis (ALS), also known as LouGehrig’s Disease. ALS is a progressiveneurodegenerative disease that affectsnerve cells in the brain and the spinalcord. When motor neurons die, the abilityof the brain to initiate and control musclemovement is lost. The progressivedegeneration of motor neurons in ALSeventually leads to paralysis and death.There is currently no cure for ALS, andtreatments currently are aimed at slowingthe progression of the disease andmaking patients more comfortable astheir symptoms worsen. A collaborativeteam of San Diego researchers is workingto change that for the estimated 30,000Americans living with the disease.Sam Pfaff, Ph.D., a professor in theSalk’s Gene Expression Laboratory andan investigator for the Howard HughesMedical Institute, is leading the group ofresearchers that also includes co-principalinvestigators Larry Goldstein, Ph.D., andDon Cleveland, Ph.D., both of UCSD.The team is focused on astrocytes,star-shaped support cells that providenutrients for nearby motor neurons.Working with six different lines of humanembryonic stem cells (hESC), theteam will grow clinical-grade astrocyteprecursor cells and identify the line that isbest suited for implantation in laboratorymodels. They hypothesize that thetransplanted human astrocyte precursors(hAP) will mature into astrocytes in vivoand provide support for diseased spinalmotor neurons. Astrocytes are alsocapable of clearing excess neurotoxicglutamate and could thereby slow or haltthe progression of ALS by preventingmotor neuron degeneration.Once the astrocyte precursors are testedfor efficacy and safety to minimize thepossibility of tumorigenesis, the next stepwill be to seek FDA approval to moveforward with human clinical trials.The work is being funded by an $11.5million, four-year CIRM Disease TeamAward that was awarded in October2009. The grants, in a $200 million roundof financing, were designed explicitly toresult in FDA approval for clinical trials.96 | California Biomedical Industry 2011 Report

Researcher profileHans Keirstead, Ph.D.:Leading the charge into thefuture of stem cellsHans S. Keirstead, Ph.D., co-directorof the Sue and Bill Gross Stem CellResearch Center, is an assistantprofessor of the Reeve-IrvineResearch Center of the University ofCalifornia, Irvine.Whereas other thought leaders in thestem cell research arena cite businessmodels and financing and regulatorypathways as potential challenges along thepath to commercializing stem-cell basedtherapeutics, Hans Keirstead, Ph.D., hasalready cleared those potential hurdles.Twice. And he has opened the doors if notpaved the path for those to follow.Keirstead is co-director of the Sue andBill Gross Stem Cell Research Centerand an assistant professor of the Reeve-Irvine Research Center, both at UCIrvine. There he directs a 20-personresearch team investigating the cellularbiology and treatment of spinal cordtrauma. He and his team developed theworld’s first embryonic stem-cell-basedtreatment, which proved be effective inmaking paralyzed rats walk again.To envision Keirstead’s approach, think ofthe spinal cord as a strand of electricalwire. The nerves are the wire inside thecord and they transmit signals betweenthe brain and all the other points ofthe body. Like an electrical cord, thespinal cord is insulated — the humantissue is made up of glial cells. When thespinal cord is damaged, the glial cells nolonger protect the signaling nerves. Thetrauma results in loss of such functionsas locomotion, sensation or bowel/bladder control.Keirstead and his team developed theworld’s first method of using embryonicstem cells to produce large quantities ofhigh-purity tissue to repair the nerves andreplace the glial cells. With new tissue, theconnection can heal, enabling signals topass between the brain and body again.Geron Corp. of Menlo Park licensedthe technology and, with Keirstead’sparticipation, “ran the long, expensivepath” to begin the world’s first clinicaltrial of an embryonic stem cell-basedtherapeutic. “It took $45 million andnine years,” Keirstead said. He addedthat because the field is brand new,so are the regulatory procedures.“Sometimes the FDA changed theirmind, sometimes we changed ourminds. It is an iterative process and ittook us awhile to figure it out.”On October 11, 2010, Geron’s first spinalcord injury patient was administeredGRNOPC.“The significance of the Geron trial ishuge,” Keirstead said. “The gates arenow open.”Indeed, in December 2010, CaliforniaStem Cell, Inc. filed its IND for asecond of Keirstead’s stem-cell basedspinal therapeutics — this one for thetreatment of spinal muscular atrophy.The development path to CaliforniaStem Cell’s IND, Keirstead said, took $3million over three years, and the FDAreview was three months, as is standardfor conventional drug developers’ INDsubmittals.