With nothing but negative news coming from Wall Street, its turning out that next week’s 3rd annual BIOCOM Investor Conference couldn’t be taking place at a more appropriate time.

As the Wall Street Journal reported yesterday, while the Dow Jones average is down more than 30 percent for the year, the U.S. Biotechnology Index has fallen only 1 percent to date. All proof that the market sees the industry as a long term play. There’s some stability in the future of drug development, as witnessed by this morning’s major drug development deal from Phenomix for a late stage diabetes drug that could be worth up to $340 million.

San Diego and the Southern California region couldn’t be better positioned to take advantage of post-crash investment in biotech. Predictability and innovative ability will be the keys to success in making investments in this industry. Consider what’s happened here lately with regard to those factors.

Invitrogen, one of the industry’s biggest scientific tool suppliers, and one of the counties largest biotech companies, is buying a Bay Area company called Applied Biosystems, which makes gene-sequencers, meaning Invitrogen will be the biggest maker of both the scientific supplies and hardware used for biotech research. They will be headquartered here, with more than $3.5 billion in annual revenues and 3,000 employees around the world.

On the big pharma side of things here, Lilly has acquired Structural Genomix and already owns Applied Molecular Evolution, but in addition they’ve announced that they’ll lease space for a San Diego research operation. Why? Lilly’s CEO John Lechleitter told me last week that they want to be where the action is in biotech innovation. They’ll join Pfizer, Merck, Novartis, Biogen Idec and Johnson & Johnson as big pharma and biotech firms with operations here. If the Roche buy-out of Genentech takes place, they’ll be here too, with ownership of the Genentech Oceanside manufacturing plant that make cancer drug Avastin.

Let’s shift gears to the basic research side. San Diego is pulling in its fair share of stem cell research funding both in terms of research dollars and in terms of facility construction funding from the California Institute for Regenerative Medicine. That attracted philanthropist Denny Sanford of South Dakota (where ALL stem cell research apparently has been banned) to park his money with the new Sanford Consortium for Regenerative Medicine. That partnership includes the Burnham, Salk and Scripps Research Institutes and UCSD — the kind of collaborative partnership among grant-competitive organizations that many agree could only take place in as collaborative an environment as San Diego.

Scripps and Burnham just received a combined $180 million from the NIH to do small molecule rapid screening of potential new molecules for drug development. I have to believe that the pharma companies are going to be knocking on their doors sooner rather than later to take advantage of this ability to fill waning pipelines.

— JOE PANETTA

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