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| A Bio·IT World special section
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STRATEGIC INSIGHTS 

By Melissa Kruse

June 15, 2003

Special Issue 
· State of the States for Biotech
· Northeast Region
· Mid-Atlantic/Southeast Region
· Midwest/South Region
· Northwest Region
· Southwest Region
Ohio 
Outpacing U.S. in Bioscience Growth 

Land of giants such as Battelle and Procter & Gamble Pharmaceuticals, Ohio also hosts up-and-coming firms. Some 1,000 companies in the areas of pharmaceutical and bioscience research and testing, as well as medical instruments, employ more than 36,000 people, according to Pat Valente, deputy director of the Ohio Department of Development, Division of Technology. A Battelle report found Ohio grew twice as fast as the nation in bioscience employment over the past six years, increasing employment by 264 percent and spawning 143 new firms. In the same time period, Ohio's pharmaceutical sector doubled in employment and increased by more than 80 percent in establishments.

Ohio's research centers include some of the top 20 teaching hospitals in the nation, including University Hospitals of Cleveland and three of the country's top 15 pediatric hospitals, located in the Cleveland and Columbus areas. These include the Children's Hospital Medical Center & Children's Hospital Research Foundation and the Case Western Reserve University Hospital. Ohio's academic research centers include Case Western Reserve University, the University of Cincinnati, Ohio State University, Ohio University, and the Cleveland Clinic Foundation.

Ohio
· 1,000 life science companies
· 264% increase in life science jobs over the past six years
· $1.6-billion Third Frontier initiative
The state's Third Frontier initiative is a 10-year, $1.6-billion investment aimed to bring high-paying, high-tech jobs to Ohio. It includes $350 million for the Biomedical Research and Technology Transfer Fund, which will distribute $25.5 million during 2003 and 2004.

Ohio's Technology Action Fund targets technology commercialization and early-stage capital. For 2003, the state legislature has allocated $14.1 million for the Technology Action Fund to support efforts furthering the commercialization of near-term technology.

Omeris serves as Ohio's chief trade organization. It has placed itself at the forefront of the state's effort to turn life sciences into a major economic force, taking over central Ohio's life science initiative from the Technology Leadership Council. Omeris' mission is to attract state support as well as private capital investments for the life sciences. With four offices across the state, Omeris receives $2 million from the state each year specifically for the life sciences.

Alabama
Sweet Home to Tech Tax Incentives

Infrastructure and resources: Alabama features strong research universities with high levels of externally funded research, entrepreneurial focus, and a technically trained workforce at all levels (i.e., BS, MS, Ph.D.). Education is a priority. The Alabama lifestyle is another plus — culture, beautiful country, sports, and more. For 10 months of the year, Alabama has one of the most beautiful climates available anywhere. Additional pluses include cheap power and plentiful water.

Financial incentives: A task force of TechBirmingham has been assembled to remodel Alabama's taxes for technology-based businesses to fit with the leading states in the nation (specifically R&D tax credits). Real and personal property tax abatements and sales/use tax abatements related to constructing and equipping a facility are available to R&D and manufacturing projects. A capital credit program for credits toward state income tax liability is available.

Key academic and research organizations: University of Alabama at Birmingham; over 30 medical and biomed centers of excellence; Southern Research Institute —outstanding research reputation for drug development; Auburn University — veterinary medicine, agbiotech, and engineering; University of Alabama at Huntsville — NASA, space research, optics, and biotechnology; University of Alabama — chemistry and technology business excellence; University of South Alabama — medical school and chemistry.

