Pennsylvania Programs & Initiatives Advancing the Biopharmaceutical Industry Pennsylvania State Profile 1 Key Programs & Initiatives The opportunities generated by the biopharmaceutical sector as a leader in innovation and high quality job creation are not limited to just a few states, but have a substantial national footprint. States proactively pursue the development of the biopharmaceutical sector because it represents: a large-scale, geographically dispersed supply chain spanning R&D through to production and distribution; a key driver of the economy including the recent economic recovery; and a sector paying high wage rates in quality jobs. States are deploying a range of programs and initiatives to support and grow the biopharmaceutical industry, including: comprehensive state development strategies; investments in R&D and related infrastructure; programs to boost venture capital, entrepreneurship, and innovation development; advanced manufacturing; economic incentive initiatives; and programs working to advance STEM education and training. The Commonwealth of Pennsylvania has a long-standing track-record in sustained support of life science technologybased economic development programs, especially those focused on commercialization of biomedical innovations. Quick Guide: Pennsylvania s Programs & Initiatives Advancing the Biopharmaceutical Industry Comprehensive State Strategies to Support Biopharmaceutical Development: Pennsylvania s Department of Community and Economic Development Life Sciences Greenhouse Program Ben Franklin Technology Partners R&D Investment: Commonwealth Universal Research Enhancement Program Biosciences Infrastructure Development: Philadelphia University City Science Center Hershey Center for Applied Research Pittsburgh Technology Center and Broader Oakland Innovation District Keystone Innovation Zones Venture Capital, Entrepreneurship, and Other Innovation Related : Ben Franklin Technology Partners Program PABizOnline Program Pennsylvania s Life Science Greenhouses New Pennsylvania Venture Capital Investment and Guarantee Programs Commonwealth of Pennsylvania s Team Pennsylvania Foundation Impacts Economic Incentives: R&D Tax Credit STEM Workforce & Education: Industry Partnerships Program Pennsylvania STEM Initiative Commonwealth Universal Research Enhancement Program has awarded approximately $800M in grants and funded more than 1,900 health research projects. The State Department of Health reports that of the 361 research grants completed as of mid-2013, study findings have been reported in more than 1,825 peer-reviewed articles and 85 patents have been filed; researchers have leveraged an additional $1.2 billion in funding to continue their research. Industry Partnerships Program 72 industry partnerships representing 20 industries involving over 6,300 companies with nearly 73,000 employees from these companies having completed or currently engaged in training efforts. Wages for participants increased by nearly 13%, and 75% of businesses reported increased productivity. Advanced Manufacturing: Lehigh University Biopharmaceutical Technology Institute Penn State University Shared Fermentation Facility
2 Pennsylvania State Profile Pennsylvania by the Numbers 2.3% PA 2.6% U.S. R&D as a Share of GSP, 2010 NA 4.6% U.S. Persons in S&E Occupations as Share of all Occupations, 2012 NA 20.3 Patents Patents per 1,000 people in S&E Occupations, 2012 U.S. capital sources, and a suite of entrepreneurial support and business development programs. Each of the greenhouses closely collaborates with major Pennsylvania research universities with strong life science R&D portfolios including, the University of Pittsburgh, Carnegie Mellon University, Penn State University, the University of Pennsylvania, Temple University, Drexel University and Thomas Jefferson University. In addition to the life science greenhouse programs, Pennsylvania has sustained a long-term 30+ year commitment to supporting technology-based economic development and new business commercialization through the Ben Franklin Technology Partners program. 8.1% PA 8.8% U.S. High-Tech Establishments as a Share of Total, 2010 Source: National Science Foundation, Science & Engineering Indicators 2014. Comprehensive State Strategies to Support Biopharmaceutical Development The Commonwealth of Pennsylvania s Department of Community and Economic Development (DCED) considers life sciences to be one of nine signature industry strengths for the state. A cornerstone of Pennsylvania s life science-based economic development strategy is the Life Sciences Greenhouse Program which operates three public/private life science development hubs in western, central and eastern regions of the state, comprising: Pittsburgh Life Sciences Greenhouse (serving western Pennsylvania) Life Sciences Greenhouse of Central Pennsylvania (serving central Pennsylvania) BioAdvance (serving eastern Pennsylvania). The Greenhouses received an early capital infusion with allocations from the Pennsylvania Tobacco Settlement, and continue to operate with annual state funds and with funds from private sector supporters such as regional foundations. In each case, the life science greenhouses serve as a regional entity for encouraging innovation commercialization in life sciences, providing pre-seed and seed capital, access to private sector Operating from a statewide office in Harrisburg, and four regional Ben Franklin operations in Bethlehem (NE PA), Philadelphia (SE PA), Pittsburgh (SW PA) and University Park (Central and Northern PA), the Ben Franklin Program provides direct capital investment in companies, supports development of private early stage funds, and provides advisory services to early-stage companies. While the life sciences