“Every subsequent story owes a debtof gratitude” to Geron, Keirstead said.Then he added, “We are going to startseeing a lot of stem cell INDs. We are at areal turning point.”While agreeing that the biomedical worldwill be watching the Geron trial closely,Keirstead said that the idea that stemcell research would be set back if thetreatment does not work is dangerous.Geron’s product is a stem-cell derivative.Keirstead said that if the product doesnot work, it would likely be the case thatthe material is not the correct substanceand/or is not able to heal the damage— not that the technology is harmful. Incontrast to gene therapy, which sufferedsome failures a decade ago, a stem celltherapy failure in one condition or tissuewould not foreshadow performance oneway or the other in different applications.However, he added, “The question pointsto the dangers of public perception.”As a high-profile stem cell researcher,Keirstead has firsthand knowledge ofthe weight that public opinion carries.He said that one day he showed up at hislab and his researchers were standingoutside, ashen faced. They directed him tothe UCI Student Center, where picketershad hung a banner. On it was a five-foothighphoto of Keirstead and 12 smallerpictures of aborted late-term fetuses. Hetook the time to talk with the protesters,most of whom were relieved to learn howembryonic stem cells are obtained.“There’s so much misinformation outthere,” Keirstead said. But informationdoes not have to be true to influencepolicy making or political decisions. “Itbehooves us all to educate the public,”Keirstead said.California Biomedical Industry 2011 Report | 97

For Keirstead, however, the mostpressing question for the emerging stemcell therapy industry is manufacturing.“The greatest challenge of stem cellresearch is to get a stem cell that canbecome any type of cell to becomea single type and produce it in largenumbers at high purity,” he said.The manufacturing process isconsiderably more complicated thanfor small molecules or even biologicproducts, he said. It requires exquisiteexpertise — workers who have boththe skills to work with the cells andthe judgment to know exactly when toperform the necessary steps. Stem celltherapies will require slower and moreexpensive manufacturing techniquesthan the biomedical industry currentlyuses, and a more rigorous regulatoryframework to match.He said that the downside of being in sucha new discipline is that the risks have notall been identified. As an example, he saidthat stem cells are grown on plates. As theplates fill, some of the cells are off-loadedto new plates and so on. Each generationis called a “passage.” Researchers in hislab discovered that at about 70 passages,the cells start to misbehave.It was not an expected development: 70passages occurred some five years intohis work.He could not be more excited, though.The science is “still at very, very earlystages. As a basic research scientist, Iam shocked at how many discoveries wemake daily. The potential is enormous.”Still, Keirstead said, “The overwhelmingtenor [regarding stem cell-relatedtherapeutics] has been progressivelyenthusiastic.” He said he sees a lotof enthusiasm among investorsand government and that majorpharmaceutical and biotechnologycompanies are building stem cellcapabilities, currently throughacquisitions and sponsored researchcontracts. He said they also areapproaching researchers regarding newdiscoveries, “which is a positive signal foryounger companies and academicians.”“Stem cells have incredible potential,”Keirstead said, adding that their greatestbenefit may be in informing conventionaldrug discovery. “We have no source forhuman tissue now. We use animal tissueor human tumor lines. Stem cells, for thefirst time in the world, are being usedto make heart cells. Using human heartcells [generated by stem cells for drugdiscovery] will increase hits dramaticallyand dramatically decrease costs,” he said.98 | California Biomedical Industry 2011 Report

Special sectionPharmaceuticals in the environment (PIE):Further study is warrantedThe SMARxT disposalcampaign: Addressing unusedpharmaceuticals simply andeffectivelyTechnological improvements haveenabled the detection of chemicals,including pharmaceuticals and overthe-counter(OTC) drugs, in aquaticenvironments and drinking water intrace quantities — less than one partper-billion.As a result, questionsare emerging over whether thesefindings are meaningful from a healthperspective.The pathway for pharmaceuticalsentering the environment is known andundisputed. Normal and appropriatepatient use and excretion is the primarysource of pharmaceuticals enteringthe domestic wastewater stream,accounting for more than 90 percentof the detected concentrations. Theremaining sources (10 percent or less)are a combination of improper disposalof unused medicines (flushing themdown a sink or toilet) and normalmanufacturing discharges.While scientists have found no adverseimpacts on human health, companies,governmental