Audit Requirement for Commercial Enterprises Receiving STTR/SBIR Grants

Guest authored by Robert Tobey, CPA, Keiter Stephens

Commercial enterprises (i.e., for profit organizations) which expend at least $500,000 in STTR or SBIR funds during an enterprise’s fiscal year are required to have audits conducted in accordance with Office of Management and Budget (OMB) Circular No. 133, “Audits of States, Local Governments and Non-Profit Organizations”. However, commercial enterprises are provided two options regarding the type of audit which will satisfy this requirement.

To read the complete article, click here.

VABIO Presents Award to Va House Speaker Bill Howell

The Virginia Biotechnology Association (VABIO) announced that the Speaker of the Virginia House of Delegates, William J. Howell (R-Stafford) received the Virginia Bioscience Legislative Leadership Award on August 23^rd for his outstanding efforts on behalf of the bioscience industry during the 2011 Session of the Virginia General Assembly. The Virginia Biotechnology Association has only recognized a handful of state legislators with this special distinction.

“I have had the privilege of knowing the Speaker for nearly twenty years,” said Mark A. Herzog, executive director of VABIO. “He has always been a stalwart supporter of small businesses in Virginia and that continues today with his enthusiastic efforts to ensure that the Commonwealth can compete for 21^st Century, advanced technology jobs.”

Previous recipients of the award include: Delegate Scott Lingamfelter of Prince William; Delegate Steve Landes of Weyer’s Cave; Delegate Mark Sickles of Fairfax; Delegate John O’Bannon of Henrico; former Delegate Sam Nixon of Chesterfield, Delegate Joe May of Loudoun; and Senator Mark Herring, also from Loudoun.

Speaker Howell played an instrumental role in supporting the 2008 joint legislative subcommittee to review the Commonwealth’s policies to advance the growth of the life science industry in Virginia. The recommendations from that group were incorporated into the first legislation in many years to accelerate the growth of the biosciences in Virginia. Most recently, in 2011, the Speaker strongly advocated for the passage of the Virginia Refundable Research and Development Tax Credit, a key recommendation of the Governor’s Economic Development and Jobs Commission.

“The Speaker is a good friend to the bioscience industry and we are grateful to him for his public service and commitment to ensuring that future generations of Virginians have access to the knowledge-economy jobs of tomorrow,” said Mr. Herzog.

The Virginia Biotechnology Association (VABIO) is the statewide non-profit organization that promotes the scientific and economic impact of the life sciences industry in the Commonwealth of Virginia. Approximately 200 biotechnology, pharmaceutical and medical device companies are based in Virginia, mainly clustered around universities in Blacksburg, Charlottesville, Richmond, Norfolk and Northern Virginia. For more information about the impact of the bioscience industry in Virginia, please visit www.vabio.org

Qualified Small Business Stock Changes Explained

An explanation of the recent IRS changes impacting qualified small business stock.

Guest written by: Robert Tobey, Keiter Stephens

In an effort to stimulate the economy and to help innovation economy companies grow, Internal Revenue Code (IRC) §1202 provides an incentive to investors who risk their funds to finance these businesses.

A BRIEF HISTORY
For qualified small business stock (QSB) acquired after August 10, 1993 and before February 18, 2009 and held for a minimum of five years, non-corporate investors may exclude 50% of the gain realized from the disposition this stock. As part of the American Recovery and Reinvestment Tax Act of 2009, in order to stimulate the economy, the exclusion percentage was raised to 75% for QSB stock acquired after February 17 and before September 28, 2010 and held for a minimum of years. The Creating Small Business Jobs Act of 2010 further amended IRC §1202 to exclude 100% of gain from QSB stock acquired after September 27, 2010 and before January 1, 2011. Finally, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 extended the deadline to QSB stock acquired before January 1, 2012. The President’s 2012 budget proposes to make this exclusion permanent.

