History of Life Science Industries in Southern California

2 INTRODUCTION The Southern California life sciences cluster remains one of the most vibrant and innovative in the world, benefiting from a unique collegiality that arises out of its high concentration of research institutes and close proximity of companies from all sectors. In this update to previous reports on the value and impact of Southern California s life sciences and related industries there is much evidence that this region continues to be a global center of cutting edge research, manufacturing, and business development working to improve the human health condition and creating jobs and opportunities for Southern California residents. History of Life Science Industries in Southern California What began more than 35 years ago with a single biotechnology startup has evolved into one of the world s largest life sciences hubs. Several major forces put the region on the map: science breakthroughs out of the research institutes on the Torrey Pines Mesa and in and around Irvine, as well as the success of the region s first true biotechnology company, Hybritech, and the growth of the medical device industry in both San Diego and Orange Counties. Scientists out of UC San Diego founded San Diego-based Hybritech. The company s signature product, the PSA test, a diagnostic test for prostate cancer and the company s acquisition by pharmaceutical giant Eli Lilly for $400 million cash in 1986, created the first generation of Southern California biotechnology entrepreneurs with the finances and connections to start new companies. Those entrepreneurs went on to form or nurture scores of biopharmaceutical and medical device start-ups, including San Diego s biggest biotech drug success story, Idec, which is now part of Biogen-Idec. In Orange County, the medical device industry s story of growth began much as it did in San Diego County. Scientists and engineers originally attracted to the region for military research and manufacturing jobs began to translate basic bioscience research from the surrounding labs and universities into potential products. Edwards Lifesciences, founded in Santa Ana in the late 1950s, anchored the device cluster to the north. It, too, graduated a new generation of entrepreneurs who started their own companies in Orange County. Meanwhile, Allergan, an Irvine eye drug company also founded in the 1950s, began to move into the new field of biotechnology in the late 1980s, with the acquisition of Botox. During these same years, funding for basic science from the National Institutes of Health began to grow, and the science in both Torrey Pines and the UC Irvine area began to thrive. Today, more than two dozen research institutes, universities and colleges in Southern California conduct basic scientific research or train future generations of scientists, entrepreneurs and life science catalysts. As the industry has grown, so has the support infrastructure. Southern California is home to law firms, accountants, real estate firms, equipment suppliers and public relations agencies that specialize in the life sciences. This critical mass of research, entrepreneurs, support services and private investors savvy about the risks and long incubations. Life science products acts as a magnet to attract even more life science activity to the region. While the life sciences in San Diego and the Orange County towns of Irvine and Mission Viejo have built global reputations for their life science prowess, the industry has also been taking root in Riverside County. There, Abbott Vascular and other medical device manufacturers take advantage of a more affordable housing market and proximity to a talented regional work force. This neighborhood in the region s cluster is even more powerful with the opening of UC Riverside s School of Medicine in August. To the east in Imperial County, long known for its agricultural heritage, new life science sectors such as industrial biotechnology and biofuels are creating opportunities for new jobs and new relationships. This sprawl of life-saving innovation makes Southern California a case study for investing millions of dollars to foster the creation of biotechnology clusters and the growth of well-paying jobs. The industry that generates cures and therapies for society s most devastating diseases is also developing alternative energy technologies to replace fossil fuels and chemicals that degrade the environment. A major economic driver in Southern California, this is the type of industry that economic development agencies around the world covet: it s clean and it stimulates the economy with a well-paid, well-educated workforce that demands excellent schools and plenty of first-rate cultural opportunities. Biocom 2013 Southern California Economic omic Impact Report

About Biocom With over 575 members across all sectors of the life sciences, Biocom is the nonprofit trade association for Southern California with members representing private industry, academia and research institutes, service providers and patient advocacy agencies. Biocom was launched in 1992 when San Diego s biotechnology start-ups realized that they needed a strong and united voice to advocate for local and regional policies conducive to industry growth and regional economic development. Twenty years later, Biocom continues to provide public policy support in city halls, Sacramento and on Capitol Hill, where it partners with peer industry groups from across the nation. Now, in addition to advocacy, Biocom saves its members money through group purchasing, and provides numerous workforce development programs that allow current employees to enhance their skills and help train the next generation of workers creating a sustainable, highly-skilled workforce in the region that is increasingly a model for regional economics across the globe. Biocom is also a premier networking organization, hosting over 75 events a year. Capital development for the region is a major Biocom goal, and the organization works with member companies on initiatives designed to accelerate development in the life sciences sector. The Study Keeping with previous research, this study explicitly recognizes that the life sciences industry cluster has become regional in scope with close interactions among firms, universities, and research institutes across Southern California. Therefore, the study area for the research presented here covers Orange, Riverside, San Diego, and Imperial Counties, which was a groundbreaking aspect of our 2011 research. Though it examines regional effects, it is still important for local leaders and policy makers to realize that each of these component counties benefit individually from the tremendous success of the life sciences industry, The following pages report the findings of our updated analysis of the scope and impacts of the life sciences industries and some of its most important sectors. The first section provides an economic overview of the counties and region, giving the reader a context of both the size and scope of the regional economy, wages, population growth, and education. The second moves from overarching economic trends to the life sciences industry cluster. It includes current and forecasted employment, economic impacts, and foreign trade. In particular, this section will illustrate clusters of competitiveness and degrees of specialization when compared with the United States and other regions. In addition, we will examine the linkages between key supporting industries and the life sciences cluster to gauge the economic contribution the life sciences industry is making to these industries. The third section briefly examines investment and funding trends. The goals of the report are to provide the life science community, and those interested in it, with a clear and accurate understanding of the innovation occurring in Southern California, to measure its economic impact on the county and the region, and to offer a fair representation of future growth that can be expected. TABLE OF CONTENTS Introduction... 2 Methodology... 4 Regional Overview... 6 Life Sciences Industry... 10 -fbiopharmaceuticals... 15 - Research, Lab Services & Education...118 - Medical Devices & Diagnostics... 21 - Industrial Biotechnology & Biofuels... 24 - Life Sciences Trade... 27 Foreign Trade... 30 Venture Capital & Research Funding... 31 Conclusion... 33 Key Terms & Concepts... 34 Appendix... 35 3 Biocom om 2013 Southern California a Economic omi ci Impact Report