regulators, nongovernmentalorganizations, legislators,and the media have all taken note of theissue. Additional study is necessary toassess the risks posed and determinethe most effective and efficient ways toaddress the source pathways.Take-back programs will notprevent PIEDespite consensus among manyconcerned groups that improperdisposal of unused medicines is aminor contributor to PIE, a desire foraction has evolved into a movementto require drug manufactures topay for the collection and disposalof unused prescription drugs. Overthe past decade, take-back programshave emerged throughout Europeand Canada. Studies to track theconcentration of pharmaceuticals insurface waters in European countrieswith mandatory take-back programsshow the programs have resulted in nodiscernable changes in concentrationsof PIE over this period.Take-back programs are now croppingup throughout the United States. In2009, Johnson & Johnson funded astudy that evaluated the quantities andtypes of household pharmaceuticalsdisposed of in the nine counties of theSan Francisco Bay Area using currenthousehold take-back systems. Thecomprehensive evaluation confirmedthe benefit of a take-back programwould be negligible. Yet, in October2010, the Public Safety Committee ofthe San Francisco Board of Supervisorspassed the Safe Drug Disposalordinance, which, if passed by thefull Board and signed by the mayor,would mandate that pharmaceuticalcompanies participate in a take-backprogram or face financial penalties.The SMARxT DisposalCampaignThe easy, environmentally sound wayto dispose of unused medicines issimply to put them in the householdtrash. Modern landfills are veryeffective in preventing trace materialsfrom entering the environment.In March 2008, the U.S. Fish andWildlife Service, the AmericanPharmacists Association and PhRMAjoined together to promote SMARxTDisposal, a national public awarenesscampaign to educate the public aboutsafe and proper disposal methods ofpharmaceuticals and OTC medicines.The campaign recommends that allunused medicines, unless specifiedotherwise by the FDA, be disposed ofin an appropriate manner at home.More information about the SMARxTDisposal program may be found atwww.smarxtdisposal.net.“In these difficult economictimes, the last thing Americaneeds is complicated andexpensive drug take backprograms that are likely tocontribute to rising healthcarecosts.”Dr. Patrick Moore,co-founder and former leaderof Greenpeace and chair,Greenspirit Strategies Ltd.California Biomedical Industry 2011 Report | 99

2011 California Biomedical Industry ReportConclusionAs demonstrated by the metrics, features and findings presented in this report, California’s biomedical industry plays asignificant and crucial role in the state.It represents the vanguard of innovation. California leads the country as well as the world in innovative therapeuticcompounds and technologies. The state’s institutions continue to pioneer ways to improve public health. Firms in the stateare devising, improving and introducing new therapies, therapeutics, devices, tools and diagnostics everyday to address thechanging and often critical needs of patients everywhere. The first biotechnology company was founded and continues tothrive in California. Today, our industry is in the forefront of emerging fields, such as personalized medicine, nanotechnologyand stem cell research.The cutting edge research and development work in California continues to attract substantial amounts of governmentgrants and venture capital funding. Although both sources reached a plateau — remaining essentially flat through 2009 ascompared to 2008 — there are some hints that venture capital is returning to the biomedical industry. A handful of initialpublic offerings (IPOs) were undertaken in 2010, and the industry saw an increased number of acquisitions as well. As thesetransactions show financial benefit, other investors are poised to again step forward.Life sciences organizations depend on an educated workforce drawn from a wide range of disciplines and functions. Theseprofessionals require specialized training and expertise, attributes that many are able to strengthen through employersupportedcontinuing education. The state’s companies and educational bodies have stepped up to ensure that workforcedevelopment is available and robust at the state’s community and four-year colleges and universities. Moreover, educatorsand employers alike are reaching out to engage school aged children in math and science and to guide the next generation ofCalifornia innovators toward careers in engineering, science, technology and medicine.In the current climate, perhaps the industry’s most critical contribution is to the economy. The state’s academic andindependent research institutions and its biopharmaceutical, diagnostics, medical device and wholesale trade companiesemploy hundreds of thousands of Californians