America's Biotech and Life Science Clusters - Milken Institute

America’s Biotech 

and Life Science Clusters 

San Diego’s Position and Economic Contributions 

by Ross DeVol, Perry Wong, Junghoon Ki, 

Armen Bedroussian and Rob Koepp 

June 2004

Acknowledgements 

The Milken Institute would like to give special thanks to key members of the Deloitte team. 

The authors would like to express their gratitude to Mari-Anne Kehler for her vision in forging 

a collaborative relationship between our organizations and in making the idea for this study 

become a reality. We would also like to thank Andrew Bird and Stuart Sechriest for their support 

in coordinating our efforts within the Deloitte organization, recommendations on stakeholders 

to be interviewed for the study and in outreach efforts to the San Diego community. We greatly 

appreciate the efforts of Teresa Young and Kim Snover of Deloitte’s San Diego office for arranging 

the interviews and participating in many of them. Teresa Young’s valuable insights, offered after 

reviewing a draft of the study, added a unique long-term cluster participant’s perspective. We would 

like to thank Anthony Buzzelli for his efforts in helping coordinate with the Deloitte National Life 

Sciences team. We appreciate all the feedback from Deloitte staff, too numerous to list. Additionally, 

we would like to thank Joe Panetta and April Bailey of BIOCOM, and Susan Atkins of Susan E. 

Atkins & Associates for their guidance and recommendations of key people to be interviewed. 

Rob Koepp and the entire Milken Institute project team extend their sincere gratitude to all of the 

San Diego cluster members who agreed to be interviewed for this project. Their insights added 

context to the quantitative assessments and allowed us to get behind the numbers. They are listed 

below in alphabetical order: 

Howard Birndorf, CEO, Nanogen 

Mike Borer, CEO, Xcel Pharmaceuticals 

Wain Fishburn, Partner, Cooley Godward 

Delbert Glanz, Executive Vice President, The Salk Institute for Biological Studies 

Lisa Haile, Partner, Gray Cary Ware & Freidenrich 

Edw ard Holmes, Vice Chancellor for Health Sciences; Dean, University of California, 

San Diego School of Medicine 

David Kabakoff, CEO, Salmedix 

Arnold LaGuardia, Executive Vice President, The Scripps Research Institute 

Catherine Mackey, Senior Vice President, Pfizer Global Research and Development 

Connie Matsui, Executive Vice President, Biogen IDEC 

Steve Mento, CEO, Idun Pharmaceuticals 

Richard Murphy, President, The Salk Institute for Biological Studies 

Gail Naughton, Dean, College of Business Administration, San Diego State University 

Henry Nordhoff, CEO, Gen-Probe 

Joe Panetta, CEO, BIOCOM 

Duane Roth, CEO, Alliance Pharmaceutical 

Ivor Royston, Managing Member, Forward Ventures 

Teresa Young, Partner, Deloitte 

Copyright 2004 Milken Institute

Table of Contents 

Acknowledgements ................................................................................................... i 

Executive Summary .................................................................................................. 1 

History ................................................................................................................... 10 

The Biotechnology Innovation Pipeline Index ..................................................... 27 

R & D Assets ..................................................................................................... 28 

Metro Findings ......................................................................................... 30 

Methodology ............................................................................................ 34 

Risk Capital & Entrepreneurial Infrastructure .............................................. 35 


Methodology ............................................................................................ 40 

Human Capital Capacity ................................................................................. 41 


Technology & Science Workforce ................................................................... 49 


Methodology ............................................................................................ 55 

Current Impact Assessment ................................................................................... 56 

Size and Performance .............................................................................. 57 

Diversity .................................................................................................... 57 

Composite Index ...................................................................................... 58 


Methodology ............................................................................................ 70 

Overall Composite Index ........................................................................................ 74 


Methodology ............................................................................................ 78 

Multiplier Impacts .................................................................................................. 79 


Methodology ............................................................................................ 82 

Conclusion ............................................................................................................... 83 

Appendix ................................................................................................................. 86 

About the Authors .................................................................................................. 99 

About Deloitte & Milken Institute ....................................................................... 101

Executive Summary 

Chemistry and physics were the sciences that propelled technological advances in the first half of 

the 20th century. Advances in engineering and electronics led to the computer and information 

technology revolution in the second half of the 20th century, but progress in microbiology and 

genomics hold the promise to make biotechnology the dominant economic force of the first half 

of the 21st century. The electronic and computer breakthroughs will allow massive amounts of 

genetic information to be decoded and processed. We are likely to see a fusing of information 

technology and biotechnology into a highly effective means of disease prevention, detection and 

finding cures. As a science and industry, biotechnology will mature and create enormous changes 

in our lives and benefit the entire human race. 

Numerous proteins are already used as therapeutics, the result of recombinant DNA technology. 

Biotechnology companies have, through their partnership with pharmaceutical firms, improved 

the quality of human life and extended the lifespan of many individuals. The industry has 

discovered antibodies for cancer, arthritis and tissue transplant, growth hormones, and clot-busting 

enzymes. 

In addition to the race for discovering biotechnology-derived therapeutics, there is a different kind 

of race underway: the one that will determine where the primary geographic locations of this 

industry reside. The economic outcomes of where these biotechnology clusters form and grow are 

likely to be immense. 

The 21st century biotechnology cluster race has many regional entries in the U.S. and around the 

world. Within the U.S., California has several metropolitan areas that are among the leaders as the 

race commences including Oakland, San Francisco, San Jose, Los Angeles, Orange County, and San 

Diego. The East Coast has Boston, Philadelphia, Washington, D.C., and Raleigh-Durham among 

the leading aspirants. Seattle and Austin appear to be two other top geographic contenders. 

What is a cluster? Industry clusters are geographic concentrations of sometimes competing, 

sometimes collaborating firms, and their related supplier network. They are agglomerations of 

interrelated industries that foster wealth creation in a region, principally through the export of 

goods and services beyond their borders. A cluster represents an entire value chain of a broadly 

defined industry sector from suppliers to end products, including its related suppliers and specialized 

infrastructure. 

Supplier networks are instrumental to the success of clusters and fostering sustained agglomeration 

processes. Clusters are interconnected by the flow of goods and services. This flow is stronger than 

the one linking them to the rest of the local economy. Cluster members usually include governmental 

and nongovernmental entities such as public/private partnerships, trade associations, universities, 

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Executive Summary

America’s Biotech and Life Science Clusters 

think tanks and vocational training programs, venture capitalists, patent attorneys, and even 

accounting and auditing firms in the case of biotechnology. 

Because knowledge is generated, transmitted, and shared more efficiently in close proximity, 

economic activity based on new knowledge has a high propensity to cluster in a geographic area. 

A region with a top biotechnology cluster will have more innovations, less of which will escape 

to other regions, or at least, they will do so at a slower rate. Regions excel to the extent that the 

firms and talent in them can innovate successfully by being there, rather than elsewhere. This 

is particularly poignant for an industry such as biotechnology whose survival is based upon 

continuous innovation streams. 

In this study, we compare and contrast the San Diego biotechnology and life sciences cluster with 

11 other clusters identified above, review its formation and historical evolution and highlight the 

industry’s economic contributions to the region. These 12 clusters were selected by reviewing 

previous studies and performing statistical evaluations for which metropolitan areas possessed the 

greatest specialization and concentration of the biotech industry in the United States. 

To appropriately determine the density of a biotechnology cluster, we utilized the smaller 

geographic area represented by metropolitan statistical areas (MSAs). Many previous studies based 

their findings upon larger consolidated metropolitan statistical areas (CMSAs). Our organizing 

principle for this study was to measure which biotech clusters were the densest, but at the same 

time had sufficient scale. 

To compare the relative strength of each metro’s biotech assets, we scaled out each component 

measure by population, employment or gross metro product (GMP), such as the San Diego metro’s 

academic R&D dollars (to biotech) per capita. After such adjustments, we compared the relative 

scores of the 12 metros and ranked them. Many previous studies based their findings upon absolute 

measures. By converting them to relative measures, a more accurate representation of the richness 

and depth of the clusters is revealed. For a more complete discussion of this topic, please see the 

methodology portion of the biotech research and development section on page 34. 

Further, we created a unique biotechnology and life sciences data set and most importantly, provided 

employment estimates through 2002. Previous studies’ most current employment information 

went through 1997. In biotechnology, 1997 is ancient history. Our data set allowed an investigation 

of recent growth performance. 

Biotechnology Innovation Pipeline 

The term “biotechnology innovation pipeline” refers to the support infrastructure and outcome 

measures that reflect the ability of an area to capitalize on its strengths in biotech knowledge and 

creativity. A rich innovation pipeline plays a pivotal role in a region’s biotech and life science 

industry gestation, commercialization, competitiveness and ability to sustain long-term growth. It 

also constitutes an important socio-economic asset to regional, state and national economies. 

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This study includes measures of research and development (R&D), risk capital and entrepreneurship 

infrastructure, biotech and life science human capital, and biotechnology and life science workforce. 

We begin with the biotech research and development (R&D) assets that can be commercialized for 

future metro biotech growth. R&D assets are vital for biotech more so than any other industrial 

sector, primarily because biotech, especially in its early stages, is intensely dependent on basic 

research. 

San Diego has particular strength in biotechnology research and development assets. Many San 

Diego-based biotech and life science firms are devoted to R&D, either basic or applied, and they are 

seeking more R&D funds and support. The Scripps Research Institute, Salk Institute for Biomedical 

Studies, Burnham Institute and the University of California, San Diego (UCSD) provide a rich R&D 

knowledge base for the region. San Diego’s composite score for biotech research and development 

inputs is 79.7 (out of a perfect score of 100) before rebasing the top score to 100 for comparison 

purposes, which positions the metro as top ranked among the 12 selected metros with a rebased 

score of 100. The research and development composite is comprised of nine indicators. 

San Diego’s relative advantages in the composite score come from its attractiveness to public R&D 

funding such as National Science Foundation (NSF) for basic biotech research and National Institutes 

of Health (NIH) for advanced research. San Diego also benefits from commercial opportunities for 

biotech research. San Diego’s superior rankings in the relative biotech Small Business Technology 

Transfer (STTR) awards and biotech Small Business Innovation Research (SBIR) statistics confirm 

regional effectiveness in commercializing R&D efforts and new ventures. Boston ranked 2nd with 

a composite score 78.9 (or a rebased score of 99) and Seattle, 3rd, followed by Raleigh-Durham- 

Chapel Hill, 4th among the 12 competing metros. 

Milken Institute's 2004 Biotech Index 

By Category and Overall Composite 

1. R&D Inputs 2. Risk Capital 3. Human Capital 

Composite 

Composite 

Composite 

MSA Rank Score MSA Rank Score MSA Rank Score 

San Diego 1 100.0 San Jose 1 100.0 Raleigh-Durham-Chapel Hill 1 100.0 

Boston 2 99.0 San Francisco 2 98.9 Boston 2 90.2 

Seattle-Bellevue-Everett 3 96.4 San Diego 3 97.4 Oakland 3 80.0 

Raleigh-Durham-Chapel Hill 4 91.9 Raleigh-Durham-Chapel Hill 4 95.4 San Diego 4 79.7 

Philadelphia 5 84.9 Boston MA-NH 5 89.9 San Jose 5 78.7 

Washington, D.C. 6 80.3 Seattle-Bellevue-Everett 6 85.1 Philadelphia 6 74.3 

San Jose 7 75.3 Washington, D.C. 7 80.9 Washington, D.C. 7 74.0 

Los Angeles-Long Beach 8 75.3 Philadelphia 8 77.3 Seattle-Bellevue-Everett 8 73.7 

San Francisco 9 71.1 Orange County 9 76.0 Austin-San Marcos 9 66.6 

Oakland 10 66.7 Los Angeles-Long Beach 10 63.6 Los Angeles-Long Beach 10 63.8 

Orange County 11 54.0 Oakland 11 56.9 San Francisco 11 59.9 

Austin-San Marcos 12 52.0 Austin-San Marcos 12 53.1 Orange County 12 51.7 

5. Current Impact 

Overall 

4. Biotech Workforce 

(Biotech) 

Composite 

Composite 

Composite 

Composite 


Raleigh-Durham-Chapel Hill 1 100.0 San Diego 1 100.0 San Diego 1 100.0 

Boston 2 99.2 Boston NECMA 2 80.3 Boston NECMA 2 95.1 

San Jose 3 95.6 San Jose 3 78.1 Raleigh-Durham-Chapel Hill 3 92.5 

Oakland 4 93.9 Raleigh-Durham-Chapel Hill 4 69.4 San Jose 4 87.8 

San Diego 5 91.7 Seattle-Bellevue-Everett 5 68.4 Seattle-Bellevue-Everett 5 83.8 

Washington, D.C. 6 86.3 Washington, D.C. 6 64.8 Washington, D.C. 6 79.4 

Seattle-Bellevue-Everett 7 78.3 Oakland 7 64.2 Philadelphia 7 76.5 

Philadelphia 8 77.7 San Francisco 8 63.6 San Francisco 8 75.8 

San Francisco 9 76.1 Philadelphia 9 58.5 Oakland 9 74.3 

Los Angeles-Long Beach 10 70.8 Los Angeles-Long Beach 10 50.0 Los Angeles-Long Beach 10 66.5 

Orange County 11 67.7 Orange County 11 29.2 Orange County 11 54.1 

Austin-San Marcos 12 42.2 Austin-San Marcos 12 27.8 Austin-San Marcos 12 47.8


Entrepreneurial capacity and performance are major players in the new economic milieu in which 

creativity and innovative dynamics determine the competitive advantage of a firm and an industry. 

Risk capital and entrepreneurs are pivotal because new ideas are best equipped with new firms or 

spin-offs. The Index’s Biotech Risk Capital and Entrepreneurial Infrastructure measure consists of 

10 components, each of them portraying essential business climate aspects for biotech start-ups 

and biotech entrepreneurial activities. 

San Diego’s biotech risk capital and entrepreneurial infrastructure score is 88.6 (out of a perfect 

score of 100) before rebasing the top score to 100 for comparison purposes. Its rebased score is 97.4, 

which places it 3rd among the 12 selected metros. Northern California metros San Jose and San 

Francisco, ranked 1st and 2nd, respectively. San Diego’s strongest achievement among the indicators 

for Biotech Risk Capital and Entrepreneurial Infrastructure were biotech venture capital dollars per 

$100,000 of GMP, biotech patents per population, biotech patent citations per population, and 

Deloitte’s Technology Fast 500 companies in life sciences. 

Though there are many economic factors expediting the formation of these biotechnology clusters 

and sustaining them, the fundamental building blocks are pools of talent, human capital and their 

respective capacity to fulfill the technical and operational requirements. Location still matters only 

if it has vast capacity to attract talent that yield a tremendous amount of intellectual property (IP). 

The Biotech Human Capital Capacity Index consists of 12 components examining stocks and flows 

of biotechnology-related human capital that give us an estimate of the capacity to create IP. 

San Diego ranked 4th with a composite score of 74.7 (or 79.7 after rebasing the top scoring metro 

to 100) on biotech human capital. The region’s placement was distant from the top ranked Raleigh- 

Durham and Boston, but it outranked life science heavyweights such as Philadelphia and Washington, 

D.C. Among the 12 components, San Diego had four important components that ranked in the top 

three places. They include per capita measurements of biotech postdoctoral fellowships, biotech 

scientists and biotech bachelor’s degrees awarded, and the percent of biotech bachelor’s degrees 

among all bachelor’s degrees granted in San Diego. San Diego distinguishes itself from many other 

biotech centers by having a disproportionate share of locally produced PhD holders who go into 

industry as opposed to academic research, a key advantage for commercialization success. 

Sustaining a biotech cluster requires a workforce with industry-specific skills within a location 

where operations take place. This pooling of specialized technology and science workforce can be 

a critical factor for the industry to expand and firms to grow. The Biotech Workforce Composite 

Index consists of six occupational components. 

In the composite measurement of the region’s biotech workforce, San Diego scored relatively high, 

ranking 5th among the 12 metropolitan areas studied with an unadjusted score of 85.3 or a rebased 

score of 91.7. Its position is very respectable, but nevertheless exposes the weaker side of the region’s 

biotech cluster in specific workforce categories and life science in general. In the measurement of 

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workforce, San Diego fell behind Raleigh-Durham-Chapel Hill (1st), Boston (2nd), San Jose (3rd) 

and Oakland (4th). On the other hand, the top five metros’ scores were very close to one another. 

Current Impact Assessment 

While the innovation pipeline addresses the capacity and infrastructure for success, the current 

impact assessment focuses on the relative economic outcome of the biotechnology and life sciences 

industry. By measuring economic outcomes, we are able to assess the effectiveness of policymakers, 

participants and other stakeholders in transforming its assets into economic prosperity for it 

residents. 

The current impact assessment measures the absolute and relative importance of employment size 

and growth, taking into account those metros that offer a more diverse set of life science industries. 

Specifically, the current impact index is comprised of seven unique components: 

• Employment Level in 2002, 

• Location Quotient 1 (LQ) in terms of employment in 2002, 

• Relative Employment Growth from 1997–2002, 

• Number of Establishments in 2001, 

• Number of Location Quotients Greater than 2.0, 

• Number of Location Quotients Less than 0.5, and finally, 

• Number of Life Science Industries Growing Faster than the U.S. from 1997–2002. 

The first four components address the issues of size and performance, while the latter three 

measure diversity. The Current Impact Composite Index (comprised of these seven components) 

summarizes and creates a relative snapshot of the current economic impact or outcome. 

Within the biotech composite, San Diego scored 100 (1st) on three of the seven measures and 

is at 78 or better on the rest. Its strengths include not only relative employment size and growth 

within the overall biotech industry, but also a high concentration mix of biotech-related industries 

as explained by the diversity measures. While the region’s biotech activity is funneled primarily 

through its R&D (North American Industrial Classification Code-NAICS 5417102), San Diego 

has displayed significant growth in its biotech production process, thus creating a diverse set of 

biotech-related industries. San Diego employs 14,500 biotech workers. Only Boston had a larger 

biotechnology employment base with 18,700 workers. Boston ranked 2nd on the overall composite 

index, followed by Raleigh-Durham in 3rd and San Jose in 4th place. 

Although San Diego scored 100 (1st) in only two categories within the life sciences, it still managed 

to rank 2nd overall with a life science composite index score of 92. Limited activity in pharmaceutical 

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1 The Location Quotient (LQ) equals % employment in metro divided by % employment in the U.S. If LQ>1.0, the industry is more concentrated in the metro area than in 

the U.S. average.


manufacturing coupled with underperformance in the medical devices industry relative to metros 

like Boston, San Jose and Orange County are the primary reasons that San Diego slipped in 

comparison to its biotech ranking on the current impact composite index. On the other hand, 

San Diego scored highest on two out of the three diversity measures, suggesting that although the 

region may not have the largest absolute share of national employment in life sciences, it certainly 

ranks among the highest when adjusting for its total employment base. 

In order to gain a more complete picture of the spatial dimensions of the San Diego biotechnology 

and life sciences cluster, it is beneficial to map its organizations and employment centers. Most firms 

are located in La Jolla and the area east of Interstate 5 in the city of San Diego near La Jolla. This 

area is called the Golden Triangle by cluster participants and is bounded by Interstate 5, Highway 

52 and Highway 805. These firms are within a five-mile radius of one another from the center. The 

Golden Triangle represents perhaps the densest concentration of biotech research, firm and overall 

employment in the nation. Ivor Royston of Forward Ventures supports this stating, “…We have 

the highest concentration of biotech companies per unit mile, whatever the denominator ...” [e.g. 

employment, per capita, population]. 

Overall Composite Index 

The overall composite index includes the four components discussed within the innovation pipeline 

and current impact assessment sections. The individual components are R&D inputs, risk capital, 

human capital, biotech workforce and current impact. San Diego ranked 1st in the nation in the 

biotech overall composite index. Much of this can be attributed to its relative 1st-place ranking 

within the R&D and current impact indices. Boston is a close 2nd with a relative score of 95.1, 

followed by Raleigh-Durham and San Jose with scores of 92.5 and 87.8, respectively. 

San 

Francisco 

(75.8) 

Los Angeles 

(66.5) 

Oakland (74.3) 

San Jose (87.8) 

Orange County 

(54.1) 

San Diego 

(100.0) 

Milken Institute Biotech-Poles 

2004 

Seattle (83.8) 

Austin 

(47.8) 

6 

Washington 

D.C. (79.4) 

Raleigh 

(92.5) 

Boston 

(95.1) 

Philadelphia 

(76.5)

The rankings in the Overall Composite Index shift when the biotech current impact index is replaced 

with the life science current impact index (keeping all other components constant.) Those metros 

highly engaged in pharmaceuticals’ and medical devices’ manufacturing activity, in addition to 

their biotech presence, rise accordingly. San Diego ranked 2nd on the overall life science composite 

index. With Boston’s high concentration of pharmaceutical industries, that metro moved up to 

1st-place for life science. Boston is also well equipped with respect to the manufacturing of medical 

devices. San Jose and Raleigh-Durham finished 3rd and 4th, respectively, on the overall life science 

composite index. 

Multiplier Impacts 

To better understand the importance of the biotech/life science industry in San Diego we must 

analyze its impact on the overall economy. Multiplicative values known as “multipliers” allow us to 

do this by quantifying how employment and output in biotech/life science industry ripple through 

other regional economic sectors. In addition to providing numerical data on an industry’s regional 

impact, economic multipliers also bring to light region-wide interdependencies and inter-industry 

relationships. 

Within the concept of multiplier impacts, three key forces are at play. In addition to the direct impact 

of industry employment, wages and output, the biotech and life sciences industry impacts many 

supplier industries such as legal, financial and advertising services. The indirect impact represents 

the number of jobs, wages or amount of output generated from all supplier industries necessary to 

support employment and output in biotech and life sciences. The higher employment and wages 

in these supplier industries ripple throughout the local economy leading to higher purchases of 

goods and services, which, in turn, cause higher income available to be spent in the local economy, 

known as the induced impact. 

Altogether, the life science industry in San Diego MSA is responsible for 55,600 jobs, or nearly 5 

percent of all nonagricultural employment in the region. Of those, 21,000 are accounted for directly, 

while 12,600 and 21,000 are generated through the indirect and induced effects, respectively. For 

every job within the life sciences in San Diego, an additional 1.7 jobs are created in all other sectors 

(see graphs below). 

Total Impact of San Diego Life Science 

Direct, Indirect and Induced Impacts - Employment, 2002 

Employment (Ths.) 

60 

Direct 

Total = 55.6 

50 

Indirect 

Induced 

40 

21.0 

30 

20 

10 

0 

Sources: Milken Institute, BEA. 

12.6 

21.0 

Total Impact 

7 

Total Impact 



Direct, Indirect and Induced Impacts - Output, 2002 

Output (Billions of $U.S.) 

7 

6 

5 

4 

3 

2 

1 

0 

Direct 

Indirect 

Induced 


Total = $5.8 Billion 

22 

.843 

2.8


Similarly, the life science industry in San Diego MSA is responsible for $5.8 billion, or 5.3 percent 

of gross metro product in the region. $2.8 billion is registered directly, while $843 million and 

$2.2 billion are generated through the indirect and induced impacts, respectively. For each dollar 

of output produced in the life sciences sector in San Diego, an additional $1.10 of output is generated 

beyond it. 

Conclusions and Policy Issues 

Based upon our evaluation criteria, San Diego ranks as the top biotechnology cluster in the country, 

edging past 2nd-place Boston. If the benchmarking criteria were adjusted somewhat, Boston might 

surpass it. In many respects the two are virtually tied for 1st place. Many in the industry view 

San Francisco as holding a top spot, but that perception is based upon looking at the entire San 

Francisco Bay Area and absolute measures of performance. 

Raleigh-Durham is a rising biotech cluster as denoted by its 1st-place finish in both the human 

capital and biotech workforce categories (and its overall 3rd place in biotech) although the metro’s 

smaller size must be taken into account. San Jose is the top scoring Bay Area metro biotech cluster 

at 4th and grew faster over the last five years than San Diego. When extending the analysis to life 

science clusters, including medical devices and pharmaceuticals, Boston moved past San Diego to 

1st overall. Boston’s top position in medical devices and strength in pharmaceuticals give it more 

diversity. San Jose moves to 3rd in life sciences, courtesy of its 3rd place in medical devices just 

behind Orange County. Raleigh-Durham slips to 4th in life sciences. 

As a national leader in biotechnology and life sciences, San Diego has enormous opportunities and 

challenges in preserving or enhancing its position. Stakeholders must shepherd their talents and 

resources to address the following issues: 

• Despite its strength in overall R&D, San Diego should acquire a greater share of funding 

distributed to research universities. UCSD is a great resource, but lack of scale could present 

it with challenges in the future. 

• More indigenous or local venture capital firms are needed to exploit the inventiveness of 

entrepreneurs in the area. San Diego must reduce its dependence upon VCs flying to the 

community by air. BIOCOM President Joe Panetta acknowledges that attracting more 

venture capital firms to San Diego is one of its strategic initiatives. 

• San Diego has been very successful at recruiting some of the best research talent from 

around the country, and even the world. Nevertheless, it must continue to increase home 

grown talent through UCSD and California State University, San Diego. 

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• More local human capital in biotechnology should be created because the high cost of living, 

especially housing, will make it more difficult to recruit young talent from other parts of the 

country. 

• San Diego needs to create more profitable biotechnology firms. Most are still operating in a 

negative cash-flow position. 

• San Diego must create a few larger biotech anchor firms to add more stability to the 

ecosystem. 

• A larger presence of pharmaceutical firms would create a deeper and richer management 

pool that the larger life science cluster could draw upon. 

• San Diego could enhance its future position as a biotech center by demonstrating an ability 

to manufacture more products locally as opposed to being heavily research-based. 

These observations should be understood in the context of San Diego as among the elite biotech 

clusters in the world. Innovative and collaborative approaches for maintaining growth must 

continue to be pursued. Pooling resources to retain and create biotechnology jobs, would enable the 

San Diego cluster to be an even greater economic force in the region. BIOCOM, UCSD CONNECT, 

San Diego Regional Economic Development Corporation, and other trade groups and associations 

are vital support systems for progress.

History 


Introduction 

San Diego’s recognition as a life science industry cluster is relatively new. The founding of 

Hybritech, one of America’s pioneer biotech companies, in the Torrey Pines Mesa area in 1978 

signified the first readily identifiable step that the region took toward becoming one of the world’s 

pre-eminent biotech hubs. In the wake of that company’s growth and multifarious impacts, by the 

1990s, San Diego went from being best known as a sleepy Navy town to a thriving center for life 

science discovery and commercialization. The founders and others who played important roles in 

Hybritech’s creation and development still contribute—though in capacities of greater experience 

and influence—to the ongoing evolution of the cluster. 

