THE STATE OF UTAH’S LIFE SCIENCE INDUSTRY A comprehensive report highlighting Utah’s life science industry and providing recommendations to support promising growth UTAH’S INDEPENDENT LIFE SCIENCE ASSOCIATION

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Table of Contents

INTRODUCTION

Letter from the President 03

Executive Summary 04

Letter from Governor Gary R. Herbert 05

Letter from Bruce A. Lefavi 06

UTAH’S LIFE SCIENCE ECONOMY

Utah’s Life Science Foundation 08

Employment 09

Infrastructure 10

Utah’s International Trade Mission 10

RECOMMENDATIONS FOR A PROMISING FUTURE

Meet Talent & Recruitment Needs 17

Bridge the Innovation Gap 18

Ensure Access to Capital & Incentives 18

Redefining the Subclusters 18PROGRAMMATIC SUPPORT

Government Programs 11

Talent Pipeline 11

Innovation Pipeline 12

Business Resources 12

ABOUT BIOUTAH

BioUtah’s Mission, Vision & Goals 19

BioUtah’s Membership 20

BioUtah’s Board of Directors 21

DEFINITIONS 22

PUBLIC & PRIVATE INCENTIVES

Incentives 13

Access to Critical Capital Start-ups 14

Start-ups 15

EMERGING & GROWTH INDUSTRIES

Healthcare IT 15

Service-based Companies 15

Advanced Manufacturing 16

Genomics/Personalized Medicine 16

Stem Cells Therapies 16

Kelly Slone President & CEO, BioUtah

As President & CEO of BioUtah, it is my pleasure to introduce you to Utah’s State of the Industry Report.

BioUtah is an independent, trade association serving Utah’s life science industry. Our members are committed to finding solutions to some of the greatest challenges in healthcare including manufacturing and the delivery of medical instruments that improves tools for diagnosis and treatments; advancing precision medicine that improves the treatment and prevention of cancer and other diseases, and developing new processes that can deliver better healthcare outcomes for patients and the overall healthcare system.

We would like to thank Lefavi Wealth Management for underwriting this report and their strong commitment in supporting Utah’s life science industry.

BioUtah looks forward to expanding our efforts in building a strong life science ecosystem in Utah, enabling success and advancing innovation for our members.

Letter from the President

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Executive SummaryThe BioUtah Life Science State of the Industry Report is a comprehensive report highlighting Utah’s life science industry and provides recommendations on how to accelerate the growth to one of Utah’s economic clusters. These include:

Meet intellectual talent & recruitment needs Bridge the innovation gap Ensure access to capital & incentives Redefining the subclusters

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Dear Reader,

As governor, I am very pleased with the progress of the life science industry in Utah. It is one of our six targeted economic clusters and has a significant impact on our state’s economy. In 2013, the life science industry employed more than 25,000 people in jobs that paid 196 percent of the average wage in Utah. This industry also has great potential as Utah is poised to become a national leader in medical technology, advance diagnostics, and biopharma innovation.

This important industry has been enhanced by the presence of BioUtah, which serves life science organizations that focus on research and development, manufacturing and commercialization, or provide supportive services to life science technologies and treatments in our state. BioUtah has in fact produced this significant report, which provides an excellent summary on the current landscape of Utah’s life science ecosystem and highlights the future growth and opportunities for the life science industry in our state.

If your life science company is already located in our great state, may I congratulate you for choosing the best place in the nation to build and grow your enterprise. If not, let me encourage you to explore all of the opportunities that await you in Utah.

I am excited about the future of Utah’s life science industry and the potential for growth and innovation that it brings. I hope that you find this report helpful and enlightening.

Sincerely,

Gary R. HerbertGovernor

Governor Gary R. Herbert

Utah Life Sciences & Lefavi Wealth Management

Lefavi Wealth Management firmly believes the success of the life science industry is critical to the future economic strength of Utah. Innovative companies producing remarkable breakthroughs will create long-term prosperity through high-paying jobs; jobs that will encourage the brightest minds to live and work in this beautiful region.