directly — and sustain the businesses and augment the incomes of countlessothers. Its jobs are typically well-compensated and fulfilling. The tax contributions to the state’s operations are significantand multiply through the income, property and sales taxes paid by individual employees. In comparison to California’s otherflagship industries — aerospace, IT and motion pictures, for instance — the biomedical industry has proven more resilient. Itretained the largest percentage of jobs among the group in the recent economic downturn.Because the biomedical industry in California contributes so much to the economy and public health, policymakers havea clear interest in continuing to support the life sciences. Industry leaders from the 2011 CEO Survey have pointed toopportunities to make our business environment more friendly and what this means in terms of tax policy, regulation,technology transfer, environmental regulation and tort reform. All this and more will be the subject of vibrant discussionbetween industry and policymakers. Clearly, California will benefit from an expansion of life sciences research anddevelopment and manufacturing and stability at all levels of the state’s education system.California and its residents have worked very hard for decades to build the most innovative and productive biomedicalindustry in the world. That industry has introduced and continues to pursue new therapies and approaches to improvingpatient outcomes, public health and quality of life the world over. It also continues to give back to the state. It is a componentof the state’s economy and, indeed, its legacy that keeps on giving. At this critical juncture, let us commit to ensuring that italways will.David Gollaher, Ph.D. Gail Maderis Tracy LefteroffPresident and CEO, President and CEO Partner, National Life SciencesCHI-California Healthcare Institute BayBio PricewaterhouseCoopers LLP100 | California Biomedical Industry 2011 Report

MethodologyEmployment, Wages, andIndustry ImpactsDataThe data used to estimate employmentand wages in California’s biomedicalindustry are made available by theBureau of Labor Statistics (BLS)Quarterly Census of Employment andWages (QCEW), available at http://www.bls.gov/cew/. The 2009 datareflected in this report were collectedin the fall of 2010. Data for prior yearsmatch the statistics reported in theCalifornia Biomedical Industry 2010Report in order to ensure comparabilitybetween reports.The QCEW is a near comprehensivecensus of employment and wageinformation at the national, state, andcounty levels for workers covered bystate unemployment insurance lawsand federal workers covered by theUnemployment Compensation forFederal Employees program. It doesnot include the self-employed, unpaidfamily workers, or private householdemployees. Jobs are counted regardlessof full-time or part-time status.Individuals who hold more than onejob may be counted more than once. Inorder to protect the confidentiality offirms’ information, the Bureau of LaborStatistics does not disclose data thatwould be easily identifiable to individualparticipating companies. Given thesmaller number of establishments thatcan occur at the county level, countyleveltotals may not represent the fullnumber of employment positions andwages for each industry. These positionswould be included by the BLS inaggregated state-level data.For reports prior to 2009, a reviewof employment data from companyspecificSecurities and ExchangeCommission (SEC) filings was alsoused to estimate employment in thebiomedical industry, specifically forthe medical device, instruments, anddiagnostics sector. The results of thereview were carried forward in thisyear’s report. Company filings with theSEC can be obtained from the EDGARdatabase available at http://www.sec.gov/edgar/ searchedgar/webusers.htm.The sectors of the biomedical industrythat are used in this analysis arecomprised of several North AmericanIndustry Classification System (NAICS)codes. For the QCEW, companies areassigned a single NAICS code by stateworkforce agencies, and thereforea company that manufactures bothpharmaceuticals and medical deviceswould only be classified in one of thesesectors depending on which is theprimary production of the company ateach establishment.The table, on the following page,displays the NAICS codes used to definethe biomedical industry in California,along with the portion of the codeattributable to the industry.MethodologyThe most recent full year for which wageand employment data were availablefor the publication of this report was2009. QCEW employment and wagedata are identified for selected NAICScodes used to define the biomedicalindustry. The relevant NAICS code dataare then multiplied by the percent of thebiomedical industry that is representedin the NAICS code, as derived by PwCfrom Census Bureau data (see table onpage 103). This methodology is identicalto the process