Yet the arrival of a cluster’s “seeding company” represents as much an end as it does a beginning: 

the economic reward attained after preliminary work helped prepare the area for industrial 

development. The significance of Hybritech (which in fact is no longer an ongoing concern in the 

region) is transcended in a multitude of ways by additional efforts that were made before, during, 

and after the company’s origination and growth. An intricate tapestry of cause and effect, one 

which spans over 100 years, needs to be appreciated. 

Early Beginnings 

What is known today as the Scripps Institution of Oceanography (SIO) represents the first instance 

of organized life science-related research in the San Diego region. Originally founded in 1903 as 

the Marine Biological Association of San Diego, the association was institutionalized as a research 

center of the University of California (UC) in 1912. At that time it also adopted the Scripps name 

to recognize the benefaction of Ellen Browning and Edward W. Scripps, whose wealth acquired in 

another knowledge-intensive activity—newspaper publishing—made such support possible. Today 

the Institution directly employs around 1,300 people (nearly 600 of whom are scientists or graduate 

students), with annual expenditures exceeding $140 million. 2 

As one of the world’s oldest and largest marine science research laboratories, SIO has long stood as 

an example of the region’s scientific capabilities. The San Diego area’s best recognized life science 

research body that carries the Scripps name however is the Scripps Research Institute (TSRI), 

founded in 1955 as the Scripps Clinic and Research Foundation, an offshoot of the Scripps Clinic 

hospital. TSRI was chief among the early catalysts for biomedical research activity in the region. 

Subsequently, the core of today’s biotech community has essentially evolved having radiated 

outward from TSRI’s base along the ocean bluffs of San Diego’s Torrey Pines Mesa area of La Jolla 

(see map). 

2 Scripps Institution of Oceanography web site: www.sio.ucsd.edu. 

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History 

The Scripps Research Institute solidified a position as one of the world’s leading centers of 

biomedical research in 1961 with the recruitment of the immunologist Frank Dixon and a team of 

four colleagues from the University of Pittsburgh. Specializing in the causes of autoimmune disease, 

the pioneering work of Dixon and his team effectively put TSRI, in particular its Department of 

Experimental Pathology, at the forefront of bio-science research. 

In 1960 the city of San Diego gifted 27 acres of ocean-facing property on the Torrey Pines bluff to 

Jonas Salk, discoverer of the polio vaccine, for establishing his Salk Institute for Biological Studies. 

By that time, in addition to the Scripps Institution of Oceanography and biomedical Research 

Institute, the divisional operations of General Dynamics involved in nuclear research, a private 

company known as General Atomics, had located to the San Diego region as well. Similar to the 

attractive force for talent exerted by the Scripps Research Institute, Jonas Salk brought to his center 

some of the world’s foremost biological research scientists, including Francis Crick, one of the 

discoverers of the “double helix” structure of deoxyribonucleic acid (DNA). Thus, almost two 

decades before the launch of San Diego’s first biotech company, the area was already well populated 

with advanced research sites and truly world-class human capital.


Noticeably lacking in this early research base, however, was a full-fledged research university. 

Although the Scripps Institution of Oceanography functioned as a University of California research 

lab, it did not operate as a university branch campus. The closest nearby universities involved in 

biomedical research up until then were the Los Angeles area campuses of UCLA, the University of 

Southern California, and the California Institute of Technology—all located more than 100 miles 

north. 

UCSD: Indicators of Bio-Science Strengths 

Since its founding in 1961, U.C. San Diego has risen to become 

one of the world’s leading universities for life science research. 

The following illustrates various dimensions of its leadership 

position. 

Nobel Laureates. Ten UCSD faculty have been awarded the 

Nobel Prize. Current faculty members who won awards relevant 

to the life sciences are Francis Crick (prize awarded in 1962 for 

discovery of the double helix structure of DNA), George Palade 

(1974, structural and functional organization of the cell), and 

Renato Dulbecco (1975, tumor viruses). 

National Medal of Science. Considered the nation’s highest 

scientific honor, eight UCSD faculty have been recipients, 

including Nobel Laureate George Palade (1986) and Yuan-Chen 

Fung (2000), professor emeritus of bioengineering. 

MacArthur Foundation Awards. Popularly known as 

the “Genius Awards,” 11 UCSD faculty have been recipients, 

including Russell Lande in biology. 

National Academy of Sciences. UCSD ranks 7th in the nation 

in the number of faculty elected to the NAS, America’s premier 

society for the scientific community. (The top 10, in descending 

order, are: Harvard, U.C. Berkeley, Stanford, MIT, Yale, CalTech, 

UCSD, Princeton, Chicago, and Cornell.) 

Nature Magazine. The leading scholarly journal of the life 

sciences, Nature, in its “Yearbook of Science and Technology” 

has ranked UCSD as “one of the 10 most powerful research 

universities in the United States.” 

Cited Research. The Institute for Scientific Information 

has ranked UCSD 5th in the world in terms of the most 

cited molecular biology and genetic research papers. UCSD 

pharmacology professor Michael Karin ranks 1st worldwide. 

Source: U.C. San Diego. 

12 

This gaping lack of a nearby research university 

was resolved in 1961 with the establishment 

of the San Diego campus of the University of 

California. Situated on the Torrey Pines Mesa 

in close proximity to the SIO, TSRI, and the 

Salk Institute sites, from its inception, UCSD 

strongly orientated toward the medical sciences 

and engineering. The leaders of the Scripps 

Institution and General Atomics had in fact 

been instrumental in lobbying the U.C. system 

and San Diego government bureaucracies to 

allow the campus’ establishment. The presence 

of U.C. San Diego was envisioned by its founders 

to constitute the “MIT of the West.” Its research 

and teaching activities since then have added 

tremendously to the intellectual diversity, depth 

and stature of the region (see sidebar). 

By the 1970s, this nascent cluster of life sciencerelated 

research institutions was being augmented 

by proactive economic development policies and 

the appearance of new research organizations. 

Later prominent arrivals to the enclave include the 

Burnham Institute, the Sidney Kimmel Cancer 

Center, the Neurosciences Institute, and the La 

Jolla Institute for Allergies and Immunology. 

The Appearance of Biotechnology 

It was back in 1919 that the Hungarian engineer, 

economist, and government minister Károly 

Ereky brought forth the term “biotechnology” 

(in the original German: “biotechnologie”) 

and its defining conceptualization of products 

made “from raw materials with the aid of living

13 

History 

organisms.” 3 Much of the promise of biotechnology did not begin to be realized until about onehalf 

century later, however, when exciting new discoveries and applications in molecular biology 

came on the scene. 

Despite San Diego’s already strong position in biomedical research capabilities, by the early 1970s, 

it was the region’s Northern California counterpart, the San Francisco Bay Area, which took the 

lead in crucial early biotechnology breakthroughs. Most notably, in 1972, Stanford biochemist 

Paul Berg managed effectively to paste together two strands of DNA to form a hybrid molecule. 

By the next year, his Stanford colleagues Stanley Cohen and Annie Chang along with U.C. San 

Francisco’s Herbert Boyer devised a way to produce the world’s first recombinant DNA organism. 

The teams’ process recombined DNA in desired configurations that, when inserted into the DNA of 

reproductive bacteria, brought to life what are essentially molecular manufacturing plants. These 

cornerstone developments in genetic engineering provided the basis for the biotechnology and 

biopharmaceutical industries of today. 

San Diego, however, was not far behind the epoch-making advances occurring in laboratories 

of Stanford and U.C. San Francisco. In fact, San Diego’s start with new biotech discoveries and 

commercialization—in a way very similar to its start in the previous decade with semiconductor 

research and manufacturing—grew as an outcropping of the talent and financial capital that had 

been accumulating in the greater San Francisco area. 

In the case of the formation of San Diego’s first full-fledged biotech company, Hybritech, its two 

co-founders had been lured away in 1977 from research positions at Stanford to do work at U.C. 

San Diego on what was then one of the most promising fields in biomedical research: monoclonal 

antibodies. Monoclonal antibodies—genetically engineered proteins that were touted as “magic 

bullets” because of their potential to attack cancer without destroying healthy cells—were discovered 

in 1975 by a team of scientists working at Cambridge’s Laboratory of Molecular Biology in England. 

The scientists, César Milstein and Georges Köhler, went on to earn a Nobel Prize for their work. 

Yet owing to severe government mismanagement of the laboratory’s intellectual property and 

lack of channels for technology transfer, nothing was done in Britain to develop the invention 

commercially. 4 In contrast, within less than a year of their arrival at UCSD’s cancer center, the 

former Stanford research team of Royston and Birndorf had decided to find a means to set up a 

company based on their own advances in monoclonal antibody production techniques. 

Royston and Birndorf named their company after the field of hybridoma technology, a process of 

fusing an antibody-producing cell with a tumor cell to produce a hybrid that then can be repeatedly 

3 Fári, M. G., R. Bud, P. U. Kralovánszky. 2001. “The History of the Term Biotechnology: Károly Ereky and His Contribution,” presentation at the Fourth Congress of Redbio 

– Encuentro Latinoamericano de Biotecnologia Vegetal, Goiânia, Brazil, June 4-8. 

4 Koepp, Rob. 2002. Clusters of Creativity: Enduring Lessons on Innovation and Entrepreneurship from Silicon Valley and Europe’s Silicon Fen (Chichester: John Wiley & Sons), 

167.


cloned to generate customized, consistently identical “monoclonal” antibodies. They incorporated 

Hybritech on September 14, 1978. By the following month, they were flush with almost twice the 

amount of capital financing than they had originally sought. The money, the founders’ knowledge 

of their field and its experts, and helpful guidance from their venture capital investor, allowed 

Hybritech to recruit top talent to its modest subleased lab and office space located in what was 

then the recently opened La Jolla Cancer Research Foundation (today known as the Burnham 

Institute). 

One of the most surprising aspects of Hybritech’s early and subsequent success was the sheer 

modesty of the company’s original purpose. The company came together without an elaborate 

business plan and no substantial business experience held by the founders. Royston and Birndorf 

entertained the hope that whatever revenue came from their venture might eventually be enough to 

support the very expensive primary research required for developing monoclonal antibodies that 

could cure cancer. But specific plans for Hybritech, which co-founder Birndorf thought of as “a very 

nice little business,” were themselves of minor scale (see below). Everything about the environment 

in which the company operated was fairly humble as well; from Hybritech’s subleased work area to 

its location in a region that at the time boasted an image of sleepy tranquility. In the late 1970s, the 

San Diego metropolitan area’s best known regional assets were still its weather, military bases and 

defense industry manufacturers. 

Hybritech: The View from Employee No. 1 

Howard Birndorf did not come to San Diego with the intention to participate in the founding of a 

biotech company, let alone what would become the seeding firm of the area’s thriving life science 

industry cluster of today. Yet from the opportunity to pursue his scientific interests in a laboratory 

at U.C. San Diego, he found the area afforded him more than just possibilities with lab bench 

science, but with starting up commercial enterprise. Since becoming the first full-time employee at 

San Diego’s first biotech company, Birndorf, who now serves as the CEO of the San Diego biotech 

company Nanogen, has gone on to play an influential role in the establishment of numerous biotech 

firms and industry-related organizations. The following comments come from his reflections on 

what brought him to San Diego; how Hybritech was initially formed, funded, and operated; and the 

significance of the industrial cluster that emerged in its wake. 

Arrival in San Diego 

I grew up in Michigan and I did my graduate work there, at Wayne State University, and then 

worked full time as a research scientist at the Michigan Cancer Foundation. I decided that I wanted 

to leave the winters and move to California. I moved to the Bay Area and got a job as a research 

associate at Stanford University in the division of oncology. During my tenure there I met another 

14

15 

History 

researcher, Ivor Royston, who was an M.D. He and I hit it off and we did sort of skunk work 

experiments, looking at new technology called hybridomas, which was a way to immortalize 

an antibody-producing cell line. He finished up his Stanford fellowship and was offered a 

position at UCSD as an assistant professor. He asked me to move down here to start and 

run his laboratory, so what brought me to San Diego initially was this job opportunity at 

the university. 

Technological Innovation 

While we were doing work in the lab on these hybridomas, both Ivor and I recognized 

the commercial possibilities associated with selling antibodies that were uniform and 

standardized. I would like to say that we had the big vision, but initially it was a much smaller 

vision. The vision was based on how we bought antibodies all the time for our research and 

antibodies back then were made in animals. The animals were injected with immunizers 

and then their blood would be harvested and the antibodies isolated and purified and sold. 

Each batch was different. Each time you did it produced different immunogenicity and 

whatnot and you had to test each batch, etc. Our initial thought was, “Well, wouldn’t it be a 

nice business if we set up a company that would sell research antibodies and each antibody 

would be the same forever?” So anybody doing research with a particular antibody that we 

sold would know that every time they bought it from us it would be exactly the same. They 

wouldn’t have to adjust their experiments for the different properties of the antibody. 

Writing the Business Plan 

We thought, well, this would be a very nice little business. So we went out and bought a book 

called How to Start Your Own Business. Both Ivor and I read the book and we wrote—I think 

it was a six-page business plan; he wrote certain sections and I wrote certain sections. We 

put it together. Ivor was an M.D. oncologist, I was a biochemist molecular biologist working 

in the lab;neither one of us had ever had any business experience. I mean, I always worked 

through high school and college and whatnot but [not in business management]. So we 

wrote this business plan. In retrospect it was quite naïve, but it covered the fundamental 

principals of equity participation and we developed a budget of what it would take to get 

through the first year. The amount we came up with was $178,000. We actually took this little 

business plan around, I took it around to friends of my family who had money; personal 

friends that I knew that could afford something like this, but it was way too technical and 

too complicated for them. They had no clue as to what we were talking about and they were 

quite hesitant to get involved in something they didn’t know anything about. 

Securing Venture Capital 

So we came up with the idea, let’s go talk to the venture guys that started Genentech [America’s 

first biotech company, based in South San Francisco on Herbert Boyer’s developments in 

gene splicing]. Through a personal contact we were able to get a meeting with Brook Byers, 

who was the junior partner at the firm, Kleiner Perkins. Brook came down with his partner 

Tom Perkins. We showed them the lab, we had a small little lab at the university and they


liked the idea. We took them to the airport and we sat in the bar at the airport and we 

finalized the deal. There were two things they did. One is, they said, we know guys like you 

typically underestimate how much money you need, so we’re going to give you more than 

you asked for, we’re going to give you $300,000 instead of the $178,000. The second thing 

they told us is that neither one of us would be the president of our firm because we had no 

business background. With those terms we agreed. Since Ivor had never intended to leave 

the university we decided he was going to be a consultant to the company and would go on 

the board of directors. I elected to go and start the company as a full-time employee. Kleiner 

Perkins brought in a number of consultants and we broadened our concept from that of 

a research antibody company to a diagnostic/therapeutics company. We incorporated in 

September and we closed the financing on October 18, 1978. 

Starting Operations 

I left the University in October of ’78 to become the first employee of Hybritech as vice 

president. My last day at the university was on Friday and on Monday I went and rented 

a lab with an office over at what was then called the La Jolla Cancer Research Foundation. 

I had an empty lab and an office with a desk a chair and a telephone. I started ordering 

supplies and started interviewing people to hire. One of the first was a research scientist, 

a Ph.D., named Gary David, who was very proficient on the antibody side. Then one of 

the things Kleiner Perkins did was find a former McKinsey consultant who had worked at 

Baxter Travenol who had gotten excited about this whole monoclonal antibody thing and 

was in the process of trying to do a start-up that would have been a competitor to Hybritech. 

His name was Ted Green. They managed to convince him to join us rather than do his 

own startup. Ted came down and started as president. Brook was chairman. That was the 

initiation of Hybritech. By the end of that year we had gotten in all of our equipment, we 

had done our first experiments, and we actually had our first proof of principle antibody 

production going. 

Protecting Intellectual Property 

We founded Hybritech on a technology that was not patented. Gary David and Ted Greene 

were kicking around how you might use antibodies in the assay and came up with this idea 

of this sandwich assay which we could patent. We filed the patent sometime mid-year ’79. 

Today it would be highly unusual to start a company based on an unpatented technology 

where others could come in and compete with you. I think that one of the things that really 

did make Hybritech successful that was within a year we had filed a major patent, which 

protected the idea of using two monoclonals in a sandwich assay. It was upheld through 

several intensive court battles. Going through the court system really nobody thought the 

patent would be upheld, but it was. It prevented others from doing what we were doing. 

The Cluster’s Strength: “Falling Off A Log” 

I think that the fact that there’s venture capital, management talent, and entrepreneurial 

attitude here in San Diego, coupled with the fact that you have these major research 

16

institutions within three square miles supports the whole reason that this cluster is here. Additionally, 

the networking here through the programs such as [UCSD’s] Connect and BIOCOM have created 

a situation where starting a company is like falling off a log. The network is so in place for not just 

the money, but the facilities and the legal support, both corporate and patent, the lab supplies, 

you name it. Everything is here, easily available and even if somebody has no clue as to what that 

is, there are so many people here that do know now and can help somebody who wants to do it. 

You’ve got serial entrepreneurs—Hybritech for some reason spawned a dozen or two-dozen serial 

entrepreneurs. The university Connect program bridged academia and industry. 

Source: Howard Birndorf, Interview, April 16, 2004. 

Yet succeeding far beyond what originally had been expected of it, Hybritech came to represent the 

most noticeable first step in economically elevating the region far beyond being merely a pleasant 

location for conducting not-for-profit biomedical research. In the wake of Hybritech, has come 

both a deepening and a broadening of the area’s commercial and R&D assets. Today it is accepted 

in a way unheard of some 25 years ago, that San Diego presents a suitable base for ambitious life 

science companies. The region now has what can be considered an interlocked and multilayered 

cluster that offers a uniquely entrepreneurial and creative dynamic generated by rivalrous and 

related firms and multiple sources of support. 

One indication of Hybritech’s lasting impact on the cluster is the number of companies that can 

be traced back to former Hybritech employees. As of the 25th anniversary of Hybritech’s founding, 

the San Diego Union Tribune counted more than 50 firms (listed on following page) that could be 

considered the progeny of San Diego’s original biotech firm. 

17 

History


1983 

1. Gen-Probe 

1985 

2. IDEC Pharmaceuticals 

3. Clonetics 

4. Pacific Rim Bioscience 

1986 

5. Gensia 

6. Immune Response 

7. Cortex 

1987 

8. Ligand Pharmaceuticals 

9. Amylin Pharmaceuticals 

10. Viagene 

11. Lipotech 

12. Corvas 

13. Cytel 

14. Pyxis 

15. Vical 

1988 

16. Biosite 

1989 

17. Epimmune 

18. Medmetric 

1990 

19. Dura Pharmaceuticals 

20. Genesys 

1991 

21. Nanogen 

1992 

22. Sequana Therapeutics 

23. Somafix 

24. Cypros 

25. Novadex 

26. Applied Genetics 

1993 

27. Gyphen 

28. Cyphergen 

1994 

29. Combichem 

30. Digirad 

31. Chromagen 

32. Novatrix 

1995 

33. Collateral Therapeutics 

34. Maxia Pharmaceuticals 

35. Triangle 

Pharmaceuticals 

36. GenQuest 

18 

37. First Dental Health 

38. Urogen 

39. Nereus Pharmaceuticals 

1996 

40. Metabasis Therapeutics 

41. Women First Healthcare 

1997 

42. Tandem Medical 

1998 

43. CancerVax 

44. Genicon 

2000 

45. GenStar Therapeutics 

46. Favrille 

47. Ambit Biosciences 

2002 

48. Corautus Genetics 

49. Verus 

50. TargeGen 

51. Kemia 

2003 

52. Somaxon 

53. AnalgesX 5 

Expanding Cluster Assets and Capabilities 

As stated at the beginning of this chapter, the birth of the San Diego life science cluster’s seeding 

technology enterprise represented both an end and a beginning: a cumulative payoff for concerted 

efforts to make the region an attractive base for biomedical research, as well as the start of an 

entrepreneurial and highly innovative industrial base that helped take the region beyond its 

economic dependence on tourism and defense spending. 

Within five years of Hybritech’s founding, spinoff companies were being formed (the first, Gen-Probe, 

was co-founded by Hybritech employee number one, Birndorf, himself). Over time, the fortunes 

of the firm would vary. In 1986, Hybritech lost its independence with a $480 million acquisition 

by the pharmaceutical giant, Eli Lilly. The style of Hybritech’s pre-acquisition management team 

5 Crabtree, Penni. 2003. “A Magical Place: Hybritech Launched San Diego’s Biotech Industry,” San Diego Union-Tribune, September 14, 2003: H-1.

did not blend well with Lily’s more staid administrative practices. The remainder of Hybritech’s 

first-generation leadership eventually went on to pursue other endeavors. Though this signaled the 

final decline and later disappearance of Hybritech’s San Diego operations, the turn of events also 

immensely strengthened the cluster as the release of accumulated experience and wealth amassed 

by Hybritech alumni went into seeding a plethora of new enterprises and initiatives. 

Chapters that follow in this report delve into the statistical data and economics behind the life 

science industry that since then has taken root in San Diego. Before exploring the numbers behind 

what makes the cluster what it is today, this chapter concludes by offering a brief glimpse into the 

thoughts of people who have made and are making the cluster so dynamic. 

What follows is but a minute sampling of the experiences and observations related by the many 

cluster leaders who shared their valuable knowledge and insights with Milken Institute researchers. 

Containing brief synopses of their stories organized according to the roles they respectively played 

either in San Diego’s life science research community, the commercial life science industry, or the 

cluster’s support industry, the following pages give a direct feel for how the cluster has evolved 

and matured. A sentiment repeated by many of the leaders spoken to was that in San Diego’s 

knowledge-based cluster, it is people—more than the technology or institutions that give the 

region its infrastructure and wellsprings of capital—who are most crucial to the region’s success. 

The sampling of comments from cluster leaders that follows is intended to help round out an 

appreciation of the relevance of the science and economics of the area by putting contributing 

factors into a more human-based perspective. The background stories and comments also offer a 

sense of how the cluster has evolved in recent years and in what directions it might be headed. 

Research Community Leaders 

Richard Murphy, president of the Salk Institute, has been in San Diego since 2000, having previously 

run McGill University’s Montreal Neurological Institute. The purpose of Murphy’s current 

organization, which relies heavily on funding from the National Institutes of Health (NIH), is to 

conduct basic biological research. This is a goal that has remained unchanged since its founding by 

Jonas Salk. Yet the operation has expanded greatly since then, integrating into the business of the 

area and adopting a particular management style to fit the institute’s evolving nature. 

By its own estimates, the Salk Institute generates $100 million a year for the local economy. Its 

scientists have been involved in the founding of nearly 20 companies and developed 250 active 

patents that are being licensed to biotech or pharmaceutical companies. Although Salk researchers 

are prohibited from engaging in contracted research, they are given the freedom to integrate 

themselves closely with the commercial applications of their work. As Murphy explained: “We allow 

our faculty—and this is in accordance with NIH rules—to work one day a week off-site. (Don’t ask 

me how we know they only spend one day!) I think we’re very supportive of getting the technology 

that we generate, out into the marketplace and into the hands of people who can develop it for 

19 

History


others to use and hopefully to create products. I mean, that’s part of the mandate of NIH. So we’re 

very comfortable with that.” 6 

As the head of an Institute that is defined by its leading-edge thinkers, Murphy (himself a renowned 

scientist) practices a style of management known as “Covert Leadership.” He characterizes the 

benefits of this approach in the following terms: “The one thing you don’t want to do is you don’t 

want to compete with your own scientists for attention or visibility. The way you want to do it is 

you want to stay in the background and you want to make sure the institute is running well but let 

the scientists be stars.” He also contends that keeping staff well-informed is key. “They don’t like 

surprises, and we don’t like surprises. So we have a lot of meetings. Part of it is that we’ve become 

very strategic. This morning I met with three people to say, ‘Here’s what I’m thinking, are you 

comfortable with this?’ Not only were they comfortable with it, but one of them came up with a 

much better modification that makes me look good. So to sit there and have those conversations 

with very bright people is quite important.” 

Edward Holmes, dean of the University of California San Diego’s School of Medicine and vice 

chancellor for Health Sciences, like Murphy, is relatively new to the San Diego cluster. Holmes took 

his current position three-and-a-half years ago after serving as dean of Duke Medical School and, 

prior to that, dean for research at Stanford Medical School. The Medical School is a later addition 

to U.C. San Diego, established several years after the campus’ founding. Surprising, given the size of 

San Diego’s population and the area’s activities in biomedical research, Holmes is in charge of the 

only medical school in the region. 

Yet the dean also sees advantages with the school’s relative smallness, as it “tends to put us in a good 

position to interact with other people.” With a faculty that only numbers 750, it means the school 

ranks around 15th in total National Institute of Health (NIH) dollars received. “But,” he is quick to 

point out, “if you look in research dollars per faculty member, we’re one, two, or three depending 

on the year.” 7 

Other statistics that Holmes cites in pointing to the school’s success include ranking number two 

in the impact of pharmacological research, three in molecular biology, and number one per faculty 

for membership in the National Academy of Sciences. Within the cluster, over 65 companies have 

spun out of the School of Medicine. “Another thing that’s special I think in San Diego,” he observes 

“is it’s a very entrepreneurial community. … UCSD reminds me of what I would have guessed 

Stanford was 20 years ago.” 

All the same, Holmes believes that much more can be done to leverage UCSD’s diverse academic 

resources. “My sense is there’s an opportunity for us that we haven’t capitalized as much on it as 

6 Interview, May 4, 2004. 

7 Interview, April 14, 2004. 

20

we might. We have really extraordinary strengths here in computation with the San Diego Super 

Computing Center and with one of the state’s centers of excellence for information technology, Cal 

IT2. It has brought tremendous expertise to this community in things like bioinformatics, and in 

imaging. I think for the future of both biomedical research but also for [information] technology 

development imaging is very, very important.” Recent progress in combining UCSD’s biological 

and computational resources is a source of encouragement, however. Holmes notes advances being 

made in Functional Magnetic Resonance Imaging (FMRI, a noninvasive way to look at biological 

functions) and Positron Emission Tomography (PET, a means for labeling a compound to trace 

where it goes in the body). 

Life Science Industry Leaders 

After the acquisition of his Connecticut-based gene therapy company in 1993, Henry Nordhoff 

joined Gen-Probe (the first of the Hybritech spin-offs) as its president and CEO in 1994. At the 

time of his appointment, Gen-Probe was operated exclusively as a diagnostics company but has 

since branched out into blood screening. By internal company estimates, it now occupies about 90 

percent of the market for screening the U.S. blood supply (donated blood that is checked for viruses 

such as HIV, hepatitis C, and West Nile). Last year the company earned over $200 million in sales. It 

employs about 850 people locally and invests heavily in research, with nearly one-third of revenues 

going toward R&D. 