IN NON-TECHNICAL TAX TERMS, WHAT DOES THIS ALL MEAN?

COMPANY CONSIDERATIONS

How does corporate stock qualify as QSB stock?
Corporate stock is treated as QSB stock only if it satisfies all of the following conditions:
1. the stock was originally issued after August 10, 1993, the original enactment date of IRC §1202;
2. the corporation issuing the stock is a domestic C corporation (i.e.: S corporations, partnerships, and LLC’s taxed as partnerships do not qualify);
3. the stock satisfies the original issuance requirement (i.e.: stock is issued by the corporation to the shareholder directly or through an underwriter);
4. the corporation issuing the stock meets the QSB requirements; and
5. the corporation issuing the stock satisfies the active business requirements.

How does a domestic C corporation qualify as a QSB?
In order to qualify as a QSB, a domestic C corporation must meet the following tests:
1. The corporation’s aggregate assets must not exceed $50 million at any time on or after August 10, 1993 and before the issuance of the stock for which IRC §1202 treatment is sought.
2. Immediately after the issuance of the stock for which IRC §1202 treatment is sought, the corporation’s gross assets, including amounts received for the stock, must continue to be no more than $50 million.

Describe the active business requirement.
A corporation meets this test if it uses at least 80% of the value of its assets in the active conduct of a qualified trade or business. As of this writing guidance has not been issued regarding when and how the 80% of assets determination is made.

What is a qualified trade or business?
A qualified trade of business is one other than:
1. A heath care provider; law, engineering, architecture, or accounting firms; actuarial or brokerage services, or any trade or business where the principal asset of such trade or business is the reputation of skill of one or more of its employees.
2. Any banking, insurance, financing, leasing, investing or similar business.
3. Any farming business
4. Any business involving the production or extraction of products subject to depletion.
5. Any hotel, motel, restaurant or similar business.

Will a corporation meet the active conduct of a qualified trade or business if it is only conducting
research and development activities with the hopes of producing a product (i.e.: start-up phase)?
Yes, if assets are used in start-up activities, activities resulting in the payment or incurring expenditures which qualify as IRC §174 research and experimental (R&E) expenditures, or activities with respect to in house research expenditures described in IRC §41(b)(4) assets used in these activities shall be treated a used in active conduct of a qualified trade or business. This determination is made without regard to whether or not the corporation has earned any income from its intended trade or business.

Are options or warrants to acquire QSB stock considered QSB stock?
No.

Can the QSB gain exclusion be preserved in tax-free reorganizations and in contributions to controlled corporations?
Yes in certain circumstances. A discussion of these circumstances is beyond the scope of this summary. If you would like more information about this, please telephone me.

Are there any types of transactions between shareholders and the corporation which would make the gain on the QSB stock ineligible for the exclusion?
Yes.
If the issuing corporation purchases any of its stock directly or indirectly from the taxpayer or a person related to the taxpayer within a four year period commencing two years before the stock was issued, the taxpayer cannot qualify for the exclusion. There is a safe-harbor de minimis amount which will not disqualify the gain from exclusion.

Stock will not qualify for the exclusion if the issuing corporation engages in a significant redemption. A redemption is significant if the corporation, within a two year period beginning one year before issuance of the stock, redeems stock with an aggregate value exceeding 5% of the aggregate value of all of the corporation’s stock. There is a de minimis exception for this also.

SHAREHOLDER CONSIDERATIONS

What are the dollar limits on the exclusion?
The amount of gain is subject to a per-issuer limitation. The cumulative per issuer limit is the greater of $10 million or 10 times the adjusted basis (i.e.: what you paid for the stock) of all qualified stock of the issuer that the taxpayer disposed during the year. Additions to basis are disregarded. This limitation can severely restrict the tax benefit of IRC §1202 in the event of a truly substantial windfall. These are shareholder by shareholder limitations. Taxpayers filing married separately split the $10 million limitation.

