State News

Biotech firms pressure Perdue for cash

Posted November 24, 2008

— North Carolina's biotechnology firms pressed Gov.-elect Beverly Perdue on Monday to commit perhaps millions of taxpayer dollars to buoy cash-starved companies that face the prospect of bankruptcy if they do not get financing.

"This industry is not on autopilot. Thirty-six percent of the publicly traded companies have less than a year of capital," said John Campbell, founder of pharmaceutical and biotechnology consulting firm Campbell Alliance Group Inc.

After a roundtable discussion with industry executives, Perdue said she wasn't ready to commit even a penny of aid, noting that a looming budget deficit already has her searching for areas to make cuts. But the Democrat did say she believed the sector was valuable for the future of the state's economy, and she vowed to spend most of her time over the coming months on trying to build jobs despite economic turmoil.

"We don't get through it by shutting down any of our hope for the future," Perdue said. "This is basic investment in building jobs and creating a work force for the future, and I'm going to be a part of making that happen."

Biotech companies rely heavily on private financing to fund their research and development. But with the credit markets stagnant and the economy in turmoil, venture-capital firms have been unwilling to commit new cash to companies.

So some executives proposed a public-private entity that would provide $100 million to $200 million for companies to tap. John Russell, a K&L Gates law partner who aids biotech companies in their growth, said the state could fund only 10 percent of the total investment and leverage cash from other companies by providing tax credits to those that join the effort.

"I think you could raise a $200 million fund with minimal state investment," Russell said.

It's not clear where that private money would come from. Historically, money to such investment vehicles came from banks or private-equity groups whose unwillingness to invest now are causing the crisis.

North Carolina's financial researchers expect the state's budget shortfall could range between $800 million to $1.6 billion by the time the fiscal year ends next June. Some independent analysts have said the deficit could balloon to more than $3 billion in the 2009-2010 fiscal year.

Saying she expects to have her first serious budget briefing next week, Perdue said there isn't $200 million in taxpayer money available for new spending in biotech.

"People across North Carolina are going to be mad at me about the decisions I'm going to have to make," she said. "It's not going to be easy. It won't be pretty.

"We'll get through this, but we don't get through it by shutting down any of our hope for the future."

Biotech revenues in the state were about $28.7 billion in 2006, and the sector directly employed some 53,200 people at the time, according to data compiled by the North Carolina Biotechnology Center.

Biotech representatives said state investment in the industry could be a boon for North Carolina. They argued it could help shore up company balance sheets in the short term and could serve as a tool to entice other firms from around the nation to move their operations to North Carolina.

"In order to keep companies from failing in this state, it's important for us to figure creative ways to support them," said Don deBethizy, president and chief executive of Targacept Inc.

"These companies are a platform for job creation right now," Campbell said. "If we get in there with smart programs, we can move companies to North Carolina. Our return on investment is going to be far better if we look over the next 10 years. But we've got to act now."

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  • Doctor Dataclerk Nov 25, 2008

    I AM SICK OF BAIL OUTS....STEW IN YOUR OWN JUICE!!!!!!
    I don't want the government to bail me or my company out, I just want them to go away and leave me alone and I'll make it just fine.

  • Garnerwolf1 Nov 25, 2008

    whatelse: you been in the eggnog already this morning?

  • Garnerwolf1 Nov 25, 2008

    Is this like all of the incentive money Easley has given away over the years? Some of these companies are no longer even in the state, or didn't meet their requirements, but have not had to pay any of it back. Everybody has their hand out, individuals included, but at some point the bill is going to come due. When it does, the current economic situation will seem to be the proverbial picnic.

  • vote4changeASAP Nov 25, 2008

    Biotech companies want our tax dollars to help fund pharmaceuticals so they can later gouge us with the inflated cost of drugs that they "Pay" doctors to push on us.

    Someone needs to remind them that capitalism is still practiced here in Amercia. Cut some of your overinflated salaries or do without.

  • affirmativediversity Nov 24, 2008

    I am sooooooo SICK AND TIRED OF BAIL OUTS!!!!!

    AND when will anyone point out that maybe, just maybe, North Carolina doesn't need to spend money trying to "creat new jobs" All we have to do is invest on deporting ALL THE ILLEGAL ALIENS!!! Remember, those jobs that Americans don't want!! Times can't be all that tough if they still don't want them!

    I have another idea. How about OFF SHORE DRILLING??? There is a great source of new jobs and new revenue for NC!!

  • whatelseisnew Nov 24, 2008

    The State budget is a bloated, wasteful, pig. One of the big targets I would hit is education. I would pretty much eliminate all state dollars to state universities and community colleges.
    They either survive on their own or go the way of some of the airlines. Some need to get a grip and realize that there is not a bottomless pit of money for Government to take. States do not have a printing press like the Feds have. When the tax burden gets too high in a State, business leaves and then the people leave. Why do you think so many fled the Northeast and other high tax states to come South? It is time to get the cost of Government under control. The only way to do that is to slash and burn the budgets. Guess what the State will survive on a lot less.

  • colliedave Nov 24, 2008

    Put the dollars where it's needed first - Public safety, education

    Sorry, the education system puts for a product that if it where a car Ralph Nadar would label it as "unsafe at any speed."

    Let's see: if I come up with a proposal to reuse the dog poo from the local dog parks can I get a part of the handout?

  • protestthis Nov 24, 2008

    I love the government bashing that goes on this site - not to say that they don't deserve it sometimes. Some of the folks here wouldn't be happy unless this was a tax free state/country completely. No government whatsoever.

    I don't doubt there are wasteful programs. I will not argue that one bit.

    You can not cut every agency 55% as a starting point. At that point lets just close the state down. We won't need the toll booths, simply put up road barriers, and announce to the bordering states - Sorry NC is currently closed. Trespassers will be

    Get a grip. Put the dollars where it's needed first - Public safety, education - after that its ??? . Those two items probably never get enough funding to start with.

  • davidgnews Nov 24, 2008

    Isn't this what Vulture Capitalists are for ?

  • whatelseisnew Nov 24, 2008

    It absolutely is easy. Start with a 10 percent cut across the board. Then hit them with another 30 percent cut across the board. Then hit them with another 25 percent cut. At that point you will be getting warm.