While San Diego remains a top biotech hub behind Boston and San Francisco, the city—which hosts this week’s BIO International Convention—has seen employment drop amid economic headwinds.
More than 18,000 attendees are expected at this week’s BIO International Convention in San Diego, billed as the world’s largest gathering of the biotechnology industry. However, the biotech hub has seen better days amid a drop in life science–related jobs and R&D.
While San Diego remains a premier life sciences hub behind Boston and San Francisco, the market has been susceptible to economic headwinds in the sector including the availability of capital to fund growth.
Biocom California, a life science industry association, in its 2024 economic impact report revealed last month that the San Diego regional area had 75,816 total jobs in 2023, a 2.5% year-over-year decrease from 2022.
Miguel Motta, vice president of strategic operations and San Diego head at Biocom California, told BioSpace that some aspects that impacted employment in the area included inflation, interest rates and a decline in venture capital funding.
“Venture capital dollars that are the primary source for the development stage companies took a significant hit,” Motta said. “If you go back to 2021, just San Diego, we got about $5 billion in venture capital, and then you go to 2022 [to] 2023, it was more than $2.5 [billion] in 2020 to $2.1 [billion] in 2023. So, there is a significant reduction there.”
Motta added that this reduction in VC money meant that companies had to be more conservative with their cash, leading to cuts in their R&D operations.
California Life Sciences (CLS), another advocacy group for the state’s sector, in its 2024 San Diego Snapshot reported that the number of “life science establishments” in the area decreased to 2,153 in the first three quarters of 2023, down from 2,215 during the same period in 2022. According to CLS, the market’s jobs dropped from 76,983 to 75,458 over the same time periods, with the most significant decline coming in biotech R&D.
Mike Guerra, president and CEO of CLS, in an emailed statement to BioSpace said that California’s life sciences industry overall is facing significant investment challenges, including the availability of institutional funding and venture capital.
“While downturns have been a recurring part of our industry’s history, the current situation is particularly taxing,” Guerra said. “While we have seen recent cutbacks in the life sciences market in San Diego, they are not exclusive to the San Diego area. These have been felt more broadly across the state and sector and result from larger economic and policy headwinds facing the organizations CLS represents.”
Guerra noted that CLS members have been “reeling” from changes to Congress’s R&D tax amortization policies, which he said have shifted from an annual R&D deduction to a five-year amortization. Because many smaller early-stage biotechs don’t have a product on the market to push funds into R&D, the tax change is reducing an “already shrinking pool” of available capital, according to Guerra.
“Predictability is critical for life sciences organizations to continue to invest in long-term, high-cost research and development,” Guerra said. “If policies, like proposed changes to the R&D tax credit, are a constantly moving goal post, it becomes difficult for life science organizations to plan these critical investments that create future treatments and cures.”
Layoffs have also hit larger, more established companies in the San Diego area. Last year, Thermo Fisher Scientific axed over 600 employees at various sites. Bristol Myers Squibb in October 2023 purchased Mirati Therapeutics for up to $5.8 billion. Now, BMS is laying off the majority of that company’s workforce—more than 400 employees—over the next year, according to the San Diego Union-Tribune.
Earlier this month, Takeda announced that it is shutting the doors to its R&D hub in San Diego, which employs around 324 employees, according to a WARN notice. In addition to these big players, other smaller biotechs have also gone the layoff route in 2023 and 2024.
San Diego’s Bright Future
Despite the layoffs continuing in San Diego, the two life science associations in California remain optimistic that the area will continue to be a major biotech hub. Guerra and Motta believe that the existing life sciences research talent is the backbone of San Diego’s thriving ecosystem and will support future growth due to its educated, professional and scientific workforce.
“While we never want to see layoffs in the sector, we are optimistic that the industry can weather economic downturns, and this setback in San Diego is not indicative of a long-term trend,” Guerra said.
Motta contended that the overall business trajectory in San Diego has been “positive” for many years even with several ups and downs along the way. When layoffs occur, people are absorbed into the life sciences talent pool and are picked up by other companies or create new ventures on their own.
New companies with serious backing have also been coming online in San Diego, such as ARCH Venture-backed Mirador Therapeutics, which launched with $400 million earlier this year. Motta believes that startup companies like Mirador will need more employees to drive future growth.
On the policy front, Guerra points to efforts on the city, state and federal levels to foster an “investment and policy climate” to incentivize more biotech activity in the area.
“Sustaining the industry as an important driver of the San Diego economy is a set of robust and longstanding pro-innovation policies that include strong IP protections, a well-functioning and evidence-based regulatory system, support for R&D and other policies that recognize both the societal and economic impact of medical innovation,” Guerra said.
Motta makes the case that San Diego is well-positioned among the nation’s most dynamic life sciences research clusters in terms of its talent pool and will remain one of the major U.S. biotech hubs.
“San Diego continues being focused on what we’ve been doing well, and if we do that, there is no reason why as the industry goes back to normality that company formation [and] new jobs will not return to previous levels,” Motta said.
Tyler Patchen is a staff writer at BioSpace. You can reach him at tyler.patchen@biospace.com. Follow him on LinkedIn.
