Legislators extended the sunset on North Carolina’s Qualified Business Venture Tax Credit to January 1, 2013. The QBV program provides a credit against personal income tax for 25% of investments in qualifying North Carolina start-up companies, up to a maximum credit of $50,000 per year. Total credits paid statewide are limited to $7.5 million annually. A House proposal to increase the statewide cap on the QBV Credit to $8 million was not included in the final budget.

The Assembly also extended by two years – with some adjustments – North Carolina’s long-time corporate and franchise tax credits for capital investments and job creation. The so-called “Article 3J” credits had been scheduled to expire at this end of this year, but will now apply to business activities occurring before January 1, 2013. Legislators also adopted two important clarifications to the incentives statutes – one providing that the State Environmental Policy Act does not require companies receiving tax credits to undertake comprehensive environmental impact studies, and a second clarifying the types of environmental infractions that can disqualify companies from receiving the credits.

Legislators also extended the State’s existing production tax credit for biofuels and renewable fuels facility tax credit through December 31, 2012.

Negotiators for the State House declined to take action establishing the $100 million loan program for initial manufacturing and other life science products proposed by NCBIO and the North Carolina Biotechnology Center. The legislation was referred to House-Senate conference committee earlier in the 2010, but House members of the committee were unable to agree on a final version of the bill. Proponents of the measure successfully argued to create a special legislative study commission to continue review of the proposal during the interim between the 2010 and 2011 legislative sessions.

“It is pretty clear that we still have some work to do in educating members of the Assembly about the merits of this loan program,” said Sam Taylor, President of NCBIO. "While we regret that North Carolina will not have this important life science job-creation tool for immediate use, we believe that the study commission established to review the proposal will lead to broader support for the program. We look forward to working with members of the Commission."

Legislators have directed the North Carolina Biotechnology Center to develop and submit a strategic plan to accelerate commercialization of promising life science technologies and discoveries in universities and private companies in North Carolina. The report is due in January of 2011.

In addition to recommended policy actions, the report is to describe the economic potential of accelerating life science commercialization, including the potential for statewide job creation, tax base expansion, and related economic development. Legislators asked for recommendations regarding both the administrative infrastructure required to operate commercialization support programs and potential sources of funding including federal, state, local, private and philanthropic sources.

“We have seen federal and state policy makers taking an increasing interest in the early stages of commercializing life science products,” said Sam Taylor, President of NCBIO. “At the federal level, these efforts have included initiatives such as such as NIH’s translation research program, the Therapeutic Discovery Project Tax Credit, and the Cures Acceleration Network authorized in this year’s health reform legislation. The legislature has now asked the Biotechnology Center how early stage commercialization support can be provide at the State level.”

“This study is very different from the review of our proposed Life Science Development Corporation,” said Taylor. “The development corporation targets support to products that are entering manufacturing or initial offerings at retail. The commercialization study will address proof of concept and the earliest stages of product development.” Taylor noted that the dual studies will require life science advocates to work aggressively to educate key legislators about the life cycle of bioscience product development and the varying needs of companies at varying stages of the development process.

Early-stage life science companies will benefit from small business tax relief enacted by the 2010 General Assembly. Legislators enacted a 25% credit against income and franchise tax for 25% of companies’ contributions of unemployment insurance taxes with respect to wages paid for employment in NC. Companies with cumulative gross receipts of $1 million or less qualify for the credit. The credit is refundable, so that companies without tax liability can apply to the Department of Revenue for cash payments of the credit amount. The credit applies to tax years 2010 and 2011.

In addition to broad increases in funding for North Carolina’s life science research and commercialization programs, the 2010 legislative session saw action on a number of bills with indirect impacts on North Carolina’s bioscience cluster. These included

• Changes to the State Medicaid Divisions’ pharmacy and preferred drug list programs;
  
• Changes to Medicaid coverage of clinical trial procedures;
  
• Funding changes for childhood immunization;
  
• A new study of wood and crop biomass resources and infrastructure;
  
• Analysis of carbon sequestration opportunities;
  
• Planning for a new regional agriscience and biotechnology school;
  
• Enhanced river basin modeling guidance for the Department of Environment and Natural Resources;
  
• Revisions to tax laws governing combined reporting of holding company system income and expenses; and
  
• Further study tort reform issues, including comparable fault and joint and several liability

For more information on these issues, contact Sam Taylor at staylor@ncbioscience.org or (919) 281-8960. NCBIO News will include further information regarding several of these matters in our August issue.

• Priority recommendations from the report include:
  
• Funding FDA sufficiently to address critical short-term needs and commit to a sustained funding growth.
  
• Strengthening the federal R&D tax credit.
  
• Adopting tax and economic incentives to boost manufacturing and export-related job growth resulting from medical innovation.
  
• Encouraging venture financing for emerging biomedical ventures from formation through IPO.
  
• Committing to a 10-year “growth” budget strategy for NIH, which includes an emphasis on translational research that moves discoveries through more applied technology development to bridge the “valley of death.”