How is any gain in excess of the exclusion taxed?
As mid-term capital gain income taxed at 28%

How long do I have to hold (i.e.: own) the stock in order to qualify for the exclusion?
For more than five years.

When does my holding period start if I acquired the stock my converting notes or exercising warrants or options?

The holding period starts the date the note is converted or the date the options or warrants
are exercised.

How is the holding period measured if I exchange one type of QSB stock for another (e.g.:
convert preferred into common)?
The holding period of the old stock tacks on to the new stock. So the holding period commences when you first acquire QSB stock.

How is the holding period measured if QSB stock is acquired by gift or inheritance?
If QSB stock is acquired by gift or inheritance, the beneficiary’s holding period includes the period the QSB stock is held prior to the gift or bequest.

How is the holding period measured if the QSB stock is received from a partnership?
If a partner receives QSB stock from a partnership in which the partner held an interest when the partnership acquired QSB stock, a partner’s holding period generally includes the period the QSB stock is held by the partnership.

How is the holding period measured if the QSB stock is received in a tax free reorganization or
in return for a contribution to a controlled corporation?
The holding period of the QSB stock received in either of these transactions apparently does not include the holding period of QSB stock surrendered in the transaction.

How is the excluded gain treated for AMT purposes?
It depends on when the gain is realized. Effective with a taxpayer’s 2003 tax year, the fraction of excluded gain treated as a preference is 7%. This percentage is applicable for stock sales occurring on or after May 6, 2003. The 7% preference is scheduled to sunset at December 31, 2012. Unless this changes, for tax years 2012 and after, the preference will be 28% for QSB stock with a holding period beginning after December 31, 2000, 42% for other stock. For QSB stock acquired between September 28 and December 31, 2011, none of the gain excluded under IRC §1202 is a preference for purposes of calculation AMT income.

A detailed write-up, including examples, explaining the provisions of IRC §1202 is available by sending a request to rtobey@kshgs.com or ring me at 434.220.2800.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding any penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction(s) or tax-related matter(s) addressed herein. 1202

Video: News Clips from Around US on CNBC #1 State for Business

Sunday RTD - Bioscience: Discovery is in Virginia's DNA

The Sunday Commentary Section of the Richmond Times-Dispatch features VABIO's opinion piece on the growth of the bioscience sector in Virginia.

Founded in 1607 by a venture-backed company in London, Virginia has long been the destination of choice for entrepreneurs and start-up companies. That same tradition of discovery continues today with nearly 300 biotechnology and medical device firms that are expanding the frontiers of modern medicine.

These dedicated scientists, clustered around research universities such as Virginia Commonwealth University, are pioneering new therapeutic medicines, more effective diagnostics and life-saving medical devices.

According to a new study by Miami-based Archstone Consulting, there were more than 1,500 active clinical trails conducted last year by Virginia researchers on new medicines, including those targeting cancer,diabetes, HIV/AIDS, mental health disorders and respiratory diseases.

In addition to the National Science Foundation and biopharma companies with facilities in Virginia (such asPfizer, Merck, Novozymes, Abbott Laboratories, Boehringer Ingelheim, and Teva Pharmaceuticals), the commonwealth is also home to the Janelia Farm Research Campus of the Howard Hughes Medical Institute(HHMI). This $500 million, world-class biomedical research complex in Loudoun County houses several hundred of the world's top scientists who use emerging and innovative technologies to pursue biology's most challenging problems.

Clearly, biotechnology has asserted itself as a vital contributor to Virginia's economic growth.

Click here for the rest of the article: http://bit.ly/jpBOEi

Virginia Student to Compete in International BioGENEius Challenge in D.C.

Riley Ennis of Fairfax County, Virginia, was named one of the ten finalists of the 2011 U.S. National BioGENEius Challenge. The Virginia, U.S. National and International BioGENEius Challenges are competitions for high school students who demonstrate an exemplary understanding of biotechnology through science research projects. The ten U.S. National finalists will join students June 27th from Canada and Australia to compete in the International BioGENEius Challenge at the 2011 BIO International Convention in Washington, D.C.

