Financial worries loom increasingly large in this pivotal sector of the economy, but a survey of BioNJ members shows the industry is continuing to grow.
New Jersey’s biotechnology industry continues to grow, even as financial worries loom increasingly large.
Such was the message from a new industry study released today by BioNJ, the state’s biotech trade group.
The survey found the number of biotech companies in New Jersey rose from 300 in July 2010 to more than 340 today. The number of workers directly employed by New Jersey biotech companies increased from 15,000 to 16,400 during the same time frame. Those employment numbers include only those directly employed within the industry.
“I think it’s a good thing,” said Debbie Hart, president of BioNJ. “It means this industry in New Jersey continued to have a stronghold and continues to be an economic driver, with no real blips on the screen.”
Still, money has been tight for the industry.
Venture capital funding, which accounted for 26 percent of the money raised by biotechs in 2009, now accounts for only 16 percent, though venture capital still ranked second among all funding sources. Product sales were the top funding source, bringing in 30 percent of total revenue. Furthermore, 57 percent of companies said they had less than $10 million in the bank at the end of 2011, a relatively low number given the capital-intensive nature of the business.
“Certainly it would be naïve not to be concerned,” Hart said. “It is a reality across the industry, so it’s not a New Jersey specific problem — it’s no reflection on New Jersey — but it certainly continues to be a concern.”
The survey also reinforced the notion that the industry is becoming one of “haves and have-nots,” as Big Pharma and other investors shy away from earlier-stage companies in favor of funding later-stage companies with higher chances of clinical and regulatory success.
Hart said the fundraising challenges are forcing companies to make tough decisions about which programs to move forward and which to curtail.
“I think everyone’s just being conservative and trying to bank on the best possibilities,” she said.
Only 42 percent of survey respondents said there was sufficient venture capital in New Jersey to support the industry’s growth. However, 73 percent of respondents said they feel the state government provides a good business environment for biotech, and 95 percent said the state has ample managerial and scientific personnel to meet the company’s needs.
By far the most popular government incentive is the state’s Technology Business Tax Certificate Program, which lets unprofitable businesses sell their unused net operating loss carryover and research and development tax credits in exchange for capital. The program is a big deal for biotech because many companies don’t turn a profit until their lead product hits the market, a process that can take several years.
Hart said there’s still more the state could do for early-stage companies, such as creating an angel investor tax credit program or giving direct financial support.
“I understand the state’s finances are constrained, but if there was some way to find some amount of money that could be given to companies in the form of grants, that would be critically important and that would be well-received, and I think it would attract more early stage companies here,” she said.
A large majority — 90 percent — of biotech companies said the state has sufficient opportunity for strategic collaborations with academic institutions and other laboratories. But while such opportunities exist, Hart said there’s more work to be done to strengthen the relationship between academia and industry, and to promote the state’s academic assets. She said that’s particularly important, given the intense competition New Jersey faces from other biotech hubs in Boston, the Research Triangle in North Carolina and California.
“If we have Big Pharma setting up shop in the Cambridge (Mass.) area, clearly that’s a function of the academic environment up there and the synergy of industry and academia working together,” she said.
Hart said BioNJ hasn’t taken a formal position on the restructuring of Rutgers University, which will bring the University of Medicine and Dentistry of New Jersey under Rutgers, but she said her organization is “excited at the possibilities” the merger could create for the industry.
The study, conducted by Ernst & Young on behalf of BioNJ, was based on a voluntary survey of biotech companies. The survey had a 20 percent response rate.