Despite the Gen-Probe’s strong research orientation, Nordhoff himself does not have formal 

scientific training, but rather learned the craft of the life science industry through previous work 

experience at the leading pharmaceutical company, Pfizer. Reflecting on his background and how 

it relates to the cluster overall, the CEO remarks: “I’ve tried to stay out of the science. Let the 

experts do the science. And I’ll just step back and just use some rationality and judgment and 

make sure everything hangs together. … I think there are others like me, you know with business 

type backgrounds; others are scientific. It would be interesting to see if there is a correlation of 

success between leaders with those different backgrounds. It probably doesn’t exist, it probably just 

depends on the personality, on the managerial style …” 8 

Despite his lack of formal scientific training, Nordhoff takes an approach to recruiting and 

motivating Gen-Probe’s highly skilled workforce in a style reminiscent of the leaders of highly 

innovative research organizations. As he states: “We try to get the best people we can. We try to 

empower them as much as we can. … We’re big on communication, and we are big on openness, 

you know, clarity, transparency, telling the people what we are doing, our strategic plans, and all 

that. We single out the key managers, a group of about 65 to 80 managers who are below the VP 

executive level, speak to them, and try to get dialogue from them, tell them what we are doing, ask 

8 Interview, April 2004. 

21 

History


them for comments. We do that every couple of months.” The key to his company’s—as much 

as the cluster’s—success, Nordhoff asserts, is “people. … The right blend of people, support and 

opportunity.” 

Salmedix’s David Kabakoff first came to the area in 1974 as a research fellow at UCSD, where he 

conducted his post-doctorate work under Nathan Kaplan, a biochemist renowned for his advances 

in enzymology and chemotherapy. Kabakoff left the area after completing his post-doctorate but 

was brought back when recruited to join Hybritech in 1983. By the time he left the firm six years 

later he was serving as senior vice president of research and development-diagnostics. From there 

he moved to Corvas International, a biopharmaceutical company, and served as its CEO before 

later moving to Dura Pharmaceuticals, a specialty pharmaceutical company, that was eventually 

acquired by Elan Corporation. Cofounding Salmedix, an oncology drug development company, in 

2001, Kabakoff now serves as its president, CEO and chairman. 

A three-year-old, 36-person company, Salmedix maintains close ties to UCSD. In addition to several 

licensing agreements, the company’s core science originated at UCSD and one of its founding 

scientists, Dennis Carson, directs the university’s Moores Cancer Center. Relating his company to 

the cluster and its evolution, Kabakoff observes: “The company itself is an active member of the 

local trade association [BIOCOM], the UCSD Connect Program, and if you look at the employee 

base, I think pretty much every employee here has worked for at least one or more previous San 

Diego employers, with a few exceptions. We’re located in town, so many of our employees have 

either worked at the university or, even more of them, at other local companies ... as the community 

has grown up since the early 1980s, people who have been in one company have moved to another 

company and then moved to another company. I would say within Salmedix, you have a fairly 

typical set of connections.” 9 

Mike Borer, the president and CEO of the specialty pharmaceutical company Xcel Pharmaceutical 

first came to San Diego in 1977 as an undergraduate at San Diego State University. Majoring in 

finance, he spent 12 years in public accounting, alternating between Denver, Colorado, and San 

Diego. He ultimately entered the pharmaceutical business by joining Dura Pharmaceuticals in 

1994. After Dura was sold to Elan Pharmaceuticals in 2000, Borer and some of his former Dura 

colleagues decided to form Xcel. 

Having graduated from a local university and moved on from one San Diego company to another, 

Borer fits something of the typical profile for an executive with long-experience in the cluster. At 

the same time, with Xcel Pharmaceutics, he is developing a business model that is fairly unique. As 

he explains: “We are not what I would consider a biotech or true biopharmaceutical company. We 

have a significant commercial operation and are pursuing late-stage product development, but we 

have no part in the research, basic research, or early research or even early development within our 

9 Interview, April 16 and 21, 2004. 

22

usiness model. I think we’re the minority within the pharmaceutical and life sciences side of [this 

cluster] in that we started as a commercial organization. … Most of the companies in San Diego 

really have come traditionally through the research and also development side of things, only in 

some select cases through a focus on commercialization.” 10 

The presence of a company like Xcel testifies to the recent broadening of the cluster in terms 

of operational models. Xcel represents the emergence of commercially focused pharmaceutical 

production, something that had largely passed the cluster by, during its early phase of growth. 

Another, more frequently commented on, recent development is the growing presence of the 

operations of large pharmaceutical corporations, “Big Pharma,” which have been establishing an 

increasingly large and numerous research footprint in San Diego. 

One of the best examples of this comes from the purchase by Warner-Lambert of San Diego’s 

Agouron Pharmaceuticals, which had the distinction of being the first biopharmaceutical company 

in San Diego to market a therapeutic drug from its own research. Warner-Lambert bought Agouron 

in 1999 for $2.1 billion. Within a year-and-a-half, Warner-Lambert was in turn purchased for $90 

billion by Pfizer, which inherited its San Diego facilities. As Catherine “Kitty” Mackey, the head 

of Pfizer’s La Jolla Laboratories, states: “Pfizer had wanted to have an R&D location in California 

for many years; we’ve been looking for an opportunity to be in California. So this was very much 

a welcome part of the Warner-Lambert acquisition, the Agouron acquisition. And so when Pfizer 

became the owner, we invested quite a bit in terms of expanding the facility here and really put 

down roots and made a commitment to stay.” 11 

Pfizer La Jolla is now the fourth largest R&D site for the global drug company, currently contributing 

about two dozen potential medicines to the company’s development pipeline. Although complaints 

are sometimes heard that the presence of Big Pharma in the cluster necessitates the “selling out” of 

once promising locally based independent firms, it can also be said that the investments of capital 

and human resources by the pharmaceutical giants is adding significantly to the stature and capacity 

of San Diego’s life science industry base. As Mackey points out: “Within the community here, we 

have a number of different relationships. I just got a list the other day of the various collaborations 

that Pfizer has with biotechs. … In terms of universities, I wish I could keep track of it because 

it’s funny, with UCSD there’s so many different touch points. I wish there was a database—UCSD 

wishes there was too—to keep track of this, but you know the scientists just call each other up and 

they’re doing all sorts of things.” Mackey also remarks on the value of working closely with Ed 

Holmes and UCSD School of Medicine, “exploring at this point a number of different ways that we 

can collaborate.” 



23 

History


Support Industry Leaders 

Since arriving in San Diego in 1977 as an assistant professor of medicine at UCSD, Ivor Royston has 

made tremendous contributions to the San Diego cluster as a researcher and business innovator. 

He began his latest enterprise, Forward Ventures—what is today the major life science-dedicated 

venture capital firm in the San Diego region—in 1990. From starting what he considered a “hobby 

fund” with himself as general partner and limited partners made up of family and friends, Royston’s 

firm has since come to manage an institutionally invested series of venture capital funds, the latest 

being his fifth-generation Forward Ventures V. 12 

“We are part of the fuel of this biotech industry here,” Royston explains. “Whereas back in the 

1970s, there was no venture capital firm here, we had to access venture capital from the Bay Area. 

But that’s now changed. There are a handful of firms in San Diego that do both IT and biotech. 

But we’re a specialized biotech investment firm. And what I do now is to use my experience from 

a quarter of a century of being involved with the biotech industry to help other scientists develop 

their ideas and transfer of technology out of institutes and universities into companies.” 

While acknowledging the importance of the cluster’s capacity to generate cutting-edge science, 

Royston stresses how having capable people, more than brilliant technology, has built up the 

cluster. “My experience, which goes all the way back to Hybritech, has brought me in contact with 

many, many different people. Probably the most important thing I’ve done is tap individuals to 

take on managerial responsibilities in companies that I’m working on. So, a good example of that 

would be recruiting David Hale, who was the CEO of Hybritech, to become the CEO of one of 

my new companies, Cancervax, which just went public. I know from my experience going back to 

Hybritech that, number one, management is far more important—significantly more important— 

than technology. Many times I’ve seen technology fail and management teams win by coming up 

with other technologies to work on. But it doesn’t work so much the other way: I’ve seen companies 

get ruined by having the wrong management teams.” 

When asked to provide one word that describes the San Diego life sciences cluster, people interviewed 

for this study tended to respond with words that relate to a sense of creative dynamism and shared 

purpose: for example, words such as “entrepreneurial,” “collegial,” “innovative,” and “interactive.” 

Among various programs, initiatives, and organizations established to reinforce and build upon the 

core dynamics of the cluster, BIOCOM represents the cluster’s leading networking and advocacy 

organization. With more than 450 member companies, BIOCOM claims to be the largest regional 

life sciences association in the world. As Joe Panetta, president and CEO of BIOCOM, asserted, his 

organization plays a variety of strategic roles in support of the cluster: 


24

I think that first and foremost BIOCOM is an organization that brings together the entire industry and 

the service sector upon which the industry depends to be able to grow and to accomplish its goals. And 

when I say BIOCOM brings the industry together, we do this in more than one way. The obvious way is 

we hold different events that allow people to come together and network with each other. That’s fine if you 

simply want to allow random motion to provide the chance for people to interact with each other. But we’re 

also very focused on areas like providing advocacy and information to the public, the legislators, and the 

media and others who need to be informed about what the industry is all about, what the industry is out 

to accomplish, and what the challenges are. Beyond that we know that we have to build this industry in San 

Diego through our relationship with the service providers that are here and the ones that we can hopefully 

attract to San Diego. BIOCOM focuses on bringing new venture capital investment to San Diego, as well as 

attracting pharmaceutical companies, partnerships, and investment banking. We also focus on creating the 

opportunities for future jobs by working with the universities and the colleges to insure that curriculum and 

training programs are being created for the biotech workforce of the future. 13 

Indicative of the cluster’s success in attracting service providers that support the cluster is the San 

Diego presence of San Francisco-based Cooley Godward, one of America’s premier technology 

law firms. After getting involved with a locally based venture capital fund established by Hybritech 

alumnus Howard “Ted” Greene, the firm decided that activities in San Diego justified a direct 

presence and so opened an office in 1992. 

Joining the firm as a founding partner of its San Diego office was Wain Fishburn, a local attorney 

who has built up substantial experience with the legal and financing needs of the biotech companies 

that had been springing up since the 1980s. Speaking of the benefits his office has been able to bring 

to the cluster, Fishburn remarks that one of the main advantages is “just very deep expertise and 

experience with, for example, public offerings and venture financing. Also, something that is very 

unique in the representation of biotech companies, strategic alliance capability. Because one of the 

things about a biotech company is that it is very much a function of a contract relationship. So 

you start with the relationship between either Scripps or UCSD or Salk and you bring technology 

from those research institutes into the company so there’s agreement to come there. Then there’s 

the agreement with the money coming in, the venture capital financing agreements. Then, as things 

progress, you’ve got the agreements for the strategic alliances with the pharmaceutical companies. 

And those are really the ingredients that go into ultimately helping form a successful company.” 14 

Fishburn sees one of the greatest strengths of the cluster to be its closeness, both from a geographic 

standpoint and in terms of synergism. “All of us that are in this industry are within a 10-mile radius 

of our office in the Golden Triangle,” he observed. (See map, previous.) “At the time we opened 

in 1992, we were the first law firm of any substance to open an office outside of downtown.” Yet 

the pluses to being close to the center of action around the Torrey Pines Mesa have been readily 

apparent. Compared to the situation in the Bay Area, where, Fishburn notes, the driving distances 

between the East Bay, San Francisco, and lower down the Peninsula can be substantial, in San Diego 

it is “possible for you to call a meeting and have everybody who mattered be in a room within 20 



25 

History

minutes.” He is also hopeful that the intense dynamic that has developed in the central territory of 

the cluster is managing to spread. “I think what’s interesting in terms of the dynamic of San Diego 

is we’ve now emerged even further so that the cluster, if you will, has gone from the Golden Triangle 

and the Torrey Pines Mesa and the Mira Mesa Corridor, and is now reaching up to Carlsbad and 

Oceanside.” 

Teresa Young, partner at Deloitte in San Diego, has been active in the region’s life sciences cluster 

longer than anyone interviewed for this study. She arrived in 1969 as an undergraduate at UCSD 

studying chemistry. It was a combination of positive factors that still typify the cluster today that 

originally brought her to the area: outstanding human capital (UCSD professors Linus Pauling, 

a Nobel Laureate in chemistry, and biologist Paul Saltman, one of the university’s visionary early 

leaders, were especially influential), the life science community’s relative smallness and collegiality, 

and the area’s natural beauty. Despite later growth of the cluster and various issues that have arisen 

as a result, she believes that the cluster’s ability to attract talent endures. “I see very few people 

wanting to leave San Diego,” she observed. “I think I’m a good example of that, being here for 35 

years. People who came in the ’60s, the ’70s, the ’80s, the ’90s—they don’t want to leave.” 15 

After obtaining her bachelor’s degree, Young worked in the laboratories of the Salk Institute for 

several years. Rather than continue in research science and study for a PhD, she opted to go for 

a master’s in accounting at San Diego State University. From there she joined Deloitte, eventually 

rising to her current position as partner and co-leader of its Southwest Pacific regional life sciences 

practice. She noted from her own professional experience within the firm that one of San Diego’s 

distinguishing features is a heavy concentration of life science research organizations. “When I talk 

with colleagues in the country who are serving other biotechs, I know that they may be working 

with one or two research institutes, whereas I may be working with five or six of them.” 

Reflecting on the lessons that the San Diego cluster might offer other regions, she acknowledged 

that although “San Diego does have a very unique set of circumstances,” she nevertheless feels that 

long-term dedication and commitment to the cluster—features that are universally applicable— 

also have been crucial. She emphasized that the cluster “really was a long time in the making.” 

Young also is excited about the particular juncture in its evolution at which the cluster currently 

finds itself, a period in which all the commitment and dedication that has been given to the region’s 

development is starting to pay off in greater and greater ways. “I work with a number of companies 

that have been running R&D for as long as 10 or 15 years,” she observed. “They really are now 

on the cusp of having commercial products; a few have even just launched. So I’m actually very 

optimistic about things because now these companies are going to start generating revenue and 

that is going to attract additional capital as investors see what these companies are doing. In 2005, 

2006, and 2007, we’re going to see a lot of success stories.” 

15 May 25, 2004. 


26

The Biotechnology Innovation Pipeline Index 

The term “biotechnology innovation pipeline” refers to the support infrastructure and outcome 

measures that reflect the ability of an area to capitalize on its strengths in biotech knowledge and 

creativity. A rich innovation pipeline plays a pivotal role in a region’s biotech and life science 

industry gestation, commercialization, competitiveness and ability to sustain long-term growth. It 

also constitutes an important socio-economic asset to regional, state and national economies. This 

section of the report analyzes the innovation pipelines of key metropolitan areas with a view toward 

determining their capacities to create and commercialize biotech and life science innovations. 

Much of the following analysis is based upon comparing and contrasting San Diego to other top 

biotech clusters that lead in concentrations of biotechnology, life science and related economic assets. 

In the innovation pipeline analysis section, we offer a brief description of each indicator, explain 

why these indicators are important, and give a summary of San Diego’s position relative to other 

top biotech clusters. Even with the focus on top-performing metropolitan areas, all metropolitan 

areas can benefit from the information generated by the index. 

We begin with the biotech research and development (R&D) assets that can be commercialized 

for future metro and state biotech growth. A metro’s biotech risk capital and entrepreneurship 

infrastructure determines the success rate of converting biotech basic and advanced research into 

commercially viable biotech services and life science products. The most important intangible asset 

to a biotech economy is its biotech and life science human capital. The intensity of the biotechnology 

and life science workforce demonstrates the depth biotech talent on the ground. By measuring 

these biotech and life science components we are able to assess the effectiveness of policymakers 

and other stakeholders in transforming regional biotech assets into regional prosperity. 

27 

The Biotechnology Innovation Pipeline Index


Biotech R&D Assets 

Background and Relevance 

Research and development (R&D) assets are widely recognized to be the pipeline of technological 

innovation, and levels of R&D expenditures are accepted as reliable indicators of innovation 

capacities of places. 16 A region with a better R&D infrastructure has a comparative advantage 

when it comes to building new industrial clusters, and attracting tech-based firms and an educated 

workforce. 

Internationally, U.S. R&D efforts are remarkable by comparison. In 2000, U.S. R&D expenditures 

surpassed the total of other G-7 countries, including Japan, Germany, France, United Kingdom, 

Canada and Italy. Despite the recent slowdown in industry-financed R&D, U.S. total R&D maintained 

positive growth rates in 2000 and 2001 with steadfast gains in federal R&D expenditures. 17 

Information technology sectors (e.g. telecommunications, computers and electronic products), 

which witnessed impressive increases in the late 1990s, experienced declines in R&D investment 

in 2001 and 2002. Meanwhile, industrial R&D expenditures in the biotech industry increased 

throughout those periods. Currently, the U.S. biotechnology industry is expanding rapidly, similar 

to the pace exhibited by the computer technology and telecommunication industries during the last 

two decades. As R&D inputs have played an important role in creating and maintaining computer 

and telecommunication clusters, so are they now taking a critical part in building up biotech centers 

in the U.S. 

R&D assets are vital for biotech more so than any other industrial sector, primarily because biotech, 

especially in its early stages, is intensely dependent on basic research. This type of research takes place 

at strong academic research institutions and medical research facilities by biotechnological scientists 

with the substantial support of public funding. Biotech research universities and institutions are 

the melting pot that combines biological scientists, medical engineers, research funding and new 

ideas into biological inventions and products. 

The biotech industry’s relationship with R&D assets does not diminish as it goes into applied 

research and commercialization stages. The biotech or biopharmaceutical approval process is both 

lengthy and costly. It takes, on average, 12-15 years to go from initial—or preclinical—development 

to commercial approval, 18 which requires substantial applied research feedback from biotech 

16 DeVol, Ross C., Rob Koepp, John Ki and Frank Fogelbach. 2004. California’s Position in Technology and Science –A Comparative Benchmarking Assessment, Santa Monica: 

Milken Institute. 

17 Shackelford, B. 2002. “Slowing R&D Growth Expected in 2002,” InfoBrief, Arlington, VA: National Science Foundation (NSF-03-307). 

18 DiLorenzo, F. 2002. Industry Survey: Biotechnology, New York, NY: Standard & Poor’s. 

28

esearch institutions, biotech scientists and engineers. Thereafter, biotech commercialization also 

tends to locate where there are strong R&D support structures such as R&D contracts and funding 

arrangements. 19 

In this study, R&D assets consist of nine components that are mostly relevant to the growth of 

biotech research and the emergence of entrepreneurial vibrancy. The components included are 

academic R&D to the biotech industry, National Science Foundation (NSF) funding to biotech, 

the Small Business Technology Transfer (STTR) program, the Small Business Innovation Research 

(SBIR) program, competitive NSF funding rate for biotech-related proposals and National Institutes 

of Health (NIH) funding to metros, research institutes and research universities. 

Academic R&D demonstrates the importance of university research as well as the capacity of each 

metro’s university system. Academic R&D focuses on basic rather than applied research, thus it is 

particularly significant to the biotech industry, which is still in its early commercialization stage. In 

2001, academic R&D expenditures on biotech sectors totaled $16 billion in the U.S. 

The National Science Foundation (NSF) is a key public investor in the technological progress and 

intellectually creative people. NSF funding to biotech sectors accounts for about 11 percent of total 

NSF support to academic and research institutions, or roughly $547.1 million for year 2003. As a 

result, NSF financial assistance of world-class biotech scientists and biotech research institutions has 

led to breakthroughs in the field of biotechnology. While the average funding rate for competitive 

NSF funding proposals in 2003 was 27 percent; it was 26 percent in biotech. Without NSF project 

funding, the range and quality of biotech research in colleges, universities and research institutes 

would be very limited. 

The Small Business Technology Transfer (STTR) program is aimed at extending the participation of 

small businesses in federal R&D and encouraging private sector commercialization of technology 

with federal assistance. The STTR award program plays a pivotal role in small biotech firms and 

research organizations while helping to strengthen their scientific and innovative capacities. 

The Small Business Innovation Research (SBIR) award is a federal program designed to support 

private sector R&D through a set-aside program allocated for cutting-edge technology at small 

businesses that has not yet become commercially applicable. SBIR awards are granted based on need 

and new ideas that have commercialization potential. SBIR awards raise the level of entrepreneurial 

creativity among small biotech firms and provide them with opportunities to commercialize new 

knowledge not yet viable. 

Although there are several governmental funding sources for biotech research, the National 

19 Cortright, J. and H. Mayer. 2002. Signs of Life: The Growth of Biotechnology Centers in the U.S., Washington, DC: The Brookings Institution. 

29 


Institutes of Health (NIH) is the largest single funding agency releasing $17.0 billion to a variety 

of biotech and medical research centers in 2002. Much of biotech research has been conducted at 

biotech research institutions and medical schools with the substantial assistance from the NIH. 20 

According to Dean Holmes, “NIH is probably more relevant to biotech than NSF itself, because 

NIH is health, while NSF is all of basic science, some of which is health, but a lot of it is physics, 

mathematics and engineering,” adding “NIH is the major fuel for biotechnology in the country.” 

NIH plays a pivotal role in igniting biotech research initiatives and elevating biotech discoveries by 

supporting regions with sufficient research facilities to attract talent and additional funds. 

Metro Findings 

San Diego has particular strength in biotechnology research and development assets. Many San 

Diego-based biotech and life science firms are devoted to R&D, either basic or applied, and they 

are seeking more R&D funds and support. Borer emphasized the role of biotech R&D companies 

in driving the San Diego economy, saying, “Most (biotech) companies in San Diego really have 

come traditionally through R&D and in some select cases commercialization. The number of R&D 

biotech, bio-development companies is vastly greater in San Diego than the commercial.” And 

this trend seems to be continuing as David Kabakoff, CEO of Salmedix, put it, “In our community 

you’re going to see more companies having started in R&D.” 

At $102 allocated per resident, San Diego ranks 8th among the 12 metropolitan areas in terms of 

academic R&D dollars in biotech fields per capita. San Diego is running slightly behind 7th-place 

Philadelphia’s ($103) and 6th-place Boston’s ($107) positions. San Diego’s lagging position in this 

component represents its relatively smaller number of research universities and higher dependence 

upon the University of California at San Diego (UCSD). UCSD garnered almost 93 percent of 

San Diego’s total academic R&D in the biotech field for year 2001. Raleigh-Durham-Chapel Hill 

with its strong university system awarded more than $480 per capita placing it at the top of this 

component, followed by San Francisco ($295). 

NSF biotech funding to San Diego amounted to $10.2 per $100,000 Gross Metro Product (GMP) in 

2003. In this component, San Diego ranked 2nd, behind top-ranked Raleigh-Durham-Chapel Hill, 

which earned an indexed $38.3. Oakland’s indexed $10.0 and Washington, D.C.’s $9.6, rank them 

in 3rd and 4th-place, respectively. Contrary to its weaker academic R&D position, strong NSF 

funding to biotech is a definite indication of San Diego’s comparative strength in biotech research 

beyond academic boundaries. Although San Diego possesses relatively weak academic R&D assets, 

it hosts a variety of biotech businesses and biotech institutes that undertake basic and applied 

research, and focus on commercialization of the outcomes. 

20 Ibid. 


30

In the case of STTR awards to biotech firms per 100,000 businesses, San Diego ranked 2nd among 

the 12 metropolitan areas studied. Statistically, San Diego had 21.4 STTR awards to biotech firms 

per 100,000 businesses in 2000. Despite its 2nd-place ranking, the metro finds itself far behind topranking 

Boston that had nine times more awards in absolute numbers (160 to 17) and was four 

times larger in relative terms (89.6 to 21.4) than San Diego. San Jose and Seattle ranked 3rd and 4th, 

respectively, with 14.1 and 9.7 STTR awards per 100,000 businesses. 

As in the case of STTR awards to biotech per 100,000 businesses, San Diego ranked 2nd again 

in STTR award dollars to biotech firms per $1m GMP. San Diego’s indexed amount is $25.9 per 

capita. Boston, as the top-ranking metro in the component, recorded $144.3 per capita, more than 

five times greater than San Diego. Los Angeles-Long Beach and Washington, D.C. ranked 3rd and 

4th, which received $18.2 and $15.6 per capita in STTR awards granted per $1m GMP, respectively. 

San Diego’s relative strength in STTR awards to biotech firms illustrates that its small-sized biotech 

businesses are recognized for their scientific and innovative efforts. 

San Diego ranked 2nd according to the number of SBIR awards for biotech granted per one million 

people in the population for the year 2000. San Diego’s indexed statistic was 60, followed by San 

Jose and Seattle, at 47 and 41 per million people, respectively. Biotech SBIR awards were granted 

in the Boston area at a rate of 263 biotech SBIR awards per one million people. In absolute terms, 

the number of Boston’s biotech SBIR awards (139) is more than the total sum of the other 11 

comparison metros (94). 

San Diego’s competitive NSF funding rate in the biotech field is 39.3 percent. This places the metro 

3rd among the 12 comparison metros. The top two metros are Washington, D.C. and Austin-San 

Marcos, in which the percentage is 42.7 and 41.0 percent, respectively. NSF funding to biotech 

has vital strategic value in its strong support of basic biotech research projects that the private 

sector tends to eschew. Higher competitive NSF funding rates implicitly recognize that the regional 

innovative potential for upcoming biotech development and commercialization is high. 

For the year measured, FY 2002, San Diego received $937 million in NIH R&D money, the 

second highest sum among the 12 selected metros. Averaged out per capita, San Diego received 

approximately $323 per capita in NIH money for research and development activities. San Diego’s 

ranking remained 2nd, followed by Boston ($288) and Seattle ($260). Raleigh-Durham-Chapel 

Hill took the top-ranked position for this component with $499 per capita in NIH funding. 

NIH funding to San Diego’s biotech research institutes confirms its dominant position in this critical 

area. San Diego research institutes were granted $316 millions in NIH funding in 2002, which is 

the highest amount among the 12 selected metros and 17 percent of total NIH funding to research 

institutes. San Diego’s major NIH-funded biotech research institutes include the Scripps Research 

Institute, the Salk Institute for Biological Studies, and the Burnham Institute. Scripps Research 

31 



Institute received $191 million for year 2002, the highest NIH-funded biotech institute nationally. 

Averaged out per 100 people, San Diego still ranks 1st among the 12 selected metros. San Diego 

had 12 research institutes awarded NIH institute funding for 745 NIH projects in 2002. San Diego 

plays a significant role in attracting NIH funding to California. In California, San Diego represents 

26 percent of NIH awarded institutes, 61 percent of NIH awarded projects, and 59 percent of NIH 

funding money to institutes. 

Adjusted per $10,000 of GMP, San Diego is granted $17.0 of NIH funding to research universities. 

This amount positions San Diego 5th among the selected 12 metros. Other top ranked metros are 

university-oriented Raleigh-Durham-Chapel Hill ($79.3), Philadelphia ($25.5), and San Francisco 

($22.9). 

San Diego’s composite score for biotech research and development inputs is 79.7 (out of a perfect 

score of 100) before rebasing the top score to 100 for comparison purposes, which positions the 

metro as top ranked among the 12 selected metros. As Pfizer Global R&D’s Catherine Mackey 

implied, San Diego might be the best location for biotech R&D in California, noting, “Pfizer had 

wanted to have an R&D location in California for many years, looking for an opportunity to 

be in California. (Finally) we invested here (San Diego) and really put down roots and made a 

commitment.” 

