Investor Watch: April 21, 2022

California Life Sciences last week released its 2021 sector report, which shows that California’s life sciences sector directly employed 313,230 people, attracted $12.5 billion in venture capital and received $5 billion in funding from the NIH last year. In addition to a focus on diversity, equity and inclusion in the sector, the report, produced in partnership with KPMG, includes a heat map showing the concentration of life sciences employment across the state. The number of life sciences establishments in the state increased by 3% from 2019. Among other takeaways:

• “The industry and its supply chain together contributed $411 billion in economic output and an estimated $42 billion in total tax revenues to the state economy.”
• Partially due to pandemic effects on this industry like every other sector, biomedical exports decreased slightly from $26.4 billion in 2021 to $25.8 billion in 2020.
• “As of January 2022,” says the report, “out of all 79 COVID-19 vaccine developments in the United States, more than a quarter have been sponsored by or primarily supported by organizations in California and over half of them (i.e. 43) have clinical trials taking place in California.”
• “The largest metro-area share of the jobs supported in California was in the Los Angeles-Long Beach-Anaheim MSA, followed by the San Diego-Carlsbad MSA, the San Francisco-Oakland-Hayward MSA, then the San Jose-Sunnyvale-Santa Clara MSA. For the entire state of California, the average life sciences salary in 2020 was around $159,000, increasing from about $142,000 in 2019.”

Among the nearly 100 corporate facility investments tracked by the Conway Projects Database in California this year so far are the HQ and R&D operations of Totus Medicines in Emeryville (60 jobs); a 100-job investment by ThermoGenesis Holdings in Rancho Cordova; and 41,000 sq. ft. occupied by the HQ and R&D operations of Vector Laboratories in Newark. — Adam Bruns

On April 18 the federal Office of Management and Budget released new Buy America rules (and exemptions) for projects being funded by the Bipartisan Infrastructure Law. The guidance applies to all iron and steel, all manufactured products (at least 55% domestic content) and all construction materials. The rules prompted an immediate response from Associated General Contractors of America CEO Stephen Sandherr:

“The Biden administration’s new Buy America mandate is the kind of red tape initiative that undermines American’s confidence in the federal government’s ability to effectively use their tax dollars,” he said. “It makes no sense to place unrealistic limitations on firms’ ability to source key materials at a time when prices for those products are skyrocketing and supplies are limited. Supply chain shortages are already prompting firms to avoid bidding on new projects, as the Army Corps of Engineers discovered on a recent project that received zero bids because of concrete scarcities in parts of the country.”

Comparing the waiver seeking process for materials not made in America to “asking the U.S. Department of Education to verify every child’s permission slip to miss a day of school,” Sandherr went on to note, “ Whatever minimal gains in domestic construction material production this new mandate might temporarily generate will be offset by the increased cost of constructing new projects, slower schedules to build those projects and the fact some key projects could be hamstrung from moving forward. Americans were right to be excited about the potential for the Bipartisan Infrastructure Law to make our economy more efficient, our commutes faster, our water safer and our economy stronger. But this new mandate will leave too many taxpayers wondering where the trillion dollars went while they are still stuck in traffic, still hearing about boil water orders and still wondering why we can’t have better transit systems.”

The iron and steel production supporting the Ukrainian economy at plants like Metinvest’s locations noted above has a historic parallel in many countries, including the United States. As documented by the National Park Service, the Saugus Iron Works National Historic Site in Essex County, Massachusetts, north of Boston, “is a reconstruction of the first successful, integrated iron works in the New World. It produced wrought iron and cast iron products from 1646 to approximately 1670, utilizing the most advanced iron making technology in early Colonial times.” Saugus is considered the birthplace of the iron and steel industry in Colonial America, “The subsequent dispersal of former workers and their descendants to other parts of Colonial America, where they established other iron producing centers, was critical to the development of industry and technology in the emerging country,” says the NPS. “The National Register of Historic Places calls the Saugus lron Works ‘the first chapter in America’s book.’ With its requirement for a large labor force, the iron works served as a conduit, fowarding the movement of technology and people from the Old World to the New. Through the experiences of Puritans, English freemen, and Scots prisoners engaged for its operation, the iron works traced the British immigrants’ journey in the New World and recorded their stories of assimilation.”