Biotech firms pressure Perdue for cash
Posted November 24, 2008 3:11 p.m. EST
Updated November 24, 2008 6:59 p.m. EST
RESEARCH TRIANGLE PARK, N.C. — 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."