METHODOLOGY The purpose of this study is to provide a deeper understanding of the life sciences industry cluster in Southern California. By taking a data-driven approach, this study will serve as a tool for industry professionals, economic development practitioners, and policy makers, enhancing their planning efforts and facilitating their decision-making process. Three research tasks are undertaken to achieve the study s purpose: Define the Life Sciences Industry Cluster Assess Regional Competitiveness Estimate the Economic Impacts of the Life Sciences Cluster ORANGE RIVERSIDE METHODOLOGY 4 For the purposes of our study, we have defi ned Southern California by incorporating the counties Biocom serves; Orange, Riverside, San Diego and Imperial Counties. As stated earlier, scores of previous studies have typically been limited to traditional metropolitan statistical areas, states, or nations. By looking at the region as a whole, we analyze the relationships between the counties and determine how they complement each other and grow from within. DEFINING THE LIFE SCIENCES INDUSTRY CLUSTER The life sciences industry cluster is not static; its core attributes are innovation and evolution. Any attempt to defi ne the life sciences industry must incorporate and embrace the latest industry trends, technologies and economic linkages. The concept of clusters itself, as a fundamental structure, is based on biological or evolutionary principles. Alfred Marshall, who pioneered the concept of industry clusters in the 1890s, was deeply infl uenced by the notion of the co-evolution between industry and the regional economy. In his landmark Principles of Economics, Marshall states that a large part of his book is intended to emphasize the notion that economics is a science of life, and is akin to biology rather than mechanics. Previous research by Biocom used multiple methods of economic inquiry to defi ne the industries and activities that make up the life sciences industry in Southern California including Biopharmaceuticals, Research and Laboratories, Medical Devices, Industrial Bio-Tech and Bio-Fuels, and Life Sciences Trade. A complete list of codes used in the analysis is provided in Appendix A. However, while keeping with the general constructs of the previous research, a re-examination of relevant industries has suggested that there is a critical contributing sector to the life sciences industry that was not fully accounted for in our previous study. The Research and Laboratories sector previously included a very narrow portion of the dynamic impact of the higher education institutions located in Southern California. In this research we have expanded that portion to recognize the critical contributions of higher education in supporting not only life sciences research, but providing the skilled workforce to manage companies and provide professional services without which the life sciences industry could not survive, let alone fl ourish. SAN DIEGO IMPERIAL SOUTHERN CALIFORNIA Therefore, the fi ndings of several aspects of this research are not directly comparable to previous research fi ndings, but offer a more complete view of the life sciences industry in Southern California: BIOPHARMACEUTICALS: Firms that develop and produce pharmaceuticals, biologics and medicinal products. RESEARCH, LAB SERVICES & EDUCATION INSTITUTES OF HIGHER LEARNING: Firms engaged in research and development in biotechnology and other life sciences, life science testing laboratories, and stand-alone medical research laboratories. MEDICAL DEVICES & DIAGNOSTICS: Firms that develop and manufacture medical instruments and supplies, laboratory equipment, electro-medical apparati including MRI and ultrasound equipment, dental equipment and supplies, and ophthalmic products. INDUSTRIAL BIOTECHNOLOGY & BIOFUELS: Firms using biological tools such as microbes and enzymes to manufacture chemicals, fertilizers, textiles, cosmetics, and energy production. LIFE SCIENCES TRADE: Firms engaged in the wholesale distribution of medical and dental supplies. Each sector was determined by grouping specifi c six-digit NAICS (North American Industry Classifi cation System) codes pertaining to the individual sector. A complete list of codes used in the analysis is provided in chapter Key Terms & Concepts.

SPECIALIZATION AND REGIONAL COMPETITIVENESS For an industry to fl ourish, it must establish a critical mass. A high level of specialization fosters synergy and collaboration as though knowledge is in the air. An effective and commonly used economic base technique to measure a region s specialization is the location quotient (LQ). This study utilizes employment as its unit of measure for LQ. The proportional employment in a selected industry for the study area is compared to a reference area, in this case, national employment. The arithmetic nature of an LQ leads to the following rules of LQ evaluation: LQ>1 is interpreted as the region being more specialized than the nation in the particular industry. LQ<1 is interpreted as the region being less specialized than the nation in the particular industry. LQ=1 is interpreted as the region having an equal degree of specialization when compared with the nation in the particular industry. Industries with strong LQs are often indicative of a regional competitive advantage that would support additional growth and opportunity. Industries with low LQs indicate goods and services that must be imported into the region and therefore could represent opportunities for business development and recruitment. Shift share is a second economic analysis technique used to highlight the region s competitive advantages and disadvantages. It is useful for recognizing established or emerging strengths and weaknesses in local regions taking into account non-local market conditions such as overall economic trends and industry trends not tied to local conditions. Shift share analysis includes three basic components: Job Change: This is the actual and/or projected job change in the regional industry over the specifi ed timeframe. The change is actual for historical data and projected for future years data. Expected Change: This is the job growth one would expect in the regional industry if it followed national trends exactly. Competitive Effect: The most important of the three indicators, this explains how much of the change in a given industry is due to a unique competitive advantage that the region possesses, because the growth cannot be explained by national trends in the industry or the economy as a whole. ECONOMIC IMPACT The analysis of the economic impact of the life sciences industry incorporates data primarily provided by EMSI* and the IMPLAN* input-output model. These estimates of total economic activity include direct, indirect, and induced impacts based on the activities of a given industry. An example to consider is the economic impact of pharmaceuticals. The direct effects would include the activities of the fi rm that hires employees, pays wages, and purchases materials. In addition, the fi rm will buy equipment and offi ce supplies, and it will engage professional service providers, such as accountants and attorneys, as part of its normal business operations. Indirect effects capture the economic activities of the company s vendors. For instance, the accounting fi rm that provides bookkeeping services buys offi ce supplies, rents space, purchases computer equipment, and hires services for its business needs. Induced effects include the impact of the employees of all these fi rms spending a portion of their wages and salaries in the local economy. At each stage, the model accounts for spending that leaves the local area, such as spending for imported (domestic or foreign) raw materials. When added together, the adjusted total impacts are often larger than direct spending by industry fi rms, which is the multiplier effect. TRIANGULATION OF THE DATA Triangulation can be defi ned as combining multiple observations, theories, methods, and analytic techniques to overcome weakness or intrinsic bias that could be present in the data being examined or the technique employed in an analysis. By including three primary methods of inquiry, location quotient, shift-share analysis, and economic impact analysis, this study offers a more holistic and accurate description of the magnitude and impact of the life sciences industry in Southern California. METHODOLOGY 5 *Find defi nitions and terms on the key concepts and assumptions page 34

