Monday, April 05, 2010

Washington region bets big on biotech

State and local leaders are betting billions of dollars in subsidies, tax breaks, loans and grants to biotech capitalists in the hopes of cashing in on a worldwide bio-boom.

But the industry's volatility has some worried that taxpayer dollars are being gambled on a dangerous roll of the dice.

"It's very much a crapshoot -- even with great science," said John Carroll, executive editor of FierceBiotech, a daily Web newsletter that monitors the industry. "On the upside, of course, biotechnology provides a great number of great jobs at high pay. And that's why so many economic development officials are eager to attract them."

Governments on both sides of the Potomac River are doubling down on life science research.

With the National Institutes of Health, the Food and Drug Administration and Johns Hopkins University calling it home, Maryland is consistently ranked as one of the top five states for biotech research. Virginia has rolled millions into the sector for more than a decade.

In 2008, Maryland Gov. Martin O'Malley promised to set aside $1.1 billion for the industry. This year, the General Assembly is weighing legislation that would require the state's pension fund to invest in Maryland bioscience companies.

Montgomery County, the fertile crescent of Maryland biotech, is lobbying for a law that would allow the county to buy biotech stocks with taxpayer money. The County Council approved a new tax credit for biotech firms, and Executive Ike Leggett has created a task force to expand the county's research industry. Nearly one-quarter of the county's economic development funds are dedicated to the life sciences industry.

County officials are considering a multibillion-dollar "Science City" project in the Gaithersburg-Potomac-Rockville area that promises to bring up to 76,000 biotech jobs to the area.
Some officials are worried that it's too many eggs in a fragile basket.

"If we invest in a company and they fall flat, we lose," said state Sen. Rob Garagiola, D-Poolesville.

Virginia Gov. Bob McDonnell signed legislation giving tax breaks to biotech investors. And he approved awarding $22 million in grants to the Ignite Center, a genetic research center that being built in Fairfax County.

The potential rewards are endless.

In the first decade of this century, the biotech industry saw more than $295 billion worth of mergers and acquisitions, according to Carroll's FierceBiotech. Among the big winners was Gaithersburg's MedImmune, which AstraZeneca acquired for more than $15 billion in 2007.
But the perils are just as big.

"For every person who goes down the right path, there's going to many more that went down the wrong path," said Andy Bauer, a regional economist with the Federal Reserve Bank of Richmond. "Whenever you have an industry driven by innovation, it's going to go in fits and starts."

Of the decade's mergers, only 18 percent of the targeted companies were making money, FierceBiotech analysts found.

In the first three months of the year, drug companies alone cut more than 26,000 jobs, according to analysts at Chicago outplacement firm Challenger, Gray & Christmas.

Last week, GenVec, a Gaithersburg biotech firm, saw its stock lose three-quarters of its value when it said it was canceling trials of a drug that was supposed to help fight pancreatic cancer. Its shares closed at 73 cents on Nasdaq Thursday, after a months-long run-up to $3.35. GenVec had borrowed $125,000 from Montgomery County.

For some, that's a bad sign.

"Since when is our county government serving as the chump of last resort for businesses too shaky to get off the ground through conventional means?" Montgomery County Civic Federation leader Peggy Dennis asked.

By: Bill Myers
Washington Examiner - Staff Writer
April 4, 2010

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