An Italian biotech consultant's shock, awe and questions
Last week here, I wrote about a rush of small Maryland start-up biotech companies to get in line for a generous state tax credit that was available for investors in the nascent industry. ("Maryland biotech companies crazy for tax credits!")
An Italian biotech consultant saw my post and was shocked -- shocked! -- by what we were doing here in Baltimore, Md. She wanted to know more. (She shot me an email. You'll see it below.)
To quickly recap: biotech companies started lining up Friday morning at the University of Maryland's BioPark in Baltimore to wait in line. The tax credits are doled out by the state every year on a first-come/first-served basis. Last I heard yesterday, 17 companies had stationed representatives in line, in an auditorium at the BioPark, to camp out for five days -- just so they could submit their applications for the tax credit this morning at 9 a.m. (I'm still waiting for the final headcount on how many submitted today.)
Several of the company reps I interviewed lauded the state for offering big tax breaks to drive investment in biotech here. One company, Noxilizer, told me how they were able to attract investors who live in other states, because of the tax credit. Few states have anything like this "Biotechnology Investment Incentive Tax Credit" program to kickstart the biotech industry, they told me.
About $36 million has gone into funding biotech startups over the past three years -- with half of it tax-free for investors, according to the Maryland Department of Business and Economic Development.
What's happening in the state's biotech industry will eventually come under more scrutiny in the future (Gov. O'Malley has a Bio202 initiative to build up the industry over the next 10 years), as the public, politicians and business leaders will expect concrete results after all this investment, including new job creation and blockbuster products. (Mary Spiro ponders this future in her post on Maryland biotech's "boom or bust.")
Now, for the email from Valeria Spagnoli, a self-described biotech consultant in Italy who wants some more insight from biotech companies in Maryland on how they're going about getting funding from the state. Who wants to help her with her questions?
Hi,
I’ve just read the article about tax break for biotech investors on the BIO smartbrief newsletter. I found it amazing that companies line up days before the application time opens up, they just sign their names on a blackboard…In my country we are overwhelmed by the so-called red tape procedures, papers and papers to fill in, this is why I would appreciate if you could provide more detailed information to this regard, such as: how are companies selected as beneficiaries? Just the first come first served basis ensures they are granted the money? How long does it take to become eligible?
Thank you so much for your kind reply!
Have a nice day!
Valeria
P.S. to Valeria: As my full story points out, there's only a limited pool of money -- $6 million this year -- so once it runs out, no one can get more funding. Each investor is entitled up to $250,000 in tax credits and no company can claim more than 15 percent of the total tax credit pool of $6 million. That said, there are some other nuances that maybe others closer to the process can jump in and explain for all of us.
(Published June 1, 2009)
Categories: BioTech, Entrepreneurs & Risk Takers, Startups, Venture Cap