Our commitment to this industry, as evidenced by the partnership with Kelly Slone and BioUtah to produce this report, is strong. However, this support is much more than an alliance for our financial gain – it is also quite personal to me. Quite frankly, I shouldn’t be here. Several years ago I was diagnosed with a form of terminal cancer. Thankfully, the impressive advances in life sciences ultimately saved my life. So now I’d like to return the favor as best I can by contributing to the stability and growth of this community.

The future of life sciences is unknown. What new cure is out there? What amazing device will be produced? What blockbuster drug is right around the corner? The financial world is no different. Lefavi clients put their financial futures in our hands and trust us to manage their wealth through whatever happens. That trust was gained through over 30 years of preserving and growing the capital of Utah’s high net worth professionals, business owners, and families. My firm’s focus on the wealth management needs of those in life sciences is unique and our capabilities are wide ranging.

Thank you for using the findings of this report to move the life science industry forward. The time is now for action. The health and wealth of Utah depend on it.

BRUCE LEFAVI President & Founder Lefavi Wealth Management

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UTAH’S LIFE SCIENCEECONOMY

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Utah’s Life Science Foundation

Utah’s life science industry is one of six economic clusters. The Utah’s Life Science

economy is anchored by diverse, large corporations, employing thousands of scientists

and engineers in diverse life science companies from medical device to pharmaceutical, to

diagnostics and contract research organizations. The life science industry has grown from

a strong foundation based in local innovation into a burgeoning economic cluster, which

significantly impacts Utah’s economy.

The Utah Life Science cluster holds promise for Utah to become a national leader in medical

technology, medicines and diagnostics that provide valuable cures and treatments for

patients, and provide great value to the healthcare system.

Currently, more than 1,000 life science companies employ more than 30,000 Utahns

In 2015, jobs in the life science industry pay on average 161% of Utah average wages, or around $62,000 a year

All of the major life science subclusters are growing faster than the national average and faster than other industries in Utah

Subclusters include:*

• Medical Devices and Equipment • Drugs and Pharmaceuticals • Research • Testing and Medical Labs • Biomedical Distribution.

Utah’s life science industry has a strong support system with a number of global medical

device amd pharmaceutical companies including Bard Access Systems, BD Medical,

Edwards Life Sciences and Merit Medical. Utah also is a growing leader and employer in

medical testing labs with the presence of Allergan, ARUP Laboratories, a national leader

in clinical and anatomic pathology reference laborites and Myriad Genetics, one of the

nation’s leading molecular diagnostics companies with a board number of diagnostic

procedures related to cancer detection and treatment.

Large Companies

*Source: Governor’s Office of Economic Development

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Employment

In 2004 it was reported that life science employment in Utah had reached 5,200 people, which was just a

3,000-person increase in the preceding ten years. Since then, Utah has added more than 26,000 jobs, and today,

that accounts for more than 16 percent of total jobs in Utah. Employment in Utah’s life sciences industry grew

by 25.8 percent from 2001 to 2010, which included a 9.2 percent increase in jobs from 2007 through 2010. At

the national level, growth in life sciences employment was 8.4 percent from 2001 to 2010, but essentially flat

during the period 2007 through 2010.

Over 26,000 jobs created in Utah since 2004

Life Science Employment Growth in Utah (2001 - 2010)

25.8% 961 Establishment Count

$62,337Average Annual Wage

26,959Cluster Jobs

161%Utah Avg Wage

Job Growth Avg

2.81%

8.61%

Utah Life Science Innovations

1-YR 5-YR

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Utah’s International Trade Mission

More than 70 percent of the world’s purchasing power is located

outside of the United States making the export of Utah’s high-

quality, innovative life science goods and services very profitable

for Utah businesses. On average, businesses that export

experience faster sales, increased job creation, and higher

employee wages over non-exporting businesses. Additionally,

businesses that export are generally more stable and able to

weather economic downturns more successfully due to their

diverse portfolio of global markets. State of Utah trade missions

and STEP grants offer a proven, cost-effective tool for Utah

companies to learn first-hand about target export markets.