REGIONAL OVERVIEW Recovery and growth. These are the two best words to describe the Southern California economy of 2012. Framed by a state that continues to grow faster that the nation as a whole, Southern California is leading the state with continuing investment resulting is new business opportunities and job growth. In addition to economic opportunity, Southern California s attributes and amenities continue to attract new residents to the region. More importantly, the region s smaller counties, Riverside and Imperial, have seen the strongest population growth rates since 2010. In this section, we report on recent demographic and economic trends in Southern California. REGIONAL OVERVIEW 6 2010 37,334,410 2010 1.9% change 2012 309,326,225 38,041,430 1.5% change 2012 313,914,040 2012 3,052,036 ORANGE RIVERSIDE SAN DIEGO 2012 3,168,486 2012 2,321,471 IMPERIAL 2012 182,108

POPULATION AREA 2010 2012 %CHANGE United States 309,326,225 313,914,040 1.5% California 37,334,410 38,041,430 1.9% COUNTY San Diego 3,095,313 3,168,486 2.4% Orange 3,010,232 3,052,036 1.4% Riverside 2,189,641 2,321,471 6.0% Imperial 174,528 182,108 4.3% More than 8.7 million people call this region home. The population is mainly concentrated in San Diego, Orange, and Riverside counties. Population growth in the region was at 3% between 2010 and 2012, much greater than in the United States and California. Riverside saw the greatest shift in population, adding roughly 131,000 individuals (6%) in that time period. REGIONAL TOTAL 8,469,714 8,724,101 3.0% Sources: U.S. Census Bureau, On Numbers as reported by The Business Journals. 2012 EMPLOYMENT BY MAJOR INDUSTRY SECTOR INDUSTRY REGION TOTAL % US % Agriculture, Forestry, Fishing and Hunting 49,538 1.1% 2.0% Mining, Quarrying, and Oil and Gas Extraction 9,547 0.2% 0.8% Utilities 13,930 0.3% 0.3% Construction 235,817 5.0% 4.9% Manufacturing 303,109 6.5% 7.0% Wholesale Trade 161,648 3.5% 3.5% REGIONAL OVERVIEW 7 Retail Trade 453,480 9.7% 9.9% Transportation and Warehousing 93,662 2.0% 3.2% Information 74,405 1.6% 1.8% Finance and Insurance 266,647 5.7% 5.5% Real Estate and Rental and Leasing 286,737 6.1% 4.5% Professional, Scientifi c, and Technical Services Management of Companies and Enterprises Admin.,Support & Waste Mgmt & Remediation Services 415,483 8.9% 6.9% 46,379 1.0% 1.2% 336,498 7.2% 6.2% Educational Services (Private) 89,095 1.9% 2.5% Health Care and Social Assistance 403,191 8.6% 11.0% Arts, Entertainment, and Recreation 124,507 2.7% 2.2% Accommodation and Food Services 367,054 7.9% 7.0% Other Services (except Public Administration) 300,461 6.4% 6.1% Government 629,122 13.5% 13.5% Unclassifi ed Industry 15,141 0.3% 0.1% TOTAL 4,675,451

Wages in the region are generally high, averaging $53,111 across all industries. This is about 4% greater than the national average. 70,000 60,000 50,000 40,000 30,000 AVERAGE WAGE BY AREA REGIONAL OVERVIEW 8 Between 2009 and 2012 the region saw 2.7% growth in overall employment, slightly below the national rate but still above the statewide rate. $51,050 20,000 10,000 0 United States $55,397 $57,114 $39,868 $39,756 $53,111 San Diego Orange Riverside Imperial Region Sources: EMSI, Bureau of Labor Statistic EMPLOYMENT CHANGE 2009-2012 AREA 2009 2012 %CHANGE United States 174,062,159 179,134,597 2.9% California 20,111,215 20,631,126 2.6% COUNTY San Diego 1,834,723 1,856,795 3.0% Orange 1,860,706 1,911,961 2.8% Riverside 816,030 833,400 2.1% Imperial 72,178 73,294 1.5% REGIONAL TOTAL 4,552,041 4,675,450 2.7% FORECASTED EMPLOYMENT CHANGE 2012-2014 By 2014, employment in the region is expected to be 4.8 million, an increase of about 155,000 jobs over 2012. Imperial County expects to add more than 4,500 new jobs, a 6.3% increase from 2012. AREA 2012 2014 %CHANGE United States 179,134,597 184,438,243 3.0% California 20,631,126 21,287,591 3.2% COUNTY San Diego 1,856,795 1,910,641 2.9% Orange 1,911,961 1,969,891 3.0% Riverside 833,400 872,830 4.7% Imperial 73,294 77,944 6.3% REGIONAL TOTAL 4,675,450 4,831,306 2.8%

Education serves as a catalyst for innovation. The very roots of our life sciences industry cluster began with UC San Diego. Data shows that students are more likely to stay where they already have established ties through their university. A region that can attract the best and brightest and retain their homegrown talent is strongly positioned to capitalize on its unique educational assets. Southern California is home to over 150 degree- or certifi cate-granting institutions offering a wide range of opportunities. With over 260,000 college students, San Diego County boasts one of the highest concentrations of students in the United States. Many of the region s institutions of higher learning bolster the life sciences cluster by producing graduates in science, technology, engineering and mathematics, collectively referred to as STEM programs. 38% of those living in the region hold an associate s degree or higher, compared to 35% for the rest of the country. In Orange County, 43% of residents fall in this category. LEVEL OF ATTAINMENT Graduate Degree or Higher EDUCATIONAL ATTAINMENT: 2012 IMPERIAL ORANGE RIVERSIDE SAN DIEGO REGION CA US 4.1% 12.1% 6.8% 12.5% 10.8% 10.7% 10.4% Bachelor s Degree 8.8% 23.4% 13.0% 21.0% 19.6% 19.0% 17.6% Associate s Degree 6.4% 7.6% 7.4% 8.6% 7.9% 7.5% 7.5% Some College 20.2% 20.9% 25.6% 23.1% 22.9% 21.9% 21.0% High School Diploma 20.5% 17.5% 24.9% 19.0% 20.0% 20.4% 28.0% REGIONAL OVERVIEW 9 Notes: Population over 25 years old Source: EMSI More than 129,000 college degrees were awarded in the region in 2011, up over 1,000 from 2010. Orange and San Diego counties continue to produce a high volume of graduates in a wide variety of fi elds. TOTAL DEGREE COMPLETIONS BY COUNTY STEM DEGREE COMPLETIONS BY COUNTY COUNTY 2010 2011 %CHANGE San Diego 55,856 55,935 0.001 Orange 54,389 55,380 0.02 Riverside 16,515 16,908 0.02 Imperial 1,505 1,404-0.07 TOTAL 128,265 129,627 0.01 Source: EMSI, California Postsecondary Education Center COUNTY 2009 2010 %CHANGE San Diego 6,612 7,059 6.8% Orange 5,287 5,578 5.5% Riverside 2,491 2,550 2.4% Imperial 50 113 126.0% TOTAL 14,440 15,300 6.0% Note: Most recent data available Source: EMSI, National Center for Education Statistics

