In the June 18, 2008 Issue:

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$1B Investment in Massachusetts Life Sciences Now a Reality
A little more than a year after unveiling a comprehensive proposal to provide crucial funding for R&D, commercialization and infrastructure to position Massachusetts as a global leader in life sciences, Gov. Deval Patrick signed an historic 10-year, $1 billion life sciences investment package, transforming the ambitious idea into reality.
 
The signing of the bill coincides with BIO’s annual meeting, currently underway in San Diego – the same event during which the governor unveiled the proposal last year. With a typical draw of more than 20,000, the event provides an opportune backdrop for the governor, legislative and industry leaders to promote the state to biotech companies and investors.

Details of the legislation were debated incessantly among lawmakers and industry leaders over the past year. The final version of the bill directs half of the money in capital funding for infrastructure, divided between targeted projects ($299.5 million) and unrestricted funds ($200 million) for investment in public infrastructure projects to be decided on by the Massachusetts Life Sciences Center (MLSC).
 
MLSC also will receive $25 million per year for 10 years for the Massachusetts Life Sciences Investment Fund to provide loans, grants, fellowships and investments to stimulate R&D. Another $250 million over 10 years will be used for tax incentives for certified life sciences projects. Additional components of the bill include: Adding to the buzz surrounding the legislation, the 2008 Massachusetts Life Sciences Super Cluster report released last week details the current economic impact of the life sciences sector in the Massachusetts region. The report finds the region is a strong force in research and innovation, but warns of increasing competition for talent and funding from other states and countries. Key indicators estimate that the life sciences sector contributes approximately $8 billion annually to the state’s economy and that the industry directly employs more than 77,000 people.
 
The report by PricewaterhouseCoopers, the New England Healthcare Institute, the Massachusetts Life Sciences Center and the Massachusetts Technology Collaborative includes the personal perspectives of 147 industry leaders in the life sciences sectors throughout the state.

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Maryland Governor Outlines 9-Point Strategy for $1.1B Bioscience Initiative
Gov. Martin O’Malley announced this week a proposal to build Maryland's reputation as a global leader in biosciences with a $1.1 billion investment.
 
Similar to the recently enacted Massachusetts Life Sciences bill (see this week’s issue of the Digest), the Bio 2020 Initiative is a long-term strategy requiring legislative approval that invests in start-up companies and increases funding for R&D. Gov. O’Malley hopes to leverage $6.3 billion in private and federal investments and create thousands of new jobs, according to a press release.
 
Speaking to a group of higher education leaders and investors at the Johns Hopkins University of Medicine, Gov. O’Malley outlined the nine major components of the Bio 2020 Initiative:

With several members of the Life Sciences Advisory Board on hand for the announcement, the governor announced that the board will work with the administration to refine the initiatives and build upon the progress made in the bioscience industry over the last 16 months.
 
View Gov. O’Malley’s speech at: http://www.governor.maryland.gov/speeches/080616.asp

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BIO and Battelle Release Bioscience Analysis
In its latest bio-industry analyses, Ernst & Young reported that the global bioscience industry has yet to become profitable, but that doesn’t mean the field isn’t growing by many measures, particularly the number of jobs created. Technology, Talent and Capital: State Bioscience Initiatives 2008, prepared by Battelle for BIO, puts total U.S. employment in the biosciences at 1.3 million in 2006, up from 1.2 million in 2004.
 
Bioscience employment in the U.S. is led by strong growth in the research, testing and medical lab subsector, which experienced a 17.8 percent increase in employment and a 32.7 percent increase in establishments between 2001 and 2006, according to the report. And most states are working hard to ensure some of that economic development impact happens within their borders.

Prepared annually since 2004, this year’s report explores more deeply the geographic distribution of the bioscience industry. Among its findings, Battelle reports:

In addition to employment, the report examines other indicators of the robustness of a state’s bioscience industry, including the level of bioscience R&D funding, venture capital investment, and patents.
 