greenhouses only work with life science companies, the Ben Franklin program covers a broader range of advanced technology fields. Life sciences is still, however, one of these fields, and a review of the portfolio companies that have received investments across the Ben Franklin network reveals a strong presence of life science companies including those active in drug discovery and development. R&D Investment and Infrastructure Programs and Initiatives Commonwealth Universal Research Enhancement (CURE) Program. Established in 2001 using part of the Pennsylvania tobacco settlement funds, this program makes grants to Pennsylvania-based organizations for biomedical research, clinical investigations and health services research. In the latest annual report from the program (covering state fiscal year 2012-13), health research grants totaling more than $41 million were awarded to 28 Pennsylvania organizations as formula grants, which are distributed by a pre-determined formula to institutions that already receive funds from the National Institutes of Health (NIH). These grants fund 95 research and infrastructure projects, the majority of which are focused on biomedical research. Under the funding, researchers are addressing research in a
Pennsylvania State Profile 3 wide-range of areas such as cancer, cardiovascular disease, diabetes, immunology, infectious diseases, neuroscience, cell biology, bioengineering, and substance abuse. Outcomes: Since its inception, the CURE program has awarded approximately $800 million in CURE Program grants and has funded more than 1,900 health research projects. The State Department of Health, which administers the program, reports that of the 361 research grants completed as of June 30, 2013, study findings have been reported in more than 1,825 peer-reviewed articles and 85 patents have been filed. It is also noted that researchers have leveraged an additional $1.2 billion in funding to continue their research. to Build Bioscience Infrastructure Pennsylvania is home to several notable science parks and bioscience innovation districts, with the three primary hubs of development being in Philadelphia, Central Pennsylvania and Pittsburgh. Philadelphia University City Science Center. Founded in 1963, University City Science Center is the oldest and largest urban research park in the United States and third oldest research park extant in the U.S. Its urban location is in the center of a district comprising multiple higher education and biomedical research institutions and strategically located to serve the biopharmaceuticals cluster of Southeast Pennsylvania. Given the characteristics of R&D and economic activity in the area it is not surprising that a substantial number of the businesses located in the City Science Center, being incubated there, or having graduated from there, are biomedical science oriented companies. Fully 72 percent of the patents issued to City Science Center patent holders have been in life sciences. Hershey Center for Applied Research (HCAR). HCAR is a privately developed park comprising 165 acres in close proximity to the Penn State Milton S. Hershey Medical Center and the Penn State College of Medicine. Because of this proximity to major biomedical research assets, the HCAR contains both wet and dry lab space for research in the life sciences, plus Class A office space, to accommodate life science business development. Pittsburgh Technology Center and Broader Oakland Innovation District. Pittsburgh has evolved a more organic biomedical innovation district in and around the Oakland neighborhood of the city that is home to the University of Pittsburgh, the UPMC biomedical research and clinical enterprise, and Carnegie Mellon University. Life sciences business development has occurred in Oakland directly and in immediately adjacent developments at the Pittsburgh Technology Center and, to a more limited extent, Southside Works. The Pittsburgh Technology Center (PTC) comprises a 48- acre riverfront research park located in the South Oakland neighborhood of Pittsburgh. The PTC s development was financed by the Commonwealth of Pennsylvania, in combination with regional and city development organizations and foundation partners. The Pittsburgh Life Sciences Greenhouse operates wet lab space within its incubator building located at the PTC. Southside Works is a private development located directly across the Monongahela River from the PTC, linked by bridge, and provides significant expansion potential for life science and technology companies into a live-work-play mixed-use urban environment. Keystone Innovation Zones. This initiative is one of the first statewide efforts to link universities and colleges to the process of determining and pursuing the economic development priorities of their respective regions, and creating an incentive for companies to locate near universities, helping to advance Innovation Districts across the state. Virtually all of these zones include at least some focus on life sciences; and, in the major clusters of Philadelphia and Pittsburgh, the result has been closer collaboration among institutions, large companies, and emerging biotech start ups. One notable feature of KIZ is its tax credits to emerging companies that are located within its geographical boundaries. In FY 2014, a reported $17 million in tax credits were awarded to over 200 companies statewide, many of whom were biosciences companies. Venture Capital, Entrepreneurship, and Other Innovation Related Unlike other states, Pennsylvania has created and sustained a network of regional organizations that combine elements of technology commercialization, entrepreneurial development assistance and venture financing to advance biosciences development.