used in the CaliforniaBiomedical Industry 2009 and 2010reports, so the results in all reportsare directly comparable. Prior to theBiomedical Industry 2009 report, PwCestimated narrow industry categoriesbased on broader industry statistics,such as employment data from theCalifornia Employment DevelopmentDepartment at the three- and four-digitNAICS code level, that were availablein the most recent year. The currentQCEW-based methodology provides amore accurate portrait of California’sbiomedical industry but makes thisreport and the 2009 and 2010 reportsincomparable to earlier publications.There was an anomaly in the QCEWwage data for the biopharmaceuticalsector in the first quarter of 2009,with wages per biopharmaceuticalemployee being over twice the amountin the first quarter as in the remainingquarters. According to the BLS, swingsin wages can occur due to mergers andacquisitions, bonuses, or other payouts.For example, if an employee is givena bonus of 12 months pay in January,her January wages are recorded as hersalary plus the full bonus. To correct forthe anomaly, we replaced the reportedfirst quarter wage data with the averagewage across the second, third, andfourth quarters weighted by averagequarterly employment. This adjustmentwas only done to the reportedbiopharmaceutical wages at the statelevel, as the anomaly was not evidentfor wages in the clusters.Employment data from the QCEWwere also used in conjunction with theIMPLAN economic model for the stateof California to quantify biomedicalindustry revenues and the direct,indirect, and induced impacts of theindustry in California. IMPLAN is awell known modeling system developedby the Minnesota IMPLAN Group forestimating economic impacts and issimilar to the Regional Input-OutputModeling System developed by the U.S.Department of Commerce. The modelis primarily based on government datasources. It can address a wide range ofimpact topics in a given region (county,state, or the country as a whole).IMPLAN is built around an “inputoutput”table that relates the purchasesthat each industry has made from otherindustries to the value of the output ofeach industry. To meet the demand forgoods and services from an industry,purchases are made in other industriesaccording to the patterns recorded inthe input-output table. These purchasesin turn spark still more purchases bythe industry’s suppliers, and so on.California Biomedical Industry 2011 Report | 101

NAICSCode 2007 NAICS Definition Sector % Used611 Educational Services (Privately Owned) Academic Research 2%611 Educational Services (State Owned) Academic Research 19%54171 R&D in the Physical, Engineering, and LifeSciencesBiopharmaceuticals 31%325411 Medicinal and Botanical Mfg Biopharmaceuticals 100%325412 Pharmaceutical Preparation Mfg Biopharmaceuticals 100%325413 In-Vitro Diagnostic Substance Mfg Biopharmaceuticals 100%325414 Biological Product (except Diagnostic) Mfg Biopharmaceuticals 100%541380 Testing Laboratories Biopharmaceuticals 20%327213 Glass Container Mfg Laboratory Services 10%621410 Family Planning Centers Laboratory Services 1.01%621492 Kidney Dialysis Centers Laboratory Services 1%621511 Medical Laboratories Laboratory Services 25%621991 Blood and Organ Banks Laboratory Services 1%621999 All Other Miscellaneous Ambulatory HealthCare ServicesLaboratory Services 1%322291 Sanitary Paper Product Mfg Med Devices, Inst, & Diag* 7%333314 Optical Instrument and Lens Mfg Med Devices, Inst, & Diag* 100%334416 Electronic Coil, Transformer, and OthInductor Mfg334510 Electromedical and ElectrotherapeuticApparatus Mfg334512 Automatic Environmental Control Mfg forResidential, Commercial, and ApplianceUse334513 Inst and Related Products Mfg forMeasuring, Displaying, and ControllingIndustrial Process Variables334514 Totalizing Fluid Meter and Counting DeviceMfg334515 Instrument Mfg for Measuring and TestingElectricity and Electrical SignalsMed Devices, Inst, & Diag* 0.4%Med Devices, Inst, & Diag* 99%Med Devices, Inst, & Diag* 10%Med Devices, Inst, & Diag* 30%Med Devices, Inst, & Diag* 10%Med Devices, Inst, & Diag* 20%334516 Analytical Laboratory Instrument Mfg Med Devices, Inst, & Diag* 100%334517 Irradiation Apparatus Mfg Med Devices, Inst, & Diag* 100%334519 Other Measuring and Controlling DeviceMfgMed Devices, Inst, & Diag* 10%339112 Surgical and Medical Instrument Mfg Med Devices, Inst, & Diag* 100%339113 Surgical Appliance and Supplies Mfg Med Devices, Inst, & Diag* 96%339114 Dental Equipment and Supplies Mfg Med Devices, Inst, & Diag* 100%339115 Ophthalmic Goods Mfg Med Devices, Inst, & Diag* 75%423450 Medical, Dental, and Hospital Equip andSupplies Merchant WholesalersWholesale Trade 100%423460 Ophthalmic Goods Merchant Wholesalers Wholesale Trade 50%424210 Drugs and Druggists Sundries MerchantWholesalersWholesale Trade 20%446199 All Other Health and Personal Care Stores Wholesale Trade 31%Meanwhile, employees and