Technology, Talent and Capital: State Bioscience Initiatives 2008 also explores the wide range of activities states engage in to support the growing sector. Tax credits and equity funding are the most prevalent forms of assistance offered: 36 states offer R&D tax credits, 31 exempt R&D equipment, including equipment purchased for biomanufacturing from sales taxes, and 39 states allow carry forward of Net Operating Losses.
 
Thirty-three states reported programs that provide pre-seed and seed stage investments in bioscience companies.
 
Sustaining research funding at universities and businesses is also of concern to the states. Of growing importance is the application of bioscience to agriculture, energy and industrial products, Battelle finds. Nearly half of the states have committed funds for bioscience energy research and facilities. Nine states have pledged to spend more than $4 billion on stem cell research over the next 10 years.
 
While U.S. higher education institutions awarded more than 143,000 bioscience-related degrees in the 2006 academic year, the report asserts, that does not address all of the labor issues facing the bioscience industry. About half of the states have conducted an inventory of workforce needs in the biosciences sector.
 
The importance of the biosciences to state economic goals can also be seen in the priority the field is given in state legislatures. Twelve states have legislative caucuses, and California, Illinois and Minnesota have dedicated bioscience committees.
 
With a wealth of statistics, graphics and insights into the industry and individual state profiles, Technology, Talent and Capital: State Bioscience Initiatives 2008 is available at: http://www.bio.org/local/battelle2008

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Enacted Budget Allocates $79M to Promote Energy Diversity in Florida
Gov. Charlie Crist signed the fiscal year 2008-09 budget into law last week, allocating nearly $79 million for energy-related projects to increase research and stimulate development and commercialization of alternative and renewable energy sources throughout Florida.
 
The Energy Diversity Package approved by lawmakers is significantly different from the $200 million proposal outlined by Gov. Crist earlier this year, with only a few of the original proposals left intact (see the Feb. 6, 2008 issue of the Digest). However, the appropriation is welcome news for the state’s technology-based economic development strategy, as Florida is one of many states facing a decline in revenue. Last week, Gov. Crist ordered all state agencies to reduce spending by 4 percent in the coming fiscal year.
 
Lawmakers appropriated funding for the following projects under the Energy Diversity Package:

Lawmakers also provided a boost in tax incentives aimed at supporting high-wage jobs and research in high-impact sectors. The enacted budget includes $21.6 million for the Qualified Target Industries Tax Refund Incentive, Qualified Defense Contractors Tax Refund Incentive, and the High Impact Performance Incentive – slightly less than the governor’s recommendation, but an increase over last fiscal year. However, legislation designed to provide tax credits for R&D expenses to qualifying businesses, HB 733, died in committee earlier this session.
 
Enterprise Florida will receive an increase in funding over last fiscal year for a total of $11.9 million, in addition to existing funds of $4.9 million. Space Florida is slated to receive $4 million from the general fund -- $4.5 million less than the governor’s recommendation.
 
The economic development transportation trust fund budget includes $14.5 million for space and aerospace infrastructure to make improvements in order to attract new space vehicle testing and businesses to the state.
 
Lawmakers did not replenish the Innovation Incentive Fund, which was depleted over the last year with investments to lure the Max Planck facility and a research initiative with the Oregon Health and Science University. The state has dedicated $450 million to the fund since 2006 (see the May 7, 2008 issue of the Digest).

The enacted FY 2008-09 budget is available at http://www.leg.state.fl.us.

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Alberta and Ontario Launch Tech and Venture Capital Initiatives
Last week, Premier Ed Stelmach of Alberta introduced a $170 million suite of initiatives to support high-tech economic development in the province. The government hopes that by providing support for commercialization from research to market it can attract high-tech entrepreneurs from other areas. Most of the province's investment will support the creation of the $100 million Alberta Enterprise Corporation to encourage venture capital investment. A press release accompanying the announcement states that the investment will improve access to both seed-stage and venture capital. The corporation is expected to begin activities this winter.
 