LIFE SCIENCES INDUSTRY 10 LIFE SCIENCES INDUSTRY Southern California s life sciences cluster provides over 107,000 jobs in fi ve sectors: biopharmaceuticals; industrial biotechnology and biofuels; life sciences trade; medical devices and diagnostics; and research, lab services and education. Importantly, we expect total industry employment to add about 9,100 new jobs over the next two years. Disparities in average wages are the result of relatively high concentrations of agricultural segments in the biotechnology and biofuels cluster in Imperial and Riverside counties. While overall growth in the region is impressive and expected to continue, Imperial County is expected to see continuing challenges to its contribution to life sciences industry performance that should be examined further. LIFE SCIENCE EMPLOYMENT BY INDUSTRY 11,105 12,142 11,237 4,530 68,447 Biopharmaceuticals Industrial Biotechnology & Biofuels Research, Lab Services & Education Medical Devices and Diagnostics Life Sciences Trade 2012 LIFE SCIENCE EMPLOYMENT BY COUNTY 586 Imperial Orange and San Diego counties hold most of the life sciences jobs in the region, combined they employ 91% of all cluster workers in Southern California. Orange 38,031 Riverside 59,871 San Diego 2012 8,975

LIFE SCIENCES EMPLOYMENT BY INDUSTRY 140,000 120,000 100,000 80,000 11,258 4,631 11,237 4,530 11,620 4,471 Biopharmaceuticals 60,000 40,000 70,116 68,447 75,042 20,000 11,953 11,105 11,741 11,738 12,142 13,671 0 2010 2012 2014 Location Quotients (LQ) help to identify a region s specialization within a particular industry or sector. LQ values above 1.00 identify a region with a greater concentration of an industry or sector than the nation as a whole. If a LQ is below 1.00, the region has less concentration of an industry than the rest of the nation. The Southern California region identifi ed in this report has an LQ of 1.7 for the life sciences cluster. This means that the life science cluster is 70% more concentrated in the region than it is in the rest of the nation. The data show that San Diego County is one of the most dominant areas of the nation in biopharmaceuticals, and this dominance is expected to increase over the 2012-2014 period. Industrial Biotechnology & Biofuels Research, Lab Services & Education Medical Devices and Diagnostics Life Sciences Trade Most of the jobs in the life science cluster in Southern California fall within the research, lab services and education sector representing about 64% of all industry jobs in 2012. LIFE SCIENCES INDUSTRY 11 LIFE SCIENCES EMPLOYMENT BY COUNTY 70,000 65,000 60,000 55,000 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 TOTAL: 39,239 8,560 59,237 38,031 8,975 59,871 648 586 547 2010 107,684 2012 107,463 2014 116,546 40,771 9,896 68,422 Imperial Orange Riverside San Diego

2012 AVERAGE WAGES INDUSTRY SECTOR SECTOR IMPERIAL ORANGE RIVERSIDE SAN DIEGO REGION Biopharmaceuticals -- $96,968 $113,744 $138,742 $119,642 Industrial Biotechnology and Biofuels $37,939 $47,413 $30,980 $ 48,997 $42,877 Life Sciences Trade $56,230 $114,567 $48,532 $96,113 $96,824 Medical Devices & Diagnostics $25,782 $120,687 $83,348 $98,917 $110,459 LIFE SCIENCES INDUSTRY 12 Research and Lab Services $43,875 $88,986 $43,406 $128,896 $97,524 All Life Sciences $40,956 $93,729 $62,002 $123,234 $108,970 Note: Biopharmaceutical wages in Imperial County represent a statistically insignifi cant number of jobs. Sources: EMSI Employment Complete, T. Clower & Associates LINKAGES TO KEY INDUSTRIES For a region s life sciences cluster to remain competitive and foster future growth, it must have strong linkages with key supporting industries. These key industries provide the necessary economic infrastructure to move products to market, supply and attract talent, create a sophisticated fi nancial services network, and offer legal services that can protect intellectual property rights and assist with patent applications. These key supporting industries are increasingly vital to the long-term development of not only the life sciences cluster but also the entire region in meeting the ever-evolving demands of all industries. By incorporating data provided by the IMPLAN model and the Biocom membership list, we have identifi ed seven support industries that are essential to the region s life sciences cluster. This list is by no means exhaustive, as every industry within the economic ecosystem plays an important role. The life sciences cluster supports nearly 47,000 jobs in these seven industries across the region. The largest support industry is real estate, followed by fi nancial services. The region s 107,463 life science employees support an additional 312,023 jobs, for a total regional impact of 419,486 jobs. These jobs pay a total of $27,9 billion in wages and salaries, with an overall impact of $76 billion in economic activity. LIFE SCIENCES IMPACT: EMPLOYMENT COUNTY Direct Indirect Induced Total Imperial 583 620 960 2,163 Orange 38,030 30,391 62,325 130,746 Riverside 8,687 5,765 17,883 32,335 San Diego 59,870 35,636 122,762 218,268 TOTAL 107,463 79,395 232,627 419,486 Sources: EMSI Employment Complete, IMPLAN, T. Clower & Associates