Infrastructure

Specialized service providers allow established companies to focus on core competencies while outsourcing

other activities, and emerging companies to access expertise and resources without the need to expend capital

internally to build and maintain specialized units. The extent of specialty service providers in a given industry

indicates the degree of horizontal integration within that industry. In other words, extensive use of contract

providers would point to a horizontally organized industry. In surveying the Salt Lake valley, many large device

companies still conduct a majority of their activities in-house and as a result, fail to support a competitive local

service provider industry. The small number of service providers highlights the degree of vertical integration.

And, as discussed, those service providers are a critical support mechanism for emerging companies, who

typically lack the infrastructure to take a product from concept to market.

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PROGRAMMATIC SUPPORT

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PUBLIC & PRIVATE INCENTIVES IncentivesThe Governor’s Office of Economic Development (GOED) provides financial

incentives to qualifying companies for creating new, high-paying jobs in Utah.

These include corporate recruitment incentives, tax credits, and TCIP Funding.

Special consideration is given to companies within Utah’s economic clusters,

including life sciences.

EDCUtah, partially funded by the state, is the business-recruiting arm of Utah.

Many of the businesses are attracted by tax incentives to relocate to the

state, are guided through the process by EDCUtah staff. EDCUtah plays a

vital role in accelerating the growth of the life science industry in this regard.

These incentives are used to select companies that create new, high-paying jobs that help improve the standard

of living, diversify the state economy, increase the tax base, attract and retain top-level management, and

encourage graduates of in-state universities to remain in Utah. All state incentives are awarded on a post-

performance basis so that companies must meet specific milestones, including generation of new state tax

revenue, before incentives are disbursed.

Nelson Labs received a $2 million in tax credit in 2008 for a 10-year period, enabling the company to open

an expanded facility in the Salt Lake City suburb of Taylorsville. In August 2009, Edwards Lifesciences

Corp. was offered an incentive of up to $11.5 million over 15 years, and Merit Medical Systems Inc., a

manufacturer of disposable medical products, an incentive package worth up to $4.4 million.

The TCIP program is a $1.6M/year legislated program that grants non-dilutive capital to companies

commercializing technology. Although it is industry agnostic, numerous life science companies have benefited

from receiving these grants.

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PUBLIC & PRIVATE INCENTIVES Access to Critical CapitalOver the past decade, many Utah start-up life science companies have been

successful in attracting private capital which has fueled many successful

life science companies and created several important medical innovations.

However, it is important to point out that there is a significant lack of capital for

many small companies needed to help grow the company and take a product

to market. The deficiency at the seed and venture stage of funding is dramatic.

Approximately less than 2% of total venture funds invested in Utah companies

were placed in life science companies.

Source: PWC / National Venture Capital Association / Money Tree / Thmoson Reuters

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Start-ups

A few start-ups to watch are Episona, which is developing an epigenetic-based diagnostic platform for men’s

personal health profiles. MedVantage is developing a unique surgical product in the microvascular surgery space.

The technology is a vascular coupling system that allows for efficient coupling of arteries and veins. ApopTx

was formed with the goal of developing novel cancer therapeutics that target cancer progression in late stage

abdominal and ovarian cancers. Progenitor Life Sciences is a start-up company focused on the development

and marketing of research tools and molecular diagnostics for the stem cell market. And lastly, Xenocor is a

surgical medical device start-up developing a low-cost laparoscopic camera system and accessory technology

for low resource setting.