San Diego’s relative advantages in the composite score come from its attractiveness to public R&D 

funding such as NSF for basic biotech research and NIH for advanced research. San Diego also 

benefits from commercial opportunities for biotech research. San Diego’s superior rankings in the 

relative biotech STTR and biotech SBIR statistics confirm regional effectiveness in commercializing 

R&D efforts and new ventures. Boston ranks 2nd with a composite score 78.9 (or a rebased score 

of 99) and Seattle, 3rd, followed by Raleigh-Durham-Chapel Hill, 4th among the 12 competing 

metros. 

An important biotechnology R&D measure that is absent from our analysis is industry-performed 

research and development. Industry figures are not publicly available due to confidentiality concerns. 

Biotech clusters with key anchor firms are likely to have higher levels of industry-performed R&D. If 

industry R&D funding data was available, Boston and San Francisco would likely be well positioned. 

It is possible that Boston might edge past San Diego for 1st in overall biotechnology research and 

development, and San Francisco’s position would undoubtedly improve, too. Nevertheless, most San 

Diego-based biotech firms invest considerable R&D money. Henry Nordhoff, CEO of Gen-Probe, 

acknowledged, “In the year 2000 we spent 48 percent of revenues on R&D and even last year (2003) 

we spent 32 percent of revenues on R&D. We invested heavily in research and development.” 

32

San Diego 

10 

9 

8 

7 

6 

5 

4 

3 

2 

1 

Level 

90 

80 

70 

60 

50 

40 

Biotech Research & Development Assets 

Twelve Selected Metropolitan Areas, 2004 

30 

Boston Raleigh D.C. L.A. Oakland Austin 

San Diego Seattle Philadelphia San Jose San Fran. Orange 

Source: Milken Institute 

Biotech Research & Development Assets 

San Diego's Score 

NIH Funding to Research Universities (US$ Per $10,000 GMP) 

NIH Funding to Institutes (US$ Per 100 Pop.) 

NIH Funding to Metro Cities (US$ Per Capita) 

Competitive NSF Funding Rate in Biotech Fields (Percent) 

SBIR Awards to Biotech Firms (Per Million Pop.) 

STTR Awards to Biotech Firms (Per $Million GMP) 

Number of STTR Awards to Biotech Firms (Per 100,000 Businesses) 

NSF Funding to Biotech (US$ Per $100,000 GMP) 

Academic R&D to Biotech (US$ Per Capita) 

Biotech R&D Assets Component 

20 30 40 50 60 70 80 90 100 

San Diego's Statistics 

1 2 

3 4 5 6 7 8 9 10 

79.7 1 102.3 2 10.2 3 21.4 4 25.9 5 60.0 6 39.3% 7 322.5 8 10,878 9 17.0 10 

U.S. Series2 Avg. 62.5 79.7 56.5 74.9 5.8 63.7 68.2 N/A 65.5 N/A 73.5 N/A 26.0% 97.8 60.0 93 634 100 10.2 64.7 

33 


Methodology 

In data collection and analysis, we focused on 12 metropolitan areas that showed the greatest 

specialization and concentration of biotech industry in the U.S. To compare the relative strength of 

each metro’s biotech research and development asset, we scaled out each component by population, 

employment or gross metro product (GMP), such as, the San Diego metro’s academic R&D dollar 

(to biotech) per capita. After such adjustments, we compared the relative scores of the 12 metros 

and ranked them. 

Many previous studies based their findings upon absolute measures of indicators. 21 By converting 

them to relative measures, a more accurate representation of the richness of the clusters is revealed. 

Additionally, we utilized the smaller geographic area represented by metropolitan statistical areas 

(MSAs), which appropriately reflects the density of a biotechnology cluster, although a compelling 

case can be made that the larger consolidated metropolitan statistical area (CMSA) is appropriate 

when it can be demonstrated that there is a high level of interaction such that they act has a regional 

network of clusters. Our organizing principle for this study was to measure which biotech clusters 

were the densest and most tightly compacted, but at the same time have sufficient scale. 

The National Science Foundation (NSF), Small Business Administration (SBA), and National 

Institutes of Health (NIH) were three major sources of data used to compile and analyze the nine 

components of this section. Academic R&D to biotech, NSF funds to biotech, and competitive 

NSF fund rates to biotech were collected from NSF data banks. STTR and SBIR statistics were 

obtained from the office of advocacy, a department of the Small Business Administration. National 

Institutes of Health’s database was employed to obtain NIH funds to metros, institutes, and research 

universities in the 12 selected metropolitan areas. 

21 Ibid. 


34

Risk Capital & Entrepreneurial Infrastructure 


Entrepreneurial capacity and performance are major players in the new economic milieu in which 

creativity and innovative dynamics determine the competitive advantage of a firm and an industry. 

Risk capital and entrepreneurs are pivotal because new firms or spin-offs are the best breeding 

grounds for new ideas. 

The Index’s Biotech Risk Capital and Entrepreneurial Infrastructure component consists of 10 

sub-components, each portraying essential aspects of the business climate for biotech start-ups 

and biotech entrepreneurial activities. The Risk Capital and Infrastructure component aims to 

evaluate the selected metros’ entrepreneurial biotech culture by the numerical analysis of risk 

capital measures like bio venture capital investment, and patents issued and cited in the field of 

biotech. Other measures that gauge the effects of biotech entrepreneurship are biotech business 

starts and Fast 500 companies in the life science field. 

Venture capital targets young and fast-growing businesses that demonstrate potential for high 

return on investment. As an important source of equity funding for start-ups, venture capital has 

a history of funding new technologies and innovations. These are the most risky investments, but 

can offer high returns. Venture capitalists supported fledgling semiconductor firms and personal 

computers, followed by the disk drive industry, biotechnology in the early 1990s, software in the 

mid-1990s and dot-coms at the end of the decade. 22 Leading biotech firms such as Genentech and 

Amgen are among those who benefited from early-stage venture capital investment. 

Venture capital investment in biotech research is evaluated on four features: biotech venture capital 

investment growth (2000-2003), number of companies receiving venture capital per thousand 

biotech firms, growth of biotech companies receiving venture capital and biotech venture capital 

dollars per $100,000 of GMP. All these venture-capital components are important indicators for 

measuring current venture activities in the metropolitan areas. Although venture capital funding 

has been in a slump since the technology-stock-driven market bubble in 2000, venture capital still 

remains a pivotal force for investing in new businesses, especially those that operate knowledgeintensive 

industries like biotech and other life sciences. 

22 DeVol, Ross C., Rob Koepp, John Ki, Frank Fogelbach. 2004. California’s Position in Technology and Science–A Comparative Benchmarking Assessment, Santa Monica: Milken 

Institute. 

35 

Risk Capital & Entrepreneurial Infrastructure


A patent is the grant of a property right to its inventor by the Patent and Trademark Office (PTO), 

a division of the U.S. Department of Commerce. Patents granted does not ensure the right to make, 

use, offer for sale, sell or import, but the right to exclude others from making, using, offering for 

sale, selling or importing the invention. That is, the major purpose of patent issuance is to protect 

and preserve various forms of individual and company property, both tangible and intangible. The 

term of a new patent is 20 years from the date on which the application for the patent was filed in 

the PTO. Though patent issuance does not directly represent regional creativity, it is well linked to 

a region’s knowledge-intensive economic capacity. 

A patent citation is the reference to a patent from subsequent patents, which indicates the 

technological impact and knowledge spillover of a patent. As Adam Jaffe, professor of economics 

at Brandeis University and his colleagues put it, a citation of patent X by patent Y means that X 

represents a piece of former knowledge upon which Y builds. 23 High citation counts are often 

linked with significant inventions, ones that are vital to future inventions. Companies or individuals 

with highly cited patents may be more advanced than their competitors, with more valuable patent 

portfolios. 

For the purposes of this study, patents and patent citations are limited to the biotech fields. They 

are then scaled out by population size or biotech employment size of each metropolitan area. When 

scaled out for a metro’s population or biotech employment, the number of patents issued (or cited) 

serves as a measure for how innovative and commercially viable the people (or biotech workers) of 

a metro are. 

Business starts data is a clear indicator of a metro’s entrepreneurial dynamics. A metro’s capacity 

to create jobs reflects its financial availability for new start-ups, business-friendly cultures and 

abundant entrepreneur pools. A metro’s successful performance in new firm formation also 

connotes the regional R&D readiness for commercialization. In 2002, averaged out on the basis of 

1,000 businesses, the number of business starts is around 21 in the U.S. 

The Deloitte Technology Fast 500 list shows North America’s fastest growing technology firms 

in terms of revenue growth for the last five years (1998–2002). The Technology 500 list identifies 

innovative, rapidly expanding firms that promise long-term technological and economic impact. 

Additionally, it indicates the depth of managerial capabilities needed to maintain high rates of 

growth as firms mature. To be eligible for the Technology Fast 500, a firm must meet a combination 

of subjective criteria such as revenue requirements. 

Among all Technology 500 firms, life sciences shows good progress with a 19 percent share as 

compared to 18 percent in the Internet field and 16 percent in the communications and networking 

23 Jaffe, A., Trajtenberg, M. and Henderson, R. 1993. “Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations,” The Quarterly Journal of Economics, 

108(3): pp 577-598. 

36

sector. The life sciences field rose on the Technology 500 list from 15 percent in 2001 to 16 percent 

in 2002 to 19 percent for the year 2003. Eighty-four of the life science firms on the Technology Fast 

500 list are U.S.-headquartered. 


San Diego’s biotech community realizes that San Diego offers a good infrastructure to support early 

stage companies, especially those in the life science field, says Steve Mento, president and CEO of 

Idun Pharmaceuticals. Entrepreneurship is an obvious landmark of the San Diego biotech business 

atmosphere. As Mackey remarked, “San Diego distinguishes itself by having a win/win mentality, 

very entrepreneurial, and very willing to try new things.” Lisa Haile, an attorney with Gray Cary 

Ware & Freidenrich, a San-Diego based law firm that represents a number of biotech firms in the 

area, concurred adding that, “What has happened between the past and now is that many companies 

have been started from the academic research centers and that was not so common at all even a 

decade ago.” The San Diego biotech and life science community is passionate about making things 

happen and creative enough to continually innovate. 

San Diego ranked 5th among the 12 competitive metros in growth of total venture capital invested, 

falling 10 percent in 2003 from 2000 levels. This decline was engendered by California’s downhill 

economy following a high rate of growth in the late 1990s. Washington, D.C. and San Jose were the 

only two among the 12 that experienced growth in biotech VC for the period. Two other metros 

leading San Diego are Los Angeles-Long Beach and Boston, both of which recorded 7.6 percent 

decline in biotech VC between 2000 and 2003. 

In San Diego, about 75 out of 1,000 biotech firms received venture capital investment annually for 

the 2000–2003 period. The figure ranked San Diego 3rd among the 12 metros, after San Jose (136 

firms) and Raleigh-Durham-Chapel Hill (97 firms). San Diego’s strong ranking in this component 

is a clear illustration of how high-risk biotech finance is assisting regional biotech entrepreneurship. 

Boston and San Francisco ranked 4th and 5th, respectively, following San Diego. 

As seen with biotech VC investment component, there was a 13 percent decrease in the number 

of companies receiving biotech VC investment over 2000–2003. In terms of ranking, San Diego is 

positioned 7th among the 12 selected metros. Even though San Diego’s descending momentum 

in biotech VC activities can be partly attributed to depressed VC market conditions in California, 

other California metros show far better accomplishments among these components. Los Angeles- 

Long Beach ranked 1st with a 38 percent increase, followed by Orange County with 27 percent 

growth in the number of companies receiving biotech VC investment, although expanding from an 

appreciably lower base than San Diego. 

With $55 biotech VC investment per $100,000 GMP, San Diego ranked 2nd among the 12 selected 

metros. That amount is more than nine times larger than the average for the U.S., the world’s 

biotech leader. San Diego is home to many venture-capital nurtured biotech companies that were 

37 



significantly aided in their initial growth phase. Venture capital investment is one of the major tasks 

of BIOCOM, according to its president, Joe Panetta. San Jose ranked 1st in this measure with $58 

per $100,000 GMP. 

Several major players in the San Diego biotech cluster pointed out that while venture capital is 

available, much of it comes from the East Coast and the San Francisco Bay Area. In other words, 

there is a limited supply of local, indigenous-based venture capital in the San Diego community. As 

Henry Nordhoff of Gen-Probe noted in our interview when asked to clarify what he would like to 

see improve, “There would be more money, more capital available locally with people in San Diego 

controlling it with informal relationships, knowing others. I’d call up somebody, say, ‘Joe I’ve got 

this wonderful product, come on over.’” Haile elaborated on this point, “On the weaknesses, I think 

we still need to see more venture capital coming into San Diego. We’ve got probably about onequarter 

of the number of VCs that the Bay Area has and that hurts us.” 

San Diego placed 4th on the component measuring the number of biotech patents issued per 100,000 

people; a good, but not remarkable sign of regional biotech creativeness. Approximately 24 biotech 

patents per 100,000 people were issued in San Diego from 1996–1999. The top three metros in this 

category were San Francisco (38 patents), San Jose (34 patents), and Raleigh-Durham-Chapel Hill 

(25 patents). Averaged out per 1,000 biotech workers, San Diego’s biotech patents slipped down to 

7th. This does not mean that San Diego’s biotech workers are less inventive, but that San Diego has 

a relatively larger number of biotech workers than other metros. 

With 122 biotech patent citations per 1,000,000 people, San Diego ranked 4th among the 12 selected 

metros. San Francisco had 210 biotech patent citations per 1,000,000 people, which positioned it 

1st, followed by Raleigh-Durham-Chapel Hill (138 biotech patents) and Oakland (122 biotech 

patents). Averaged out per 1,000 biotech employees, San Diego ranked 5th. 

In terms of business starts per 1,000 businesses, the San Diego metro ranked 5th out of the 12 

selected metros. San Diego’s mediocre rank on this component is attributed to a drop in venture 

capital funding in the biotech field, the downturn in the business cycle for the California economy 

as well as rising business costs. The Austin-San Marcos metro took the top position with 57 business 

starts averaged out per 1,000 businesses. 

Eleven percent, or nine of 84 Technology Fast 500 companies in life sciences for 2003 are located 

in San Diego. Averaged out per 1,000,000 business establishments, the metro placed 1st among 

the selected 12. Among these, seven firms are in the biotech field, one in pharmaceuticals and the 

other in medical devices. Technology Fast 500 companies in biotech based in the San Diego metro 

include firms such as Prometheus Laboratories Inc., Protein Polymer Technologies, Inc., Diversa 

Corporation, Digirad Corporation, and Carlsbad-located Invitrogen Corporation. 

38

San Diego’s biotech risk capital and entrepreneurial infrastructure score is 88.6 (out of a perfect 

score of 100) before rebasing the top score to 100 for comparison purposes, which placed it 3rd 

among the selected 12 metros. Northern California metros San Jose and San Francisco ranked 

1st and 2nd, respectively. San Diego’s strongest achievements among the indicators for Biotech 

Risk Capital and Entrepreneurial Infrastructure were biotech venture capital dollar per $100,000 of 

GMP, biotech patents per population, biotech patent citations per population and Technology Fast 

500 companies in life sciences. 

11 

10 

9 

8 

7 

6 

5 

4 

3 

2 

1 

Biotech Risk Capital & Entrepreneurial Infrastructure 


Level 

100 

90 

80 

70 

60 

50 

40 

San Fran. Raleigh Seattle Philadelphia L.A. Austin 

San Jose San Diego Boston D.C. Orange Oakland 




Tech Fast 500 Companies in Life Science (Per Million Businesses) 

Number of Business Starts (Per 1,000 Businesses) 

Biotech Patent Citations (Per 1,000 Biotech Employees) 

Biotech Patent Citations (Per Million Pop.) 

Biotech Patents Issued (Per 1,000 Biotech Employees) 

Biotech Patents Issued (Per 100,000 Pop.) 

Biotech VC Investment (Per $100,000 GMP) 

Companies Receiving Bioech VC Investment Growth Average (2000-2003) 

Companies Receiving Biotech VC Investment (Per 1,000 Biotech Firms) 

Total Biotech Venture Capital Investment Growth Average (2000 - 2003) 

Biotech Risk Capital & Entrepreneurial Infrastructure Component 

30 40 50 60 70 80 90 100 


1 2 3 4 5 6 7 8 9 10 

11 

San Diego 88.6 1 -10.0% 2 75.2 3 -13.3% 4 55.0 5 24.1 6 46.1 7 121.5 8 23.3 9 22.6 10 113.3 11 

U.S. Series1 Avg. 88.6 67.2 92.6 -14.0% 88 27.3 -2.2% 88.2 98.6 6.0 87.7 5.0 84.4 49.4 89.7 18.3 18.0 79.6 77.1 20.6 100 10.4 

39 



Methodology 

As in the previous section, data analysis of this section was carried out with 12 metropolitan areas 

that show the strongest concentration of biotech in the U.S. In the comparison of the relative 

strengths of each metro’s biotech entrepreneurial settings, we scaled out each component by 

population, biotech worker or biotech business, such as the San Diego metro’s biotech patents 

issued per 1,000 biotech workers. After these adjustments, we compared the relative values using 

our score and rank systems. 

Data used and compiled in this section came from four major sources: PriceWaterhouseCoopers/ 

Venture economics, United States Patent and Trademark Office (USPTO), Dunn & Bradstreet, and 

Deloitte. Four biotech venture capital-related components came from PriceWaterhouseCoopers/ 

Venture economics, a division of Thompson Financial. USPTO-released statistics were compiled to 

capture patent-related components. Dunn & Bradstreet provided business starts statistics and Tech 

Fast 500 companies in life science field originated from “2003 Deloitte Technology Fast 500 list” 

(http://www.public.deloitte.com/fast500). 

40

Human Capital Capacity 


A region’s assets—physical endowments such as a suitable climate, congregation of large populations, 

geographical advantages such as the proximity to ports and availability of raw materials—have 

long been recognized as the key determinants to regional economic, industry and commerce 

development. Although materials and geographical advantages are still considered as key location 

choice factors, they are less relevant in today’s high-tech economy than decades ago. Modern 

transportation, communication and production efficiency have minimized costs related to labor 

and movement of goods. 24 Rather, the current emphasis on innovation and creativity to capture the 

highest value creation throughout the design and production process is recognized as the key for an 

industry and region to dominate in the global economy. 

In today’s highly mobile, increasingly democratized global economy, talented people, particularly 

those who posses the ability and capacity for scientific and technological innovation and the 

management of such creative activities, are more in demand than ever before. They are the builders 

of the economic locomotive that propel a region’s economic growth. The location pattern of 

economic activities, where material goods, innovation and the management of enterprises mix, 

often demonstrates a complex interdependence among firms and industries. 25 In an industrialized 

economy, these complex inter-connected production/service relationships were more a function 

of passing semi-finished products and sharing raw material. In a knowledge and intangible-based 

economy, the linkages among firms are often talent, human capital, and ideas and innovation. 

In the past, such complex relationships among firms were shaped by a single cluster of industries, 

such as in Detroit for the auto industry and New York City for the finance and equity markets. 

Today, the spatial distributions among industries and economic activities are no long confined 

by transportation distance and hence labor pool availability within a singular space. In fact, the 

evolution of the IT industry in Silicon Valley or the Boston Route 128 perfectly illustrates the 

dispersion and spin-off of industry sub-sectors that gave birth to many IT mini-clusters around 

the world. 26 The supply chain of making a PC or many electronic products joined various clusters 

stringing from the Northern California Bay Area to Singapore, Taiwan, Korea, Japan, India and 

China. Each cluster uniquely and neatly produces and assembles the components that are necessary 

to the assembly of the final products. 

24 DeVol, R., et al. 1999. America’s High-Tech Economy, Santa Monica: Milken Institute. 

25 James Heilbrun. 1980. Urban Economics and Public Policy. 

26 Borrus, Michael, Dieter Ernst and Stephan Haggard. 2001. “International Production Network in Asia: Rivalry or Riches?” Routledge. 

41 

Human Capital Capacity


Though there are many prevailing economic factors expediting the formation of these clusters, 

the underlying fundamental that enables these long-chains of clusters to form across multiple 

regions and countries are pools of talent; human capital—a pool of talented professionals capable 

of innovation, creation, and capturing the institutional knowledge—and its respective capacity to 

fulfill the technical and operational requirements. Location still matters only if the region or the 

location has the capacity to attract talent that yields tremendous amounts of intellectual capital. 27 

The importance of having highly qualified talent pools as a reservoir of human capital in a region 

cannot be underestimated. Economic development history and the rise in resource-poor regions 

in the last quarter century have convincingly proved the importance of human capital to a region’s 

economic lifeline. Three of the four Asian Tigers—Korea, Singapore and Taiwan—have progressed 

technologically and are more advanced than their resource-rich neighbors, Thailand, China, 

Malaysia and Indonesia. 

These regions, Korea, Singapore and Taiwan, have one commonality among them in the quest for 

building regional industries and developing their high-tech economies—they focus on educating, 

nurturing and actively recruiting talent to build up human capital. It is not a surprise that Korea’s 

technological advancement outperforms its competitors such as Taiwan and Singapore, if one 

measures per capita PhDs in science and technology in Korea. The success stories of these countries 

can almost certainly traced back to their earlier stage economic policy aimed to establishing science 

and industrial parks that provided suitable research and development space for seasoned scientists 

and science-entrepreneurs alike. 28 Similarly, many credit the success of India’s software industry 

to the India Institute of Technology which has been and will continue to turn out highly educated 

and trained software engineers and entrepreneurs each year. These practices and policies all foster 

and promote talent, enlarge the human capital pool, and finally contribute to the buildup and 

the enrichment of local and regional intellectual property, which in turn provides a region with a 

superior competitive edge over other regions. 

Though many have tried both from an economics and management point of view to define the 

relationships between talent, human capital and intellectual capital, they have not captured the 

essence of the inner working relationship in quantitative fashion. It is even more challenging to 

define such relationships and why it matters in a singular economic spatial dimension. A better 

and more definitive description of talent, human capital and intellectual capital in the context of a 

single spatial economy is perhaps the concept of economies of agglomeration. 

Perhaps it is more fruitful and intuitive to start out the description of such complex interlocking 

relationships in a theoretical framework of external economies of scale. The concentration of 

industry in a geographical location can be better understood not through the linkages of activities of 

27 DeVol, R., Rob Koepp, John Ki, Frank Fogelbach. 2004. California’s Position in Technology and Science. Santa Monica: Milken Institute. 

28 Saxenian, A. 1999. Reversed Brain Drain. 

42

firms in a single economic space, but rather by the external economies of scale. When firms—groups 

of highly talented people—operate on the input side, such economies have generally been known 

as “external economies of scale” where external refers to the firm. These firms are economies that 

depend not on the size of the firm, but upon the size of the industry. 

As George Stigler explains more clearly, “When one component is made on a small scale it may be 

unprofitable to employ specialized machines and labor; when the industry grows, the individual firm 

will cease making this component on a small scale and a new firm will specialize in its production 

on a large scale. …The progressive specialism of firms is the major source of external economies. 29 ” 

Clearly, Stigler’s assessment can be applied to the context of research and development in life 

science or biotechnology production, not only on the firm level, but to the congregation of talent, 

forming regional human capital or talent pools. Because such an external scale exists, it paves the 

way for the development of specialization through seemingly random derivatives of a single unit of 

“talent.” Delegation of various technical, management, and financing aspects of producing goods, 

or delivery of research and development of new ideas, then become critical for a firm or a group 

of highly specialized talent. Again, the external economies of agglomeration, i.e., groups of talent 

or human capital, are the critical building blocks in the formation of regional competitiveness. 

Individual firms or talent will then share the burden of cost as well as the production efficiency at 

lower costs across the entire industry, benefiting the entire region. 

In the world of biotech and other life science research and development, the concept of external 

economies of scale can be equally applied. Unlike IT product developments which inherently 

require shorter cycles and do not go through stringent regulatory tests, biotech and other life science 

products have far longer research and development cycles. Consider the success story of Advance 

Tissue Sciences. The company was founded in 1988 specializing in tissue substitutes for burn 

victims. After a long, industrious 10 years, the product was first approved by the FDA in 1997. 30 

This long research cycle, coupled with the complexity of coordination with multiple disciplinary 

fields throughout the process of developing artificial tissue, can be a substantial burden to a small 

startup. A regional science center, backed by resident research-oriented institutions such as the 

University of California, San Diego and other bio-science and molecular research centers, can 

extend the benefit of external economies of scale. Then it is not surprising to see that the number 

of biotech start-ups affiliated with UCSD and the many PhDs who have joined local companies. 

Some have estimated that 95 percent of PhD-holders from UCSD and San Diego State University 

went into private industry, whereas, about 85 percent of PhDs nationwide enter academia. 31 It is 

clear that the region, both in industry and academic institutions, has formed a new culture, placing 

a high value on human capital at work combined with entrepreneurial spirit. 

29 George Stigler. 1952. The Theory of Price. Macmillan 

30 Gail Naughton, Dean, College of Business Administration, San Diego State University. 

31 Ibid. 

43 


When this agglomeration is possible, individual firms and talent share lower costs than if they 

were geographically disperse. Hence, chemists, physicists, microbiologists, physicians, computer 

scientists, and bio-statisticians all cross-pollinate, compete and supplement one another’s research 

agenda, despite limitations on the scale of operation and budget. In other words, external economies 

of scale define how firms behave in spatial economies and explain the importance of clustering and 

agglomeration. Talent, human capital and finally the reservoir of knowledge of a region and how 

the elements interact can be explained by the importance and organization of human capital and 

regional intellectual capital. Human and intellectual capital are the DNA of a knowledge-based 

industry and regional economy. Talent might be a point of origin in a creative process, but the 

expansion, growth and eventually the domination of an industry and region, rely on the realization 

and building of the external economies of scale, where knowledge, intellectual capital and assets 

can be stored and expanded upon through accumulation and regeneration. 


Over the past quarter century, San Diego has become the focus of bioscience and biotechnology 

development in the world. It is a region, in the words of Gail Naughton, a former biotech executive 

and dean of San Diego State University’s Business School, that grew from a “lazy government 

contract town” to becoming “the leaders in biotech, software and telecom...” 32 In particular, San 

Diego’s reputation in growing biotech start-ups has surpassed other leading biotech and bioscience 

regions along the Northeast pharmaceutical and life science corridor. 

The rise of San Diego’s biotech cluster is a new chapter in the region’s history and a testament to 

the region’s capacity as a strong knowledge-based economy. Certainly, the region’s advancement in 

and ability to compete head-to-head with other science and technology dominating regions such 

32 Ibid. 


Level 

100 

90 

80 

70 

60 

50 

40 

Biotech Human Capital Capacity 


Boston San Diego Philadelphia Seattle L.A. Orange 

Raleigh Oakland San Jose D.C. Austin San Francis. 


