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Insight & Intelligence™ : Apr 26, 2011

NY Biotech Leaders Pursue Empire State of Mind with One-Stop Shop Proposal

Think tank is also promoting tax credit extensions, tailored incentives, and easier tech transfer as cures for state’s life science blues.
  • Alex Philippidis

For years New York state has had the makings of a strong biotechnology cluster. It graduates the nation’s fourth-highest number of bioscience majors (9,630 in the 2008 academic year). Its academic institutions spend some $2.7 billion on bio R&D, more than any state except California.

New York is also second only to California in its number of clinical trials (3,267 last year). In terms of life science employment, a report issued April 12 by the research arm of the Business Council of New York State put the Empire State in fourth place with 10,320 jobs across seven categories that included scientists but not administrative and support staff. The report analyzed seven reportedly peer biomanufacturing states. California came in at number one by a large margin with 41,200, followed by Pennsylvania (15,920) and Massachusetts (15,300).

Yet the whole New York biocluster has long been far less than the sum of its parts. For the state to reach the top tier it will need to speed up commercialization of technologies developed in state universities, promote its strengths in clinical trials and regional bioclusters, craft incentives tailored to life science companies, and thaw a business climate so chilly the Tax Foundation ranks New York dead last among the 50 states. It will also have to encourage more capital investment in companies. Battelle and the Biotechnology Industry Organization rank New York seventh in life science venture capital investment raised during 2004–2009 (over $1.8 billion).

Those are among the mostly sensible conclusions of the Business Council’s report titled “New York Must Step Up Its Game: The Global Struggle for Biopharmaceutical Jobs.” The Public Policy Institute (PPI) also recommends extending the Qualified Emerging Technology Credit (QETC) for facilities, operations, and training (FOT) past its scheduled end date of January 1, 2012, and expanding the eligibility criteria.

New York expects to have awarded $28 million in QETC FOT credits in the fiscal year ending March 31, according to the state Department of Taxation and Finance. Of that total, $22 million is projected to be awarded to payers of corporation franchise taxes and the rest to individual investors on their personal income taxes. The latest available figures show $11.7 million awarded in QETC FOT credits to businesses in FY 2007 and $6.3 million to personal income tax payers in FY 2008.

“The report does have a very strong tone with respect to the need for New York to really change its approach toward supporting the biopharmaceutical industry,” said Heather Briccetti, the Business Council’s acting president and CEO. “There’s a real failure to recognize at the state governmental level the impact that this industry has on our economy.” Briccetti discussed portions of the new report during a panel talk at the New York Biotechnology Association’s (NYBA’s) 20th Annual Meeting, held April 6–7 in New York City.

Current Status in NY

Recent years have brought signs of progress across New York. Last year Alexandria Real Estate Equities completed the first 310,000 square foot phase of the 1.1 million square foot Alexandria Center for Life Science®—NYC on Manhattan’s East Side. Work began in October 2007.

In Brooklyn, the State University of New York (SUNY) Downstate Medical Center is building the third phase of its Advanced Biotechnology Incubator, which will more than double in size from its current 24,000 square feet. Five miles west SUNY Downstate is building out 85,000 square feet for companies that have outgrown the incubator. That space is part of the 486,000 square feet planned for the Bioscience Center at Brooklyn Army Terminal, or BioBAT, a joint project of SUNY Downstate and the New York City Economic Development Corp.

In Hudson Valley, New York Medical College in Valhalla is developing an incubator projected to create 140 full-time and 75 part-time jobs. The incubator is about a mile from the Tarrytown headquarters of the region’s largest life science employer, Regeneron Pharmaceuticals.

In Long Island Governor Andrew M. Cuomo signed into law a bill allowing for expansion of Broad Hollow Bioscience Park, on the campus of Farmingdale State College. OSI Pharmaceuticals, acquired last year by Astellas Pharma, is expected to expand there.