4 Pennsylvania State Profile Innovation Development Ben Franklin Technology Partners Program. This longstanding effort, dating back to the early 1980s, involves a network of four regional centers. Each BFTP regional center has developed its own recipe for engaging in commercialization and entrepreneurial development for a variety of activities including proof-of-concept funding, entrepreneurial boot camps and mentoring, and incubators. For instance, the Pittsburgh-based BFTP center, known as Innovation Works, provides University Innovation Grants to support prototype development and early marketing analysis of university-based research discoveries and technologies. The BFTP of Northeastern Pennsylvania operates a network of incubators, three of which offer biosciences wet lab space. Meanwhile, the BFTP of Southeastern Pennsylvania has created the PA Life Sciences Connect (Connect) program, in collaboration with the state and other regional partners, to help displaced life science workers in the Southeast Pennsylvania region become engaged in entrepreneurship. Entrepreneurial Development PABizOnline Program. The Commonwealth of Pennsylvania operates the PABizOnline program as a first stop for entrepreneurs and potential entrepreneurs seeking information and advisory services for starting a new business venture in Pennsylvania. More hands-on assistance, however, (especially for life science entrepreneurs) is provided through the three state supported Lifescience Greenhouses and the four Ben Franklin regional centers. Venture Financing Pennsylvania s Life Science Greenhouses. Located in three regions of the state with substantial bioscience industry and research hubs, each of these regional Life Science Greenhouses have customized their program offerings to the needs and characteristics of their areas, and as a result funding programs vary across the regions of the state. Key Greenhouse funds include: Pittsburgh Life Sciences Greenhouse. The PLSG has three funds. The earliest stage fund is the Technology Development Fund (TDF) designed to bridge the gap from discovery to the pre-seed funding stage. Typical TDF investments are in the $50,000 to $250,000 range and have a 1:1 matching requirement. The second fund is called the Early Stage Fund (ESF) and covers seed stage funding for companies that have raised less than $2.5 million in total funds at application. Like the TDF, the ESF makes investments in the $50,000 to $250,000 range and requires a 1:1 match from other funding sources. There is also an $8.1 million PLSG Accelerator Fund which is designed for investing in companies as they move beyond the pre-seed/seed, friends and family and angel investor scale. The PLSG also has partnerships with private investors and venture capital companies, working to introduce life science companies to private sector funders. The Life Sciences Greenhouse of Central Pennsylvania. The LSGCP highlights one major funding program, designed to be highly flexible in the stage of company funded and the amount of investment made. LSGCP can provide up to $1 million in investment in a company provided as milestonedriven convertible debt or equity financing. BioAdvance offers staged investment in companies, typically starting $50,000 pre-seed/pilot investments (with no match requirement), followed by investments ranging from $250,000 to $500,000. These are provided in two tranches at the seed stage of company development. As a start-up venture expands, BioAdvance will invest up to a maximum of $1.5 million. Ben Franklin Technology Partners Program. In venture financing, each of the BFTP regional centers makes direct investments in companies and many have also invested in some external early stage venture funds. Funds are available for pre-seed, seed, and later stage venture funding rounds. The staged approach to venture financing is illustrated by the staging highlighted by the Ben Franklin Technology Partners of Central and Northern Pennsylvania: First Year Investment Phase One. Company proposals address the technical feasibility and product development risks associated with starting the company. A typical Phase One investment would be for prototype development or for fees associated with protecting the intellectual property and would not exceed $100,000. Second Year Investment Phase Two. Proposals focus on market feasibility and acceptance which includes the introduction of beta sites and proof-of-concept installations. A typical Phase Two investment would be in the $150,000 range. Third Year Investment Phase Three. Investments are made when a business achieves revenues of $50,000 per month. The loan, for approximately $200,000, is intended to ramp-up sales efforts and encourage overall business growth. Investment in an Existing Manufacturer Phase Four. Funding up to $250,000, is made to existing manufacturing-based businesses that need to develop a product or process for entry into a new market. Because the risks associated with an established business are less, the payback is structured differently from that of an emerging business and the loan will be repaid regardless of project success.