Though venture capital investment in Canada increased by 21 percent in 2007 over 2006, investment in Alberta grew by only 3 percent. As in the U.S., the Canadian venture capital activity is largely centered in a few provinces, namely Ontario, Quebec, and to a lesser extent British Columbia. Private capital resources are harder to find in the more rural provinces like Alberta.
 
Another $6 million will support various initiatives intended to draw young people into high-tech entrepreneurship through "technopreneur" programs. These programs will help train young entrepreneurs to bring new technologies to market through successful companies.
 
The remaining $72 million will be dedicated to providing additional services and resources for companies. Efforts to be initiated later this year include:

A new science and research experimental development tax credit will also be implemented to offset certain research-related expenses. Participating companies will receive credits equal to 10 percent of eligible expenses, up to $400,000, between 2008 and 2011.
 
Read Premier Stelmach's announcement of the plan at: http://premier.alberta.ca/speeches/speeches-2008-June-11-Tech_Comm.cfm
 
Ontario
The Ontario provincial government also recently announced its own plan to strengthen the venture capital industry. Along with several private sector partners, Ontario will launch a $205 million Ontario Venture Capital Fund to invest in the province. Between 80 percent and 100 percent of this amount will be invested in Ontario-based and Ontario-focused funds. The remaining amount will be invested directly into local companies, particularly during the early stages of development. Ontario will contribute $90 million to the initial fund, which will be managed by TD Capital Private Equity Investors.
 
Although Ontario is Canada's most active venture market, local entrepreneurs have cited a lack of early-stage funds as a major impediment to growth. Between 2000 and 2007, early-stage venture investment fell from $1.5 billion to $236 million, according to Canada NewsWire. That drop reflects the massive global collapse of venture capital markets in the early 2000s, but Ontario's venture industry has not recovered as quickly as some U.S. markets.
 
The fund is part of the $3 billion Ontario Innovation Agenda. Find out more about this plan at: http://www.mri.gov.on.ca/english/programs/oia/program.asp

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Iowa Venture Capital Tax Credit Not Extended to Next Fiscal Year
An initiative in Iowa to disperse tax credits worth 20 percent of equity investments into pre-qualified businesses or seed capital funds has reached its $10 million cap and will not be continued in the next fiscal year. The Iowa Venture Capital Credit – Qualified Business or Seed Capital Fund was started in 2002 with a cap of $10 million, and as monitored by the Iowa Department of Revenue, all credits have been issued.
 
Efforts in the most recent Iowa legislative session to increase the monetary cap of the program under House Bill 2484 by an additional $3 million did not succeed. The discontinuance of the initiative comes as the practice of utilizing tax credits in Iowa for various activities has grown dramatically over the last several years. However, the scrutiny of the tax credit programs has grown, as well.
 
SSTI reported on an Iowa Department of Revenue study tracking the growth of the state’s R&D Tax Credit Program (see the April 30, 2008 issue of the Digest), and in a report released in April on tax credit liabilities, the department claims the amount of tax credits awarded in FY 2001 was just over $100 million, but expanded to more than $500 million in FY 2007.
 
The April 2008 version of the Iowa Tax Credits Contingent Liability Brief can be found at:
http://www.iowa.gov/tax/taxlaw/0408RECReport.pdf

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NIH Changes Peer Review, Commits $1B for Transformative Research
As annual appropriations for the National Institutes of Health (NIH) flattened – at the same time more and more states and universities are increasing their investments in academic bioscience research capacity – competition for NIH grants has heightened. Reports indicate investigators in the early stages of their careers and transformative research have been the victims of the squeeze.
 
The peer review process employed by NIH to select winners in competitive solicitation cycles, lauded for its impartiality for years, has been indicted by many recently as adding to the problem. During the first weeks of June, NIH announced plans to address some of the criticism, including a commitment of  $1 billion over the next five years for investigator-initiated, high-risk/high-impact transformative research.
 