35 Utah-based start-ups raised $783 million in venture capital investment in 2014

Service-based CompaniesThere are four medical device service providers and twenty pharma service providers employing over 1000

scientists, engineers and technicians in Utah. Despite the small number of medical device service providers, a

key observation is the breadth of these providers. There are a growing number of medical device contractors,

such as Zien Medical, who provide research and development services. In addition, medium-sized, downstream

service providers such as Nelson labs (microbiological services) and Biomerics (injection molding) are

experiencing growth from both large and emerging companies, suggesting that the full spectrum of services

not only exists but is reflective of cluster activity. Larger companies who engage local service providers and

help grow their business, also help lower the barriers to entry for smaller companies.

EMERGING & GROWTH INDUSTRIES

Healthcare ITUtah’s strengths in the software/ IT sector provide the foundation for Utah’s emerging life science IT / software

economy. Varian Medical Systems is a leading manufacturer of medical devices and software for treating

cancer and other medical conditions with radiotherapy, radiosurgery, proton therapy, and brachytherapy.

Companies like Verisk Health, Orca Health, and Master Control are all rapidly growing. Software applications, like

Health Hub Mobile app, exist in a gray zone between medical devices, which are highly regulated, and computer

applications, which aren’t regulated much at all.

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Genomics/Personalized MedicineGenomics and Personalized Medicine are thriving in Utah. The University of Utah’s Program in Personalized

Health Care includes research, clinical and educational initiatives that support the tailoring of medical treatment

to the individual characteristics of each patient. Tute Genomics provides a clinical genome interpretation

platform that helps researchers identify disease genes and biomarkers, and assists clinicians/labs with genetic

diagnosis and personalized therapeutics.

EMERGING & GROWTH INDUSTRIES

The emerging life science industries are areas of potential rapid growth. These industries are predicated on Utah’s foundational strengths, occasionally crossing and impacting multiple economic clusters. Advanced manufacturing and software IT are two such examples.

Advanced ManufacturingUtah is home to many specialty and advanced manufacturing industries that support the Life Science industry,

such as pharmaceutical preparation, surgical appliance, irradiation apparatus, electromedical, electrotherapeutic

apparatus surgical and medical instrument manufacturing and more.

Stem Cells Therapies The Cell Therapy and Regenerative Medicine (CTRM) is a thriving group located in Research Park and part of

the Huntsman Cancer Institute, capitalizing on both co-location and a unique expertise to support numerous

stem cell-based companies (ie. DiscGenics, LSK, Allocure and Q-Therapeutics). The CTRM offers R&D support

to this concentration of stem cell focused companies.

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RECOMMENDATIONS FORA PROMISING FUTURE

Currently, the supply of well trained, qualified employee candidates is not meeting the demand of Utah’s life

science industry which is creating a barrier to growth for Utah’s life science companies and recruiting talent.

The STEM Action Center is an industry-driven effort at developing science and technology literate workforce

of tomorrow. It is housed within GOED and maintains a board of industry advisors. As life science companies

grow, it will be increasingly important to both encourage students to pursue science careers but to also improve

science education in the state. As the STEM Action Center continues to gain momentum and pursue new

programs, it will be important for life sciences to maintain a strong presence.

Additionally, Utah’s life science companies need access to low-risk economic development through academic

collaboration. There is a need for continued investment in creating 1) stronger and more effective outreach

programs that can be sustained over the long term, 2) identifying best practice internship models and developing

strategies to grow internships as a key component to STEM education activities, 3) fostering greater university

collaboration in applied research and 4) foster greater university and industry interactions and partnering.

