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If you need a couple of million dollars to start up a bio-tech firm that may find the next breakthrough in Alzheimer’s treatment, where do you go to get the start-up money?
Reps. Warren Kampf (R-157-Chester/Montgomery) and Joe Hackett (R-161-Delaware) hosted a House Majority Policy Committee hearing Wednesday at Tredyffrin Township’s Keene Hall that gathered input from specialists in the life-science and high-tech industries about how Pennsylvania can help small-business start-ups get under way, ultimately to fuel job creation and to stimulate growth that can multiply over time.
The hearing was titled, Job Creation and Investments in Technologically Advanced Industries in Pennsylvania. Opening remarks were made by Rep. Dave Reed (62nd district), chair of the Republican Policy Committee. Kampf and Hackett also had opening statements. Together, they set the stage for testimony dealing with the problems in finding venture capital for entrepreneurial development, the need for innovation and new growth, and the possibility of using “long-term future tax-credits” to supply funding now.
The specialists who testified said that Pennsylvania is in an envious position with its infrastructure, its prestigious educational institutions and its history of maintaining a skilled work force in the life-sciences.
They also said that Pennsylvania has slipped out of the top five states in bringing capital resources into the life-science field and is in the process of losing high-tech companies and life-science expertise to leaders Bay-area California and Boston, Mass. and possibly to new challengers such as Maryland and Tennessee.
John Gill, CEO of Malvern-based TetraLogic Pharmaceuticals, which is producing a “new class of cancer drug,” told the committee how he needed $500,000 to start his company in 2003 and $8 million more in 2004.
Rifat Pamukcu, CEO of Midway Pharmaceuticals, which is developing treatments for gastro-intestinal diseases associated with cancer treatments, said that his company is $2.5 million away from “product demonstration, the hardest part.” He calls it “a de-risking process. Dollars are extremely difficult.”
The focus was clearly on venture capital, which in the state is down from 5.3 to 1.8 percent of the national total, according to Dean Miller, president and CEO of the Greater Philadelphia Alliance for Capital and Technology. It’s a situation that might be addressed and remedied by the state “auctioning off insurance tax credits,” as Kampf described what may become the basis for a House bill soon.
Mentioned frequently as central to Pennsylvania’s ascendency in bio-tech was the Ben Franklin Partnership, established by the Pennsylvania General Assembly in 1982. In 30 years the Ben Franklin Technology Partners has built a record of creating sustainable, high-quality jobs as well as tax revenue for the Pennsylvania treasury. BFTP also has, for every dollar invested, paid back $3.50 in state tax revenues; has boosted the state economy by more than $17 billion; has generated 125,827 jobs; and has created jobs with a 33 percent higher average than the Pennsylvania non-farm average, according to its current statement.
However, while Ohio, Maryland, New York and other states and even foreign countries have copied the BFTP formula for innovation-based economic development and have in almost all cases surpassed its funding level, BFTP funding itself has slipped from more than $25 million in 2008-09 to less than $15 million in 2012-13.
RoseAnn Rosenthal, president and CEO of Ben Franklin Technology Partners of Southeastern Pennsylvania, told the committee that “the shortage of private seed capital was at an all-time low in 2009.” Start-ups, she said, are what initiate technological advancements.
As jobs have drained out of the state, other jobs are being “leveraged” along with them. “Money follows money,” another testifier said. Funding cooperation from the state will help, according to more than one of the advocacy groups present at the hearing.
Among the other advocacy groups whose representatives testified were PA Bio and Select Greater Philadelphia. Also testifying were representatives from BioAdvance — The Biotechnology Greenhouse of Southeastern Pennsylvania, and Cromwell Schmisser, LLC.
State legislators also present included Pennsylvania House representatives Sheryl Delozier (88th district), Thomas Quigley (146th district), Mike Vereb (150th district), William Adolph (165th district), Chris Ross (158th district) and Tim Hennessey (26th district).
The bio-science industry, which has been among the most robust growing industries in the state, accounts for nearly 80,000 jobs and more than $8 billion in total annual wages. The average wage is more than $90,000.