44

as Boston, Philadelphia, Washington, D.C, Seattle-Bellevue-Everett, and San Jose and Oakland, 

validates its depth of human capital, technical know-how and entrepreneurial capability. 

San Diego ranked 4th among the 12 top biotech metropolitan areas examined in this study with 

a composite score of 74.7 for biotech human capital capacity. The composite score is a weighted 

aggregate of twelve components. The metro lags top-ranked Raleigh-Durham-Chapel Hill (93.7) 

and Boston (84.5), and essentially tied Oakland (74.9), but outranked life science heavyweights 

such as Philadelphia (69.6) and Washington, D.C (69.3). Whereas regional scores are benchmarked 

to the highest score (Raleigh-Durham-Chapel Hill, NC, 100), the normalized composite score at 

79.1 reveals similar information. What is worth noting in this chart, however, are the small numeric 

differences among the three California technology concentrated regions: Oakland, San Diego, and 

San Jose. San Diego has a minor advantage over its sister regions up north. 

Boston and Philadelphia, the two combined leading life science clusters in the country and the 

world, have almost two centuries of tradition and expertise in medical science, pharmaceuticals, 

medical devices, chemical, biochemical material research and production. The depth of these 

regions’ human and intellectual capital, and their capacity to generate and attract financial capital, 

are far superior to either San Diego or Raleigh-Durham-Chapel Hill. Worth mentioning, however, 

is the fact that San Diego and Raleigh-Durham-Chapel Hill, a pair of “young talents,” took less than 

one-quarter century to be comparable to and competitive with these life science giants in the one 

of most regulated, complex and multi-disciplinary fields of science and technology research and 

production. 

A more detailed look at the breakdown of the composite index will further our analysis of how 

and why San Diego became competitive with Boston, surpassing Philadelphia and Washington, 

D.C, yet losing to Raleigh-Durham-Chapel Hill—a mirror image of San Diego in its quest for 

technology and science advancement, especially in biotech and life science. We compiled data for 

12 components that identify the dimensions of human capital for each of the 12 regions measured 

and compared. 

The 12 components measuring biotech human capital capacity describe and measure four key 

competences with regard to the human capital of a region engaged in the biotech industry. These 

components calculate and benchmark the human capital stock, flow of specialists, and finally general 

pools of noncore human capital that support the core scientific and development activities. 

San Diego’s biotech industry ranks favorably against the other 11 regions selected for comparison 

in the study. The accompanying table shows the relative positions of the 12 components including 

the composite index. Of them, San Diego has four important components that are ranked in the top 

three positions, up against biotech heavyweights Boston, Raleigh-Durham-Chapel Hill, Oakland 

and San Jose. They are per capita measurements of biotech postdoctoral fellowships awarded, 

biotech scientists and biotech bachelor degrees awarded, and the percent of biotech bachelor’s 

45 



degrees among all bachelor’s degrees granted in San Diego. 

These top-ranked indicators are very telling. They not only showcase San Diego’s strength in biotech 

research and development, but illustrate that the region is also gaining more momentum in the 

development of biotech and biotech related fields. 

The region’s talent pool with regards to biotech research and development is highly concentrated. 

Notably, two indicators stand out and very likely help elevate San Diego’s competitive advantage 

over many other regions incorporated in our study. In practice, these two indicators can also be 

used interchangeably or complementary to each other. The first one is the number of postdoctoral 

fellowships awarded per university, which is 677 in San Diego, ranking it 3rd. The second indicator 

is the number of biotech scientists per capita. At 2,240 persons, San Diego ranked 3rd (adjusted for 

the size of population). 

Although the number of postdocs awarded trails other leading university towns such as Boston, 

Raleigh-Durham-Chapel Hill, Los Angeles, and Philadelphia, the concentration of talent in San 

Diego is far greater than in many of these regions. When the ranking of postdocs is normalized 

per research university, San Diego’s advantage stands out over other region such as Boston. Its 

position climbs close to the top. Another indicator, the number of postdocs awarded per 100,000 

people in the 25-34 age cohort also confirms the region’s strong standing with its 5th-place ranking. 

San Diego 

U.S. Avg. 

13 

12 

11 

10 

9 

8 

7 

6 

5 

4 

3 

2 

1 

Biotech Postdocs Awarded (Per Research University) 

Biotech Postdocs Awarded (Per 100,000 Pop.) 

Biotech PhDs Awarded (Per 100,000 Pop.) 

Biotech Graduate Students (Per 10,000 Pop.) 

Biotech Human Capital Capacity 


Recent PhD Degrees Awarded in Biotech (Per 100,000 Civilian Workers) 

Recent Master's Degrees Awarded in Biotech (Per 10,000 Civilian Workers) 

Recent Bachelor's Degrees Awarded in Biotech (Per 10,000 Civilian Workers) 

Biotech Engineers (Per 100,000 Pop.) 

Biotech Scientists (Per 100,000 Pop.) 

Number of Biotech PhD Granting Institutions (Per Million College Enrollees) 

Number of Biotech PhD Granting Institutions (Per 10 Million Pop.) 

Bachelor's Degrees Granted in Biotech Fields (Percent of Total Bachelor's Degrees) 

Biotech Human Capital Component 

10 20 30 40 50 60 70 80 90 100 

1 2 3 4 5 


6 7 8 9 10 11 12 

74.7 18.9 18.3 150.7 677.0 8.1 17.2 20.7 77.1 4.8 37.1 5.6 

58.6 20.7 15.9 74.0 195.2 . 5.3 12.1 19.9 34.9 2.5 10.5 1.7 

46 

13 

21.6 

9.3

Perhaps this advantage is best understood in light of the observation by Dean Naughton that, “95 

percent of our graduating PhDs go straight into industry with the mindset to stay in industry. … 

In most universities, greater than 85 percent go straight into academia…” While San Diego does 

not generate larger numbers of PhD degrees in biotech, ranking 9th, this limitation arises from the 

small number of institutions in San Diego that can actually grant such a degree. Only when one 

understands the geographical boundaries and size of the metropolitan area can the dominance of 

the region in biotech be fully appreciated. 

With only five biotech PhD granting institutions, San Diego ranked 5th among the 12 metros for 

number of PhD granting institutions versus top-ranked Boston with 17 institutions. This limitation 

also impacted San Diego’s rank on recent PhDs awarded in biotech—9th among the 12 metros. 

This is a weaker link among key assets in human capital measures. It shows vividly against leading 

titans such as Boston and Raleigh-Durham-Chapel Hill where the number of PhDs awarded were 

1,728 and 1,076, respectively. This weakness is further illustrated by the relatively small number of 

biotech graduate students per 10,000 people. San Diego ranked 9th out of the 12 metros. San Diego’s 

strong ranking in the postdoctoral component, yet weaker showing in the number of recent PhD 

degrees awarded and relatively lower score in the number of graduate students enrolled, strongly 

indicates that San Diego “imports” many fresh-minted PhDs from other locations. The region relies 

on them to build the width and depth of its biotech cluster. The high rate of young PhDs with a 

strong commitment to private industry is probably the most important asset the region has. While 

most highly trained talent focuses on and furthers theoretical building and other research, San 

Diego offers alternatives that enable this group of specialists to convert, and subsequently profit 

from turning theories and models into products. 

Interestingly, the San Diego model works almost perfectly from a regional industry building and 

economic development perspective, attracting talent from other regions to reinforce and compensate 

for the shortcomings of the local infrastructure (e.g., the limited number of universities in a small 

geographical boundary). Through this “enrichment process,” San Diego has heightened its capacity 

to bring in not only the talent and a “denser” human capital pool, but along with them, millions of 

dollars in research funding. 

This concentration of talent aided the region in attracting bioscience and biotech talent from other 

regions, including neighboring Los Angeles and Orange Counties. It is then not a surprise to see 

that the largest amount of NIH Biotech R&D funding in 2002 being awarded to a single research 

entity is in San Diego—The Scripps Research Institute—valued at $191 million. Other NIH funding 

awarded to the region also shows the depth and width of the metro’s human capital and intellectual 

capacity. San Diego has 26 percent of California’s research institutes, and captures 61 percent of 

NIH awarded projects and receives 59 percent of NIH funding. 

47 



San Diego Biotech Research 

2003 

San Diego California 

Percent of 

California Total 

Biotech Research Institutes 12 47 26% 

NIH Awarded Research Projects 745 1,213 61% 

NIH Awarded Research Funding 316.2 ($ Mil.) 537.8 ($ Mil.) 59% 

Sources: National Institutes of Health (NIH), Milken Institute. 

Weaving other social and general regional capital into the fast expanding biotech cluster is very 

important, despite the region’s strong standing in attracting large pools of biotech talent. 

San Diego’s successful undergraduate programs comprise another of its top-ranked human capital 

assets. They enrich the local human capital and lower economic costs as industries build larger 

external economies of scale. Bachelor’s degrees are important to the region because they give an 

indication of both the levels of educational attainment and the type of skills that are in demand 

by the local or regional market. Additionally and increasingly a critical factor, enrollment in 

local educational institutions in biotech/bioscience is often a strong tell- tale sign of the growth 

momentum of a locally dominant industry. With a score of 95.4, San Diego ranked 3rd in the 

number of biotech bachelor’s degrees granted, very high in terms of the percentage of total bachelor’s 

degree granted (8.13%). Many students enroll in particular academic degree programs with the 

hope that they can obtain skills and a rewarding career on which they can build their livelihoods. In 

this regard, San Diego outperformed many other metros among the 12 metros studied. San Diego 

educational institutions granted 1,083 bachelor degrees, trailing only Boston (2,195), Los Angeles 

(1,952), and Philadelphia (1,088) where the number of universities is far greater than San Diego’s. 

Deloitte’s Teresa Young believes that San Diego’s success in producing undergraduates is a reflection 

of the cluster’s strength in creating ample private sector opportunities for life scientists. Whereas 

for other regions that are populated by several universities with graduate programs in the life 

sciences, the more obvious route for talented undergraduates who want to pursue careers in the 

life sciences would be to first get a PhD to qualify themselves for progressive responsibilities in 

research fields. Young (herself a bachelor’s degree holder in chemistry from UCSD who eventually 

went on to pursue a career in the business side of the life sciences) observes: “In San Diego you 

have a number of individuals who, because of this whole diversity of what they can do, can just get 

their undergraduate degree, work in a biotech company and not have to take a PhD—unlike when 

I got my degree 31 years ago, there weren’t the biotechs and other opportunities outside of pure 

research.” 33 


48

Technology & Science Workforce 


An economy can go only so far with strong research and development capacity as its only asset. A 

region’s development and a growing economy also depend on the conversion of theoretical models 

and ideas into tangible goods and deliverable services to consumers and the marketplace. A region 

can only capture the full value of research and development through product manufacturing or 

service rendering. A region’s or firm’s strong research and development attributes do not guarantee 

yielding superior products and services if it lacks a qualified technology and science workforce 

that has suitable engineering craftsmanship, specialties in product quality control, marketing, 

and management skills in various functioning areas of running a business entity and production 

process. 

As mentioned in the previous chapter, a region’s economic advantage lies in its utilization and 

expansion of external economies of scale. The term “specialism” refers to economic agents in a 

spatial economy working competitively yet collaboratively while achieving lower sharing costs 

across the industry as a whole, and enhancing benefits to the region in general. Hence, the most 

economically successful places are those with firms whose innovation processes are organized 

in a collaborative framework with research, development and production engaging in dynamic, 

interactive learning processes. 34 

A technology and science workforce is a necessary and a natural extension of region’s human 

capital and intellectual capacity. These two elements, brainpower for innovation, and the technical 

competence and sophistication for production, are often closely linked. The pharmaceutical 

industry in the Mid-Atlantic region demonstrates this closely knit relationship. More often than not, 

research and development centers are in a central location surrounded by multiple manufacturing 

plants where scientists, engineers and product production teams congregate and communicate to 

improve production efficiency. This intense feedback loop is common among high-technologyoriented 

industries. 

Sustaining a high-tech cluster such as a biotech cluster needs a workforce with industry-specific 

skills within a location where operations take place. This pooling of a specialized technology and 

science workforce is critical for the industry to expand and firms to grow. Science and technology 

workers are the keys to the creation of economic value in the innovation, product development 

and mass manufacturing operational processes. These workers do not just access knowledge and 

apply it to firm-specific objectives, rather and more importantly, they harness new information 

to generate new knowledge, bringing both inductive and deductive analytical skills to complex 

problems, creating both new concepts and processes. 35 Acquiring new knowledge, experience and 

34 DeVol, R., Bedroussian, A., Koepp, R., Wong, P., “Manufacturing Matters: California Performance and Prospect,” Milken Institute, 2002 

49 

Technology & Science Workforce


technical know-how are often highly dependent upon the types of operation, detailed divisions of 

labor, extensive work experience, constant interaction with other colleagues working in the same 

field and the like. In general, these skill sets are heavily industry and product specific and highly 

regionalized as well. 

The quality and availability of a science and technology workforce not only affect the overall long 

term performance of an industry, but can directly impact it on the firm level as well. The location 

choice a particular firm faces often depends upon the availability of input and the cost of obtaining 

such input. Other things being equal, firms move to areas with abundant supply of high-quality 

low-cost input, assuming the particular firm is small and the local industry structure is competitive, 

and its relocation would not alter the existing industry setting and structure. 36 It is arguably true 

that the smaller the startup firm, the more critical “the abundant supply of high-quality inputs 

with low-cost” factor there is. San Diego’s biotech industry structure is very similar or closer to a 

“competitive environment” in which many small firms exist in a relatively small space. 

Small firms tend to have smaller operational budgets and limited ability to recruit needed qualified 

technical workers from long distance or retain technical staff full time. Small startups tend to 

contract out “noncore” technical tasks or “administrative work” to consultants who are in proximity 

to the firm’s operating location. A region lacking larger pools of this highly skilled, scientific and 

technically trained workforce and highly qualified administrative support will not be able to grow, 

attract and nurture young technology-based startups. 

The biotech industry requirements for a science and technology workforce are even more demanding 

than other technology-oriented industries such as information technology. Given bioscience’s long 

development cycle, cross-multiple disciplinary fields, tight government regulation, and larger capital 

investment up front, the requirement for a suitable workforce can only be more demanding. Many 

have wondered why the biotech industry prospers in San Diego. A seasoned biotech entrepreneur, 

Howard Birndorf of Nanogen in San Diego, stated that, “The fact of the matter is that because of the 

intense talent pools here, you start a company and you have people that you can hire. To duplicate 

that is going to be hard to do for another state. That is probably one of the key ingredients.” 37 

Young echoed a similar sentiment in observing how her firm has had to develop various types of 

specialization to serve the needs of the cluster. “Life sciences is a heavily regulated industry,” she 

remarked. “It demands a number of individuals who have expertise in the areas of clinical trials 

and FDA approval so they can help companies as they work their way through the whole process of 

product development and make sure they’re in compliance with various regulatory requirements. 

We have people with such expertise in our consulting practice. For example, one of the women 

35 DeVol,R., Koepp,R., Ki,J., and Fogelbach, F., California’s Position in Technology, and Science Milken Institute, March 2004 

36 James Heilbrun.1980. Urban Economics and Public Policy. 

37 Howard Birndorf, Nanogen, Interview with Rob Koepp, April 16, 2004 

50

here has a background as both a nurse and an attorney, and one of her areas of focus is regulator, 

compliance.” 

The answer to why biotech prospers in Sand Diego seems to be simpler than many researchers 

have tried to come up with, but it is definitely true. Since talent and a well-disciplined science and 

technology workforce are the fundamental elements in the knowledge-based economy, a region that 

can train, attract and retain this specialized workforce will be likely to prosper. Regions that do not 

are likely to experience gradual economic decline. The conversion and commercialization of local 

products benefits the local economy. Ideas and research yield few benefits with limited scope locally 

if the most of the economic value is generated elsewhere. It makes no significant difference to a firm 

where its product is made as long as it captures its profits, but it does make a significant difference 

to a region and industry as a whole. It is vital that regions keep both the highest production value 

and the talent that helps produce it to maintain economic vitality in a knowledge-based economy. 


In the composite measurement of its scientific and technology workforce, San Diego scored 

relatively high, ranking 5th among the 12 metropolitan areas studied. The position is very 

respectable, but nonetheless, the rank exposes the weaker side of the region’s biotech cluster in 

specific workforce categories and life science in general. In the measurement of workforce, San 

Diego falls behind Raleigh-Durham-Chapel Hill (1st), Boston (2nd), San Jose (3rd) and Oakland 

(4th). Quantitatively, the statistical differences among the 3rd, 4th and San Diego at 5th place are 

marginal at best, separated at most by four. On the other hand, the metro ranked favorably against 

Washington, D.C. (6th), Seattle-Bellevue-Everett (7th) and Philadelphia (8th). However, if we look 

at this ranking with respect to the human capital capacity composite measurement on which San 

Diego ranked 4th, we see that San Diego has some catching up to do albeit the gap is not wide. 

The discrepancy in ranking between 

human capital capacity (4th) and 

workforce (5th) is a function of the 

smaller scope (not size) of life science in 

San Diego compared to other top ranked 

regions. Scope refers to the number of 

teaching hospitals, the presence of larger 

pharmaceutical firms and manufacturing 

of medical devices. Secondly, the region’s 

relatively weaker manufacturing base, 

compared to San Jose, Philadelphia and 

Raleigh-Durham-Chapel Hill contributes 

to this limitation. 

Level 

100 

90 

80 

70 

60 

50 

40 

30 

Boston Oakland D.C. Philadelphia L.A. Austin 

Raleigh San Jose San Diego Seattle San Francis. Orange 


51 

Technology & Science Workforce 

Biotech Workforce 

Twelve Selected Metropolitan Areas, 2004


San Diego’s limited scope in life science may have a lot to do with the limitation of the industry 

traditionally in San Diego, lacking a sufficient number of occupational categories such as 

microbiologists and a wider array of medical scientists. The metro’s limited capability in 

manufacturing could be influenced by the fact that the biotech industry as a “stand-alone field” 

is very new and the optimal mix and level of technology and science workforce will develop over 

time to accommodate further industry expansion in the future. However, a weaker intensity in 

technology and science workforce could also be due to the business environment by which the 

metropolitan area is regulated, i.e., government regulations. 

San Diego’s score and ranking in each of the six workforce categories appears in the accompanying 

chart. The science and technology workforce composite index captures measurement of the key 

components supporting the biotech industry and life science in general. 

7 

6 

5 

4 

3 

2 

1 

Intensity of Biomedical Engineers 

Intensity of Medical Scientists 

Intensity of Biological Scientists 

Intensity of Biochemists & Biophysicists 

Intensity of Life Scientists 

Biotech Workforce Component 



Intensity of Microbiologists 

50 60 70 80 90 100 

1 2 3 


4 

5 6 7 

San Diego 

85.3 1 192.5 2 77.6 3 10.5 4 90.6 5 90.6 6 11.3 

7 

U.S. Series1 Avg. 

68.8 85.3 84.4 90.9 11.9 98.8 62.2 11.6 33.6 93.5 45.2 84.1 66.7 5.6 

Similar to the human capital capacity measurement, San Diego’s rankings across all seven categories 

(including the overall composite measurement) are strong overall, but there are weaknesses in 

two categories. The intensity of microbiologists and biomedical engineers falls slightly behind as 

compared to other biotech metros. “Raw” statistics tend to bias towards regions that are centered 

geographically and academically such as Boston, Philadelphia, Washington, D.C. and Raleigh- 

Durham-Chapel Hill, unlike San Diego’s with its limited geographical space and boundaries. 

Additionally, these two indicators (intensity of microbiologists and biomedical engineers) are 

more traditionally affiliated with basic research institutions such as universities rather than 

52

applied research centers and biotech start-ups. Hence, this shortcoming, rather than being tied to 

the deficiency of the biotech cluster in San Diego is indicative and illustrative of the orientation 

of the biotech industry in there, that is, an economic space specializing in applied research and 

commercialization of advanced biotechnology products and services. 

Despite being one of the two younger biotech/life science clusters in the country (the other being 

Raleigh-Durham-Chapel Hill), San Diego’s intensity in the four other biotech workforce statistics 

overcomes the limitations of having a short history in bioscience and biotechnology and very few 

universities (there is only one medical teaching hospital and only three PhD-granting institutions 

in San Diego). Against all these odds, the metro’s rapid development over the past decade has 

attracted both funding and talent from all over the country. As a result, the number of life scientists 

in San Diego stacks up strongly against Oakland, San Jose, Philadelphia, and Washington, D.C. 

This is probably one of the lesser known achievements about San Diego. 

This heavy recruitment from outside the region has yielded significant economic benefit. The 

immediate economic return of this practice is a buildup of biotech specific occupations such as 

biochemists and biophysicists. San Diego shows overwhelming dominance over 11 of the 12 regions 

slated in the study, only losing to pharmaceutical giant Philadelphia in the nation. The region 

hosts 960 biochemists and biophysicists as compared to Philadelphia with 1,080 such specialists, 

surpassing Oakland (820), Raleigh-Durham-Chapel Hill (520) and Boston (520). Given the short 

time in which it accumulated so many specialists, one would wonder if San Diego might surpass 

Philadelphia in terms of the number of highly specialized workers/scientists with the metro’s 

biotech cluster continuing to expand at the current rate. 

Since these statistics are not weighted, the biotech-specific workforce is tilted toward those metros 

with a greater number of research universities and more mature life science, pharmaceutical and 

biotech clusters such as Boston, San Jose, Oakland, Philadelphia and Washington, D.C. Other 

categories in which San Diego stands out include the intensity of biological scientists, biomedical 

engineers and medical scientists, once the statistics are normalized to the scale of the regional 

workforce. San Diego’s biotechnology research and development intensity exceeds other regions. 

Other employment categories and business infrastructures are part of the regional workforce 

capability as well. So far we have focused almost exclusively on the high-end, highly specialized 

research development categories. The fact is, the region’s biotech firms and research institutions, 

particularly those that expand over time, need professional staff other than scientists to mind the 

business and manage daily administrative functions. As part of our study, Institute researchers 

conducted interviews with educators, venture capitalists, scientists and business leaders from 

nonprofit trade groups to ascertain their input, opinions and assessment, and suggestions with 

regard to the local industry and its prospects in the future. 

53 



Thus far, statistics have been very indicative of San Diego’s leading position in incorporating a 

high-end workforce into the regional biotech industry. Other occupational and employment 

statistics with regard to professional managers with expertise in biotech product marketing and 

planning, business development, and various corporate functions for the biotech industry are 

difficult to define. From some of the interviews, however, we did gain some insight on the issues of 

cross-functional support within biotech firms, and other corporate and regional biotech industry 

needs. 

The success of San Diego’s technology advancement has always been associated with strong 

leadership in the region’s educational institutions. This tradition has played a critical role in shaping 

the expansion and growth of local technology industries. This kinship between the industries and 

educational institutions is probably the most important intellectual capital as well as workforce 

capacity in San Diego. Early in the development of the biotech industry when the technology base 

was weak, educational institutions led the way, but now, as biotech has taken root in the region, 

these institutions often respond to the industry’s needs. 

Universities’ participation can be valuable in building a workforce that caters to industry’s needs, 

in this case the biotech industry. New programs such as joint PhD-MBA degrees and MS degrees 

in quality control (QC) cater almost exclusively to the biotech/bioscience field with strong leanings 

toward the biotech firms in San Diego. More importantly, this PhD-MBA program is not a 

construction of an academic mission. Rather, it is supported and the curriculum is partially designed 

by executives from local pharmaceutical and biotech companies, in anticipation of increasing 

needs or a shortage of competent science/technical business managers in San Diego. 38 During 

the interviews with local business leaders, some thought that the region was weak in supplying 

specialists in manufacturing. Implicitly, these interviewees drew comparisons between San Diego 

and the Northeast Pharmaceutical Corridor. 

San Diego’s overall ranking among the 11 other biotech leading centers in the country is strong. The 

metro’s rise in technology dominance is almost an overnight success compared to the development 

histories of Boston, Philadelphia and Washington, D.C. While there are many achievements worth 

celebrating, weaknesses remain. The small community—many have lauded its closeness among 

competitors and collaborators alike—may prove to be a limitation to the region’s future growth. 

The issue will become more obvious, when San Diego is measured against Raleigh-Durham-Chapel 

Hill. 

Space can be critical to industry development. San Diego’s geographic limitations reduce the 

probability of building another teaching hospital or large-scale pharmaceutical manufacturing 

plants, for example. These large institutions, if constructed, would boost the training, experience, 

38 Gail Naughton, Interview with Rob Koepp, May 2004. 

54

scope and sophistication of the metro’s biotech and life science workforce. Raleigh-Durham-Chapel 

Hill has very few limitations in this regard. 

While San Diego enjoys a high ranking among our six key indicators, Raleigh-Durham-Chapel 

Hill actually surpasses San Diego with more top-ranked positions. Raleigh-Durham-Chapel Hill 

outranks San Diego in five categories. In many ways, the two metros are similar; both grew out of 

“boredom” towns and anchored their economic development strategies in high-technology. Both 

fully utilized state universities and the advantage of having regional super-computing sites at their 

disposal to leverage industry development. To gain an advantage over the other, both regions must 

seek policies and strategies to expand and upgrade their scale of life science and biotech operations. 

From an industry development viewpoint, the metro that can further its external economies of 

scale will gain the upper hand. 

Methodology 

For the purposes of this analysis, the biotech human capital capacity and workforce components 

focus on the core assets—bioengineers, biophysicists and the like—and do not include members 

of supporting industries and occupations or ancillary services. Although this section specified 

the organizational relationships between “core” biotech assets and supporting industries and 

occupations, a more detailed description is presented in the current impact section. 

Statistics and information that are utilized in the analysis came mainly from public sources. 

Statistics on degree-granting institutions, and number and types of degrees awarded came from 

the National Science Foundation (NSF). Occupational and employment data such as number of 

bioengineers, biochemists or microbiologists came from the Bureau of Labor Statistics (BLS), 

Department of Commerce. We also utilized information derived from interviews conducted by the 

Milken Institute. 

We present our analytical findings in both level measurements, and adjusted by the size of the 

regional economy and population base in order to obtain unbiased comparisons. The analysis also 

focuses on the concentration, density and relative strengths or weaknesses of the 12 metros. The 

scoring system applied in these two sections is the same as those that are used in other sections of 

this study. It illustrates relative values among different indices and indicators. 