Area bio/pharma organizations: Axcan Scandipharm — specializing in cystic fibrosis therapies; Nektar Therapeutics — specializing in PEGylation technology for therapeutic drug delivery; BioCryst — in Phase II development of drugs for cancer and flu; Durect — drug delivery systems and materials.      www.bioalabama.com




Kentucky
Investing Multimillions to Breed Bio Business

Infrastructure and resources: A growing portfolio of university-developed technologies; early-stage companies in novel biotechnology fields; significant early-stage and venture capital available; commercialization centers that help scientists and entrepreneurs define and perfect their ideas and business plans, and fund or license new technologies; business accelerators and incubators; worldwide distribution network; nearly $500 million invested to expand research capacity — another $240 million to be invested over the next year.

Financial incentives: More than $68 million allocated for high-tech infrastructure development over the past three years — leveraged with private sector investment 3:1; corporate tax credits, loan financing, training grants, opportunities for enterprise zone operations; R&D income tax credit for new and existing Kentucky companies of up to 5 percent of the qualified costs to construct, expand, or equip research facilities.

Key academic and research organizations: University of Kentucky School of Pharmacy, ranked third in the nation; University of Kentucky and University of Louisville medical schools offering M.S. and Ph.D. degrees in the life sciences; Center for Pharmaceutical Sciences and Technology (Lexington), an FDA-registered pharmaceutical manufacturing facility that provides contract manufacturing of drugs suitable for Phase I and II clinical trials.

Area bio/pharma organizations: Advance Genetic Systems; Advanced Chemtech; Advanced Syntec; Alltech; Amgen; ApoImmune; Bays-Brown Laboratories; BD Biosciences; Cariotech; Equine Biodiagnostics; EnviroDerm Pharmaceutical; Griffin Industries; Intranasal Technology; ISP Chemicals; Kentucky Clinical Research; Miles Enterprises; New Ace Research; ONC; Peptides International; PolyCare; Pro-Liquitech; RXCrossroads; Sheltowee; Thorn Bioscience; US WorldMeds; Xanodyne Pharmaceutical.

www.biokentucky.com




Minnesota
The 'Right Mix' of Talent and Funding

Infrastructure and resources: Minnesota has the financial, educational, and cultural climate for bioscience companies to succeed. A strong venture capital network (14th nationally in venture capital investments by capital amount; first among the Midwestern states) and one of the nation's best banking and public sector partnerships ensure access to capital. Minnesota has long fostered life science and medical device companies and is home to several important bioscience companies, such as Cargill 3M Pharmaceuticals, Medtronic, and Syngenta Seeds. These companies found the right mix of scientific talent, advanced research capabilities, business support and services, and financial resources in Minnesota.

Financial incentives: Minnesota provides financial assistance through several programs. The Minnesota Investment Fund offers low-interest loans up to $500,000 for capital asset purchases. The Job Skills Partnership makes grants up to $400,000 for training. And the State Board of Investment is exploring ways to make greater venture investments in Minnesota's bioscience industries.

Key academic and research organizations: The University of Minnesota is among the nation's top three public research universities, with particular strengths in the College of Biological Sciences; Academic Health Center; College of Agriculture, Food and Environmental Sciences; and Institute of Technology. Rochester's Mayo Clinic is a world leader in patient care and clinical research.

Area bio/pharma organizations: Cargill; 3M; 3M Pharmaceuticals; Medtronic; Guidant; Cargill Dow; Upsher-Smith Laboratories; MGI Pharma; Orphan Medical; R&D Systems; Protein Design Labs; Biopolymer Engineering; BioE, Inc.; Land O' Lakes; Gentra Systems; Pioneer Hi-Bred International; Solvay Phamaceuticals; SurModics; Ecolab; Intervet; New Port Laboratories; General Mills; Mycogen Seeds; Syngenta Seeds.

www.positivelyminnesota.com




Tennessee:
Pioneering Research Centers

Infrastructure and resources: The state of Tennessee has an enviable biotechnology infrastructure with an advantageous business environment for life sciences, coupled with an exceptional quality of life. Tennessee's many public and private resources in the life sciences, including St. Jude Children's Research Hospital in Memphis, Vanderbilt University in Nashville, and the Oak Ridge National Laboratory in East Tennessee, help create a favorable environment for growing biotechnology business in the state.

