When you think of a pro-business state, what images come springing forward? Lower taxes, less government regulation, and support for private enterprise are reasons why states such as Delaware attract small business entrepreneurs from all over the country. However, New Jersey has something that Delaware lacks: the pharmaceutical and biotech industry. This is the largest private industry in New Jersey, and it is a critical component to our state’s economy. Not only do schools such as Princeton, Rutgers, and UMDNJ attract biotech companies from all over the world, but state incentives in the recent past have also played a pivotal role in their success.
While top-notch universities and a highly skilled work pool will continue to be a main attraction to entrepreneurs, important government initiatives such as the Technology Business Tax Certificate Transfer Program are being slashed. Without the government working hand-in-hand with the private sector, there is growing concern that New Jersey will lose its competitive edge in the pharmaceutical and biotech industry.
Though I am sure lower taxes and less government regulation also play a factor in the decision for a company to set up shop in one state over another, pro-business does not automatically mean anti-government. Indeed, government can have a positive impact on the private sector. By creating incentives through grants, tax-credits, and government programs, states not only attract new companies, but also provide a reason for them to remain in-state. This lends itself to a question all New Jersey elected officials should be asking: What incentives is the state providing to keep pharmaceutical companies in New Jersey?
Not only is our state the home to 15 of the world’s 20 largest pharmaceutical companies, but we also have the distinction of housing one of the largest concentrations of independent cottage companies in the country. With more than 184,000 scientific professionals employed through biotech and pharmaceutical companies, this $27 billion a year industry is critical to continued economic prosperity throughout New Jersey.
While it is important that large pharmaceutical companies such as Bayer HealthCare, Johnson & Johnson, Novo Nordisk, and the like, do not relocate elsewhere, we cannot ignore the importance of the bourgeoning biotech cottage industry. Such cutting edge companies as Agile Therapeutics, Tobira Therapeutics, and Signum Biosciences are making serious advancements in women’s healthcare, HIV treatment, and molecular disease research.
Despite New Jersey’s pharma history and the positive impact the biotech industry has on the state’s economy, New Jersey’s role as a leader in biotechnology has declined. According to the U.S. Census Bureau, North Carolina, Massachusetts, Pennsylvania, Virginia, and Maryland, have surpassed New Jersey in the categories of biotech establishments, industry payroll, and number of employees. From 2002 to 2007 the number of employees in New Jersey dropped from 33,000 to 25,000, while North Carolina’s rose from 17,000 to 28,000, Pennsylvania’s rose from 15,000 to 24,000, and Virginia’s rose from 25,000 to 43,000.
While some New Jersey politicians question whether we should provide financial assistance to private enterprise, states such as Maryland are offering a $6 million per year refundable biotechnology tax credit. Likewise, Massachusetts has designated $1 billion over a 10-year span to its life sciences initiative, North Carolina has appropriated $15.7 million to the Biotechnology Center to provide loans and grants, and California voters approved a $3 billion loan to fund the California Institute for Regenerative Medicine. Even our neighbor, Pennsylvania, has allocated $20 billion to support initiatives for biotech industry. So what is New Jersey doing to maintain a vibrant biotech community?
One of the state incentives that these cottage companies have benefited from is the Technology Business Tax Certificate Transfer Program. This program is an invaluable lifeline for small businesses in New Jersey. The true story of Celgene Corporation sheds light on the importance of the program.
In 1998, Celgene Corporation, located in Summit, was on the brink of bankruptcy. As Chapter 11 loomed, it seemed that there was no way in which the company could remain afloat. When it applied to the Technology Business Tax Certificate Transfer Program, Celgene only had 35 employees and six weeks of liquid cash. Through the program, Celgene received $3.5 million that allowed the company to remain solvent. Today Celgene has a current capitalization of over $27 billion. Furthermore, the company has grown 70 times larger, employing over 2,500 employees worldwide – 1,500 are New Jersey-based. For a sum of $3.5 million, Celgene Corporation was able to avoid bankruptcy and go on to become one of the top biotech companies in the world.
New Jersey also reaped the benefits. In fact, in 2009, the $34 million allocated from the program to biotechnology companies leveraged an additional $510 million for the industry. According to BioNJ, for every $1 invested in this program, $10 of new venture capital is invested in New Jersey’s biotech industry – and that means jobs for our science and high tech graduates.
Indeed, a recent BioNJ survey showed that over 43 percent of university-business collaborations with New Jersey biotech companies are with schools such as Princeton, Rutgers, and UMDNJ. Yet, despite the overwhelming positives, the Technology Business Tax Certificate Transfer Program was reduced by $30 million in the Governor’s FY2011 Budget, an interesting decision for a supposed “pro-business” politician.
If we are serious about fixing the economic problems in our state, we must continue to invest in the pharma and biotech industry. It’s hard to argue that programs such as the Technology Business Tax Certificate Transfer Program can not help New Jersey maintain its competitive advantage. Such collaboration can continue to feed our tax base and provide bright futures for our college graduates.
Reed Gusciora, Democrat, is a state assemblyman serving the 15th Legislative District, which includes Ewing, Hopewell, Lawrence, Pennington, Princeton, and Trenton. He received his J.D from Seton Hall in 1988 and has served in the Assembly since 1996.