55 





Now that we have identified and discussed the key components of San Diego’s biotech innovation 

pipeline, we can assess its relative economic performance to other major biotech centers. While that 

section addressed the San Diego’s available resources in terms of research and development, venture 

capital investment, labor force quality and so on, the current impact measures focus on the relative 

economic outcome within the life science industry. The current impact can be thought of as a cause- 

and-effect relationship; if a metro is surrounded by research-oriented centers/universities endowed 

with significant R&D funding and/or VC investment, has a vibrant entrepreneurial orientation, 

and is able to attract a sophisticated labor pool, then that metro is in a better position to capitalize 

on its regional assets. This environment would not only generate a larger, more concentrated 

employment base and higher growth potential within the industry, but it would also stimulate an 

increase in economic activity within the region. Given the value-added benefits that the biotech 

industry has to offer, one would expect its economic contribution to be of greater significance than 

your average industry, both locally and outside the region. 

The current impact assessment measures the absolute and relative importance of employment size 

and growth, as well as diversity within the life science industries. Specifically, the current impact 

index is comprised of seven unique components. The first four components address the issues of 

size and performance, while the latter three measure diversity. 

• Employment Level in 2002, 

• Location Quotient 39 (LQ) in terms of employment in 2002, 

• Relative Employment Growth from 1997-2002, 

• Number of Establishments in 2001, 

• Number of Location Quotients Greater than 2.0, 

• Number of Location Quotients Less than 0.5, and finally, 

• Number of Life Science Industries Growing Faster than the U.S. from 

1997–2002. 

The Current Impact Composite Index (comprised of these seven components) summarizes and 

creates a relative snapshot of the current economic impact or outcome. 

39 The Location Quotient (LQ) equals % employment in metro divided by % employment in the U.S. If LQ>1.0, the industry is more concentrated in the metro area than in 

the U.S. average. 

56

Size and Performance 

Size and performance are captured by employment level, employment concentration as measured 

by LQ, relative employment growth indexed to the U.S., and the number of biotech/life science 

establishments per 10,000 establishments. The employment level is simply the employment size 

in a given year, in this case for 2002. The location quotient measures a particular industry’s share 

of employment in a given metropolitan area relative to that of the national share. Mathematically 

speaking, if the U.S. is equal to 1.0, and the LQ for a given metro is 2.0, then that would mean 

that the metro has twice the U.S. average for biotechnology. Similarly, with relative employment 

growth, the current level of employment in a particular industry is indexed or benchmarked to its 

base year (1997) within the respective metro and then taken as a proportion of the indexed growth 

in the U.S. If a metro’s relative indexed growth is 120, then it grew 20 percent above the national 

average. Conversely, if a metro’s relative indexed growth is 80, then it grew 20 percent less than 

the national average. Finally, establishments classified under a specific industry are measured per 

10,000 total establishments. Thus, within the biotech industry, for instance, if there are 10 biotech 

establishments in a given metro that has a total of 100,000 establishments, then we can say that for 

every 10,000 establishments within the metro only one is a biotech establishment. 

For the purposes of this study, 12 metropolitan areas known for their biotech presence (including 

San Diego) were selected for comparison. While this study addresses the biotech industry, it would 

be inadequate to ignore the pharmaceutical manufacturing industry, since certain components 

of biotech (e.g., biological processes) are utilized in the development of pharmaceuticals and 

vice versa. Other studies in the past have failed to make this distinction due to limitations in data 

availability and oftentimes combine these classifications into a higher aggregate category. To achieve 

the highest credible results, this study separately addresses the overall life science industry which 

includes the pharmaceutical and medical devices industries’, in addition to the biotech industry. 

Consequently, those metros that capture only a minor share of the nation’s biotech industry, yet 

are surrounded by pharmaceutical and/or medical devices manufacturing, may score relatively low 

on the biotech measures, but higher in the overall life science category. For further explanation of 

industry specification, please refer to the methodology section. 

Diversity 

The second section of the current impact assessment focuses on diversity. Three unique measures 

were used to determine the level of diversity within the biotech/life sciences sector or industry 

groupings: 

• The number of industries within the biotech/life sciences industry group with location 

quotients (LQ’s) greater than 2.0 in terms of employment, 

• The number of industries within the biotech/life sciences industry group with LQ’s less 

than 0.5 in terms of employment, and 

• The number of industries within the biotech/life sciences industry group whose 

employment has grown faster than the national average. 

57 

Current Impact Assessment


The purpose of the first two components used to measure diversity within the biotech/life science 

industry, is to credit those metropolitan areas that have at least twice the concentration of the 

national average, and penalize those that are at most 50 percent or less, below the national average. 

This methodology allowed us to rule out extremities. For example, a metro with a very high 

location quotient due to a low overall employment base, could lead to skewed results. The diversity 

measurements correct for this, so that the metro is attributed the same amount of significance 

whether it has an LQ of 2.5 or 15, at least within the diversity portion of the overall index. 

To further illustrate the purpose of these measurements, let’s take the following example using 

the biotech industry. Four industries comprise the overall biotech sector: Medicinal and Botanical 

Manufacturing, In-Vitro Diagnostic Substance Manufacturing, Other Biological Manufacturing, 

and Biological Research and Development (see Methodology). While a metro may have an extremely 

high concentration of Biological Research and Development, its employment presence among the 

manufacturing components of biotech may not be as high. Thus, it may not be fair to say that the 

metro is a top biotech center in the nation without considering all of the sub-industries that are 

comprised of biotech. A metro that has a well-balanced mix of biotech manufacturing industries 

and, in addition, has the research criteria to go along, is more likely to score higher on the diversity 

scale. 

The third and final component used to measure diversity is the number of biotech/life sciences 

industries whose employment has been growing relatively faster than the U.S. between 1997 and 

2002. The purpose of this measure is to reward those metros that have exhibited strong relative 

growth in recent years versus those that have not. For example, a metro could have a high biotech 

employment base, and a high biotech employment location quotient, but may not be growing 

relative to other parts of the nation for one reason or another. 

A metro may rank high in terms of employment level and concentration within a particular 

industry, yet display moderate or little growth relative to other parts of the nation, often leading 

to several implications. This may suggest that the metro is losing some of its employment to other 

parts of the county, and/or not effectively capitalizing on its resources or inputs. 

Composite Index 

The current impact composite index ties together the seven components used in determining the 

current impact measures. In arriving at the index, several steps were conducted. First, within each 

component, each metro was benchmarked to the top metro in that category, creating a normalized 

scoring system that could be consistently compared across each measure. It also generates a relative 

sense of dispersion across each metro and eliminates any extreme bias. Second, unique weights are 

attached to each component when arriving at the composite score. As one would expect, the weights 

are indicative of each measure’s relative importance and contribution to its overall performance. 

Since size and performance comprise a primary indicator when measuring economic outcome, 

58

they deserve greater weight. Finally, if a metro ranked 1st in every category, it would receive a score 

of 100 and rank 1st in the overall composite. 


Within the biotech industry, San Diego ranks 2nd in terms of absolute employment size among the 

metros examined, with 14,500 biotech workers. Only Boston had a higher employment size, with 

18,700 workers within the biotech industry. In relative terms, however, San Diego had the highest 

location quotient. Its concentration of biotech employment is about 5 1/2 times greater than the 

national average. In other words, given San Diego’s overall employment base, a relatively higher 

proportion is comprised of biotech and related R&D. Much of this can be attributed to the presence 

of U.C. San Diego, the Salk Institute, and the Scripps Research Institute, which have generated 

112 biomedical companies combined, founded through their faculty and alumni. 40 “UCSD has 

pioneered the Connect Program trying to put potential inventors with entrepreneurs,” explained 

Henry Nordhoff of Gen-Probe. 

San Diego’s research establishments and universities have provided a foundation for giving birth 

to many commercial biotech companies and attracting others into the region. Haile noted that the 

combination of lifestyle along with the high quality and number of research institutes, such as the 

Salk Institute, Burnham Institute and Scripps, attracts top researchers. 

Growth in venture capital investment coupled with federally funded R&D has led to the training of 

highly skilled individuals and development of biotech start-ups, which growth is reflected in gains 

in employment. In terms of relative employment growth within the biotech industry, San Diego 

grew 10 percent faster than the nation between 1997 and 2002 and ranked 4th overall in growth. 

Finally, for every 10,000 establishments in San Diego, 75 are biotech establishments, ranking it 2nd 

only to San Jose in this category. 

40 California Healthcare Institute, 2002 Report on Southern California’s Biomedical R&D Industry. 

59 


The three-dimensional bubble chart below provides a good way to illustrate size and 

performance. 

Biotech Industry 

Employment - Concentration, Growth, and Size 

Location Quotient (U.S. Average = 1.0) 


7.0 

6.0 

5.0 

4.0 

3.0 

2.0 

1.0 

Philadelphia 

Austin 

Orange Co. 

Raleigh-Durham 

Boston 

Los Angeles 

0.0 

50 60 70 80 90 100 110 120 130 140 

Relative Growth 1997-2002 (Index U.S. = 100) 

The vertical y-axis positioning of each bubble corresponds to the concentration, or location 

quotient, of the biotech industry in each state. Ideally a state’s bubble should be centered above 

the horizontal line at 1.0, which indicates the U.S. national average concentration (equivalent to 

a location quotient of 1). The horizontal x-axis positioning of each bubble corresponds to the 

relative growth of the biotech industry in each state from 1997 to 2002. High-growth states are 

represented by bubbles positioned to the right of the vertical line at 100 (the average growth in the 

U.S. for biotech sectors). Finally, the size of the bubble indicates employment size within the metro. 

If a metro has an LQ above 1.0 and an index growth greater than 100 (e.g., San Diego) then its 2002 

concentration of employment is not only higher than the U.S., but its employment has also grown 

relatively faster than the nation between 1997 and 2002. 

Multiple analyses were performed using four different industry classifications: biotech, medical 

devices, bio-medical (sum of biotech and medical devices), and life science (sum of bio-medical 

and pharmaceuticals). See the Appendix for detailed tables regarding each component. 

Of the 12 metros examined for the biotech industry, only six place above the horizontal line at 1.0 

and to the right of the vertical line at 100, suggesting that these metros are most proficient in their 

regional inputs. Of those six metros, San Diego is the biggest in terms of both absolute and relative 

size in biotech. When looking at the life science industry as a whole (next page), San Diego still 

maintains its vibrant position. 

60 

San Francisco 

San Diego 

Seattle 

San Jose 

Oakland 

Wash.,D.C.

The addition of medical devices and pharmaceuticals to biotech (i.e.,life sciences) improves the 

relative position of those metros with particular strengths in those industries, while conversely, 

weakening those that lack those industries. With that said, only four metros remain within the 

upper right area of the bubble chart (above the horizontal line at 1.0 and to the right of the vertical 

line), along with some relative shifting among the other metros. 

Unlike San Diego, whose position remains strong when looking at biotech alone and life sciences as 

a whole, some metros do not fare as well when incorporating medical devices and pharmaceuticals 

into the picture. 

Looking first at the metros no longer within that spectrum, Washington, D.C. and San Jose, we 

see that Washington, D.C has a higher concentration of biological R&D than manufacturing of 

pharmaceuticals and biological-related products, thus its relative position in life sciences as a whole 

is not as great as in biotech alone. The same holds true for San Jose. One might think that San Jose’s 

high-tech manufacturing of medical devices would strengthen its relative position, but because of 

its lack of manufacturing activity in the pharmaceutical industry, that region does not fare as well 

in the life science category. That region is also still rebounding from losses it endured during the 

dot-com bust. Orange County, on the other hand, improves its relative position in the life science 

bubble chart due the high concentration of medical devices industries there. 


4.0 

3.5 

3.0 

2.5 

2.0 

1.5 

1.0 

0.5 

Life Science Industry Aggregate 



Boston 

Orange Co. 

Philadelphia 

Austin 

San Jose 

0.0 

70 80 90 100 110 120 130 


BIOCOM, an association of biotech and medical devices companies in the San Diego area, has 

61 

Seattle 

San Diego 

Wash.,D.C. 

Los Angeles 


San Francisco 

Oakland


450 industry members. 41 Its purposes include fostering the growth of biomedical innovation by 

providing its member companies with up-to-date information, advocating relevant public policy 

issues, and promoting the continuous development of a highly skilled life sciences workforce. 

BIOCOM has taken the role of advocate for its members, and serves as one of the driving forces 

responsible for the San Diego region’s remarkable growth and success in the life sciences industry. 

As Panetta put its, “BIOCOM focuses on bringing new investment to San Diego, venture capital 

investment, pharmaceutical companies, partnerships, and investment banking, and we focus on 

creating the opportunities for future jobs by working with the universities and the colleges to ensure 

that the curriculum and training programs, and the degree programs are being created to ensure 

that we have the biotech workforce in the future.” The association has grown 500 percent since it 

was established in 1995. 

In San Diego, all four industries that comprise biotech have LQs greater than 2.0, ranking that 

metro first in that category. Conversely, no biotech industries in San Diego have an LQ of less than 

0.5. Thus, the results of the diversity analysis show San Diego’s biotech industry to be the most 

diverse in the nation. According to Mackey, “One of the great things about San Diego is its size. It’s 

large enough to be very stimulating in that you’re always making new connections and meeting 

more people, but it’s small enough that you can maintain those connections.” 

In San Diego, three out of the four industries that make up biotech have seen their employment 

grow faster than the nation, placing the metro 4th in the employment growth category. Oakland, 

San Francisco, and Washington, D.C. all tied for 1st, and have at least four biotech-related industries 

growing faster than the U.S. 

Diversity Measures 

By Metro, 2002 

# of Industries 



with LQ >2.0 

with LQ

5-digit NAICS level and 1 at the 6-digit NAICS level). Again, the life science category is comprised 

of biotech, medical devices, and pharmaceuticals. Even within this broader category, San Diego 

does relatively better than most metros. Metros such as Boston, Philadelphia, and Orange County 

exhibit more diversity due to broader mix of industries with high concentration and growth levels 

in employment. 

In the overall composite index of the current impact measures (CIM), San Diego ranks 1st in terms 

of biotech and 2nd in terms of life science. Only Boston scores higher on the life science composite 

index, while San Jose ranks a respectable 3rd. 

Within the biotech composite, San Diego scores 100 on three of the seven measures and is at 78 or 

better on the rest. Its strengths include not only relative employment size and growth within the 

overall biotech industry, but also a high concentration mix of biotech-related industries as explained 

by the diversity measures. While the region’s biotech activity is funneled primarily through its R&D 

(NAICS 5417102), capturing approximately 71 percent of total biotech employment, San Diego 

has portrayed significant growth in its biotech production process, thus creating a diverse set of 

biotech-related industries. 

The scoring system creates a sense of where each metro stands relative to the other’s performance. 

While the characteristics are unique across each metro, the relative employment growth category 

portrays the least dispersion or standard deviation. Although only six of the 12 metros have been 

growing relatively faster than the United States, the variation in growth among metros has been 

incremental. The category of absolute size contains the widest amount of dispersion as one might 

anticipate. 

The table below summarizes the current impact measures in terms of biotech and ranks the metros 

on a relative scoring system. 

BIOTECH Size and Performance 

Diversity 

Current Impact 

Employment LQ Rel. Growth Establishments # of Ind. # of Ind. # of Ind. Composite 

Level (US=1) (US=100) per 10,000 est. LQ>2 LQUS Index 

MSA 2002 2002 97-02 2001 2002 2002 2002 2002 

San Diego 78 100 89 80 100 100 80 100 

Boston NECMA 100 50 72 45 60 50 20 80 

San Jose 49 85 93 100 60 33 40 78 

Raleigh-Durham-Chapel Hill 35 80 75 61 80 100 40 69 

Seattle-Bellevue-Everett 50 59 88 32 60 50 60 68 

Washington, D.C. 49 28 100 64 40 50 100 65 

Oakland 33 50 98 47 60 50 100 64 

San Francisco 37 59 86 48 40 33 100 64 

Philadelphia 56 37 66 25 40 100 20 58 

Los Angeles-Long Beach 43 17 78 19 40 100 20 50 

Orange County 13 15 57 31 20 50 20 29 

Austin-San Marcos 8 18 50 34 40 33 40 28 

Addendum:Ventura* 31 175 167 28 60 33 80 111 

See footnote below regarding the Ventura MSA. 42 

Current Impact Measures (CIM) - Scores for Biotech 

Ranked by Composite Index 

42 Although Ventura was included as an addendum for the sake of recognizing Amgen as one the nation’s leading companies in the biotech industry, it was excluded from 

the rankings given its relative total employment base. Also note that this study compares MSAs, and not CMSAs, otherwise Ventura MSA would have been incorporated into 

the larger Los Angeles CMSA. 

63 



In San Diego, the R&D component (driven primarily by Scripps, Salk, and U.C. San Diego) has 

served as the foundation for luring biotech manufacturing activity into the region and is responsible 

for many of the university spin-offs. Companies tend to locate in regions where talent exists. Close 

proximity to universities and research institutes attracts a knowledge-based labor pool and plays a 

strategic role in determining the locality of new firms. In short, there tends to be strong correlation 

between the location of R&D activity and the production process. Other instances of close proximity 

to a research-based university driving the emergence of biomedical firms include Stanford in San 

Jose, U.C. Irvine in Orange County, University of North Carolina in Raleigh-Durham, U.C. Berkeley 

in Oakland, and Harvard in Boston. 

In terms of life sciences, however, places like Boston, Philadelphia, and Orange County score higher 

overall. Although perceived as major biotech centers, these metros are awarded proper recognition 

for specializing in nonbiotech specific industries, namely, medical devices (in the case of Boston, 

Philadelphia, and Orange County) and pharmaceutical manufacturing (in the case of Boston and 

Philadelphia). Other metros score higher or lower in the life science category depending upon their 

area of specialization. 

The table below summarizes the current impact measures in terms of life science and ranks the 

metros based on their relative scores. 

Current Impact Measures (CIM) - Scores for Life Science 


LIFE SCIENCE Size and Performance Diversity 




MSA 2002 2002 97-02 2001 2002 2002 2002 2002 

Boston NECMA 100 66 72 49 100 67 56 100 

San Diego 49 84 83 77 88 100 100 92 

San Jose 43 100 72 100 88 29 56 85 

Philadelphia 64 56 70 35 38 100 67 79 

Orange County 42 62 71 48 100 100 44 74 

San Francisco 31 67 85 48 38 40 100 70 





Washington, D.C. 29 21 100 55 25 22 100 57 


Addendum:Ventura 16 118 53 43 63 50 56 71 

Although San Diego scored 100 in only two categories within the life sciences, it still managed to rank 

2nd overall, with a life science composite index score of 92. Limited activity within pharmaceutical 

manufacturing coupled with underperformance in the medical devices’ industry relative to metros 

like Boston, San Jose and Orange County, is the primary reason that San Diego slipped in comparison 

to its biotech ranking on the current impact composite index. On the other hand, San Diego scored 

highest on two out of the three diversity measures, suggesting that although the region may not 

have the largest absolute share of national employment in life sciences, it certainly ranks among the 

64

highest when adjusting for its total employment base. This adjustment process is captured by the 

location quotient for each life science industry. The majority of San Diego’s life science industries 

are either characterized by high location quotients (also referred to as export-based industries) or 

industries that have an LQ of at least greater than 0.5, which count for some contribution toward 

local demand. Using this analysis, San Diego has one of the most diverse life science sectors in the 

nation. Furthermore, when the LQ of a particular industry exceeds 1.0, it suggests that the industry 

has more than met the needs of local demand and is exporting its benefits beyond the region. 

Boston ranked 1st in the life science composite index. Remarkably, Boston’s score of 100 on the 

absolute employment measure gives the metro a significant edge, especially since Philadelphia, 

the 2nd closest to Boston in that category, scored 64. The wide spread across metros characterizes 

Boston’s importance in the life sciences. The fact that Boston has the highest number of industries 

with LQ’s greater than 2.0, suggests that the metro is not merely diverse in the life sciences, but 

highly diverse. 

Clustering and the Spatial Dimension of San Diego 

The following section provides some explanation of what constitutes a cluster and how firms and 

employment in biotechnology are spatially distributed in San Diego. 

Clusters of existing and emerging science-based technologies are critical factors in shaping the 

economic winners and losers of the first half of the 21st century. Because knowledge is generated, 

transmitted, and shared more efficiently in close proximity, economic activity based on new 

knowledge has a high propensity to cluster within a geographic area. 43 Biotechnology is reaching 

maturity phase, but because of rapid discoveries in new biological processes and related areas, 

and their potential for breakthrough compounds, commercialization in the industry is likely to 

accelerate. As economic activity is increasingly based more on intangible assets, those regions with 

vibrant technology and medical-related clusters will experience superior economic growth. In 

other words, a region with a top biotechnology cluster will have more innovations, less of which 

will escape to other regions, or at least, they will do so at a slower rate. 

The keys to regional viability are now linked to their ability to establish local technology and 

medical-related clusters that are networked with the global business community. The paradox 

of the global-based economy is that the enduring competitive advantages lie in location-specific 

competencies—knowledge, workforce skills, customer and supplier relationships, entrepreneurial 

infrastructure, management practices, the motivations, and quality-of-place attributes that allow 

firms to thrive. In essence, thinking locally to succeed globally. 44 

43 DeVol, Ross C. 2000. Blueprint for a High Tech Cluster, The Case of the Microsystems Industry in the Southwest, Santa Monica: Milken Institute Policy Brief. 

44 Moss Kanter, Rosabeth. 2000. Thriving Locally in the Global Economy,” World View: Global Strategies for the New Economy, Jeffrey E. Garten, editor. Boston, MA: Harvard 

Business School Publishing. 

65 



Industry clusters and their associated support infrastructure are a region’s best defense against 

being arbitraged in a global cost-minimization game, especially in those based upon medical-related 

agglomerations. Firms, and the clusters to which they belong, can mitigate input-cost disadvantages 

through global sourcing. Location sustainability is contingent upon making more productive use of 

inputs, based largely upon innovation competencies. Clusters linked to the outside world offer their 

regions access to the best practices and latest industry developments. 45 Regions excel to the extent 

that the firms and talent in them can innovate successfully by being there, rather than somewhere 

else. This is particularly poignant for an industry such as biotechnology whose survival is based 

upon continuous innovation streams. 

To create international comparative advantage in a knowledge-based economy, clustering innovative 

activity is imperative. The spatial dimensions of economic activity are becoming an interesting 

field of inquiry—space is central to understanding how an economy works. 46 Since the late 1980s, 

there has been renewed interest in “economic geography” mainly because of new statistical tools. 

If we really lived in a world of constant returns, we would not see the high level of specialized 

economic activity within regions that we do. This clustering results from businesses and workers 

seeking geographic proximity with others engaged in related activities. Increasing returns lead to 

competitive advantages, as in, the more that is produced, the cheaper it is to make. Such externalities, 

or what an economist might call agglomeration effects, typically arise from three primary sources: 

labor-force pooling, supplier networks and technology spillovers. 

How do we describe clusters? A common misperception of clusters is that they are based upon a 

single industry. One single industry might be the core of a cluster, but without its partners, it may 

not endure for long. Industry clusters are geographic concentrations of sometimes competing, 

sometimes collaborating firms, and their related supplier-network. 47 They are agglomerations of 

interrelated industries that foster wealth creation in a region, principally through the export of 

goods and services beyond its borders. 

Clusters depict regional economic relationships—local industry drivers and regional dynamics— 

more richly and aptly than do standard industrial methods. An industry cluster differs from the 

traditional definition of an industry group. It represents an entire value chain of a broadly defined 

industry sector from suppliers to end products, including its related suppliers and specialized 

infrastructure. A cluster of interdependent linked firms and institutions represents a collaborative 

organization form that offers its members advantages in efficiency, effectiveness and flexibility. 48 

45 Coyle, Diane. 2001. Paradoxes of Prosperity: Why The New Capitalism Benefits All New York, NY: TEXERE. 

46 Fujita, Mashisa, Paul Krugman, and Anthony J. Venables. The Spatial Economy: Cities, Regions, and International Trade. Cambridge, MA: The MIT Press. 

47 Kotkin, Joel and Ross C. DeVol. 2001. “Knowledge-Values Cities in the Digital Age,” Santa Monica: Milken Institute. 

48 Porter, Michael E. 2000. “Clusters and the New Economics of Competition,” World View: Global Strategies for the New Economy, Jeffrey E. Garten, editor. Boston, MA: Harvard 

Business School Publishing. 

66

Supplier networks are instrumental to the success of clusters and fostering sustained agglomeration 

processes. Clusters are interconnected by the flow of goods and services. This flow is stronger than 

the one linking them to the rest of the local economy. Cluster members usually include governmental 

and other nongovernmental entities such as public/private partnerships, trade associations, 

universities, think tanks and vocational training programs, venture capitalists, patent attorneys, 

and even accounting and auditing firms in the case of biotechnology. These institutions provide 

specialized skill training, education, research, and technical support. Cluster members include both 

high- and low-value activities. 49 

The key to regional technology sustainability is based upon the diversity of its ecosystem. Locally 

based innovative technology firms that evolve into dominant players are necessary, but not sufficient 

for sustaining the system. These newly dominant firms assist regions in developing management 

capabilities that can be leveraged to quicken the pace of innovation for new entrants. Newly formed 

entrepreneurial firms can tap into the technology management capabilities resident in the region to 

rapidly exploit emerging technology market opportunities. Many high-tech regions have developed 

capabilities for rapid design changes at dominant firms, and more importantly, integrating new 

regional knowledge into new firm births. The leading biotech clusters in the United States epitomize 

this model of innovation and sustainability. 

While it is clear that discoveries in biotechnology will surely benefit the entire human race, there 

is a different kind of race underway: the one that will determine where the primary geographic 

locations of this industry will reside. The economic consequences of where these biotechnology 

clusters form and grow will likely be immense. San Diego is well positioned to collect the economic, 

job creation and social benefits of this rapidly growing industry. 

In order to gain a more complete picture of the spatial dimensions of the San Diego biotechnology 

and life sciences cluster, it is beneficial to map its organizations and employment centers. The 

accompanying map shows the location of each biotechnology, medical device, pharmaceutical and 

related health division firm within the county of San Diego. From the map it is clear that most firms 

are located in La Jolla and the area east of Interstate 5 in the city of San Diego near La Jolla. There 

are more than 90 firms in La Jolla and adjacent it to the east in San Diego. This concentration of 

firms is called the Golden Triangle by cluster participants. These firms are within a five-mile radius 

of one another from the center. The next largest concentration of firms is in the Carlsbad/Vista area 

with more than 30 firms. 

49 Porter, Michael E. 1998. On Competition. Boston, MA: Harvard Business Review Book Series. 

67 



The Golden Triangle is the area bounded by Interstate 5, Highway 52 and Highway 805. The map 

displays how it acquired its name. As firms began spinning out of the La Jolla research institutes, 

the logical place to locate was to the east where land was available and relatively inexpensive when 

the cluster started to form. Fishburn noted that, “There were a number of unique things that I 

think led to the formation of the biotech cluster here. One very unique aspect was the geography 

of San Diego and … the fact that you can get most places within a relatively small amount of time.” 

Agouron Pharmaceuticals is one of the major employers in the Golden Triangle with over 1,600 

on its payrolls. Other major firms include Biosite Incorporated, BD Parmingen Inc. and Ligand 

Pharmaceuticals Inc. The mean employment size of biotech firms in the Golden Triangle is slightly 

less than 200. The table below shows the location of firms by city within the county. 