businessowners make personal purchases out ofthe additional income that is generatedby this process, sending more newdemands rippling through the economy.Multipliers describe these iterations.The Type I multiplier measures thedirect and indirect effects of a changein economic activity. It capturesthe inter-industry effects only (i.e.,industries buying from local industries).The Type SAM (Social AccountingMatrix) multiplier captures the directand indirect effects. In addition, it alsoreflects induced effects (i.e., changes inspending from households as incomeincreases or decreases due to thechanges in production).The current IMPLAN model has beenbenchmarked to data collected in the2007 Economic Census. The IMPLANmodels used in our prior reports haverelied on base data benchmarked to the2002 Economic Census. This update indata has resulted in a rebasing of thebiomedical industry’s revenues, indirectand total economic impacts. As a result,the industry revenue, indirect impacts,and total impact figures provided in thisreport are not comparable to earlierpublications.InvestmentDataData on venture capital investmentnationally and by state were collectedfrom The MoneyTree Report fromPricewaterhouseCoopers and theNational Venture Capital Associationbased on data provided by ThomsonReuters. The 2010 data reflected inthis report were collected in the fall of2010. Data for prior years are from theCalifornia Biomedical Industry 2010Report in order to ensure comparabilitybetween reports.*Note: Approximately 36,000 jobs were additionally added to the medical devices, instruments, and diagnostics sectorbased on a review of SEC filings.102 | California Biomedical Industry 2011 Report

NIH GrantsDataData for this analysis come from theNational Institutes of Health Officeof Extramural Research, available athttp://grants. nih.gov/grants/oer.htm.The 2009 data do not include researchand development contracts due to theunavailability of that data at the time ofpublication of this report. Prior year’sdata may also not include researchand development contracts to ensurecomparability across years. Also, NIHgrants funded under the AmericanRecovery and Reinvestment Act of 2009(ARRA) are documented separately andare not included in funding totals unlessotherwise noted.The data include all awards toCalifornia from NIH, some of which donot necessarily fund basic biomedicalresearch. For example, some grantswere used for training programs andprojects that are designed to supportthe research training of scientists forcareers in the biomedical and behavioralsciences, as well as to help professionalschools to establish, expand, or improveprograms of continuing professionaleducation. Other grants were used tofund health policy or behavioral scienceresearch. Despite these caveats, overallthe NIH grant funding demonstrates thefederal commitment to health scienceresearch in California. The 2009 datareflected in this report were collectedin the fall of 2010. Data for prior yearsare from the California BiomedicalIndustry 2010 Report in order to ensurecomparability between reports.The datacome in two forms:1. State and Congressional District:http://report.nih.gov/award/trends/State_Congressional/StateOverview.cfm2. NIH SBIR and STTR grants: http://grants.nih.gov/grants/Funding/award_data.html.3. Data on NIH grants funded underARRA: http://report.nih.gov/recoveryCalifornia Biomedical Industry 2011 Report | 103

__________________________________________________________________________________Editorial Advisory BoardCarl W. Hull - Gen-Probe IncorporatedDavid Gollaher, Ph.D. - CHI–California Healthcare InstituteSusan M. Baxter, Ph.D. - California State UniversityDavid W. Beier - AmgenKen Berger - Thermo Fisher ScientificMichael V. Drake, M.D. - U.C. IrvineJohn Dunn – Biogen IdecPeter C. Farrell, Ph.D. - ResMedMichael A. Friedman, M.D. - City of HopeLawrence P. Guiheen - Baxter Healthcare CorporationRobert B. Hance - Abbott VascularPaul Hastings - OncoMed PharmaceuticalsTerry Hermiston, Ph.D. - Bayer Healthcare PharmaceuticalsPeter Barton Hutt - Covington & BurlingNaomi Kelman - LifeScan North AmericaSteve E. Krognes - GenentechTracy T. Lefteroff - PricewaterhouseCoopers LLPMarcea B. Lloyd - Amylin Pharmaceuticals, Inc.John C. Martin, Ph.D. - Gilead SciencesDana G. Mead, Jr. - Kleiner Perkins Caufield & ByersPeter G. Milner, M.D. - Optivia BiotechnologyMichael A. Mussallem - Edwards LifesciencesChristian W. Nolet - Ernst & YoungMichael Onuscheck - Boston ScientificRichard P. Patrylak - Merck & CompanyPhilip A. Pizzo, M.D. - Stanford UniversityDavid E. I. Pyott - AllerganJack Rodgers, Ph.D. - PricewaterhouseCoopers LLPWilliam E. Rhodes - BD BiosciencesJohn D. Stobo, M.D.- University of CaliforniaKatie M. Szyman - Medtronic DiabetesEric J. Topol, M.D. - Scripps Translational Science Institute, Scripps Health & West Wireless Health InstituteKeith C. Valentine - NuVasive, Inc.