Mr. Ennis, aged 17, is a recent graduate of Fairfax County’s Thomas Jefferson High School for Science and Technology. His winning presentation was titled, “Cancer Immunotherapy Research Vaccine: Mannose Glycoprotein Encapsulated PLGA Fluorescent Nanoparticles Biotinylated for Conjuga.”

Following the announcement of his selection by the judges at the awards banquet at the Omni Shoreham Hotel on Sunday night, Mr. Ennis said, “As an international finalist for the BioGENEius Challenge, I am so honored to be part of the competition; surrounded by amazing students all with the same passion as me. I would like to thank the Virginia Biotechnology Association and the Chesapeake Bioscience Education Foundation for their incredible help and support. Hopefully in the next few years, cancer vaccines will be at the forefront of cancer therapeutics; and it is at competitions like the BioGENEius Challenge where ideas become reality.”

Mr. Ennis was one of three outstanding students who won the 2011 Virginia BioGENEius Challenge, co-sponsored by the Chesapeake Bioscience Education Foundation (C-BEF) and the Virginia Biotechnology Association (VABIO). "I know I can speak for the entire bioscience community in Virginia when I commend Riley for his achievement," said Mark A. Herzog, VABIO executive director. “Virginia had an outstanding group competing for the national title and we are very pleased that Riley Ennis will be representing Virginia and the United States at the International Competition.”

“Two years ago, I couldn't have imagined arriving at the point of being selected as a U.S. National Finalist and now a competitor in the International BioGENEius Challenge in Washington DC,” continued Mr. Ennis. “I have developed an innovative cancer vaccine that harnesses the innate abilities of the human body in order to battle cancer, without deleterious side effects or invasive procedures. I was able to take my project to the next level of pharmaceutical relevance with the help of experts in the biotechnology field, who helped me file for a provisional patent, and start RC Molecular Innovations: a biotechnology company focused on the development of this vaccine platform technology.”

“We are so proud of Riley, Prasannappa and Venkatesan,” said Dr. Martin Chapman, chairman of C-BEF and president of Indoor Biotechnologies in Charlottesville, Virginia. “All three of the winners of the Virginia BioGENEius Challenge who competed for the U.S. National title are outstanding students and will be a credit to the industry in the days ahead.”

Also competing in the U.S. National BioGENEius Challenge from Virginia were:

• Prasannappa Rithvik, Age 17, Thomas Jefferson High School for Science and Technology, Fairfax County: “Investigating wingless-mediated signaling in class specific dendrite morphogenesis.”
• Venkatesan Radha, Age 14, York High School, York County: “Study of over expression of C-MET Receptor Tyrosine Kinase signaling in liver cancer.”

The International BioGENEius Challenge competition will be held June 27, at the 2011 Biotechnology Industry Organization (BIO) International Convention in Washington, D.C. The BIO International Convention is the largest global event for the biotechnology industry attracting approximately 15,000 attendees each year. The convention attracts the biggest names in biotech, offers key networking and partnering opportunities and provides insights and inspiration on the major trends affecting the industry. Winners of the competition will be announced at the June 28th keynote luncheon session featuring Virginia Governor Robert McDonnell, Maryland Governor Martin O’Malley and former British Prime Minister Tony Blair.

The panel of judges will include scientists, researchers, educators and key members of the biotechnology industry and academia. Judges will select the top four winners from 14 U.S. National, Western Australia, and Canada finalists. The first place winner of the BioGENEius Challenge will receive $7,500; second place will receive $5,000; third place will receive $2,500 and fourth place will receive $1,000. Each remaining participant will receive an honorable mention award and $500.

At the Local, U.S. National and International competitions, students are evaluated on the quality of their research and display, as well as on their responses to questions relating to their scientific knowledge and potential commercial applications of their research.