Financial incentives: The Tennessee Industrial Infrastructure Program (TIIP) and the Tennessee Job Skills Program are available to support the recruitment of new biotech and pharma companies, and assist our state's existing life science companies to grow.

Key academic and research organizations: Vanderbilt University and Medical Center; Oak Ridge National Laboratory; University of Tennessee Health Science Center; St. Jude Children's Research Hospital; University of Tennessee; East Tennessee State University; Johnson City Meharry Medical College.

Area bio/pharma organizations: GlaxoSmithKline; King Pharmaceuticals; Pfizer; Schering-Plough; Baxter; Wyeth.

www.tnbio.org




Wisconsin:
'Thriving Cluster' of Life Science Firms

Infrastructure and resources: Wisconsin provides a complete resource package, from start-up financing to manufacturing and production assistance, uniquely designed to maximize profitability and success for all life science ventures. Wisconsin has leading research facilities, growing capital markets, strong partnership organizations, a thriving cluster of life science firms, supportive business-government cooperation, and wonderful quality of life. Wisconsin's life science success touches more than 200 companies in biotechnology, bioinformatics, medical devices, and healthcare. Wisconsin is ranked in the top 10 for biotechnology employment growth and number of biotech companies.

Financial incentives: The Technology Zone Program offers biotech and pharma companies income tax credits for locating and expanding within the eight zones across the state. The Wisconsin Department of Commerce Technology Development Loan program assists with financing for working capital, equipment purchases for commercialization efforts, market entry, and expansion.

Key academic and research organizations: The University of Wisconsin-Madison, with 800+ faculty in the biological sciences, ranking second among U.S. universities in the number of science and engineering doctorates granted and second in R&D spending; The Medical College of Wisconsin in Milwaukee; Marquette University; The Marshfield Clinic.

Area bio/pharma organizations: GE Medical Systems; Imago Scientific Instruments; Datex-Ohmeda; Covance; Promega; PanVera; Third Wave Technologies; Infigen; Pel-Freez Clinical Systems; Tetrionics; Schwartz Pharma USA; Nutra-Park; Mirus; ABS Global; Allograft Resources; NimbleGen; EraGen Biosciences; Stratatech; Scientific Protein Labs; Gala Design; GeriGene Medical; Pierce Milwaukee; GenTel; nPoint; Neoclone Biotechnology.

www.BioWI.com

Information provided by the respective states.

To cope with tough economic times, Omeris has expanded its efforts to gain overseas resources, so far bringing two biotech companies to Cleveland from Israel. Omeris is currently working with Ohio State University to strengthen ties to Asia, since its campus has one of the highest percentages of Asian students in America.

Omeris has zeroed in on the state's longtime struggle to attract venture capital funds. It recently used state funds to launch four seed and pre-seed funds through the annual $10-million to $12-million Technology Action Fund.

Consulting groups such as BIO/START, Battelle Healthcare Products, Copernicus Therapeutics, and BioMax specialize in product commercialization and also help to grow companies throughout the state.

www.omeris.org



Michigan
Teeming 'Life Sciences Corridor' 

Some 542 life science companies with more than 31,000 employees in the fields of pharmaceuticals, biotechnology research, medical device, diagnostics, generic drug making, and instrumentation thrive in Michigan, according to Raili Kerppola, managing director of the Michigan Life Sciences Corridor. Most of these companies are small, but seven large firms represent the majority of industry sales and employment.

Michigan
· 542 life science companies
· 31,000+ life science employees
· 15 state universities
· 125-mile Life Sciences Corridor
Research facilities include 15 state universities, led by the University of Michigan, Michigan State University, and Wayne State University. Combined, the three spend $1 billion in life science research annually. Hospital research facilities include the Henry Ford Hospitals, St. Joseph Mercy, Sparrow, Oakwood, Spectrum Health, Borgess, and William Beaumont Hospital. Two hundred and fifty scientists from all over the world staff the Van Andel Research Institute in Grand Rapids, a nonprofit facility dedicated to cancer treatments.

