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  1. 1. State efforts to attract, grow and retain bioscience industry
  2. 2. Growing Interest in Biosciences <ul><li>The potential of bioscience technologies to improve the quality of life and generate economic development has gained greater recognition in the United States. </li></ul><ul><li>Many states have put in place initiatives to improve the economic and regulatory climate for bioscience companies. </li></ul>
  3. 3. Growing the Nation’s Bioscience Sector: State Bioscience Initiatives 2006 A PDF version of the report is available on the BIO website at under the “State Government” section
  4. 4. Growing State Interest in Biosciences <ul><li>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. </li></ul>
  5. 5. Bioscience Subsectors Agricultural Feedstock & Chemicals <ul><li>Agricultural processing </li></ul><ul><li>Basic organic chemicals </li></ul><ul><li>Ethyl alcohol mfg. </li></ul><ul><li>Organic fiber mfg. </li></ul><ul><li>Fertilizers </li></ul><ul><li>Pesticides and other agricultural chemicals </li></ul><ul><li>Medicinal & botanicals </li></ul><ul><li>Pharma- ceutical preparations </li></ul><ul><li>Diagnostic substances </li></ul><ul><li>Biological products </li></ul>Drugs & Pharmaceuticals Medical Devices & Equipment <ul><li>Laboratory apparatus & furniture </li></ul><ul><li>Surgical, medical, dental, ophthalmic & analytical instruments & equipment </li></ul><ul><li>Irradiation apparatus & electromedical equipment </li></ul>Hospitals <ul><li>Specialty hospitals </li></ul><ul><li>University medical research hospitals </li></ul><ul><li>Clinical research institutions </li></ul>Research, Testing, & Medical Laboratories <ul><li>Biological research </li></ul><ul><li>Commercial medical research </li></ul><ul><li>Testing laboratories </li></ul><ul><li>Medical laboratories & diagnostic imaging centers </li></ul>Product-Oriented Service-Oriented
  6. 6. Key Findings and Summary <ul><li>1.2 million employees, in over 40,000 firms across all 50 states. </li></ul><ul><li>Multiplier Effect accounts for an additional 5.8 million jobs created in the economy: 7 million jobs total </li></ul><ul><li>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 . </li></ul>
  7. 7. The Bioscience Subsectors <ul><li>Research & Testing 20,565 companies/413,550 employees </li></ul><ul><li>Medical Devices 15,190 companies/411,460 employees </li></ul><ul><li>Drugs & Pharmaceuticals 2,589 companies/313,207 employees </li></ul><ul><li>Ag Feedstock & Chemicals 2,111 companies/104,893 employees </li></ul>Distribution of Bioscience Employment by Subsector Source: Battelle calculations based on Bureau of Labor Statistics, QCEW program data from the Minnesota Implan Group. Data include Puerto Rico. Agricultural Feedstock & Chemicals Drugs & Pharmaceuticals Medical Devices & Equipment Research, Testing, & Medical Laboratories
  8. 8. Rationale for State Interest <ul><li>Investment in the biosciences can lead to improving health care, a cleaner environment and healthier foods </li></ul><ul><li>Biosciences provide a wide breadth of opportunities in the various subsectors </li></ul><ul><li>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 </li></ul><ul><li>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 </li></ul>
  9. 9. Bioscience Wage Trends <ul><li>The biosciences offer high-paying, quality jobs across a range of occupations </li></ul><ul><li>Bioscience workers earn $26,772 more that the average U.S. private sector wage, with all four subsectors above the national average </li></ul><ul><li>Since 2001, real (inflation-adjusted) earnings are up 6.4% for bioscience workers, compared to just a 1.4% increase for private sector </li></ul>
  10. 10. Industry Stability and Jobs <ul><li>Bioscience industries provide stability because demand for medical-related and food products remains fairly constant year after year </li></ul><ul><li>Employment opportunities across the spectrum of experience and responsibility </li></ul>research scientist production technician healthcare technician medical doctor nurse engineer chemist lab technician farmer
  11. 11. Industry Drivers <ul><li>Talent </li></ul><ul><ul><li>Chief Scientists and Technologists </li></ul></ul><ul><ul><li>Bench Scientists and Engineers </li></ul></ul><ul><ul><li>Technicians </li></ul></ul><ul><ul><li>Serial Entrepreneurial Managers (Regulatory, Sales and Marketing, Quality Control) </li></ul></ul><ul><li>Capital </li></ul><ul><ul><li>Angel Investors </li></ul></ul><ul><ul><li>Pre-Seed/Seed Capital </li></ul></ul><ul><ul><li>Venture Capital </li></ul></ul><ul><ul><li>IPO </li></ul></ul><ul><li>Technology </li></ul><ul><ul><li>Strong IP Position </li></ul></ul><ul><ul><li>Infrastructure </li></ul></ul><ul><ul><li>Research Engines </li></ul></ul><ul><ul><ul><li>Higher education </li></ul></ul></ul><ul><ul><ul><li>Hospitals and academic heath centers </li></ul></ul></ul><ul><ul><ul><li>Research anchors </li></ul></ul></ul><ul><li>Quality of Life </li></ul><ul><ul><li>Talent drives firm growth </li></ul></ul><ul><ul><li>Cost of living </li></ul></ul><ul><ul><li>Family issues; schools, neighborhoods, cultural opportunities </li></ul></ul>
  12. 12. Bioscience Capital Funding Cycle
  13. 13. Capital Financing Needs <ul><li>Company Stage Private investment per company </li></ul><ul><li>Proof of Concept $25,000 – $100,000 </li></ul><ul><li>Pre-seed $50,000 – $500,000 </li></ul><ul><li>Seed $150,000 – $2 million </li></ul><ul><li>Early-stage $1 million – $5 million </li></ul><ul><li>Expansion-stage Up to $10 million </li></ul><ul><li>Mezzanine Up to $20 million </li></ul><ul><li>Successful Product Launch: 10-15 years - $1 billion+ </li></ul>