Report authors hereDavid L. Gollaher, Ph.D.President and CEOCalifornia Healthcare InstituteTracy T. LefteroffNational Life Sciences PartnerPricewaterhouseCoopers LLPGail MaderisPresident and CEOBayBioProject TeamNicole BeckstrandCalifornia Healthcare InstituteLambert ShiuPricewaterhouseCoopers LLPTravis Blaschek-MillerBayBioMolly IngrahamCalifornia Healthcare InstituteOusmane CabaPricewaterhouseCoopers LLPJeremy LefflerBayBioWritingChristi WhittemoreStellar Road Copy WorksEconomic AnalysisJack Rodgers, Ph.D.PricewaterhouseCoopers LLPKristen SoderbergPricewaterhouseCoopers LLPCHI-California Healthcare InstituteCHI-California Healthcare Institute is a non-profit public policy research organizationfor California’s biomedical R&D industry. CHI represents more than 250 leadingmedical device, biotechnology, diagnostics and pharmaceutical companies andpublic and private academic biomedical research organizations. CHI’s mission isto advance responsible public policies that foster medical innovation and promotescientific discovery.California Healthcare Institute888 Prospect StreetSuite 220La Jolla, CA 92037Phone: (858) 551-6677www.chi.orgPricewaterhouseCoopers Pharmaceutical and Life SciencesIndustry GroupPricewaterhouseCoopers Pharmaceutical and Life Sciences Industry Group (www.pwc.com/pharma or www.pwc.com/medtech) provides assurance, tax and advisoryservices to proprietary, generic and specialty drug manufacturers, medical device andinstrumentation suppliers, biotechnology companies, wholesalers, pharmacy benefitmanagers, contract research organizations, and industry associations. The firm isdedicated to delivering effective solutions to the complex strategic, operational,and financial challenges facing pharmaceutical, biotechnology and medical devicecompanies. More than 163,000 people in 151 countries across our network sharetheir thinking, experience, and solutions to develop fresh perspectives and practicaladvice.Tracy Lefteroff, PartnerPricewaterhouseCoopers LLP10 Almaden Blvd.Suite 1600San Jose, CA 95113Phone: (408) 817-3700BayBioAttila Karacsony, DirectorPricewaterhouseCoopers LLP400 Campus DriveFlorham Park, NJ 07932Phone: (973) 236-5640BayBio is Northern California’s life science association. We support the regionalbioscience community through advocacy, enterprise support, and enhancement ofresearch collaboration. We maintain Northern California’s leadership in life scienceinnovation by supporting entrepreneurship, science education and life science careerdevelopment through the BayBio Institute. Our members include organizationsengaged in, or supportive of, research, development and commercialization of lifescience technologies.BayBio400 Oyster Point Blvd., Suite 221South San Francisco, CA 94080Phone: (650) 871-7101©2011 CHI-California Healthcare Institute. All rights reserved. Published by CHI-California Healthcare Institute, 888 ProspectStreet, Suite 220 La Jolla, California 92037. No part of this book may be reproduced, stored in the retrieval system andtransmitted in any form or by any means, electronic, mechanical, photocopying, microfilming, recording and otherwise without thepermission of the copyright holder.©2011 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers LLP,a Delaware limited liability partnership, which is a member firm of PricewaterhouseCoopers International Limited, each memberfirm of which is a separate legal entity. This document is for general information purposes only, and should not be used as asubstitute for consultation with professional advisors. MW-11-0163 jat