The Michigan Life Sciences Corridor, a 125-mile stretch between Grand Rapids and Detroit, is becoming the state's biotechnology hub. Michigan Life Sciences Corridor Fund supports life science research and commercialization through annual contributions of $50 million over 20 years. The fund led to the start-up of 50 new life science companies over the past two years by donating $145 million to Michigan life science industries. The Life Sciences Corridor distributed another $32.5 million in late May. The Corridor Fund also helped launch four venture capital funds offering $65 million in seed capital investments to Michigan life science companies.

The state's 11 "SmartZones," a network of high-tech clusters, are centers of technology transfer, attracting 21 companies and more than $100 million in investments. They offer wet-lab space, six incubators with free business space for startup operations, and "accelerators" that assist startups in locating funds and commercialization.

Michigan's Economic Growth Authority (MEGA) offers the High-Tech MEGA Credit to businesses involved with biotechnology, laboratory testing related to product development, medical device technology, and product research. The Credit allows companies to receive a Single Business Tax credit for the incremental SBT liability attributable to expansion or location in Michigan and a refundable credit equal to the personal income tax attributable to new jobs being created at the site of the expansion or new location.

These credits can be awarded for up to 20 years and for up to 100 percent of the taxes related to the project. Eligible businesses must use at least 25 percent of their total operation expenses for R&D for three years and create five new jobs within one year of beginning operations and 25 new jobs within five years of beginning operations.

The Michigan Economic Development Corporation also offers the Emerging Technology Challenge Fund, which provides $1 million each year in grants to develop Michigan universities' emerging research and technology. The Growth Capital Fund offers $5 million to promote public and private investments in Michigan's technology business sector.

Other industry programs and trade organizations include the Michigan Universities Commercialization Initiative, The Core Technology Alliance, Biotechnology Business Consultants, BioConnections, the Michigan Biosciences Industry Association, and the Michigan Medical Devices Association.       www.michigan.org



Indiana
Energizing Biotech Growth 

Indiana is the hub of world-leading biotech firms such as Eli Lilly, Covance Central Laboratories, and Roche Diagnostics. Companies in the field of pharmaceuticals, drug development, and surgical/medical devices total 139 firms with 29,165 employees, according to Ginger Kreil, vice president of marketing at the Indy Partnership. During the 1990s, life sciences grew 40 percent faster than any other industry in the state, according to the Battelle Memorial Institute.

Indiana offers several financial incentives for life sciences. Energize Indiana is the state's 10-year, $1.25-billion plan to create 200,000 high-wage, high-skill jobs in the life sciences and other high-tech fields. Energize Indiana's Indiana Venture Fund is a 10-year, $144-million investment that allows companies to leverage state money to help startups get off the ground.

Indiana
· 1990s: 40% faster growth in life sciences than other industries
· 139 life science companies
· 29,165 life science employees
· $1.25-billion Energize Indiana life science investment plan
Economic Development for a Growing Economy (EDGE) tax credits are based on the added payroll for new Indiana jobs created as a result of a project. The payroll taxes withheld from these new employees, effectively 3.1 percent in Indiana, is the basis for the credit. Tax credits can be awarded for up to a 10-year period and are first applied against any Indiana corporate income tax liability. Any excess amount earned is refunded directly to the company. Eligible projects are those with a competitive disparity in project costs, including incentives and the cost of doing business, between an Indiana location and a competing state.

Lilly BioVentures, a $75-million venture capital fund, targets the newest research technologies and identifies those likely to make a difference within 10 years in the development of breakthrough compounds.

The Training Skills Enhancement Fund provides reimbursement of up to 50 percent of eligible training costs, capped at $200,000, through Indiana Department of Commerce grants.

