Showing bioscience the money

Maryland proposal could boost venture capital for bioscience companies

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ANNAPOLIS, Md.—A proposal recently unveiled by Maryland Gov. Martin O'Malley could lead to an influx of venture capital for businesses—including bioscience companies —located in the state.

Dubbed InvestMaryland, the plan will require approval by state lawmakers. It would support the growth of the state's knowledge-based industries by stimulating investment in the Maryland Venture Fund.  

Maryland Department of Business & Economic Development Secretary Christian Johansson explains that the program will make insurance companies eligible for state-issued tax credits and in turn they would invest dollars today in Maryland's venture infrastructure.  

"A minimum of half these investments will flow into the Maryland Venture Fund and the balance will flow into Maryland-based venture capital firms for the purposes of getting critical capital to businesses so they can create jobs and advance innovation in fields like biosciences and nanotechnology," Johansson says.   

According to O'Malley, a shrinking pool of venture capital has been one of the many effects of the national recession—something that state officials are hoping to counter.

"It will come as a shock to no one that our life sciences sector saw a 26-percent decrease in venture dollars during the first quarter of this year," he said in a statement. "Our state ranks first among states in federal research and development dollars per capita, and second in the total amount we receive annually. It must be our goal to convert more of these dollars into jobs and economic opportunity Venture capital, as we all know, is a key ingredient. We believe this initiative can spur the creation of thousands of jobs and secure $100 million in venture capital to unlock hundreds of millions, and perhaps billions, in economic activity."

The department will work with legislators, businesses and universities to draft a bill on behalf of the governor for the 2011 Maryland legislative session.

Created in 1997, the Maryland Venture Fund has invested $51 million in more than 200 Maryland companies and these investments have yielded $61 million in returns.

In April, the legislature increased funds for a biotech tax credit—which replenishes up to 50 percent of a Maryland company's biotech investment—from $6 million to $8 million. It could prove to be a financial boon for bioscience companies in the Old Bay State.

"In general, more capitals are always good and welcome especially for bioscience sector, which requires a lot of capital investments, time and patience," notes Sun Lu, executive vice president of GeneCopeia, a Germantown, Md.-based manufacturer and provider of genomics and proteomics products and services for academic and governmental research institutes and the pharmaceutical and biotechnology industries.

If approved by lawmakers, Lu says any available resources would be an attractive option to many biotech companies in Maryland, possibly even GeneCopoeia.

"Yes, if there are more funds available from venture capital funds and/or the state, we will try to get some for our corporate development needs," he says.

Some technology leaders say investors' growing timidity is crushing the state's startups.
Former MedImmune CEO David Mott says the state is lagging leading technology hubs in Silicon Valley, Calif., and Cambridge, Mass.

"We have better resources, but we are not executing at that level," he said, adding that he believes there is a disconnect between researchers and businesses.

Johansson says supporting startups now—while investors are shying from riskier investments—will put Maryland ahead.

It isn't likely that any companies are banking on the money at this point, with the uncertainty of legislative approval and other hurdles in the way to the plan's approval.
The program reaching Maryland's legislature also could turn on whether or not O'Malley is reelected in November. Two similar programs were studied by lawmakers during the state's 2010 legislative session, but failed to pass.

Maryland isn't the only state trying to use venture capital money to fuel its biotech sector. In January, a group of Wisconsin politicians and business people announced plans to raise a $100 million venture fund to invest in advanced industries, including biotechnology.

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