  14. 14. State Approaches to Addressing Risk Capital <ul><li>Use state general and pension funds to invest in privately managed venture funds </li></ul><ul><li>Offer state assistance to firms to leverage Federal SBIR funds/private equity </li></ul><ul><li>Provide technical assistance to companies to better access private financing sources </li></ul><ul><li>Offer R&D tax credits </li></ul><ul><li>Form pre-seed/seed or later stage funds </li></ul>
  15. 15. Best Practices for States <ul><li>Universities are engaged in economic development and committed to technology transfer </li></ul><ul><li>Have created vehicles for technology commercialization </li></ul>Engaged Universities with Active Leadership Best Practice States/Regions Factors of Success
  16. 16. Best Practices for States <ul><li>Some states and regions have created programs to address the commercialization, pre-seed, and seed financing gaps to help establish and build firms </li></ul><ul><li>Active informal angel networks investing in the biosciences </li></ul><ul><li>Investors include private, philanthropic, and public entities </li></ul>Available Capital Best Practice States/Regions Factors of Success
  17. 17. Best Practices for States <ul><li>Every major technology region in the U.S. has received significant federal discretionary funding </li></ul><ul><li>In these regions, one or more federally designated centers serve as anchors for the state or region’s bioscience base </li></ul>Discretionary R&D Funding Best Practice States/Regions Factors of Success
  18. 18. Best Practices for States <ul><li>Talent increasingly provides the discriminating variable for states and regions to build comparative advantage </li></ul><ul><li>Educational institutions at all levels responsive to training students to meet the needs for bioscience workers at all skill levels including scientists, technicians, and production workers </li></ul>Talent Pool Best Practice States/Regions Factors of Success
  19. 19. Best Practices for States <ul><li>Leading bioscience regions have private markets that provide facilities offering space for bioscience companies </li></ul><ul><li>Specialized bioscience incubators and research parks are a growing trend </li></ul><ul><li>Access to specialized facilities and equipment, such as core labs and animal facilities, is readily available </li></ul>Specialized Facilities and Equipment Best Practice States/Regions Factors of Success
  20. 20. Best Practices for States <ul><li>Building a critical mass of bioscience firms takes many years or even decades </li></ul><ul><li>While the early technology pioneers took 25 years to develop, more recent examples such as Maryland and San Diego took 12 to 14 years to mature </li></ul>Patience and Long-term Perspective Best Practice States/Regions Factors of Success
  21. 21. States addressing capital needs <ul><li>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 </li></ul>
  22. 22. State Capital Formation Priorities <ul><li>Research and Development Tax Credits </li></ul><ul><li>NOL Carry-forwards </li></ul><ul><li>Tax Credit Transferability </li></ul><ul><li>Sales and Use Tax Exemptions </li></ul><ul><li>Creation of Capital Access Funds </li></ul><ul><li>State Pension Fund Investment </li></ul><ul><li>Capital Gains Tax Reductions </li></ul><ul><li>Investment Tax Credit </li></ul><ul><li>Developing Incubator/Shared Research & Manufacturing Facilities </li></ul>
  23. 23. Recent State Economic Development Activity
  24. 24. Texas <ul><li>The Texas Legislature approved the Texas Emerging Technology Fund: $200m allocated from general revenues and “Rainy Day” reserves to be focused on three areas. </li></ul><ul><li>$100m for Regional Centers of Innovation & Commercialization (RCIC) project grants </li></ul><ul><li>$50m Matching Emerging Technology Research Grants </li></ul><ul><li>$50m Acquisition of Research Superiority Grants </li></ul>
  25. 25. Washington <ul><li>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. </li></ul>
  26. 26. Michigan <ul><li>In 2005 Governor Granholm annouced the creation of a $2 billion 21 st 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 </li></ul>
  27. 27. Connecticut <ul><li>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. </li></ul>
  28. 28. Maryland <ul><li>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 </li></ul><ul><ul><li>Eligibility : </li></ul></ul><ul><ul><li>Individuals investing more than $25,000 </li></ul></ul><ul><ul><li>Corporations and VC firms investing more than $250,000 </li></ul></ul><ul><ul><li>Value of credit capped at $50,000 and $250,000 respectively </li></ul></ul>
  29. 29. South Carolina <ul><li>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 state’s 3 main research universities. In addition the state created a $50 million venture capital investment fund to facilitate life science company creation and retention. </li></ul>
  30. 30. Pennsylvania <ul><li>Pennsylvania established a $100 m Life Science Greenhouse program to build technology incubators. </li></ul><ul><li>Includes a $60 m venture fund to help form companies. </li></ul><ul><li>In addition: Keystone Innovation Zones (KIZ) are targeted areas where companies are eligible for a pool for $25 m in R&D tax credits targeting early stage companies. Companies locating in these zones can sell their earned tax credits. </li></ul>
  31. 31. Rhode Island <ul><li>Not to be outdone, the nation’s 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. </li></ul>
  32. 32. Conclusion <ul><li>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. </li></ul>
  33. 33. 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 [email_address]