LIFE SCIENCES IMPACT: LABOR INCOME COUNTY DIRECT INDIRECT INDUCED TOTAL Imperial $45,191,391 $23,780,269 $44,636,220 $113,607,881 Orange $3,692,885,982 $2,092,314,265 $3,450,903,566 $9,236,103,813 Riverside $649,315,859 $264,253,475 $851,341,861 $1,764,911,194 San Diego $5,412,732,133 $2,231,026,757 $7,031,858,295 $14,675,617,184 TOTAL $9,921,199,136 $4,993,949,826 $13,003,124,522 $27,918,273,484 Note: Labor income includes all forms of employment income, including employee compensation (wages and benefi ts) and proprietor income. LIFE SCIENCES IMPACT: ECONOMIC ACTIVITY COUNTY DIRECT INDIRECT INDUCED TOTAL Imperial $298,877,760 $66,277,153 $94,041,080 $459,195,993 Orange $13,101,660,541 $5,423,072,617 $8,793,932,818 $27,318,665,976 Riverside $3,186,784,267 $747,631,502 $1,987,538,192 $5,921,953,961 LIFE SCIENCES INDUSTRY 13 San Diego $14,292,853,620 $5,951,883,299 $16,389,265,070 $36,634,001,989 TOTAL $31,440,796,477 $13,524,948,727 $ 31,424,834,602 $76,390,579,806 Sources: EMSI Employment Complete, IMPLAN, T. Clower & Associates LIFE SCIENCES IMPACT: SHIFT SHARE ANALYSIS BY COUNTY 2009 2012 COUNTY EXPECTED CHANGE COMPETITIVE EFFECT Imperial 6 6 Orange 1,519-545 Riverside 306-657 San Diego 2,170 8,599 The competitive effect shows how counties outperformed (or underperformed) expected change based on national employment trends. Region 3,996 7,405

LIFE SCIENCES IMPACT: ECONOMIC ACTIVITY IN KEY SUPPORT INDUSTRIES SECTOR IMPERIAL ORANGE RIVERSIDE SAN DIEGO TOTAL LIFE SCIENCES INDUSTRY 14 Accounting & Tax Preparation $ 635,509 $ 145,247,986 $ 15,291,047 $ 133,853,291 $ 295,027,833 Insurance $ 790,978 $ 592,938,538 $ 45,406,682 $ 583,104,482 $ 1,222,240,680 Legal Services $ 719,587 $ 297,772,394 $ 23,966,479 $ 456,756,432 $ 779,214,892 Recruitment & Administrative Services $ 483,271 $ 221,865,693 $ 38,624,047 $ 351,474,162 $ 612,447,173 Financial Services $ 10,943,351 $ 864,727,256 $ 115,533,722 $ 1,068,653,361 $ 2,059,857,690 Marketing, Advertising, and Communications $ 143,360 $ 173,148,042 $ 26,616,420 $ 114,595,107 $ 314,502,929 Real Estate $ 10,543,572 $ 961,500,312 $ 240,546,534 $ 1,589,267,580 $ 2,801,857,998 Source: IMPLAN The life sciences industry cluster generates a total of $8.1 billion dollars of economic activity in these key industries. SECTOR IMPERIAL ORANGE RIVERSIDE SAN DIEGO TOTAL Accounting & Tax Preparation 12 1,123 215 1,233 2,583 Insurance 6 1,998 202 2,221 4,427 Legal Services 6 1,434 155 2,190 3,785 Recruitment & Administrative Services 11 3,629 739 4,901 9,280 Financial Services 49 4,014 507 5,184 9,754 Marketing, Advertising, and Communications 1 1,368 193 902 2,464 Real Estate 58 4,319 1,484 8,581 14,442 Source: IMPLAN LIFE SCIENCES IMPACT: EMPLOYMENT CREATED IN KEY SUPPORT INDUSTRIES

BIOPHARMACEUTICALS The biopharmaceutical sector, simply put, produces biological products, drugs, and therapeutics that can save, improve, and prolong an individual s life. With 156 establishments providing high paying and innovative jobs in the biopharmaceutical sector, Southern California has emerged as one of the leading regions for employment in this arena. As suggested by the sectors high LQ in the four-county region, the biopharmaceutical industry is incredibly strong in the region. BIOPHARMACEUTICALS: MAJOR EMPLOYERS BUSINESS NAME LOCAL EMPLOYEES Allergan Inc 4,800 Life Tech 1,300 BeckmanCoulter, Inc. 1,200 Teva Parenteral Medicines, Inc. 830 Gensia Sicor, Inc. 800 Access Business Group LLC 700 Omni Pak 700 Quidel Corporation 488 Prometheus Laboratories 405 Metagenics, Inc. 386 Valeant Pharmaceuticals International 355 BIOPHARMACEUTICALS 15 Arena Pharmaceuticals 200 Halozyme 152 Source: Hoovers, Biocom Orange and San Diego counties are home to most of the regions biopharmaceutical jobs, with 4,309 and 5,543 jobs in each county respectively. On average, biopharmaceutical employees in the region earn $119,642 each year; in San Diego County, however, the average biopharmaceutical employee will earn over $138,000 in 2014. BIOPHARMACEUTICALS: EMPLOYMENT BY COUNTY COUNTY 2010 2012 2014 2014 avg earnings Imperial 0 0 0 $0 Orange 4,715 4,309 4,161 $96,968 Riverside 1,378 1,385 1,416 $113,744 San Diego 5,165 5,543 6,043 $138,742 Region 11,258 11,237 11,620 $119,642

BIOPHARMACEUTICALS SHIFT SHARE ANALYSIS 2009 2012 COUNTY EXPECTED CHANGE COMPETITIVE EFFECT Imperial --- --- Orange -278-247 Riverside -85-24 San Diego -57 606 Region -425 30 BIOPHARMACEUTICALS 16 BIOPHARMACEUTICALS ESTABLISHMENTS AND JOBS, 2012 COUNTY ESTABLISHMENTS JOBS/ESTABLISHMENTS Orange 59 73.0 Riverside 12 115.4 San Diego 85 65.2 Region 156 72.0 Note: Data was statistically insignifi cant for Imperial County The biopharmaceutical sector in Southern California supports an additional 92,270 jobs in the regional economy. Ultimately, the 11,000 plus biopharmaceutical jobs in four-county region contribute around $7 billion in labor income and over $25 billion in economic activity. BIOPHARMACEUTICALS IMPACT: ECONOMIC ACTIVITY COUNTY DIRECT INDIRECT INDUCED TOTAL Orange $5,448,654,636 $2,463,747,503 $2,661,870,825 $10,574,272,964 Riverside $1,894,920,823 $341,963,455 $881,672,710 $3,118,556,988 San Diego $3,979,972,416 $2,044,452,959 $3,778,248,095 $9,802,673,470 TOTAL $11,315,143,232 $5,358,205,530 $8,654,144,595 $25,327,493,358 Note: Data was statistically insignifi cant for Imperial County Sources: EMSI Employment Complete, IMPLAN, T. Clower & Associates