“You don’t know how important you are to North Carolina,” North Carolina Commerce Secretary Keith Crisco told NCBIO’s Biotech Manufacturers Forum (BMF) at its quarterly meeting June 23rd. “Not only are you appreciated, you are a model for the future -- a part of the new economy for North Carolina.”

Crisco outlined some of the budget issues before the General Assembly and discussed the State’s current economic situation. He noted that after months of losing jobs, the State is now gaining 2,000 jobs a month. He added that while biotechnology and other areas are important to the State’s future, North Carolina is still dependent on many of the traditional industries.

The Commerce Secretary expressed concern about the investments that other states such as Virginia and Louisiana are making in biotechnology. He also talked about the need for tax modernization to increase revenues for the state.

NC Biotechnology Center Senior Vice President for Statewide Operations and Economic Development Mike Wilkins and Center Vice President for Bioscience Industrial Development Bill Bullock also talked with BMF members.

“We wanted BMF members to get a better understanding of the State’s economic development efforts and to have a chance to communicate their ideas and concerns with the State’s economic development officials,” stated NCBIO BMF Program Manager Bruce Kaylos. “I think it was a great opportunity for all of us to share suggestions and understand each other’s perspective.”

For more information about BMF, contact bkaylos@ncbioscience.org.

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NCBIO members are eligible for discounted registration AdvaMed 2010. The conference will be held October 18-20 in Washington, DC. It provides an important opportunity for participants to showcase products and concepts to national and international businesses, media, government officials, and other key constituents.

Join the Healthcare Distribution Management Association (HDMA) and NCBIO for “Leveraging Distribution to Commercialize New Products,” a two-day seminar designed to help pharmaceutical manufacturers leverage the services and expertise of healthcare distributors to better understand the high impact tactics that can be used to successfully commercialize new products. The seminar will be held at the Marriott Crabtree Valley in Raleigh, October 4th and October 5th.

NCBIO Members can register for this seminar at the discounted HDMA member rate. Click here for a special registration form.

A number of companies and organizations have joined NCBIO this membership year. New members include: Administaff, AstraZeneca, Biocair, Inc., Cognosci, Genentech, Groninger, Oncoscope, Poyner Spruill, Premier Research Group, QuickSTAT, TransEnterix, and Two Blades Foundation.

“We are pleased to welcome these companies to the Organization. NCBIO continues to grow and add a diverse group of companies and organizations to the membership,” stated NCBIO Membership Director Jennifer Fong. For more information about membership, contact Jennifer Fong or call 919-281-8960.

 
The Biotechnology Industry Organization (BIO) released the following statement in reaction to the Supreme Court’s decision to uphold the lower court’s ruling in Bilski v. Kappos.

“In our amicus brief, BIO urged the Supreme Court to overturn the lower court’s rigid new test for determining whether a method or process is eligible for patenting. We are pleased that the Justices crafted a narrow opinion that does just that. The Court was clearly conscious of the potential negative and unforeseeable consequences of a broad and sweeping decision,” stated BIO President and CEO Jim Greenwood.  “This ruling specifically states that the ‘machine-or-transformation test is not the sole test for patent eligibility’ and recognized that the lower court’s ruling could have created uncertainty in fields such as advanced diagnostic medicine techniques.”

“In the Diamond v. Chakrabarty decision in 1980, the Supreme Court defined patent-eligible subject matter in a flexible and inclusive way that has fostered the tremendous growth of biotechnology for the benefit of millions of patients, farmers, and other consumers around the world,” continued Greenwood.  “We are pleased that the Court made it clear in today’s decision that the patent system was designed to be broad and inclusive in order to promote innovation.  Strong intellectual property protection is critical to our nation’s economy and global competitiveness.”

Greenwood stated, “This economic climate has left many of today’s most promising small businesses starved for investor capital, and has had an especially detrimental effect on America’s biotechnology companies, whose numbers have shrunk by 25% in the past two years.  Overwhelmingly comprised of small, early stage research and development-oriented companies, biotech companies are pursuing innovations that have the potential to improve human health, expand our food supply, and provide new sources of energy. They often require a decade or longer to bring to market new technologies and, as such, require risk capital.”
 
“Our thanks go out to Rep. Nydia Velazquez, Chair of the House Small Business Committee, Rep. Barney Frank, Chairman of the House Financial Services Committee, and Rep. Glenn Nye (D-VA) for recognizing and addressing the funding shortfall facing many early-stage small businesses,” Greenwood stated. “By authorizing the SBA to issue $1 billion in grants to investment companies making investments in those industries most in need of early-stage capital, this legislation has the potential to significantly increase the flow of capital into small, early-stage biotechnology companies.  In turn, the bill increases our likelihood of finding cures and treatments for patients, and high-paying jobs for American workers.”
 
Under the program, the SBA’s investments would be treated the same as investments by other limited partners in an investment fund, except that the SBA would not receive any control or voting rights with respect to the early-stage small business. Importantly, the new program protects the interest of the taxpayer by specifying that grants could only be awarded to investment companies that had already raised an equivalent amount of capital from private-sector sources. Ideally, over time, the SBA’s investment program will become self-sustaining as funds from successful small businesses are repaid into a revolving fund.