California: Limitless Possibility Lives Here, For Now.

It started with a conversation. A biochemist and a venture capitalist, talking about what science could do, for medicine, for business, for people. What came out of that conversation was Genentech, founded in South San Francisco in 1976. Its founding didn’t just create a company, it ignited an industry here in California. For fifty years, what followed was unlike anything the world had ever seen. Every generation of medicine had a California address. The tools, the platforms, the companies, the cures. The rest of the world didn’t just look up to us. It depended on us.

What followed was a half-century of American leadership: the development of targeted cancer therapies, biologics, gene therapies and medicines for diseases that once had no treatment at all. That legacy was built on a policy environment that valued research, rewarded risk, and understood that biomedical advances are the product of a delicate, capital-intensive R&D ecosystem. The question before us now is whether we are still committed to that understanding.

Just last week, Sacramento passed a state budget that permanently divests in biotech by imposing a permanent cap on R&D tax credits after 2030 – a shocking and disheartening development in a state that boasts the title and legacy of being the “birthplace of biotech”. California’s R&D tax credit was the lone shining star as far as state incentives for the life sciences industry to encourage investment in the state, but Sacramento’s recent decision signals they are lowering their defenses as China and other states aggressively compete and recruit life sciences into their territory. At stake is California’s long-time leadership role in biomedical innovation, which was built on the R&D tax credit. The life sciences, the second largest sector in California, is the most aggressive users of the R&D tax credit because our companies spend billions of dollars annually hiring researchers and scientists while also making massive investments in the capital-intensive work of R&D needed to create life-saving cures and treatments.

This tide-change decision by Sacramento occurred, interestingly, right before the BIO International Convention in San Diego (June 22-24), where tens of thousands from the life sciences community gather to exchange ideas, forge partnerships, and chart the next generation of innovation. As in the past, Governors from other states come to this convention to recruit biotech companies and advertise their state incentives for biotech. Instead of defending our turf and this home-grown industry, Sacramento’s recent decision makes our top-notch talent and incredibly productive innovation infrastructure open game for others to pick off for generations to come.

In stark contrast to California’s divestment, China’s biotech sector has grown 400-fold over the past decade and projections show China outspending the United States on R&D by more than 50 percent by 2030. China continues to close the biomedical innovation gap with the United States at an astounding rate–some reports show that they are now the new global leaders of drug development–representing 40% of all global drug development in comparison to 35% coming out of the United States.

California Life Sciences continues to raise red flags with lawmakers in Sacramento and Washington, DC – warning them that our leadership in biomedical innovation is not guaranteed. To protect our leadership role, lawmakers need to advance a regulatory landscape that allows innovation to grow. Unfortunately, this industry is facing policy threats continually in California that collectively chip away at the very foundations of the life sciences ecosystem. If California loses its leadership role in biomedical research, it will take generations to gain back. In our 2026 life sciences sector report, we are seeing red flag trends: for the first time we experienced consecutive years of employment loss in our major life sciences regions and a staggering 34% drop-off in venture capital funding for start-up biotechs in San Diego.

Investor funding that once defaulted to California’s biotech start-up community, increasingly found its way to China, where regulatory timelines are shorter and the government has made biomedical dominance an explicit national priority. The era of California dominance is at an inflection point – and not in our favor.

The stakes are global. Other countries are competing aggressively for the same companies, capital, and talent. California retains every structural advantage, but only if it continues to act like the world’s leader in life sciences.

And that is ultimately what this moment demands: not nostalgia for how leadership was built but clarity about how it is sustained. California’s biotechnology story has never been static. It has always been the product of connection. Of scientists and investors. Of discovery and capital. Of ideas meeting action at exactly the right moment. California Life Sciences will be very active at the BIO International Convention to advocate for one of California’s most important crown jewel innovation sectors–representing more than 336,000 California employees – we will align our collective voices to defend the important work we do for patients every day.

www.califesciences.org
1201 K St., Suite 1010
Sacramento, CA 95814
(916) 226-9957