As for Syracuse, SUNY Upstate Medical University broke ground April 15 on a $72 million expansion of its Institute of Human Performance designed to advance its interdisciplinary study of nervous system disorders and boost its research effort beyond the $42 million projected this year.

As it gains in the life science and biotech arena, New York also continues to lose. Earlier this month Bayer joined New Jersey Governor Chris Christie in announcing that the firm will consolidate East Coast operations in the Garden State in return for $38 million in incentives.

Earlier this year, Christie signaled his intent to expand state support for biopharma and keep a competitive edge over New York and other states. He proposed doubling funds for the state’s Technology Business Tax Certificate Transfer Program to $60 million and doubling the R&D tax credit to 100%.

Creating a Central Agency

One of PPI’s key recommendations is a “one-stop shop” agency that would function as a single point of contact for pharma and biotech companies interested in moving to or expanding in New York. The oldest and best example of a one-stop shop is the North Carolina Biotechnology Center (NCBC). Established in 1984, the Center has catalyzed life science industry growth within the Tar Heel state.

The value of a one-stop shop, Briccetti told NYBA meeting attendees, would be its ability to help life science companies find suitable sites, locate a trained workforce or train one with help from local colleges, and most importantly, navigate the numerous state and local approvals required for doing business in New York.

“Anything that can pull previously disconnected resources together is a positive,” Laurence P. Gottlieb, director of Westchester County’s Office of Economic Development, told GEN. He cited the Hudson Valley Economic Development Corp. (HVEDC) as a good example of a central agency. HVEDC represents seven counties in the Hudson Valley: Westchester, Rockland, Orange, Dutchess, Sullivan, Ulster, and Putnam Counties.

HVEDC markets itself to biotech and pharma companies as NY BioHud Valley. “We have to constantly educate communities as to the benefits of companies coming to the region, the tax dollars, and the investment that comes into the communities,” HVEDC president and CEO Michael Oates told GEN. “Certain communities are more receptive than others to that message.”

Choosing the Right Model

Gottlieb believes the agency in New York “should be a public-private partnership. That’s the most successful model.” PPI, however, says the one-stop shop should be nestled within the state’s economic development agency, Empire State Development Corp (ESD).

ESD has had a disappointing record of advancing job growth, though. It has frequently shifted direction on initiatives likely due to frequent shifts in leadership and arrival of new governors. As Briccetti correctly noted, ESD has traditionally taken a last-century approach to job attraction, with policies geared to headcount-heavy sectors like manufacturing.

It remains to be seen whether ESD will improve under its new chairman, Cuomo-appointee Kenneth Adams, who is Briccetti’s predecessor at the Business Council helm. Cuomo has also promised to create 10 regional economic councils, some of which are expected to include life science among the business sectors they wish to expand.

NCBC is set up as a public-private one-stop shop for the pharma and biotech industry in North Carolina. During its 2010 fiscal year, 73% of NCBC’s funds, or $14 million, came from the state. The rest, $5.2 million, came from the Golden Leaf Foundation as well as federal grants, contracts for services, and other sources. Golden Leaf is a nonprofit that uses state tobacco settlement funds to boost the state’s economy.

The Center has its own board and management, though not without ties to state government. NCBC’s president and CEO, Norris Tolson, once headed his state’s commerce, revenue, and transportation departments. However, functioning outside direct state control helps the Center focus more on biotech than politics.

Longer-term, a North Carolina model for New York would be ideal, NYBA executive director Nathan Tinker, Ph.D., told GEN. But short-term, he added, the one-stop shop should be tied to ESD, since Governor Cuomo will soon merge the New York State Foundation for Science Technology and Innovation into ESD.

If New York opens a state-connected one-stop agency, it may emerge along the lines of the Maryland Biotechnology Center, created in 2009 by Governor Martin O’Malley. The Center, part of O’Malley’s $1.1 billion, 10-year Bio2020 initiative, operates on $3.8 million in state funds—a figure set to stay flat in FY 2012.