Meet Intellectual Talent & Recruitment Needs

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The life science cluster dynamics data have traditionally not differentiated between diagnostics, pharma/

biotech, pharma services, natural products, medical device, medical device services, reagents and equipment

among others. There is an opportunity to understand the data much more in depth, and to use this data to

drive business and investment decisions. For example, in a 2012 Battelle report titled Utah Cluster Acceleration

Partnership (UCAP), Accelerating Utah’s Life Sciences Industry, there is no distinction between “natural products

and dietary supplements” from “Drugs and Pharmaceuticals and Biomedical Distribution” as companies in these

respective industries often share the same NAICS code (North American Industry Classification System). There

was also no attempt to distinguish service providers from the companies they serve. Both a medical device

service provider and a medical device company would be characterized as “Medical Devices and Equipment”

even though these industries are very different from one another.

Redefining the Subclusters

Bridge the Innovation GapConversations with key medical device companies indicate there is a growing “innovation gap” in some larger

companies. The number of new product ideas emerging from internal R&D have slowed, primarily due to the

nature of large company operations that emphasize the establishment of sales channels, strict adherence to

regulatory guidelines, and milestone-driven process. A confirmation of this innovation gap can also be assumed

through a rise in acquisitions, which usually indicate a company is compensating for deficiencies in R&D by

acquiring other company technology. A healthy cluster would be capable of bridging the innovation gap both by

offering local acquisition targets and by companies engaging local service providers and resources.

Ensure Access to Capital & Incentives While there is a vibrant private capital investment in Utah, it is mostly focused on software and the IT industries.

A focused effort is needed to develop a collaborative strategic plan that will provide greater access to capital

and identify relevant investment incentives that fit the needs of the life science ecosystem.

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About BioUtah

Our MissionBuild Utah’s life science ecosystem; enable success and advance innovation for our members.

Our VisionUtah to be recognized as a respected global leader in life science innovation that improves the quality of life.

Our GoalsEducate to retain and attract life science talent in the state

Ensure access to public and private capital and new investment incentives

Lead public policy efforts for the life science ecosystem

Develop valuable networks and collaborations

To Become a BioUtah Member:visit bioutah.org/member/newmemberapp

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Pozzetta Scientific

ProMD

Recursion Pharmaceuticals

Saarland Economic Promotion Corporation

Simplicity Airway

Sorenson Genomics

Sports Medicine Research & Testing Lab

Springboard5 PR & Marketing

Squire

Stryker Corporation

Surgical Frontiers, LLC

Symptomly

Takeda Pharmaceutical America, Inc

Tolero Pharmaceuticals, Inc

Turner MedTech, Inc

uBiota, LLC

UniConnect LC

University of Utah

USTAR

Veristride

Vestan, Inc

whatsnewMD

Xable][

ZIEN Medical Technologies

Zions Bank

About BioUtah 1800Contacts

Actavis

Aerotek Scientific

AncestryDNA

Aplion Medical

Asserta Health

AssurX, Inc.

ATL Technology

Ballard Spahr

Bard Access Systems

BD Medical Systems

BioInnovations Gateway

Biomerics

Blackrock NeuroMed, LLC

BSI

BYU Technology Transfer Office

Clene Nanomedicine, Inc.

Clinical Innovations

Conextions Medical

Crocker Ventures

CrowdFunding Cures

Curza

Dinesh & Kalpana Patel Foundation

Discgenics

Durham Jones & Pinegar

Edwards Lifesciences LLC

Fabian & Clendenin

InnovaBio

Intermountain Healthcare

iVeena Delivery Systems Inc.

Jade Therapeutics, Inc.

Johnson & Johnson

Knudra Transgenics

Kosmo Technologies

Lefavi Wealth Management

Liyen, Inc

LowestMed

Marsh

Megadyne Medical Products, Inc.

Merit Medical Systems, Inc.

Michael Best & Friedrich

MT Promedt Consulting GmbH

Myriad Genetics

Navigen, Inc.

Navillurn Nanotechnologies, Inc.

Nelson Laboratories, Inc.

Nexus Orthopaedics

Novo Nordisk

OneSource Regulatory LLC

PenBlade, Inc.

