Orange County is known as a national center of the medical device industry.
It has a lower profile on drugs and biotechnology, but industry observers say there’s potential to take that up a few notches to approach the status of other centers such as the Bay Area, Boston and New Jersey.
“We have a lot of the basic elements—we’ve got the resources and the brains to do it,” said David Hayes, a partner with Dorsey & Whitney LLP’s Costa Mesa office who works in its corporate group.
A key to the potential resides in research institutions and universities here “that are making great strides in trying to leverage technology,” Hayes said.
Academic involvement is important because “typically the lead time to (an) actual revenue product is fairly long,” he said. “I think UCI is making great strides in moving more towards making people understand how important it is to take that research from the lab and getting it out into the real world.”
Kevin Lynch, a principal in the Costa Mesa office of Deloitte Consulting LLP, agreed.
“The academic programs and depth in life science and biotechnology at (UCI) is growing in stature,” Lynch said. “They have a great focus in gene structure, virology, immunology, pathogenesis and stem cells, to cite a few.”
UCI has a relatively short history of fostering companies compared to other public and private universities in the state. The website for its Office of Technology Alliances, which seeks to commercialize university research, says that it’s participated in the founding of more than 50 companies, many of which are healthcare-related.
Among the companies are Cortex Pharmaceuticals Inc., a drug developer that started in the late 1980s and remains in Irvine; Los Angeles-based multiple sclerosis drug developer BPT Pharmaceuticals Inc.; and Ability Biomedical Corp., which started in Orange County and developed antibodies to fight various diseases before being acquired by Medarex Inc., a unit of Prince-ton, N.J.-based Bristol-Myers Squibb, in 2004.
Much of the research coming out of UCI is “probably more attractive to a startup or a biotech company” than to a large drug company, according to Ronnie Hanecak, an assistant vice chancellor in the Office of Technology Alliances.
“Big Pharma is very particular about the kind of molecules that they license,” she said. “There are certain parameters a molecule has that makes it drug-like.”
Hanecak also said large drug companies “are a little bit stringent on how far the development pipeline (a drug candidate) needs to be before they’ll license it. They actually like to see data in patients.”
Funding
Funding sources are also important, said Juli Moran, a Costa Mesa-based director in Deloitte’s life science practice. Those could include wealthy individual investors, existing companies and various types of venture capital funds, she said.
A drug/biotech cluster could also develop through “a local government and business community willing and able to offer incentives that foster an ‘incubator’ culture in the marketplace,” Moran said.
To be sure, drug makers have had a solid presence in Orange County (see story, page 28), particularly in the eye sector.
Allergan Inc. of Irvine got its start with eye drugs in the early 1950s. It’s now popularly known for its Botox neurotoxin for cosmetic and therapeutic uses but still expects to get about half of $5.3 billion in revenue this year from eye drugs.
Smaller eye drug makers include Ista Pharmaceuticals Inc., which boasts a number of executives who previously worked at Allergan. Ista’s drugs include Bepreve for eye allergies and Bromday for treating pain after eye surgery.
Hayes said a pattern he’s seen in medical device makers of investing in companies earlier on “might work well here” for drug companies.
Generic drug makers also have a presence, including Israel-based Teva Pharmaceutical Industries Ltd., and Anchen Pharmaceu-ticals Inc., which is being bought for $410 million by Woodcliff Lake, N.J.-based Par Pharmaceuticals Inc.
There also is the beginnings of a biotech sector, particularly after Dendreon Corp., a Seattle-based drug maker, opened a manufacturing plant in Seal Beach to make its customized Provenge drug to fight advanced prostate cancer. Other biotech-related companies with a presence here include Agendia BV, a Dutch maker of breast cancer tests that has a U.S. headquarters in Irvine.
David Gollaher, chief executive of the Cali-fornia Healthcare Insti-tute, a La Jolla-based lobbying and trade group, pointed to the Bay Area as an example of how clustering and research could work.
As with the others, Gollaher pointed to a density of “top-flight university research, ba-sic research” that fosters the industry in Northern California.
The University of California, Berkeley, Stanford University and the medically fo-cused University of California, San Fran-cisco, campus have been major creators of patents.
The Bay Area also had a seminal company that created other bi-otechs—Genentech Corp., now part of Switzerland-based Roche SA.
“Genentech was the first biotech company, and the number of people and the amount of capital that spun out of that because it was so successful sort of created a ‘seed’ effect,” Gollaher said.
The entrepreneurial spark led many former Genentech employees to establish their own companies, he added.
“There hasn’t been the same effect in Orange County, and to the degree there has been (such an effect), it’s been more successful medical device companies with serial entrepreneurs coming out of them.”
Besides that, Gollaher said that the county doesn’t have the same density of basic scientific research.
“While UC Irvine has done great, particularly in the short time it’s been established, it’s comparatively new if you look at, again, Stanford, Berkeley, UCSF,” he said.
Establishing an industry takes time, “but also, industries tend to build on industries,” Gollaher added.
Deloitte consultant Moran said the Orange County marketplace also has “almost been a victim of its own success” in terms of life science companies.
Fast-growing companies here have been acquired, something “that resulted in the departure of not only the organization from the community, but much of the talent associated with those life science companies,” she said.
