HJR 248: Joint Subcommittee Studying Biosciences and Biotechnology

September 29, 2008

The joint subcommittee met in Richmond with Delegate Sickles as chair.

Presentations and Discussion

Robert Skunda, President of Virginia Biotechnology Research Park
Robert Skunda spoke on the capabilities of the Virginia Biotechnology Research Park. He stated that a modest state investment of $10-$15 million would be effective if used to attract companies in a multitenant facility.

Delegate Sickles asked Mr. Skunda if he had requested the Virginia Biotechnology Research Park to be included in the last state bond package. Mr. Skunda responded that the most recent bond package was dedicated to higher education and the Research Park was not included.

Mark Herzog, Virginia Biotechnology Association, offered a letter to the joint subcommittee that was written by a small biotech company to the Secretary of Commerce and Trade, Patrick Gottschalk. The letter informed Secretary Gottschalk that the company moved to Maryland due to insufficient wet lab space in the Commonwealth to accommodate its needs. Mr. Herzog used the letter to highlight the immediate need for more wet lab space to foster growing biotechnology companies.

Senator Herring asked Mr. Skunda if the Biotech Research Park would have been successful without state investment. Mr. Skunda responded that the state funding was necessary to attract private investment, even though the state contribution totaled only $8 million over 12 years.

Delegate Sickles asked Mr. Skunda what steps need to be taken to continue advancing the biotechnology industry in the Commonwealth. Mr. Skunda responded that an investment of $10-$15 million would be necessary, mainly to attract private and public partners and additional capital.

Peter Jobse, Center for Innovative Technology, agreed that the Commonwealth could be doing more to finance biotechnology projects similar to that of the Research Park, but he noted that research and commercialization parks work best when focused on a specific area of science.

No public comment was received. Delegate Sickles stated he would like to consider the possibility of a $10-$15 million state investment to develop an additional incubator (multitenant) facility in the Commonwealth that would include wet lab space.

Aneesh P. Chopra, Secretary of Technology of the Commonwealth
Secretary Chopra reviewed current biotechnology programs in the Commonwealth. At the request of Delegate Sickles, Secretary Chopra explained in detail the key features of the UVA/VT and Rolls Royce partnership agreement. Secretary Chopra stated that a major component of the partnership was the agreement that Rolls Royce would retain a majority of the intellectual property rights developed by the partnership. Secretary Chopra concluded by stating that although the Commonwealth has made some significant investments in the biotechnology sector, a lack of coordinating, managing, and reporting among both the universities and the private sector when compared to the recent UVA/VT and Rolls Royce partnership still exists. Secretary Chopra stressed the need for the Commonwealth to bring together universities to compete with larger and more centralized university systems in other states.

Senator McDougle asked if appropriations to universities are required to be used for commercialization. Currently, only $1 million of state appropriations are dedicated to commercialization through the Commonwealth Technology Research Fund (CTRF). Mr. Jobse noted that there is a high value in basic research that is needed to develop more advanced research and used to teach students. Additionally, the majority of funds used for basic research come from federal grant opportunities. Senator McDougle proposed that all state money designated for research be tied to commercialization. Delegate Sickles noted that targeting state funds on commercialization would be a good opportunity to market the Commonwealth as a place to do biotechnology-related business.

Delegate O'Bannon stated his support for increased data collection on university intellectual property transfer as well as working to establish more economic development packages similar to that of UVA/VT and Rolls Royce. Dr. Hewlett, citizen member of the joint subcommittee, advised that tech transfer offices at most universities are not self-sufficient, and if they are, they often lack the resources to take advantage of all possible opportunities. Secretary Chopra identified UC Berkeley as a leader in tech transfer.

Recommendations

Staff reviewed the subordinated debt and equity tax credit, noting that approximately
$10 million in requests have been made over the last fiscal year. Staff also noted that it appears businesses such as restaurants qualify for the credit, which may not have been the original intent of the legislation.

Mr. Jobse stated that tax credits are helpful, but they have a tendency to help compensate investors for losses, and are not effective in attracting investment in more promising technologies. The general consensus of the joint subcommittee was that angel investors look for investments that have the greatest potential for financial return and the availability of tax credits is not the most effective incentive. Mr. Jobse stated that using state dollars as a match to private dollars is the most beneficial and that the Commonwealth needs to target companies that are classified as high-expectation companies. Mr. Jobse highlighted the CIT GAP Fund as an example, which is currently returning over $10 for every $1 of state investment.

Delegate Sickles led a group discussion that generated several recommendations that staff will have prepared in draft form for the next meeting.

The first recommendation would be a draft that would narrow the scope of the subordinated debt and equity tax credit. One potential draft will change the qualification requirement to an inclusive list of business and innovative high-tech companies, rather than an exclusive list. One option in the draft will be a requirement that a business applying for the credit be a spin-off from a Virginia university. One potential draft will change the tax credit to an investment fund with similar requirements. Mr. Herzog recommended looking specifically at the Maryland tax credit system, which has been enormously popular and effective.

Another recommendation would be a draft that would require the CTRF funds go to the three research priorities of the state as identified by the Virginia Research and Technology Advisory Commission (VRTAC) and require that grants be awarded only to a multiple universities that form partnerships with private companies. The current language in the Code of Virginia only requires one university to partner with a private company. The draft would clarify that the CTRF would focus exclusively on commercialization. One option is to prepare a Section One bill of limited duration to accomplish the goal of this recommendation.

A general recommendation was made that the Commonwealth promote biotech grants and funds. One idea was to have a biosciences press desk to reach out-of-state press organizations. Another possible idea was to coordinate the press offices and tech transfer offices of all Virginia universities. VRTAC recently created a similar framework for the Nano-Users Network. Mr. Jobse wanted to see the network highlight companies established and developed from university research.

The final recommendation designated a more significant portion of the Commonwealth Research Initiative (CRI) funding to translational research that has commercialization potential. A competitive process could be managed by a board that would develop parameters for the exact type of research that would qualify. This recommendation could be phased-in to allow universities to adjust research priorities.

After discussing the formal recommendations listed above, Mr. Skunda suggested that the joint subcommittee advance specific long-term recommendations regardless of the budget condition. Mr. Skunda reiterated the need for access to start-up capital and the need to add wet lab and incubator space for biotechnology companies in the Commonwealth. Delegate Sickles suggested a lease guarantee program. One option staff will research is the availability of loans through the Virginia Resource Authority for a shell building and wet lab space.

Next Meeting

The next meeting will be held in conjunction with the Mid Atlantic Biotech Conference in Chantilly, Virginia.

Chairman:
The Hon. Mark Sickles

Vice-Chair:
The Hon. Janet Howell

For information, contact:
Lisa Wallmeyer and Patrick Cushing, DLS Staff

Privacy Statement | Legislative Services | General Assembly