Phil Triolo & Associates LC

PhRMA

OUR MEMBERSHIP CONTINUES TO GROW! TO SEE NEW MEMBERS, VISIT BIOUTAH.ORG/MEMBERS

BIOUTAH MEMBER DIRECTORY

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Nathan Conover President & CEO

Pathwise

Gary Crocker President & Managing Director

Crocker Ventures

Ivy Estabrooke Executive Director

USTAR

Val Hale Executive Director

Governor’s Office of Economic Development

George Hamilton Vice President Business Development

Intermountain Healthcare

Stephen Jacobsen President & CEO

Sterling Technologies

John Knorpp Chief Regulatory Affairs Officer

Merit Medical Systems, Inc.

John Langell MD, PhD, MPH Chief of General Surgery,

George E. Wahlen VA Medical Center

Executive Director, CMI at the University of Utah

Dirksen Lehman Corporate Vice President, Public Affairs

Edwards Lifesciences LLC

Richard “Rich” Linder President & CEO, Director

CoNextions Medical

Kimberly Linthicum Vice President of Government Affairs

Myriad Genetics

Jeffery Nelson CEO

Nelson Laboratories, Inc.

Dinesh Patel, PhD, BE Managing Partner

Patel Family Investments

Travis Sessions Founder, President & CEO

Biomerics

John Stillings Executive Vice President, Commercial Lending

Zions Bank

BioUtah’s Board of Directors

RECOGNITION: Kevin Jessing, Former Life Science Cluster Director, GOED

FOR A CURRENT LIST OF BOARD MEMBERS, VISIT BIOUTAH.ORG/GROUPS/GROUPROSTER/ BOARD-OF-DIRECTORS-3

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ECONOMIC CLUSTER “A cluster is geographically proximate firms in vertical and horizontal relationships involving a localized

enterprise support infrastructure with a shared developmental vision for business growth, based on competition and coop-

eration in a specific market field.” –Forsman and Solitander 2003

LIFE SCIENCE INDUSTRY Utah’s life science industry is comprised of medical device manufacturing and services, research

and testing, biotechnology, pharmaceuticals and healthcare IT.

MEDICAL DEVICE Instrument, apparatus, implant, in vitro reagent, or similar or related article that is used to diagnose, prevent,

or treat disease or other conditions, and does not achieve its purposes through chemical action, but medical devices act by

other means (e.g. physical, mechanical, or thermal).

MEDICAL DEVICE SERVICES include medical device testing, certification, audit, and training and remediation services, quality

systems, regulatory compliance consulting, and support.

PHARMACEUTICAL companies make medicinal products, which achieve their principal action by pharmacological, metabolic

or immunological means. Utah pharmaceutical companies are both innovative and generic.

CONTRACT RESEARCH ORGANIZATIONS (CRO) provide support to the pharmaceutical, biotechnology, and medical device

industries in the form of research services outsourced on a contract basis.

DIAGNOSTICS are used to analyze biological markers in the genome and proteome—the individual’s genetic code and how

their cells express their genes as proteins—by applying molecular biology to medical testing.

EQUIPMENT AND REAGENT PROVIDERS manufacture and supply reagents, instruments, equipment or consumables to life

science companies.

DEFINITIONS

RECOGNITION: Kevin Jessing, Former Life Science Cluster Director, GOED

FOR A CURRENT LIST OF BOARD MEMBERS, VISIT BIOUTAH.ORG/GROUPS/GROUPROSTER/ BOARD-OF-DIRECTORS-3

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We are committed to finding solutions to some of the greatest challenges in healthcare, manufacturing, and delivering medical instruments to improve tools for

diagnosis and treatments; advancing precision medicine to improve the treatment and prevention of cancer and other diseases; and developing new processes that can deliver

better healthcare outcomes for patients and the overall healthcare system.

801. 867.4061 | contact@bioutah.com | www.bioutah.org

UTAH’S INDEPENDENT LIFE SCIENCE ASSOCIATION