State efforts to attract, grow and retain bioscience industry

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State efforts to attract, grow and retain
bioscience industry
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Growing Interest in Biosciences

• The potential of bioscience technologies to
  improve the quality of life and generate economic
  development has gained greater recognition in the
  United States.
• Many states have put in place initiatives to
  improve the economic and regulatory climate for
  bioscience companies.

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Growing the Nations Bioscience Sector State
Bioscience Initiatives 2006
A PDF version of the report is available on the
BIO website at www.bio.org under the State
Government section
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Growing State Interest in Biosciences

• The potential of bioscience technologies to
  improve the quality of life and generate
  significant economic development has gained
  greater recognition in the states. Many states
  have put in place initiatives to improve the
  economic and regulatory climate for bioscience
  companies.

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Bioscience Subsectors
Research, Testing, Medical Laboratories
Agricultural Feedstock Chemicals
Drugs Pharmaceuticals
Medical Devices Equipment
Hospitals

• Agricultural processing
• Basic organic chemicals
• Ethyl alcohol mfg.
• Organic fiber mfg.
• Fertilizers
• Pesticides and other agricultural chemicals

• Medicinal botanicals
• Pharma- ceutical preparations
• Diagnostic substances
• Biological products

• Laboratory apparatus furniture
• Surgical, medical, dental, ophthalmic
  analytical instruments equipment
• Irradiation apparatus electromedical
  equipment

• Specialty hospitals
• University medical research hospitals
• Clinical research institutions

• Biological research
• Commercial medical research
• Testing laboratories
• Medical laboratories diagnostic
  imaging centers

Product-Oriented
Service-Oriented
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Key Findings and Summary

• 1.2 million employees, in over 40,000 firms
  across all 50 states.
• Multiplier Effect accounts for an additional 5.8
  million jobs created in the economy 7 million
  jobs total
• Almost every state in the country is now
  specifically targeting bioscience industry
  development, many strategically targeting
  specific niches, based on their research and
  industry strengths including agricultural and
  industrial applications.

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The Bioscience Subsectors
Distribution of Bioscience Employment by Subsector

• Research Testing 20,565
  companies/413,550 employees
• Medical Devices 15,190
  companies/411,460 employees
• Drugs Pharmaceuticals 2,589 companies/313,207
  employees
• Ag Feedstock Chemicals 2,111 companies/104,893
  employees

Source Battelle calculations based on Bureau of
Labor Statistics, QCEW program data from the
Minnesota Implan Group.Data include Puerto Rico.
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Rationale for State Interest

• Investment in the biosciences can lead to
  improving health care, a cleaner environment and
  healthier foods
• Biosciences provide a wide breadth of
  opportunities in the various subsectors
• Biosciences are expected to grow at faster rate,
  in the next decade, than any other industry
  sector 13 greater than average growth rate for
  overall U.S. employment
• Biosciences offer high-skill, high-wage jobs
  across a range of occupations - 26,000 (US) more
  than the national average for the entire private
  sector

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Bioscience Wage Trends

• The biosciences offer high-paying, quality jobs
  across a range of occupations
• Bioscience workers earn 26,772 more that the
  average U.S. private sector wage, with all four
  subsectors above the national average
• Since 2001, real (inflation-adjusted) earnings
  are up 6.4 for bioscience workers, compared to
  just a 1.4 increase for private sector

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Industry Stability and Jobs

• Bioscience industries provide stability because
  demand for medical-related and food products
  remains fairly constant year after year
• Employment opportunities across the spectrum of
  experience and responsibility

medical doctor
nurse
healthcare technician
farmer
research scientist
chemist
production technician
engineer
lab technician
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Industry Drivers

• Talent
• Chief Scientists and Technologists
• Bench Scientists and Engineers
• Technicians
• Serial Entrepreneurial Managers (Regulatory,
  Sales and Marketing, Quality Control)
• Capital
• Angel Investors
• Pre-Seed/Seed Capital
• Venture Capital
• IPO

• Technology
• Strong IP Position
• Infrastructure
• Research Engines
• Higher education
• Hospitals and academic heath centers
• Research anchors
• Quality of Life
• Talent drives firm growth
• Cost of living
• Family issues schools, neighborhoods, cultural
  opportunities

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Bioscience Capital Funding Cycle
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Capital Financing Needs

• Company Stage Private investment per company
• Proof of Concept 25,000 100,000
• Pre-seed 50,000 500,000
• Seed 150,000 2 million
• Early-stage 1 million 5 million
• Expansion-stage Up to 10 million
• Mezzanine Up to 20 million
• Successful Product Launch 10-15 years - 1
  billion