68

San Diego Biotech & Life Science Cluster * 

Biotech & Life Science Firms and Employment by City, 2003 

Rank City Number of Firms Employment 

1 San Diego 105 22,740 

2 La Jolla 11 6,739 

3 Vista 11 2,073 

4 Carlsbad 21 2,030 

5 Chula Vista 4 1,290 

6 San Marcos 6 409 

7 Poway 1 349 

8 Oceanside 4 333 

9 Santee 2 240 

10 National City 2 190 

11 Solana Beach 2 130 

12 Fallbrook 1 125 

13 Escondido 3 119 

14 Spring Valley 1 80 

15 El Cajon 1 68 

16 Del Mar 1 50 

17 San Ysidro 1 24 

18 La Mesa 1 5 

Total 178 36,994 

Sources: Dun & Bradstreet (D&B), Milken Institute. 

*Note: Includes related health care division employment. 

The following map translates the concentration of biotechnology and other life science firms’ 

employment by area within the county of San Diego. One of the most striking features of this 

map relative to the one on firm location is that employment is more heavily based in La Jolla. 

The large bubble in La Jolla is caused by the high employment at the Scripps, Salk and Burnham 

Institutes. Coupled with Pfizer R&D activities in La Jolla (more than 2,000 employees) you have a 

large research employment base. The Golden Triangle represents perhaps the densest concentration 

of biotech research, firm and overall employment in the nation. Ivor Royston of Forward Ventures 

support this hypothesis, “…we have the highest concentration of biotech companies per unit mile 

… whatever the denominator…” [e.g., employment, per capita, population]. 

This translates into other social patterns within the area as Mackey noted, “One of the great things 

about San Diego is its size; it’s very small geographically. So we run into people all the time. Once 

you’re out a little, it’s a very small town in that my neighbor is the head of the Institute of Molecular 

Medicine at UCSD, the Vice Chancellor lives up the street; Marsha Chandler, Ed Holmes live three 

blocks down in La Jolla.” Royston goes on to illuminate the unique relationship further, “You go 

to a restaurant; you see other biotech people. It’s like the entertainment industry in Hollywood. 

One big family. That’s what so unique about this cluster.” It’s the informal, unplanned interactions 

where much productive activity takes place in supporting the outcomes of the cluster. The tighter 

the cluster is physically, the more opportunities for these interactions. 

69 



Methodology 

The purpose of this section is to clarify in detail the definition of biotech and life science as it 

pertains to this study. A brief explanation regarding the data estimation and sources used in arriving 

at the current impact measures is also included. 

Defining the Industries 

The industry data compiled and used in this study is based on the 2002 North American 

Classification System (NAICS) as defined by the Office of Management and Budget (OMB) of the 

federal government. 

In measuring the current impact assessment, four similar yet unique industry groups were examined: 

biotech, medical devices, biomedical, and life science. Although this report primarily analyzes the 

biotech and life science industries, data was compiled for all four industry groups. Detailed tables 

and charts are provided in the appendix. 

70

Below is a list of NAICS-based industry classifications that were used in defining the biotech 

industry: 

Defining the Biotech Industry 

NAICS Biotech Industry 

325411 Medicinal and botanical manufacturing 

325413 In-vitro diagnostic substance manufacturing 

325414 Other biological product manufacturing 

5417102 Biological R&D 

Similarly, the medical devices industry is defined using the following NAICS-based industry 

classifications: 

Defining the Medical Devices Industry 

NAICS Medical Devices Industry 

339111 Laboratory apparatus and furniture mfg. 

339112 Surgical and medical instrument manufacturing 

339113 Surgical appliance and supplies manufacturing 

339114 Dental equipment and supplies manufacturing 

339115 Ophthalmic goods manufacturing 

339116 Dental laboratories 

334510 Electromedical apparatus manufacturing 

334517 Irradiation apparatus manufacturing 

The biomedical industry group is simply the aggregate of the biotech and medical devices industries. 

This classification provides an additional perspective of analysis and may result in a different set of 

metro rankings on the current impact measures. 

The life science industry group is defined as the aggregate of biomedical and pharmaceutical 

preparation manufacturing (NAICS–325412). Next is a table that lists the 13 industries that define 

the life science category. 

71 



The life science industry group provides yet another perspective in examining the current impact 

measures and produces a unique set of outcomes. It rewards those metros that offer more than just 

biotech. Places like Boston, which are known for the manufacturing of pharmaceutical products, 

score higher in the life science category. 

Data Estimation Techniques 

Defining Life Science 

NAICS Life Science Industry Group 

325411 Medicinal and botanical manufacturing 

325412 Pharmaceutical Preparation manufacturing 

325413 In-vitro diagnostic substance manufacturing 

325414 Other biological product manufacturing 

5417102 Biological R&D 

339111 Laboratory apparatus and furniture mfg. 

339112 Surgical and medical instrument manufacturing 

339113 Surgical appliance and supplies manufacturing 

339114 Dental equipment and supplies manufacturing 

339115 Ophthalmic goods manufacturing 

339116 Dental laboratories 

334510 Electromedical apparatus manufacturing 

334517 Irradiation apparatus manufacturing 

Six of the seven measures used in arriving at the current impact assessment are based on employment 

data, while one is based on the number of establishments. The employment data was derived using 

government released ES202 and County Business Pattern data. ES202 metro employment data is 

available from 2000–2001 at the 4-digit NAICS level from the Bureau of Labor Statistics (BLS). 

The ES202 reports payroll employment derived from the quarterly tax report submitted to state 

Employment Development Departments (EDDs) that are subject to unemployment insurance 

(UI) laws. It has been appropriately re-benchmarked to the former SIC classification system to 

include history through 1980 by Economy.com. However, in order to obtain a more detailed level 

of industry classification, specifically, the 5-digit NAICS level data, County Business Pattern (CBP) 

employment data must be obtained from the U.S. Census Bureau. CBP data, available from 1998– 

2001, was used to calculate the shares of employment at a more detailed NAICS level, and then 

applied to the higher NAICS level from ES202 for those years. Since ES202 data at the 4-digit NAICS 

level is available for 2002, the employment shares from the 2001 CBP are then redistributed using 

the absolute change in ES202 employment from 2001 to 2002. Similarly, the 1998 CBP employment 

shares are applied to the 1998 ES202 and then carried back one year to 1997, thus maintaining a 

realm of consistency and producing detailed historical estimates through 1997. 

72

For the Biological R&D industry, represented by the 7-digit NAICS code 5417102, data is publicly 

available from the 1997 Economic Census. Employment shares from the 2001 CBP and historical 

trends from the ES202 data set were applied in obtaining more current estimates. 

By applying these estimation techniques, detailed metro employment data up to the 5-digit NAICS 

level (and 7-digit for Biological R&D) is compiled for 1997 to 2002. Twelve (12) metropolitan areas 

were examined as a basis for relative comparison. The 12 metros examined all engage in some 

type of biotech/life science activity. Those metros are: Austin-San Marcos, Boston, Los-Angeles- 

Long Beach, Oakland, Orange County, Philadelphia, Raleigh-Durham-Chapel Hill, San Diego, San 

Francisco, San Jose, Seattle-Bellevue-Everett, and Washington, D.C. Ventura was accounted for as 

an addendum, mainly to recognize Amgen as a world leader in the biotech industry. However, since 

it is the only biotech establishment in Ventura, it would not be justified to include it in the rankings 

among the other metros. 

Finally, establishment data at the detailed 5-digit NAICS level was compiled from the County 

Business Patterns and then processed into the appropriate categories as described earlier in this 

section. 

73 





This section provides a brief overview of all components discussed within the innovation pipeline 

and current impact assessment sections. The individual components are R&D inputs, risk capital, 

human capital, biotech workforce and current impact. The first four focus on topics such as 

research and innovation, the availability of financial resources, local talent pool, and occupational 

strengths. Current impact, as discussed earlier, explains where the metro currently stands in the 

nation in terms of industry employment, while emphasizing areas of high concentration, growth 

and diversity. 

The overall composite index combines all components and creates an overall ranking of the top 

biotech and life science centers in the country. While each component is vital in assessing overall 

metro performance, some components are undoubtedly of higher importance than others and 

should be given more weight, accordingly. The R&D component is accorded a weight that is 1.5 

times greater on the overall composite index since it is difficult to build an industry without the 

proper R&D infrastructure, making R&D, arguably, the most important component. Without new 

ideas and innovation, an industry would struggle to compete in the global market and face many 

local challenges. The presence of R&D serves as a basis for attracting high-knowledge workers, 

biotech and pharmaceutical companies, and various forms of venture capital investment. Similarly, 

the current impact index carries a weight that is twice as great on the overall composite. The current 

impact essentially describes the outcome or impact as a result of the innovation pipeline measures. 

It receives greater weight since it directly explains a metro’s regional economic performance within 

a given industry. 


The following table provides a summary of the main individual components, the overall composite 

index, along with the metros and their associated scores and rankings. Since two versions of the 

current impact assessment were constructed, one for biotech and one for life science, there are also 

two versions of the overall composite index. The first table is the biotech overall composite. 

74

Milken Institute's 2004 Biotech Index 



Composite 

Composite 

Composite 














5. Current Impact 

Overall 


(Biotech) 

Composite 

Composite 

Composite 

Composite 


Raleigh-Durham-Chapel Hill 1 100.0 San Diego 1 100.0 San Diego 1 100.0 

Boston 2 99.2 Boston NECMA 2 80.3 Boston NECMA 2 95.1 

San Jose 3 95.6 San Jose 3 78.1 Raleigh-Durham-Chapel Hill 3 92.5 

Oakland 4 93.9 Raleigh-Durham-Chapel Hill 4 69.4 San Jose 4 87.8 

San Diego 5 91.7 Seattle-Bellevue-Everett 5 68.4 Seattle-Bellevue-Everett 5 83.8 

Washington, D.C. 6 86.3 Washington, D.C. 6 64.8 Washington, D.C. 6 79.4 

Seattle-Bellevue-Everett 7 78.3 Oakland 7 64.2 Philadelphia 7 76.5 

Philadelphia 8 77.7 San Francisco 8 63.6 San Francisco 8 75.8 

San Francisco 9 76.1 Philadelphia 9 58.5 Oakland 9 74.3 

Los Angeles-Long Beach 10 70.8 Los Angeles-Long Beach 10 50.0 Los Angeles-Long Beach 10 66.5 

Orange County 11 67.7 Orange County 11 29.2 Orange County 11 54.1 

Austin-San Marcos 12 42.2 Austin-San Marcos 12 27.8 Austin-San Marcos 12 47.8 

1 6 

2 5 

3 4 

4 3 

5 2 

Total 1 

Biotech Workforce (San Diego = 5th Place) 

Biotech Composite Index 

San Diego's Relative Score 

Biotech Research & Development Assets (San Diego = 1st Place) 

Biotech Risk Capital & Entrepreneurial Infrastructure (San Diego = 3rd Place) 

Current Impact (Biotech) (San Diego = 1st Place) 

Biotech Index (San Diego = 1st Place) 

60 65 70 75 80 85 90 95 100 


1 2 3 4 5 Total 

San Diego 100.0 1 97.4 2 79.7 3 91.7 4 100.0 5 100.0 6 

U.S. Series1 Avg. 

78.5 100 73.9 100 91.7 62.6 79.7 73.9 97.4 N/A N/A 100 

San Diego ranks 1st in the nation in the biotech overall composite index. Much of this can be 

attributed to its relative 1st-place ranking within the R&D and current impact indices. Boston is 

75 


Biotech Human Capital Capacity (San Diego = 4th Place)


a close 2nd with a relative score of 95.1, followed by Raleigh-Durham and San Jose with scores of 

92.5 and 87.8, respectively. San Diego’s relative placement proves that the metro has successfully 

capitalized on its regional inputs. Its high concentration of biotech employment and research 

institutions has established a knowledgeable labor force, increased the intensity of human capital 

and created or lured innovative and successful biotech companies to the region. The following map 

illustrates our overall composite measure of biotech centers, or as we call them, “Biotech Poles,” for 

the relative biotech pull that they exert. 

San 

Francisco 

(75.8) 

Los Angeles 

(66.5) 

Orange County 

(54.1) 



San Diego 

(100.0) 

Milken Institute Biotech Poles 

2004 


Austin 

(47.8) 

76 

Washington 

D.C. (79.4) 

Raleigh 

(92.5) 

Boston 

(95.1) 

Philadelphia 

(76.5) 

Replacing the biotech current impact index in the overall composite with the life science current 

impact index and keeping the other components constant shifts the rankings in the overall composite 

index. Again, as stated earlier in the report, it is necessary to distinguish between biotech and life 

science, since life science includes medical devices and pharmaceutical preparation in addition 

to biotech. Those metros highly engaged in pharmaceutical and medical devices manufacturing 

activity, in addition to their biotech presence, rise accordingly.

The table below is the overall composite index with the life science current impact index, producing 

a different set of rankings. 

Milken Institute's 2004 Life Science Index 



Composite 

Composite 

Composite 














5.Current Impact 

Overall 


(Life Science) 

Composite 

Composite 

Composite 

Composite 


Raleigh-Durham-Chapel Hill 1 100.0 Boston NECMA 1 100.0 Boston NECMA 1 100.0 

Boston 2 99.2 San Diego 2 91.6 San Diego 2 95.9 

San Jose 3 95.6 San Jose 3 85.4 San Jose 3 88.9 

Oakland 4 93.9 Philadelphia 4 78.6 Raleigh-Durham-Chapel Hill 4 88.8 

San Diego 5 91.7 Orange County 5 73.9 Philadelphia 5 81.8 

Washington, D.C. 6 86.3 San Francisco 6 70.0 Seattle-Bellevue-Everett 6 81.1 

Seattle-Bellevue-Everett 7 78.3 Los Angeles-Long Beach 7 68.2 San Francisco 7 76.7 

Philadelphia 8 77.7 Oakland 8 67.1 Washington, D.C. 8 75.8 

San Francisco 9 76.1 Seattle-Bellevue-Everett 9 63.9 Oakland 9 74.1 

Los Angeles-Long Beach 10 70.8 Raleigh-Durham-Chapel Hill 10 62.2 Los Angeles-Long Beach 10 71.3 

Orange County 11 67.7 Washington, D.C. 11 57.1 Orange County 11 67.6 

Austin-San Marcos 12 42.2 Austin-San Marcos 12 37.8 Austin-San Marcos 12 50.2 

1 6 

2 5 

3 4 

4 3 

5 2 

Total 1 

Biotech Workforce (San Diego = 5th Place) 

Life Science Composite Index 


Biotech Research & Development Assets (San Diego = 1st Place) 

Biotech Risk Capital & Entrepreneurial Infrastructure (San Diego = 3rd Place) 

Current Impact (Life Science) (San Diego = 2nd Place) 

Life Science Index (San Diego = 2nd Place) 

60 65 70 75 80 85 90 95 100 

1 2 


3 4 5 Total 

San Diego 

100.0 1 97.4 2 79.7 3 91.7 4 91.6 5 95.9 6 

U.S. Series1 Avg. 95.9 78.5 73.9 91.6 91.7 62.6 79.7 73.9 97.4 N/A N/A 100 

San Diego ranks 2nd on the overall life science composite index. With Boston’s high concentration 

of pharmaceutical industries, the metro moves up to 1st-place as the nation’s top locale for life 

77 


Biotech Human Capital Capacity (San Diego = 4th Place)


science. Boston is also well equipped with respect to the manufacturing of medical devices as noted 

in The Economic Contributions of Health Care to New England 50 , in another report conducted 

by the Milken Institute. San Jose and Raleigh-Durham finish 3rd and 4th, respectively, on the life 

science overall composite index. The Milken Institute’s nationwide mapping of “Life Science Poles” 

demonstrates life science-driven metro areas on the basis of the overall life composite measure. Life 

Science Poles capture the spatial intensity of life science-driven sectors. 

San 

Francisco 

(76.7) 

Los Angeles 

(71.3) 

Orange County 

(67.6) 

San Diego 

(95.9) 

Milken Institute Life Science Poles 




2004 

Austin 

(50.2) 

Methodology 

Mathematically speaking, where ƒ stands for “is a function of”: 

— biotech overall composite index = ƒ (1.5*R&D input index, risk capital index, human 

capital index, biotech workforce index, 2* biotech current impact index); and 

— life science overall composite index = ƒ (1.5*R&D input index, risk capital index, 

human capital index, biotech workforce index, 2* life science current impact 

index). 

For a detailed methodology on each component and its subcomponents, please see the methodology 

section pertaining to that component. 

50 DeVol, Ross and Rob Koepp. 2003. The Economic Contributions of Health Care to New England, Santa Monica: Milken Institute. 

78 

Washington 

D.C. (75.8) 

Raleigh 

(88.8) 

Boston 

(100.0) 

Philadelphia 

(81.8)

Multiplier Impacts 


To better understand the importance of the biotech/life science industry in San Diego we must 

analyze its impact on the overall economy. Multiplicative values known as “multipliers” allow us to 

do this by quantifying how employment and output in biotech/life science industry ripple through 

other regional economic sectors. In addition to providing numerical data on an industry’s regional 

impact, economic multipliers also bring to light region-wide interdependencies and inter-industry 

relationships. It is important to appreciate these relationships because they directly influence how 

regional economies respond to changes in long-term industry structure and business cycles. 

Within the concept of multiplier impacts, three key forces are at play. The first is what is known as 

the direct impact, which measures how an industry’s employment, wages and output immediately 

translate into economic stimulus for other sectors of the economy that support the industry (for 

example, suppliers of legal, financial, and advertising services). 

The second multiplier force relates to indirect impact. This represents a further extension of stimulus, 

the sort given to tertiary economic activity that, although not directly interacting with the studied 

industry, nevertheless is supported by it through a region’s overarching economic framework. An 

example of an indirect impact of the biotech industry is the wholesale and retail distribution of 

drug products in the region. The cumulative employment and wages generated by all of this tightly 

and extensively interconnected economic activity ripples throughout the regional economy. The 

wealth created leads to greater purchases of goods and services. This, in turn, produces still more 

income that becomes available to a region’s residents who recycle their earnings back into their 

local economies. 

The net result of this latter process is known as induced impact. For example, in addition to the 

consumer spending by chemists, microbiologists, biotech researchers, and pharmacists, spending 

by restaurant workers, retail clerks, real estate agents, contractors, and many others indirectly 

dependent upon the industry is also accounted for in this measure. It is through the aggregation of 

these impacts, also referred to as the total impact, that a given industry contributes to its local 

economy. 

79 

Multiplier Impacts



In 2002, the biotech industry in San Diego employed more than 14,500 workers, producing a gross 

metro product of $2.7 billion. These figures represent the direct impact of the biotech sector on the 

regional economy. When the full extent of multiplicative dynamics are accounted for by applying 

total impact measures, biotech can be recognized as responsible for 38,200 jobs, or 3.1 percent of 

all nonfarm employment, and $5.7 billion worth of output, or 5.2 percent of all real gross metro 

product, throughout San Diego. 

The additional 23,700 jobs and $2.9 billion in these total impact figures stem from the indirect and 

induced impacts that biotech brings to the rest of the economy. The indirect impact generates an 

additional 8,400 jobs and $815.7 million worth of output, while the induced effect adds another 

15,300 jobs and $2.1 billion worth of output. Together they contribute to the total impact that the 

biotech sector brings to the region. 

Consequently, the total biotech employment multiplier in San Diego is 2.6 (38,200/14,500). In 

other words, each job in San Diego’s biotech sector produces an additional 1.6 jobs in other sectors. 

By the same token, since 1.2 percent of total employment in San Diego is in biotech, the industry 

ultimately accounts for nearly 3.1 percent of total employment in San Diego when including the 

multiplier effect (1.2 percent multiplied by 2.6). 

Between 1997 and 2002, the biotech industry accounted for 1.5 percent of total nonfarm employment 

growth in San Diego. When incorporating for the total impacts, biotech growth comprised of 4.1 

percent of total growth. With respect to output, biotech was responsible for 3.5 percent of total 

non-farm growth in output from 1997 to 2002. When adjusting for the total impacts, that growth 

expanded to 7.4 percent of the total share. 

The following table provides a breakdown of the direct, indirect and induced impacts on employment 

in San Diego by the following industry classifications: biotech, medical devices, biomedical and life 

science. 

Employment Multiplier Impacts 

San Diego, CA MSA 

Employment (In Thous.) 

Industry Direct Indirect Induced Total Multiplier 

Biotech 14.5 8.4 15.3 38.2 2.6 

Medical Devices 5.7 3.2 5.4 14.3 2.5 

Bio-Medical 20.2 11.5 20.6 52.4 2.6 

Life Science Total 


21.0 12.6 22.0 55.6 2.7 

80

Similarly, a total output multiplier of 2.1 indicates that for each dollar of output produced in the 

biotech sector, an additional $1.10 worth of output is generated outside of it. 

Output Multiplier Impacts 

San Diego, CA MSA 

Output (In US$ Millions) 

Industry Direct Indirect Induced Total Multiplier 

Biotech 2701.0 815.7 2142.0 5658.8 2.1 

Medical Devices 76.6 20.7 35.8 133.1 1.7 

Bio-Medical 2777.7 836.4 2177.8 5791.9 2.1 

Life Science Total 


2796.0 842.8 2185.8 5824.6 2.1 

The employment multiplier, with respect to the life science industry, is nearly equivalent to the 

one represented by biotech. This suggests that the relative contribution of the biotech and medical 

devices industries in terms of employment is similar. In absolute terms, however, biotech contributes 

an additional 23,700 jobs, while medical devices adds another 8,600 jobs. 

Altogether, the life science industry in San Diego MSA is responsible for 55,600 jobs, or nearly 5 

percent of all nonagricultural employment in the region. Of those, 21,000 are accounted for directly, 

while 12,600 and 21,000 are generated through the indirect and induced effects, respectively. For 

every job within the life sciences in San Diego, an additional 1.7 are created in all other sectors (see 

graphs below). 


Direct, Indirect and Induced Impacts - Employment, 2002 

Employment (Ths.) 

60 

Direct 

Total = 55.6 

50 

Indirect 

Induced 

40 

21.0 

30 

20 

10 

0 


12.6 

21.0 

Total Impact 


Direct, Indirect and Induced Impacts - Output, 2002 

Output (Billions of $U.S.) 

7 

Similarly, the life science industry in San Diego MSA is responsible for $5.8 billion, or 5.3 percent 

of gross metro product in the region. $2.8 billion is registered directly, while $843 million and 

$2.2 billion are generated through the indirect and induced impacts, respectively. For each dollar 

of output produced in the life sciences sector in San Diego, an additional $1.10 worth of output is 

generated beyond it. 

6 

5 

4 

3 

2 

1 

0 

81 

Direct 

Indirect 

Induced 


Total = $5.8 Billion 

22 

.843 

2.8 

Total Impact 

Multiplier Impacts


Methodology 

The Milken Institute utilized the Regional Input-Output Modeling System (RIMS II) developed 

by the Bureau of Economic Analysis (BEA) at the U.S. Department of Commerce to conduct its 

systematic economic multiplier impact analysis. This methodology makes use of the input-output 

structure of U.S. industries to estimate the total impact one industry has on the wider economy. 

The employment and output multipliers from RIMS are applied to the appropriate employment 

and output estimates from the Bureau of Labor Statistics (BLS) and Economy.com, respectively. 

The input-output matrix from RIMS provides the necessary coefficients or multipliers needed to 

estimate the total number of jobs and value of wealth generated in all other sectors through the 

biotech industry. Thus, the total impact is calculated by applying the multiplier to the direct impact 

for either employment or output. Further statistical estimation is conducted to derive the difference 

between the induced and indirect shares. 

The BEA multipliers are based on 2000 regional data as defined by the standard industrial 

classification (SIC) system. Since employment data from the current impact assessment is based 

on the more current North American Industry Classification (NAICS) system, the SIC-based data 

was converted into NAICS to maintain consistency throughout the entire report. The U.S. Census 

provides a mapping of the two classifications utilized in translating SIC to NAICS and vice versa. 

Furthermore, the Office of Management and Budget contains the official documentation behind 

the NAICS classification. 

82

Conclusion 

Based upon our evaluation criteria, San Diego ranks as the top biotechnology cluster in the 

country, edging past 2nd-place Boston. If the benchmarking criteria were adjusted somewhat, 

Boston might surpass it. In many respects the two are virtually tied, but San Diego’s higher current 

impact assessment, better R&D score and faster growth over the past five years give it a slight 

advantage. Cambridge-based (Boston MSA) Biogen’s recent acquisition of IDEC might impact 

these placements in the future. 

Many in the industry view San Francisco as holding a top spot, but that perception is based upon 

looking at the entire San Francisco Bay Area and absolute measures of performance. While the Bay 

Area has many assets, when you split the San Francisco metro area out separately and scale the 

biotech indicators by population, employment, or GMP, its relative scores are not as impressive. 

On the other hand, if industry R&D expenditures by such biotech giants as Genentech and Chiron 

were publicly available by metro area, San Francisco would undoubtedly have a higher score. 

Raleigh-Durham is a rising biotech cluster as denoted by its 1st–place finish in both the human 

capital and biotech workforce categories (and its overall 3rd place in biotech), although the metro’s 

smaller size must be taken into account. San Jose is the top scoring Bay Area metro biotech cluster 

at 4th and grew faster over the last five years than San Diego. 

When extending the analysis to life science clusters, including medical devices and pharmaceuticals, 

Boston moves past San Diego to 1st overall. Boston’s top position in medical devices and strength 

in pharmaceuticals give it more diversity. San Jose moves to 3rd in life sciences, courtesy of its 3rd 

place in medical devices just behind Orange County. Raleigh-Durham slips to 4th in life sciences. 

Philadelphia, courtesy of pharmaceuticals, ranked 5th as a life science cluster based upon our 

evaluation criteria. 

The biotechnology and life science cluster plays a central role as an economic engine of San 

Diego. 

• Altogether, the life science industry in San Diego MSA is responsible for 55,600 jobs, 

or nearly 5 percent of all nonagricultural employment in the region. Of those, 21,000 

are accounted for directly, while 12,600 and 21,000 are generated through the indirect and 

induced effects, respectively. For every job within the life sciences in San Diego, 

an additional 1.7 jobs are created in all other sectors. 

• Similarly, the life science industry in San Diego MSA is responsible for $5.8 billion, or 5.3 

percent of gross metro product in the region. $2.8 billion is registered directly, while $843 

million and $2.2 billion are generated through the indirect and induced impacts, 

83 

Conclusion


respectively. For each dollar of output produced in the life sciences sector in San Diego, 

an additional $1.10 of output is generated beyond it. 

• Between 1997 and 2002, the biotech industry accounted for 1.5 percent of total nonfarm 

employment growth in San Diego. When incorporating the total impacts, biotech growth 

comprised of 4.1 percent of total growth. With respect to output, biotech was 

responsible for 3.5 percent of total non-farm growth in output from 1997 to 2002. 