Pennsylvania State Profile 5 New Pennsylvania Venture Capital Investment and Guarantee Programs. Dating back to 2004, these efforts to invest or provide guarantees for venture capital firms investing in Pennsylvania are operated by the Commonwealth Financing Authority under the Department of Community and Economic Development. The New PA Venture Capital Investment Program authorized $60 million as loans to venture capital companies seeking to invest in Pennsylvania firms. The New PA Venture Capital Guarantee Program authorized up to $250 million of guarantees on the first losses of equity investments made in Pennsylvania companies by qualified venture capital firms to be matched 1:1 with additional investments. Commonwealth of Pennsylvania s Team Pennsylvania Foundation. This statewide initiative has invested over $15 million in early start-up initiatives via direct investments made in three Pennsylvania-based venture capital firms including: Draper Triangle Ventures; Novitas Capital, and Penn Venture Partners, L.P Advanced Manufacturing Lehigh University Biopharmaceutical Technology Institute. Offers a pilot plant for mammalian and plant cell culture with an active industrial liaison program offering BioPilot Services. Among the services are technical problem solving of issues in bioprocess scale-up, process and product development and pilot-scale production, plus on-site short courses and technical seminars. Penn State University Shared Fermentation Facility. Penn State s Huck Institutes of the Life Sciences operates a shared use facility for university-affiliated and independent government and industry researchers offering biotechnology pilot plant capabilities for microbial cells and also includes technologies for separation and cell disruption, biomolecule purification and process monitoring. Economic Incentives R&D Tax Credit. Businesses qualifying for the federal Research and Development tax credit, and making research and development investments in Pennsylvania are eligible to apply for the Commonwealth s R&D tax credit. The program provides a 10% tax credit on a company s increased R&D expenses over a base period (prorated to not exceed $15 million annual cap for all businesses). There is up to a 20% of total pool set aside for small businesses. Since companies in the early stages of development typically may not have taxable profits, the program now allows technology businesses to sell unused R&D Tax Credits. STEM Workforce & Education Programs and Initiatives Industry Partnerships. Pennsylvania has an active Industry Partnerships program that works with industry clusters across the state to address skill shortages. The program focuses on having workers gain industry recognized credential and/or promotions. Industry is required to match state funding on a 1:1 basis. Outcomes: Team Pennsylvania Foundation reports that recent outcomes for this program include serving 72 industry partnerships representing 20 industries involving over 6,300 companies with nearly 73,000 employees from these companies having completed or currently engaged in training efforts. Wages for participants have increased by nearly 13% and 75% of businesses reported increased productivity. Pennsylvania STEM (Science, Technology, Engineering, Math) initiative. Established in 2007 as a collaboration of Team Pennsylvania Foundation and the National Governor s Association, this effort partners state agencies, business, secondary education and higher education to develop and implement programs that provide students hands-on opportunities to work on real-life issues in their field. Prepared for PhRMA to accompany Driving Innovation and Economic Growth for the 21st Century: State Efforts to Attract and Grow the Biopharmaceutical Industry, by TEConomy Partners, LLC. Information prepared in 2016.