BIOPHARMACEUTICALS: LOCATION QUOTIENT COUNTY 2009 2011 2012 Orange 1.66 1.55 1.56 Riverside 1.13 1.08 1.11 San Diego 1.67 1.82 1.92 Region 1.55 1.55 1.60 The biopharmaceuticals sector has improved its regional competitiveness since the previous study. San Diego especially, with nearly 600 new jobs fostered by the county s positive business climate and competitive edge. Note: Data was statistically insignifi cant for Imperial County BIOPHARMACEUTICALS IMPACT: EMPLOYMENT COUNTY DIRECT INDIRECT INDUCED TOTAL Orange 4,309 12,972 18,823 36,104 Riverside 1,388 2,365 7,908 11,660 San Diego 5,542 10,935 28,256 44,733 TOTAL 11,237 28,375 63,895 103,507 BIOPHARMACEUTICALS 17 Note: Data was statistically insignifi cant for Imperial County Sources: EMSI Employment Complete, IMPLAN, T. Clower & Associates BIOPHARMACEUTICALS IMPACT: LABOR INCOME COUNTY DIRECT INDIRECT INDUCED TOTAL Orange $ 614,093,114 $ 1,016,977,407 $ 1,045,288,828 $ 2,676,359,349 Riverside $ 232,739,897 $ 127,850,240 $ 377,111,407 $ 737,701,544 San Diego $ 788,626,784 $ 822,772,064 $ 1,630,549,374 $ 3,241,948,222 Region $ 1,628,541,530 $ 2,123,533,306 $ 3,588,013,481 $ 7,340,088,316 Note 1: Data was statistically insignifi cant for Imperial County Note 2: Labor income includes all forms of employment income, including Employee Compensation (wages and benefi ts) and Proprietor Income. Sources: EMSI Employment Complete, IMPLAN, T. Clower & Associates

RESEARCH, LAB SERVICES & EDUCATION 18 18 RESEARCH, LAB SERVICES & EDUCATION The research, lab services & education sector includes the many colleges, universities and private research institutes in Southern California. These institutions conduct basic research in the life sciences, industrial biotechnology, genetic sequencing, and synthetic biology, and they combine different areas of expertise, such as cellular technology and medical device technology, to create new classes of products such as wireless health technology. This sector also includes the growing sub-sectors of contract research and contract manufacturing, with companies such as Pharmatek and Millennium Laboratories, which provide services to the increasingly popular virtual life science company business model. RESEARCH, LAB SERVICES & EDUCATION: MAJOR EMPLOYERS BUSINESS NAME LOCAL EMPLOYEES University of California, San Diego 24,400 University of California, Irvine 20,000 University of California, Riverside 3,850 California State University Fullerton 3,660* Chapman University 3,300 San Diego State University 3,000 The Scripps Research Institute 2,906 Tri-City Medical Center 2,100 National University 1,954 Orange Coast College 1,900 Palomar College 1,200 These numbers represent all institute employees. Source: Hoover s. * Estimate Since the previous study, the research, lab services, and education sector has continued to show a strong regional business climate and overall competitiveness. While national trends also predict strong job growth, the region continued to outpace expected job growth. Much of this growth, however, is in San Diego County alone. The sector did not fare well in Orange or Riverside counties, where job loss was more than the expected values. In total,1,347 establishments are engaged in the research, lab services, and education sector of the life sciences cluster, providing, on average, 50 jobs per establishment.

RESEARCH, LAB SERVICES & EDUCATION: EMPLOYMENT BY COUNTY COUNTY 2010 2012 2014 2012 avg earnings Imperial 62 81 91 $43,875 Riverside 2,708 2,906 3,181 $43,406 Orange 20,213 19,996 21,951 $88,986 San Diego 45,123 45,464 49,819 $128,896 Region 70,116 68,447 75,042 $97,524 REGIONAL SPECIALIZATION & COMPETITIVENESS San Diego County has over three times the concentration of employment in research, lab services, and education compared with the rest of the United States. One look at the density of the private academic research labs on Torrey Pines Mesa would explain this unique feature of the region. The lingering effects of the Great Recession have had an impact of this industry cluster with total regional employment showing a slight decline of about 2% from 2010 levels. However, as the national economic recovery picks up steam in 2013 and 2014, we expect a signifi cant rebound in this cluster with total employment increasing to over 75,000. Both Orange County and San Diego County have strong location quotients in the research, lab services and education sector. This is driven by the large number of research and development jobs in San Diego County, the growing number of medical laboratory jobs in Orange County, and the aforementioned strength of higher education institutions in Southern California. The LQ for the San Diego-Orange counties region for research, lab services, and education is 1.79, which means there is almost 80 percent more of these jobs in this area per capita than the national average. The competitive effect for the research, lab services, and education sector in the region over the past few years has been very strong. However, Orange County is showing indication of challenges that are likely the result of industry trends and budget troubles facing California s public universities over the past few years. RESEARCH, LAB SERVICES & EDUCATION 19 COUNTY 2009 2011 2013 Imperial 0.12 0.08 0.08 Orange 1.24 1.27 1.33 Riverside 0.31 0.26 0.25 San Diego 2.53 3.01 3.06 REGION 1.57 1.77 1.82 Source: EMSI Complete Employment, T. Clower & Associates RESEARCH, LAB SERVICES & EDUCATION: LOCATION QUOTIENT COUNTY DIRECT INDIRECT INDUCED TOTAL Imperial 84 16 34 134 Orange 19,997 7,839 19,465 47,301 Riverside 2,906 722 2,094 5,722 San Diego 45,463 18,374 72,212 136,049 TOTAL 68,447 28,111 97,610 194,168 Sources: EMSI Employment Complete, IMPLAN, T. Clower & Associates RESEARCH, LAB SERVICES & EDUCATION: EMPLOYMENT