When adjusting for the total impacts, it accounted for 7.4 percent of the aggregate growth 

in output. 

As a national leader in biotechnology and life sciences, San Diego faces enormous opportunities 

and challenges in enhancing or preserving its position. Ensuring that biotechnology continues to 

contribute a disproportionate share of future job and income growth should be a top priority for its 

cluster members, citizens and business and community leaders. Stakeholders must shepherd their 

talents and resources to address the following issues: 

• Despite its strength in overall R&D, San Diego should acquire a greater share of funding 

distributed to research universities. UCSD is a great resource, but lack of scale could 

present it with challenges in the future. 

• While San Diego attracts a high level of venture capital, most of the funds come from 

outside the region. More indigenous or local venture capital firms are needed to exploit 

the inventiveness of entrepreneurs in the area. San Diego must reduce its dependence 

upon VCs flying to the community by air. More local venture capital would improve the 

entrepreneurial infrastructure of the cluster as well. BIOCOM President Joe Panetta 

acknowledges that attracting more venture capital firms to San Diego is one of its 

strategic initiatives. 

• San Diego has been very successful at recruiting some of the best research talent from 

around the country, and even the world. Nevertheless, it must continue to increase 

home grown talent through UCSD and California State University, San Diego. 

Encouraging programs are underway such as dual-degree education like the joint MD/ 

MBA program, the MD/MS in bioengineering program, and joint programs between 

UCSD and Cal State, San Diego. 

• Additionally, more local human capital in biotechnology should be created because the 

high cost of living, especially housing, and rising congestion-related costs will make it 

more difficult to recruit young talent from other parts of the country. 

• San Diego must create more profitable biotechnology firms. Most are still operating in a 

negative cash-flow position. This will limit growth of the cluster in the future. 

84

• San Diego has many commercial success stories, but as its leading biotech firms begin 

to reach critical mass, they are acquired. While this can be seen as a source of strength 

because it allows wealth to circulate back to deployment in starting more firms, it needs a 

few large biotech anchor firms to add more stability to the ecosystem. 

• A larger presence of pharmaceutical firms would create a deeper and richer management 

pool that the larger life science cluster could draw upon. It would increase the efficiency 

at which fledgling biotech firms capitalized on their innovative products and services. 

• San Diego could enhance its future position as a biotech center by demonstrating an 

ability to manufacture more products locally as opposed to being heavily research-based. 

More cross-fertilization efforts would be available. 

These observations should be understood in the context of San Diego as among the elite biotech 

clusters in the world. Innovative and collaborative approaches for maintaining growth must 

continue to be pursued. Pooling resources to retain and create biotechnology jobs, would enable 

the San Diego cluster to become an even greater economic force in the region. BIOCOM, UCSD 

CONNECT, San Diego Regional Economic Development Corporation and other trade groups and 

associations are vital support systems for progress. 

85 

Conclusion


Appendix 

Academic R&D to Biotech 

Per Capita, 2001 

Biotech 

Natural Log Relative 

Rank MSA 

Scale Score 

1 Raleigh-Durham-Chapel Hill 6.18 100.0 

2 San Francisco 5.69 92.1 

3 Austin-San Marcos 5.22 84.5 

4 San Jose 5.09 82.5 

5 Seattle-Bellevue-Everett 5.05 81.7 

6 Boston NECMA 4.67 75.6 

7 Philadelphia 4.63 75.0 

8 San Diego 4.63 74.9 

9 Los Angeles-Long Beach 4.34 70.2 

10 Orange County 3.70 60.0 

11 Oakland 3.68 59.6 

12 Washington, D.C. 3.68 59.6 

U.S. 4.04 65.3 

Number of STTR Awards to Biotech 

Per 100,000 Businesses, 2000 



Rank MSA 

Scale Score 


2 San Diego 3.06 68.2 

3 San Jose 2.65 58.9 










U.S. N/A N/A 

Number of SBIR Awards to Biotech Firms 

Per Million Pop., 2000 



Rank MSA 

Scale Score 


2 San Diego 4.10 73.5 

3 San Jose 3.86 69.2 










U.S. N/A N/A 


86 

NSF Research Funding to Biotech 

Per $100,000 GMP, 2003 



Rank MSA 

Scale Score 


2 San Diego 2.32 63.7 









11 San Jose 0.64 17.7 


U.S. 1.76 48.2 

STTR Award to Biotech 

Per $Million GMP, 2000 



Rank MSA 

Scale Score 


2 San Diego 3.26 65.5 



5 San Jose 2.50 50.3 








U.S. N/A N/A 

Competitive NSF Funding Rate in Biotech Fields 

Percent, 2003 



Rank MSA 

Scale Score 



3 San Diego 3.67 97.8 








11 San Jose 2.94 78.4 


U.S. 3.26 86.8

NIH Funding to Metro Cities 

Per Capita, 2002 



Rank MSA 

Scale Score 


2 San Diego 5.78 93.0 




6 San Jose 4.99 80.3 







U.S. 4.09 65.9 

NIH Funding to Research Universities 

Per $10,000 GMP, 2002 



Rank MSA 

Scale Score 





5 San Diego 2.83 64.7 

6 San Jose 2.66 60.8 







U.S. 2.32 53.2 


San Diego Biotech Research 

2003 

87 

NIH Funding to Institutes 

Per 100 Pop., 2002 



Rank MSA 

Scale Score 

1 San Diego 9.29 100.0 








9 San Jose 5.44 58.5 




U.S. 6.45 69.4 


Composite Index, 2004 


Composite Rebased 

Rank MSA 

Score Composite Score 

1 San Diego 79.7 100.0 






7 San Jose 60.0 75.3 






U.S. 62.5 78.5 

San Diego California 

Percent of 

California Total 

Biotech Research Institutes 12 47 26% 

NIH Awarded Research Projects 745 1,213 61% 

NIH Awarded Research Funding 316.2 ($ Mil.) 537.8 ($ Mil.) 59% 

Sources: National Institutes of Health (NIH), Milken Institute. 

Appendix



Biotech VC Investment Growth 

Annual Average, 2000-2003 



Rank MSA 

Scale Score 


2 San Jose 4.95 96.2 



5 San Diego 4.77 92.6 







12 Oakland N/A N/A 

U.S. 4.61 89.5 

Increase in Number of Biotech Firms Receiving VC 

Annual Average, 2000-2003 



Rank MSA 

Scale Score 



3 San Jose 4.91 93.7 




7 San Diego 4.62 88.2 






U.S. 4.61 87.9 

Biotech Patents Issued 

Per 100,000 Pop., 1996-1999 



Rank MSA 

Scale Score 


2 San Jose 3.52 97.1 


4 San Diego 3.18 87.7 









U.S. 1.61 44.4 

88 

Number of Biotech Firms Receiving VC 

Per 1,000 Biotech Firms, Annual Average, 2000-2003 



Rank MSA 

Scale Score 

1 San Jose 4.91 100.0 


3 San Diego 4.32 88.0 










U.S. 3.31 67.4 

Biotech Venture Capital Investment 

Per $100,000 GMP, Annual Average, 2000-2003 



Rank MSA 

Scale Score 

1 San Jose 4.07 100.0 

2 San Diego 4.01 98.6 











U.S. 1.86 45.7 

Biotech Patents Issued 

Per 1,000 Biotech Workers, 1996-1999 



Rank MSA 

Scale Score 


2 San Jose 4.12 90.8 





7 San Diego 3.83 84.4 






U.S. 3.90 85.9


Biotech Patent Citations 

Per Million Pop., 1996-1999 



Rank MSA 

Scale Score 




4 San Diego 4.80 89.7 

5 San Jose 4.76 89.0 








U.S. 2.91 54.3 

Business Starts 

Per 1,000 Businesses, 2002 



Rank MSA 

Scale Score 





5 San Diego 3.12 77.1 


7 San Jose 2.96 73.2 






U.S. 3.03 74.9 





Rank MSA 


1 San Jose 91.0 100.0 


3 San Diego 88.6 97.4 










U.S. 67.2 73.9 

89 

Appendix 

Biotech Patent Citations 

Per 1,000 Biotech Workers, 1996-1999 



Rank MSA 

Scale Score 





5 San Diego 3.15 79.6 


7 San Jose 3.06 77.2 






U.S. 2.89 73.1 

Tech Fast 500 Companies in Life Science 

Per Million Businesses, 2003 



Rank MSA 

Scale Score 

1 San Diego 4.73 100.0 


3 San Jose 4.39 92.8 










U.S. 2.34 49.4


Biotech Human Capital Investment 

Biotech Graduate Students 

25-34-Year-Olds Per 10,000 Pop., 2001 



Rank MSA 

Scale Score 







7 San Jose 3.16 70.1 


9 San Diego 2.94 65.2 




U.S. 3.03 67.2 

Biotech Postdocs Awarded 




Rank MSA 

Scale Score 



3 San Jose 5.82 95.0 


5 San Diego 5.02 81.8 








U.S. 4.30 70.2 

Bachelor's Degrees Granted in Biotech Field 

Percent of Total Bachelor's Degrees, 2001 



Rank MSA 

Scale Score 



3 San Diego 2.10 95.4 







10 San Jose 1.35 61.4 



U.S. 1.67 76.1 



Rank MSA 

Scale Score 




4 San Jose 3.29 70.9 





9 San Diego 2.90 62.6 




U.S. 2.77 59.7 

90 

Biotech PhDs Awarded 


Biotech Postdocs Awarded 

25-34-Year-Olds Per Research University, 2001 



Rank MSA 

Scale Score 

1 San Jose 6.90 100.0 


3 San Diego 6.52 94.5 









12 San Francisco N/A N/A 

U.S. 5.27 76.4 

Number of Biotech PhD Granting Institutions 

Per 10 Million Pop., 2002 



Rank MSA 

Scale Score 





5 San Diego 2.85 82.4 


7 San Jose 2.47 71.7 






U.S. 2.49 72.2


Number of Biotech PhD Granting Institutions 

Per Million College Enrollees, 2002 



Rank MSA 

Scale Score 





5 San Diego 3.03 82.8 


7 San Jose 2.65 72.4 






U.S. 2.99 81.8 

Biotech Engineers 

Per 100,000 Pop., 2002 



Rank MSA 

Scale Score 

1 San Jose 3.01 100.0 




5 San Diego 1.57 52.3 








U.S. 0.91 30.2 

Recent Master's Degrees in Biotech 

Per 10,000 Workers, 2002 



Rank MSA 

Scale Score 






6 San Diego 1.73 59.5 

7 San Jose 1.44 49.3 






U.S. 0.53 18.3 

91 

Biotech Scientists 

Per 100,000 Pop., 2002 



Rank MSA 

Scale Score 



3 San Diego 4.34 84.9 

4 San Jose 4.29 83.9 









U.S. 3.55 69.5 

Recent Bachelor's Degrees in Biotech 

Per 10,000 Workers, 2002 



Rank MSA 

Scale Score 



3 San Diego 3.61 81.4 








11 San Jose 2.78 62.6 


U.S. 2.35 53.0 

Recent PhD Degrees in Biotech 

Per 100,000 Workers, 2002 

Appendix 



Rank MSA 

Scale Score 





5 San Jose 3.52 69.3 




9 San Diego 3.07 60.4 




U.S. 2.23 43.8







Rank MSA 





4 San Diego 74.7 79.7 

5 San Jose 73.7 78.7 








U.S. 58.6 62.6 

92

Intensity of Life Scientists 

Per 100,000 Workers, 2002 



Rank MSA 

Scale Score 



3 San Diego 5.26 90.9 


5 San Jose 5.17 89.3 








U.S. 4.44 76.6 

Intensity of Microbiologists 

Per 100,000 Workers, 2002 



Rank MSA 

Scale Score 



3 San Jose 3.29 87.0 





8 San Diego 2.35 62.2 





U.S. 2.45 64.7 

Intensity of Medical Scientists 

Per 100,000 Workers, 2002 



Rank MSA 

Scale Score 



3 San Diego 4.51 84.1 





8 San Jose 4.04 75.5 





U.S. 3.81 71.1 


93 

Intensity of Biochemists & Biophysicists 

Per 100,000 Workers, 2002 



Rank MSA 

Scale Score 



3 San Diego 4.35 98.8 

4 San Jose 3.98 90.5 









U.S. 2.48 56.3 

Intensity of Biological Scientists 

Per 100,000 Workers, 2002 



Rank MSA 

Scale Score 



3 San Diego 4.51 93.5 

4 San Jose 4.39 91.1 









U.S. 3.52 72.9 

Intensity of Biomedical Engineers 

Per 100,000 Workers, 2002 

Appendix 



Rank MSA 

Scale Score 

1 San Jose 3.64 100.0 




5 San Diego 2.43 66.7 








U.S. 1.72 47.3





Composite Rebased Composite 

Rank MSA 

Score 

Score 



3 San Jose 89.0 95.6 


5 San Diego 85.3 91.7 








U.S. 68.8 73.9 


94

Biotech Employment Size 

2002 

Current Impact – Biotech 

Rank MSA 

Number Rank MSA 

LQ 

(US=1) 

1 Boston NECMA 18,741 

1 San Diego 5.45 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

Addendum: 

San Diego 

Philadelphia 

Seattle-Bellevue-Everett 

Washington, D.C. 

San Jose 

Los Angeles-Long Beach 

San Francisco 

Raleigh-Durham-Chapel Hill 


Orange County 

Austin-San Marcos 

Ventura 

14,542 

10,554 

9,464 

9,266 

9,174 

8,145 

6,935 

6,474 

6,208 

2,450 

1,419 

5,797 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

Addendum: 

San Jose 


San Francisco 



Boston NECMA 

Philadelphia 




Orange County 

Ventura 

4.65 

4.35 

3.23 

3.22 

2.74 

2.72 

2.02 

1.52 

0.99 

0.93 

0.80 

9.53 

Biotech Relative Employment Growth 

1997-2002 

Rank MSA 

Index 

(US=100) 

1 Washington, D.C. 123.2 

2 Oakland 120.2 

3 San Jose 114.6 


5 Seattle-Bellevue-Everett 108.8 

6 San Francisco 106.0 

7 Los Angeles-Long Beach 96.2 

8 Raleigh-Durham-Chapel Hill 92.4 

9 Boston NECMA 88.8 

10 Philadelphia 81.6 

11 Orange County 70.2 

12 Austin-San Marcos 61.2 

Addendum: Ventura 205.4 

95 


7.0 

6.0 

5.0 

4.0 

3.0 

2.0 

1.0 

Biotech Location Quotient 

2002 

Biotech Industry 


Philadelphia 

Austin 

Orange Co. 


Boston 

Los Angeles 

Current Impact Measures (CIM) - Scores for Biotech 


Appendix 

San Francisco 

0.0 

50 60 70 80 90 100 110 120 130 140 


San Diego 

Seattle 

San Jose 


Wash.,D.C. 

BIOTECH Size and Performance 

Diversity 




MSA 2002 2002 97-02 2001 2002 2002 2002 2002 

San Diego 78 100 89 80 100 100 80 100 

Boston NECMA 100 50 72 45 60 50 20 80 

San Jose 49 85 93 100 60 33 40 78 



Washington, D.C. 49 28 100 64 40 50 100 65 


San Francisco 37 59 86 48 40 33 100 64 

Philadelphia 56 37 66 25 40 100 20 58 


Orange County 13 15 57 31 20 50 20 29 


Addendum:Ventura* 31 175 167 28 60 33 80 111


Current Impact – Medical Devices 

Medical Devices Employment Size 

2002 

Rank MSA 


LQ 

(US=1) 

1 Boston NECMA 18,901 


2 Los Angeles-Long Beach 12,972 


3 Orange County 11,341 


4 San Jose 9,044 


5 Philadelphia 6,604 


6 San Diego 5,701 


7 

8 

9 

10 

11 

12 

Addendum: 



San Francisco 




Ventura 

4,700 

4,404 

2,330 

2,003 

1,861 

1,163 

929 

7 

8 

9 

10 

11 

12 

Addendum: 



Philadelphia 

San Francisco 



Ventura 

1.15 

1.01 

0.98 

0.84 

0.61 

0.26 

1.19 

Medical Devices Relative Employment Growth 

1997-2002 

Rank MSA 

Index 

(US=100) 














96 


4.0 

3.5 

3.0 

2.5 

2.0 

1.5 

1.0 

0.5 

Medical Devices Location Quotient 

2002 

Medical Devices Industry 


San Jose 

Seattle 

Orange Co. 

Boston 

San Diego 

San Francisco 

Austin 

Los Angeles 

0.0 

70 80 90 100 110 120 130 



Philadelphia 

Wash.,D.C. Raleigh-Durham 

Current Impact Measures (CIM) - Scores for Medical Devices 


MEDICAL DEVICES Size and Performance Diversity 


Employment LQ Rel. Growth Establishments # of Ind. # of Ind. # of Ind. 

Level (US=1) (US=100) per 10,000 est. LQ>2 LQUS Composite 

MSA 2002 2002 97-02 2001 2002 2002 2002 2002 

Boston NECMA 100 60 74 56 86 50 67 100 

Orange County 60 81 76 80 100 100 67 95 

San Jose 48 100 72 100 71 25 67 89 


San Diego 30 47 71 67 43 100 83 66 


Philadelphia 35 28 85 53 14 50 100 60 




San Francisco 12 24 72 50 14 33 67 42 

Washington, D.C. 11 7 65 34 14 14 67 32 

Addendum:Ventura 5 33 53 81 43 100 17 42

Bio-Medical Employment Size 

2002 

Current Impact – Bio-Medical 

Rank MSA 


LQ 

(US=1) 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

Addendum: 

Boston NECMA 


San Diego 

San Jose 

Philadelphia 


Orange County 



San Francisco 



Ventura 

37,641 

21,118 

20,243 

18,219 

17,158 

13,867 

13,791 

11,269 

10,908 

9,265 

7,637 

3,279 

6,726 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

Addendum: 

San Jose 

San Diego 

Boston NECMA 




Orange County 

San Francisco 

Philadelphia 




Ventura 

4.04 

3.32 

2.39 

2.25 

2.11 

2.06 

1.98 

1.89 

1.44 

1.06 

1.00 

0.81 

4.84 

Bio-Medical Relative Employment Growth 

1997-2002 

Rank MSA 

Index 

(US=100) 














97 


5.0 

4.5 

4.0 

3.5 

3.0 

2.5 

2.0 

1.5 

1.0 

0.5 

Bio-Medical Location Quotient 

2002 

Orange Co. 

Philadelphia 

Austin 

Bio-Medical Industry Aggregate 


Boston 

San Jose 

San Diego 


Seattle 

San Francisco 

Los Angeles 

0.0 

70 80 90 100 110 120 130 


Current Impact Measures (CIM) - Scores for Bio-Medical 


Appendix 

BIO-MEDICAL Size and Performance Diversity 


Employment LQ Rel. Growth Establishments # of Ind. # of Ind. # of Ind. 

Level (US=1) (US=100) per 10,000 est. LQ>2 LQUS Composite 

MSA 2002 2002 97-02 2001 2002 2002 2002 2002 

Boston NECMA 100 59 71 48 100 33 44 100 

San Diego 54 82 85 76 88 100 89 98 

San Jose 48 100 76 100 88 17 56 93 




Orange County 37 49 70 46 88 50 44 67 

Philadelphia 46 36 72 34 25 50 67 64 

San Francisco 25 47 83 48 25 20 89 61 


Washington, D.C. 30 20 88 55 25 13 89 56 



Oakzand 

Wash.,D.C.


Life Science Employment Size 

2002 

Current Impact – Life Science 

Rank 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

Addendum: 

MSA 

Boston NECMA 

Philadelphia 


San Diego 

San Jose 

Orange County 


San Francisco 





Ventura 

Number 

42,855 

27,613 

23,533 

20,986 

18,518 

17,793 

14,019 

13,389 

12,242 

11,015 

9,247 

3,327 

6,741 

Rank 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

Addendum: 

MSA 

San Jose 

San Diego 

San Francisco 

Boston NECMA 


Orange County 

Philadelphia 






Ventura 

LQ 

(US=1) 

3.25 

2.73 

2.16 

2.16 

2.15 

2.02 

1.83 

1.69 

1.65 

0.93 

0.80 

0.70 

3.84 

Life Science Relative Employment Growth 

1997-2002 

Rank MSA 

Index 

(US=100) 














98 


4.0 

3.5 

3.0 

2.5 

2.0 

1.5 

1.0 

0.5 

Orange Co. 

Philadelphia 

Life Science Location Quotient 

2002 

Life Science Industry Aggregate 



Austin 

Boston 

San Jose 

Seattle 

San Diego 

Wash.,D.C. 

Los Angeles 

0.0 

70 80 90 100 110 120 130 


Current Impact Measures (CIM) - Scores for Life Science 


San Francisco 

LIFE SCIENCE Size and Performance Diversity 




MSA 2002 2002 97-02 2001 2002 2002 2002 2002 

Boston NECMA 100 66 72 49 100 67 56 100 

San Diego 49 84 83 77 88 100 100 92 

San Jose 43 100 72 100 88 29 56 85 

Philadelphia 64 56 70 35 38 100 67 79 

Orange County 42 62 71 48 100 100 44 74 

San Francisco 31 67 85 48 38 40 100 70 





Washington, D.C. 29 21 100 55 25 22 100 57 



Oakland

About the Authors 

Ross DeVol is Director of Regional Economics at the Milken Institute. He oversees the Institute’s research on 

the dynamics of comparative regional growth performance, and technology and its impact on regional and 

national economies. He is an expert on the intangible economy and how regions can prepare themselves to 

compete in it. He authored the ground breaking study, America’s High-Tech Economy: Growth, Development, 

and Risks for Metropolitan Areas, an examination of how clusters of high-technology industries across the 

country affect economic growth in those regions. He also created the Best Performing Cities Index, an 

annual ranking of U.S. metropolitan areas that shows where jobs are being created and economies are 

growing. Prior to joining the Institute, DeVol was senior vice president of Global Insight, Inc. (formerly 

Wharton Econometric Forecasting), where he supervised their Regional Economic Services group. He was 

the firm’s chief spokesman on international trade. He also served as the head of Global Insight’s U.S. Long- 

Term Macro Service and authored numerous special reports on behalf of the U.S. Macro Group. DeVol 

earned his master’s degree in economics at Ohio University. 

Perry Wong is a Senior Research Economist in Regional Economics at the Milken Institute. He is an expert 

on regional economics, development and econometric forecasting and specializes in analyzing the structure, 

industry mix, development and public policies of a regional economy. He designs, manages and performs 

research on labor and workforce issues, the relationship between technology and economic development, 

and trade and industry, with a focus on policy development and implementation of economic policy in 

both leading and disadvantaged regions. Wong is actively involved in projects aimed at increasing access 

to technology and regional economic development in California and the American Midwest. His work 

extends to the international arena, where he is involved in regional economic development in southern 

China, Taiwan and other parts of Asia. Prior to joining the Institute, Wong was a senior economist and 

director of regional forecasting at Global Insight, Inc. (formerly Wharton Econometric Forecasting) 

where he managed regional quarterly state and metropolitan area forecasts and provided consultation. 

Wong earned his master’s degree in economics at Temple University in 1990 and completed all course 

requirements for his PhD. 

Armen Bedroussian is a Research Analyst with the Milken Institute. Bedroussian has extensive graduate 

training in econometrics, statistical methods and other modeling techniques. Before joining the Institute 

he was an economics teaching assistant at U.C. Riverside where he taught intermediate micro and macro 

economics to undergraduates. Since coming to the Institute, Bedroussian has contributed to several 

projects including Butler County’s Economic Impact Assessment, The Impact of an Entertainment Industry 

Strike on the Los Angeles Economy, Los Angeles Mayors Task Force Study on the Assessment of Post Sept.11 

Economic Conditions. He also co-authored Manufacturing Matters: California’s Performance and Prospects 

and The Economic Contributions of Health Care to New England. Bedroussian earned his bachelor of science 

in applied mathematics and a master’s in economics at the University of California, Riverside. 

99 

About the Authors

About the Authors 

Rob Koepp is a Research Fellow at the Milken Institute. His research interests center on the topics 

of innovation, entrepreneurship and regional economic development, especially in the context 

of global technology businesses. His foreign geographic expertise is in the areas of East Asia and 

Europe, especially China, Taiwan, Japan, and the United Kingdom. He is the author of Clusters of 

Creativity: Enduring Lessons on Innovation and Entrepreneurship from Silicon Valley and Europe’s 

Silicon Fen (John Wiley, 2002) and is a report leader in a World Bank-sponsored study for China’s 

Ministry of Science and Technology on reform of China’s high-tech park system. In addition to his 

work at the Institute, he lectures on technical entrepreneurship and international entrepreneurship 

as an Adjunct Professor at the University of Southern California. Fluent in Chinese (Mandarin) and 

Japanese, Koepp served in various senior positions with Western and Japanese technology firms 

prior to joining the Institute in 2002. Koepp earned his BA in Asian Studies at Pomona College and 

his MBA with an emphasis in venture capital financing at Cambridge University. 

Junghoon Ki is a Research Analyst in Regional Economics at the Milken Institute. His research 

interests include history of technology, human capital development, location of high-tech business, 

job creation strategy, and other urban planning related issues, especially in the planner’s perspective 

and with spatial context. He is responsible for capturing, analyzing, interpreting and visualizing 

regional economic data in order to create reasonable policy implications for the public. Ki is 

involved in the Institute’s Fresno Economic Development Project and its New England health care 

research. He wrote “The Role of Two Agglomeration Economies in the Production of Innovation: 

A Comparison between Localization Economies and Urbanization Economies,” Enterprise and 

Innovation Management Studies, 2001. Ki was awarded a doctoral dissertation grant from National 

Science Foundation and earned his PhD. at the University of Southern California. 

100

About Deloitte 

Deloitte, one of the nation’s leading professional services firms, provides audit, tax, consulting, and 

financial advisory services through nearly 30,000 people in more than 80 U.S. cities. Known as an 

employer of choice for innovative human resources programs, the firm is dedicated to helping its 

clients and its people excel. “Deloitte” refers to the associated partnerships of Deloitte & Touche 

USA LLP (Deloitte & Touche LLP and Deloitte Consulting LLP) and subsidiaries. Deloitte is the 

U.S. member firm of Deloitte Touche Tohmatsu. For more information, please visit Deloitte’s Web 

site at www.deloitte.com/us. 

About Milken Institute 

The Milken Institute is an independent economic think tank whose mission is to improve the 

lives and economic conditions of diverse populations in the U.S. and around the world by helping 

business and public policy leaders identify and implement innovative ideas for creating broadbased 

prosperity. We put research to work with the goal of revitalizing regions and finding new 

ways to generate capital for people with original ideas. We are nonprofit, nonpartisan and publicly 

supported. For more information, please visit www.milkeninstitute.org. 

101 

About Deloitte & Milken Institute

America's Biotech and Life Science Clusters - Milken Institute

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