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State Approaches to Addressing Risk Capital

• Use state general and pension funds to invest in
  privately managed venture funds
• Offer state assistance to firms to leverage
  Federal SBIR funds/private equity
• Provide technical assistance to companies to
  better access private financing sources
• Offer RD tax credits
• Form pre-seed/seed or later stage funds

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Best Practices for States
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Best Practices for States
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Best Practices for States
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Best Practices for States
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Best Practices for States
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Best Practices for States
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States addressing capital needs

• In the past several years, numerous states have
  put in place strategies and incentives to grow
  vibrant life science clusters. These programs
  run the gamut from building facilities for early
  stage company development to establishing capital
  access funds

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State Capital Formation Priorities

• Research and Development Tax Credits
• NOL Carry-forwards
• Tax Credit Transferability
• Sales and Use Tax Exemptions
• Creation of Capital Access Funds
• State Pension Fund Investment
• Capital Gains Tax Reductions
• Investment Tax Credit
• Developing Incubator/Shared Research
  Manufacturing Facilities

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Recent State Economic Development Activity
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Texas

• The Texas Legislature approved the Texas
  Emerging Technology Fund 200m allocated from
  general revenues and Rainy Day reserves to be
  focused on three areas.
• 100m for Regional Centers of Innovation
  Commercialization (RCIC) project grants
• 50m Matching Emerging Technology Research
  Grants
• 50m Acquisition of Research Superiority Grants

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Washington

• The Washington Legislature approved the Life
  Science Discovery Fund. The state will invest
  approximately 350 million from tobacco
  settlement income in life science research and
  industry development - 35 million/year for 10
  years starting in 2008. The fund was designed to
  match private investment dollars in an effort to
  generate 1 billion in total investment over the
  next decade.

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Michigan

• In 2005 Governor Granholm annouced the creation
  of a 2 billion 21st Century Jobs fund. The
  commercialization component of this fund 400
  million is administered by the Michigan Economic
  Development Corporation (MEDC) and can take the
  form of grants or loans to early- stage companies

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Connecticut

• In 2005 Governor Jodi Rell (R) approved
  legislation to allocate 100 million general
  revenues to stem cell research over a period of
  ten years. The legislation focuses on embryonic
  stem cell research, allocating 10 million in
  annual grants to Connecticut research
  institutions and bioscience companies developing
  treatments using embryonic stem cells.

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Maryland

• Legislation (HB 664) approved to implement the
  Maryland Biotechnology Investment Incentive Act
  A 50 income tax credit for qualified angel and
  institutional investment in biotechnology
  companies with fewer than 50 employees
• Eligibility
• Individuals investing more than 25,000
• Corporations and VC firms investing more than
  250,000
• Value of credit capped at 50,000 and 250,000
  respectively

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South Carolina

• The South Carolina Legislature approved the Life
  Sciences Act and Venture Capital Investment Act.
  The state will allocate 220 million towards
  improving research capacity and infrastructure at
  the states 3 main research universities. In
  addition the state created a 50 million venture
  capital investment fund to facilitate life
  science company creation and retention.

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Pennsylvania

• Pennsylvania established a 100 m Life Science
  Greenhouse program to build technology
  incubators.
• Includes a 60 m venture fund to help form
  companies.
• In addition Keystone Innovation Zones (KIZ) are
  targeted areas where companies are eligible for a
  pool for 25 m in RD tax credits targeting early
  stage companies. Companies locating in these
  zones can sell their earned tax credits.

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Rhode Island

• Not to be outdone, the nations smallest state
  approved a bond measure in 2004 to allocate 50
  million for the construction of the University of
  Rhode Island (URI) Center for Biotechnology and
  Life Sciences. This initiative was an effort to
  build on the fact that Amgen is investing 1
  billion to reconfigure a manufacturing facility
  in the state.

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Conclusion

• Almost every state in the country is now
  targeting bioscience industry development. In
  many cases funding is available for small
  companies looking to leverage existing resources.
  If direct funding is not available, programs to
  help leverage funding can be utilized to attract
  early stage funding from angel networks and/or
  seed funds.

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Thank You
Patrick M. Kelly
Vice President, State Government
Relations Biotechnology Industry
Organization 1225 Eye Street,
NW, Suite 400 Washington, DC 20005
(202)
962-9503 pkelly_at_bio.org