The institutes also are making significant changes to enhance and improve the NIH peer review system. This marks the end of a year-long effort to determine ways to further enrich the process, which drew on thousands of comments, opinions and criticisms received throughout the year.
 
The Implementation Plan Report consists of four main priorities, with highlights including:

Collaborative teams of participants worked to tackle challenges of the system and discover solutions. A comprehensive framework was created and implementation will be carried out over the next 18 months. More information about enhancing peer review at NIH and the implementation plan is available at http://enhancing-peer-review.nih.gov.

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Cities Take Action to Support Early-stage Companies
New York City officials recently announced the launch of a $2 million seed fund to boost entrepreneurship and the local venture capital market. NYC Seed will provide up to $200,000 for seed-stage New York-based businesses and will offer mentoring and other support for client companies. The initiative is a partnership between several city and state organizations, including the Industrial Technology Assistance Corporation (ITAC), the New York City Investment Fund, the New York State Foundation for Science, Technology and Innovation (NYSTAR), the New York City Economic Development Corporation, and PolyTechnic University.
 
Mayor Michael Bloomberg made the announcement at the opening ceremonies for the city's inaugural Internet Week. The mayor hopes that both the event and the fund will help attract tech and digital media entrepreneurs to the city. Despite the size of New York's economy, the city has lagged behind Silicon Valley and Boston in capital resources for tech start-ups. NYC Seed is targeting extremely early-stage companies and first-time entrepreneurs. By creating this new fund and by connecting participating companies to other city resources, Mayor Bloomberg believes the new program will make the city a more desirable location for new companies.
 
New York is not, however, the only city to invest directly in private companies. Last year, San Jose invested $3 million in an Economic Development Catalyst Fund to support in companies with a physical presence in the city. Although San Jose is located within the world's most active venture capital market, city leaders launched the fund to aid firms that have the potential to generate much-needed quality jobs for lower-income workers. The fund, which has also attracted private investors, is expected to generate a profit and add to the city's revenue stream. San Jose is uniquely positioned to benefit from such a fund, since high-quality investment opportunities are more common in Silicon Valley than in the rest of the country.
 
Fresno recently announced the creation of a funding opportunity of its own for start-ups. The city's 250K Entrepreneurial Challenge is a business plan competition for entrepreneurs interested in locating their business in the region. Fresno and several collaborating institutions, including the Lyles Center of Innovation and Entrepreneurship at California State University, are offering $100,000 in cash and $150,000 in in-kind services to the winning entrepreneur. The top 10 finalists will present their business plans to a panel of local judges in October. Though this is the first year for the contest, the city expects the event to be held annually if it is successful this year.

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People & TBED Organizations

The Kansas Technology Enterprise Corporation (KTEC) has announced the launch of a statewide trade association to provide support to Kansas' software and information technology industry. The nonprofit has been registered with the state as the Software and Information Technology Association of Kansas (SITAKS) and is designed to support Kansas software, information technology and telecommunications companies.

Susan Strommer announced she will step down as president and CEO for the National Association of Seed and Venture Funds (NASVF) to explore a new opportunity.

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SSTI Job Corner
Additional job opportunities are available at http://www.ssti.org/posting.htm.

The National Association of Seed and Venture Funds (NASVF) seeks an energetic chief executive officer (CEO) with strong organizational, interpersonal, communication, and fundraising skills to lead the association as it grows its membership and expands its reach. NASVF is the association for "innovation capitalists" - seed and early-stage investors who champion and invest in local entrepreneurs. NASVF has 120 member organizations and a network of more than 8,000 individuals. For the position of CEO, a graduate degree with five years of experience in entrepreneurial ventures, capital formation, venture capital or a related industry is required. To view the job description, go to: http://www.nasvf.org/web/allpress.nsf/pages/18166

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