RESEARCH, LAB SERVICES & EDUCATION IMPACT: ECONOMIC ACTIVITY COUNTY DIRECT INDIRECT INDUCED TOTAL Imperial $ 9,449,749 $ 1,942,308 $ 3,491,298 $ 14,883,355 RESEARCH, LAB SERVICES & EDUCATION 20 Orange $ 3,036,297,152 $ 1,227,849,963 $ 2,765,735,908 $ 7,029,883,023 Riverside $ 273,392,056 $ 95,335,057 $ 235,456,292 $ 604,183,405 San Diego $ 7,219,108,640 $ 2,773,308,779 $ 9,668,898,749 $ 19,661,316,168 TOTAL $ 10,584,153,088 $ 4,247,147,425 $ 13,262,336,336 $ 28,093,636,848 Sources: EMSI Employment Complete, IMPLAN, T. Clower & Associates RESEARCH, LAB SERVICES & EDUCATION: SHIFT SHARE ANALYSIS 2009 2012 COUNTY EXPECTED CHANGE COMPETITIVE EFFECT Imperial 5 6 Orange 1,415-2,052 Riverside 191-138 San Diego 2,010 7,315 REGION 3,626 5,131 ECONOMIC IMPACT The research, lab services and education sector creates roughly $12 billion in labor income and over $28 billion in overall economic activity within the region. Roughly 125,000 additional jobs are supported within the region by research, lab services and education alone. RESEARCH, LAB SERVICES & EDUCATION IMPACT: LABOR INCOME COUNTY DIRECT INDIRECT INDUCED TOTAL Imperial $ 3,907,766 $ 657,887 $ 1,513,426 $ 6,079,079 Orange $ 1,606,615,909 $ 434,807,987 $ 1,063,050,634 $ 3,104,474,530 Riverside $ 115,872,789 $ 28,059,784 $ 97,350,829 $ 241,283,401 San Diego $ 3,908,489,091 $ 1,010,939,548 $ 4,102,793,876 $ 9,022,222,515 TOTAL $ 5,677,930,543 $ 1,514,256,050 $ 5,396,993,229 $ 12,589,179,822 Notes: Labor income includes all forms of employment income, including employee compensation (wages and benefi ts) and proprietor income. Sources: EMSI Employment Complete, IMPLAN, T. Clower & Associates

MEDICAL DEVICES & DIAGNOSTICS The medical devices and diagnostics sector includes companies that make products that are used outside the body, or used or implanted inside the body to improve its function and health. It also includes tools used on biological samples to detect diseases. In Southern California s medical devices and diagnostic sector, medical devices include ResMed s masks and air pumps to treat sleep-related breathing disorders, to CareFusion s Pyxis technologies to control drug inventory in the health care setting, or the company s intravenous drug pumps that aim to control drug dosing errors. Devices used inside the body include the microscopic cameras in Volcano s vision systems that aid heart catheterization and stent procedures, or NuVasive s tools that make spinal surgery less invasive and traumatic. Examples of the sector s diagnostics range from Quidel s rapid fl u tests to Hologic s high-throughput systems that run several tests for infectious diseases on multiple blood samples, which protect the nation s donated blood supply. MEDICAL DEVICES & DIAGNOSTICS: MAJOR EMPLOYERS BUSINESS NAME LOCAL EMPLOYEES CareFusion 15,000 Masimo Corp. 2,548 Volcano Corp. 1,298 Hologic (formerly Gen-Probe) 700 DexCom, Inc. 560 DJO 550 Genoptix Division of Novartis 585 NuVasive 575 Alphatec Spine 280 Source: Hoover s, Biocom In the four-county region, 11,105 people have a job in the medical devices and diagnostics sector. Orange County is by far the leading employer in this sector with 6,722 employees, followed by San Diego County, which employs 3,236 people in this sector. The sector includes 243 companies throughout the region. The average salary for this sector is $110,459 in Southern California. However, there is a broad range in salaries between counties with the average salary in Imperial County being $25,782 and the average salary in Orange County being $120,687. From 2010 through 2012, the sector lost 848 jobs in the region. In the next two years it is expected to add 636 new jobs. MEDICAL DEVICES & DIAGNOSTICS 21

MEDICAL DEVICES & DIAGNOSTICS 22 MEDICAL DEVICES & DIAGNOSTICS IMPACT: EMPLOYMENT BY COUNTY COUNTY 2010 2012 2014 2012 avg earnings Imperial 5 5 7 $25,782 Riverside 1,157 1,142 1,419 $83,348 Orange 7,409 6,722 6,945 $120,687 San Diego 3,382 3,236 3,370 $98,917 Region 11,953 11,105 11,741 $110,459 MEDICAL DEVICES & DIAGNOSTICS: SHIFT SHARE ANALYSIS 2009 2012 COUNTY EXPECTED CHANGE COMPETITIVE EFFECT Imperial 0 2 Orange 5-467 Riverside 4 110 San Diego 11-2 REGION 19-357 60% of the medical device and diagnostics sector jobs in the region are spread across 139 establishments in Orange County alone. In the previous report, the medical device and diagnostics sector exhibited strong regional competitiveness; however, as the current competitive effect value suggests, this sector has faced diffi culties within the region. Of the 243 establishments in this sector, 139 are in Orange County. Unfortunately, Orange County has a very weak competitive effect value and lost a considerable number of jobs in this sector between 2010 and 2012. MEDICAL DEVICES & DIAGNOSTICS: LOCATION QUOTIENT COUNTY 2009 2011 2013 Imperial 0.16 0.18 0.18 Orange 3.27 3.56 3.68 Riverside 2.28 2.26 2.42 San Diego 1.66 1.81 1.86 REGION 2.41 2.58 2.68 Source: EMSI Complete Employment, T. Clower & Associates

