L.A.'s biomed prominence grows, but still lags behind other regions.

L.A.'s biomed industry is healthier than that of most other major U.S. cities, but it still has a ways to go before it attracts some of the nation's true biomed powerhouses.

Venture capitalists, who actively search for and track the kinds of high-growth startups that comprise much the biomed industry, say Northern and Southern California (most notably Orange and San Diego counties) are among the nation's strongest regions for biomed.

Venture Capital Investments in Biomed(*)

(in millions)

                                    Medical
                         Biotech     Device     Total
Area                       Cos.        Cos.     Invest.

Silicon Valley            $184.0       $91.7     $275.7
Boston                     141.4        70.4      211.8
San Diego                  102.0        31.7      133.7
L.A./Orange                 19.6        31.2       50.8
Minneapolis-St. Paul         5.8        13.3       19.1

* For the four quarters ended Sept. 30, 1996

Source: Price Waterhouse LLP

Other hot spots include Boston and Minneapolis, with pockets of strong biomed activity also in parts of Texas and Florida.

Venture capitalists invested $50.8 million in biomed companies in L.A. and Orange counties during the year ended Sept. 30, 1996 (see accompanying chart).

By comparison, Silicon Valley biomed firms received $275.7 million in venture capital during that period, while the Boston area got $211.8 million and San Diego $133.7 million.

Many industry experts consider Southern California a single, unified region when it comes to biomed. But the region is actually trisected into L.A., Orange and San Diego counties, according to Don Milder, a general partner in the Irvine office of venture capital firm Crosspoint Venture Partners.

"San Diego is one of the leading areas for biotechnology - specifically in drug development using biological processes. ... Orange County has a strong history of medical devices," he said.

Orange County's strength dates back to the 1970s, when several major companies set up shop in the Irvine area, Milder said.

He pointed to former firms such as Bentley Labs, Hancock Labs and McGaw Labs as three major medical equipment producers that set up shop in the area and spawned successor companies. All three firms were subsequently acquired by larger national companies.

"They just happened to be there. They built up very exciting companies that attracted real talented people, and those people jumped out and started their own companies. They begot dozens of companies," Milder said. By comparison, he noted, L.A. hasn't had the same strong field of biomed companies to spawn a large crop of new firms.

Another ingredient to Orange County's success in medical equipment has been the abundance of laid-off Southern California aerospace engineers, who provided a rich supply of talent to new startups, said Ross Jaffe, a general partner in the Menlo Park office of venture capital firm Brentwood Venture Capital.

"Many of the (Orange County) workers tended to be guys who came out of aerospace, then went to big (biomed) companies, and later went out and formed their own companies," he said.

In San Diego, meanwhile, the focus in biomed has been on biological pharmaceutical companies. San Diego has been especially helped by the strong academic commitment from the University of California campus there, which helped foster the local biological pharmaceutical industry, said Dave Chonette, a general partner in the Irvine office of Brentwood Venture Capital.

"L.A. is not nearly as significant as Orange County and San Diego," Chonette said. He noted that L.A. is probably more on par with cities like Minneapolis, with a reputation for medical equipment production, Boston, which is known for biological pharmaceuticals, and Houston, which is known for its health care technology.

One of the nation's hottest spots for biomed remains the San Francisco Bay Area, which is actually a relative newcomer to biomed, with most firms there not starting up until the 1980s or afterward, said Jaffe.