Purdue University's Trask Venture Fund provides one-time, pre-seed capital of up to $250,000 for faculty members launching companies.

Purdue University and Indiana University lead the state in technology transfer. In 2001 alone, 109 patents were filed and 10 new companies were formed based on Purdue University research. Purdue provides a network of incubation facilities and support services at the Purdue Research Park. Indiana University's Advanced Research and Technology Institute (ARTI) offers more than 100 technologies for licensing and recently opened its own life science incubator in downtown Indianapolis. Ball State University and the University of Notre Dame also have strong technology transfer offices.

Several dedicated trade organizations are creating opportunities for the life science industry in Indiana. Among them are the Central Indiana Life Sciences Initiative, The Indiana Health Industry Forum, Indiana Proteomics Consortium, Indiana Medical Device Manufacturer's Council, and TechPoint.       www.iedc.org



Missouri
Showing Biotech the Money 

Missouri has nearly 42,000 life science workers in 889 enterprises statewide. Some 390 of these firms operate in St. Louis, which is bidding to become the nation's "BioBelt." The city boasts more than 22,000 life science employees generating more than $10.5 billion in annual economic impact. St. Louis offers a mix of large to small companies from leaders like Monsanto, Wyeth BioPharma, and Pharmacia to small biotech companies located in two giant incubators, the Nidus Center and the Center for Emerging Technologies.

Major research centers include Washington University's Gene Sequencing Center, one of three major centers in the United States funded to contribute to the Human Genome Project. Other research centers include the Donald Danforth Plant Science Center, the Missouri Botanical Gardens, Washington University, Washington University School of Medicine, Saint Louis University, the BJC System, and the Danforth Foundation. The Center for Vaccine Development at Saint Louis University School of Medicine is one of six National Institutes of Health-funded vaccine centers in the country.

Wyeth BioPharma is currently constructing a $232-million biopharmaceutical manufacturing and research facility, expected to produce some 600 new life science jobs in the St. Louis region.

Special services for biotechnology are growing rapidly in Missouri. In addition to the Nidus Center and the Center for Emerging Technologies, the state is finalizing a Commercialization Center. Funded through the Danforth and McDonnell foundations and the Monsanto Fund, the Commercialization Center will operate through a collaboration of all area universities and Missouri's two incubators to hatch a continuous stream of new companies.

Missouri
· 889 life science companies, 390 in St. Louis
· 40% tax credit for equipment purchases
· "BioBelt" generates $10.5 billion annually
These companies may find support through Prolog Ventures, RiverVest Venture Partners, Oakwood Medical Investors, and Ascension Health Ventures, which have helped raise more than $284 million over the past three years for medical and biotech investments. Prolog Ventures has raised $34 million for early-stage life science technologies. RiverVest Venture Partners is a $90-million national fund that focuses on seed and early-stage life science investments. Oakwood Medical Investors targets mid- to late-stage pharmaceutical, biotechnology, and medical-device companies. Other St. Louis venture capital funds are expected to raise another $250 million for the life sciences.

Many life science companies in Missouri take advantage of the Equipment Tax Credit for firms locating to distressed communities. The 40 percent tax credit capped at $75,000 for three years is not based on the size of the company, but rather dedicated to building in areas that could benefit from economic stimulation.

The Research and Development Tax Credit can be claimed for up to 6.5 percent of the incremental increase over an initial three-year base period of qualified research expenses incurred in Missouri.

To help build the life science workforce, Missouri reimburses students who work in biotechnology for the first two years of their higher education.

Trade organizations also supply staff, among other services. These include the Missouri Biotechnology Industry Organization, Technology Gateway Organization, and the American Soybean Association.       www.stlrcga.org





Also Online

For more on each state's incentives and infrastructure for biotech, check out our detailed, searchable directory.


> Northwest Region 





For reprints and/or copyright permission, please contact  Terry Manning, 781.972.1349 , tmanning@healthtech.com.