ECONOMIC IMPACT Each job in the sector has an average direct impact of $380,255 in economic activity and $858,725 in total economic activity. The 11,106 jobs in the sector support an additional 36,088 jobs, for a total regional jobs impact of 78,428. MEDICAL DEVICES & DIAGNOSTICS IMPACT: ECONOMIC ACTIVITY COUNTY DIRECT INDIRECT INDUCED TOTAL Orange $ 2,687,306,814 $ 951,845,886 $ 1,668,049,056 $ 5,307,201,756 Riverside $ 358,336,739 $ 62,424,873 $ 217,381,542 $ 638,143,154 San Diego $ 1,161,339,812 $ 405,286,682 $ 1,062,639,173 $ 2,629,265,667 TOTAL $ 4,223,114,928 $ 1,579,500,256 $ 3,734,391,160 $ 9,537,006,344 Note: Data was statistically insignifi cant for Imperial County Sources: EMSI Employment Complete, IMPLAN, T. Clower & Associates MEDICAL DEVICES & DIAGNOSTICS IMPACT: EMPLOYMENT MEDICAL DEVICES & DIAGNOSTICS COUNTY DIRECT INDIRECT INDUCED TOTAL Orange 6,721 5,121 11,763 23,605 Riverside 1,138 467 1,934 3,539 San Diego 3,236 2,217 7,949 13,402 TOTAL 11,106 8,545 27,543 47,194 Note: Data was statistically insignifi cant for Imperial County Sources: EMSI Employment Complete, IMPLAN, T. Clower & Associates 23 MEDICAL DEVICES & DIAGNOSTICS IMPACT: LABOR INCOME COUNTY DIRECT INDIRECT INDUCED TOTAL Imperial $1,634,666 $310,227 $206,219 $2,151,112 Orange $ 787,568,583 $ 365,992,628 $ 647,397,211 $ 1,800,958,422 Riverside $ 106,990,192 $ 22,886,818 $ 90,100,988 $ 219,977,998 San Diego $ 313,353,237 $ 153,564,559 $ 457,884,731 $ 924,802,527 TOTAL $ 1,222,438,964 $ 586,914,127 $ 1,537,343,270 $ 3,346,696,362 Notes: Labor income includes all forms of employment income, including employee compensation (wages and benefi ts) and proprietor income. Sources: EMSI Employment Complete, IMPLAN, T. Clower & Associates

NDUSTRIAL BIOTECHNOLOGY & BIOFUELS 24 INDUSTRIAL BIOTECHNOLOGY & BIOFUELS Industrial biotechnology includes enzymes, microbes biofuels and other technologies that are created to be highly effi cient or sustainable and designed to replace other chemicals or fuel sources that rely on petrochemicals and are harmful to the environment over time. These more sustainable chemicals or processes are used in manufacturing, as additives for livestock feed or to help break down waste products. The sector also includes biofuels research and synthetic biology. All of the fi elds in this sector have benefi ted from the fi eld of genetic sequencing, an area in which Southern California has a particular strength since it is home to Life Technologies and Illumina, two of the leading companies in the space that are driving the technology forward in leaps and bounds. INDUSTRIAL BIOTECHNOLOGY & BIOFUELS: MAJOR EMPLOYERS BUSINESS NAME LOCAL EMPLOYEES Euroamerican Propagators, LLC 200 Seltzer Companies, Inc. 165 BP Biofuels 150 Synthetic Genomics 145 Genomatica 115 Verenium 110 Verdezyne 45 SG Biofuels 25 Source: Hoover s, Biocom The region employs 6,542 people in this sector. San Diego leads the region in employment in the sector with 2,372 jobs in 2012, followed by Riverside County, which had 1,193 jobs. From enzyme companies such as Verenium, to industrial chemical companies such as Genomatica, to alternative fuel source companies such as SG Biofuels and Verdezyne, to larger global companies such as BP s Global Biofuels Technology Center, San Diego s long-standing strength in research and traditional biotechnology has helped it to evolve into a recognized center of innovation for this emerging sector. The average salary paid in this region to people working in the sector is $42,883, which is lower than most sectors due to agricultural jobs included in this sector. Southern California saw a decrease in industrial biotechnology and biofuels employment from 2010 to 2012, a trend which is expected to continue into 2014. Riverside County and San Diego County managed to buck the trend and post modest job gains in this sector.

INDUSTRIAL BIOTECHNOLOGY & BIOFUELS: LOCATION QUOTIENT COUNTY 2009 2011 2013 Imperial 2.43 2.47 2.13 Orange 0.22 0.18 0.17 Riverside 0.59 0.63 0.61 San Diego 0.43 0.46 0.46 REGION 0.40 0.40 0.40 Source: EMSI Complete Employment, T. Clower & Associates INDUSTRIAL BIOTECHNOLOGY & BIOFUELS IMPACT: EMPLOYMENT BY COUNTY COUNTY 2010 2012 2014 2012 avg earnings Imperial 579 494 445 $37,939 Riverside 1,161 1,193 1,195 $30,980 Orange 577 471 352 $47,413 San Diego 2,314 2,372 2,480 $48,997 Region 4,631 4,530 4472 $42,883 Source: EMSI Complete Employment, T. Clower & Associates The industrial biotechnology and biofuel industry faces many challenges in the region. National trends have contributed to job loss in the sector; however the competitive effect value for the region suggests that regional factors have hampered growth in the industry. San Diego County, however, has continued to exhibit a strong local advantage in this sector. NDUSTRIAL BIOTECHNOLOGY & BIOFUELS INDUSTRIAL BIOTECHNOLOGY AND BIOFUELS ESTABLISHMENTS, 2012 25 COUNTY ESTABLISHMENTS JOBS/ESTABLISHMENTS Imperial 23 21.5 Orange 19 24.8 Riverside 33 36.2 San Diego 64 37.1 Region 139 29.3 INDUSTRIAL BIOTECHNOLOGY & BIOFUELS IMPACT: LABOR INCOME COUNTY DIRECT INDIRECT INDUCED TOTAL Imperial $40,964,282 $23,078,059 $42,914,757 $106,957,098 Orange $41,049,059 $59,055,880 $66,647,455 $166,752,394 Riverside $50,899,692 $54,275,998 $106,642,178 $211,817,868 San Diego $124,071,956 $155,993,328 $363,381,051 $643,446,336 TOTAL $256,984,989 $292,403,265 $579,585,441 $1,128,973,696 Notes: Labor income includes all forms of employment income, including employee compensation (wages and benefi ts) and proprietor income. Sources: EMSI Employment Complete, IMPLAN, T. Clower & Associates