Biotech breakthrough: Industry emerging in Central Va.

They research the drugs and machines that are in your future to diagnose ailments, cure ills, ease your pain and reattach your limbs.

They are the increasing number of biomedical companies being created, researched, financed and grown in Central Virginia, many an offshoot of research and development being conducted in laboratories of the University of Virginia.

About 15 percent of Virginia’s estimated biomedical/technology companies reside in the Charlottesville area and the segment of the region’s economy is slowly growing to become an important community asset area officials say.

Click here to read the complete article by Bryan McKenzie in The Daily Progress.

Business Rx: Tau Therapeutics

Tau Therapeutics article in The Washington Post today.

Andrew Krouse was working at the University of Virginia when he learned about a revolutionary technology his neighbor, a professor of medicine, was developing that could be the key to cancer treatment. Not long after, Krouse joined the team and is now president and chief executive of Tau Therapeutics, a life-sciences company based in Charlottesville that is developing a nontoxic pill it believes can stop cancer and block the side effects of chemotherapy and radiation.

The pitch

Krouse

“Our clinical priority for the technology we licensed from U-Va. is a program we call Interlaced Therapy. It promises to significantly enhance the efficacy of chemotherapy in a number of serious cancers. It works by halting the dividing cancer cells so that standard chemotherapies are more powerful. We have patented and received orphan drug designation on a drug that was on the market for hypertension and are repositioning this drug for the treatment of cancer. By taking our nontoxic drug in a sequential combination with a standard chemotherapy, we hope to minimize chemotherapy’s terrible side effects and greatly enhance the effectiveness of these therapies. There’s also the potential to overcome drug resistance.

Click here to read the complete article in The Washington Post.

Paul B. Ferrara, pioneer of DNA use, dies at 68

Paul B. Ferrara, 68, the former head of Virginia's forensic-science laboratory who helped pioneer the use of DNA as a crime-fighting tool in the U.S., died Monday.

His wife, Dale Lynn Ferrara, said Tuesday that her husband died of complications of cancer Monday morning at their home in Chesterfield County. She said funeral and other arrangements have not yet been set.

Mr. Ferrara retired at the end of 2006 after 21 years as director of the state Department of Forensic Science, where he was credited with recognizing the forensic potential of DNA and then winning the resources to exploit it.

He began his career in 1971 and held doctoral degrees from Syracuse University and the State University of New York. He was a distinguished professor of forensic science at Virginia Commonwealth University.

A high point in his career began in the mid-1980s when he and others at his lab learned about a new tool then called "genetic fingerprinting." In a 2006 interview with the Richmond Times-Dispatch, Mr. Ferrara said they realized, "My God, we have to implement this.'"

"We just knew intuitively … that it's going to change the way police conduct investigations, collect evidence, how prosecutors and defense attorneys are going to approach their cases," he said.

In September 1987, a private New York laboratory, Lifecodes, offered to train two of Mr. Ferrara's scientists so Virginia could establish the first state DNA laboratory in the country.

Mr. Ferrara fought for roughly $300,000 from the state and, in March 1989, Virginia opened the first state DNA laboratory capable of performing DNA fingerprinting. The FBI had started its limited DNA laboratory operations just four months earlier.

That same year the state forensics laboratory also became the first to create a DNA database of previously convicted sex offenders. In 1992, the state became a pilot state for a national DNA databank.

A "cold hit," or match, from the state databank resulted in a first conviction in 1994. The laboratory's work, in addition to catching many criminals, has also cleared people wrongly convicted of crimes.

"I don't know a single person that does not think highly of Paul. That's something to say," said Peter Marone, the current director of the department.

Mr. Ferrara hired Marone as a forensic serologist in 1978. An independent agency and not a part of law enforcement, the forensic laboratory went through several iterations before becoming a department six years ago.

Marone said that in addition to his forensic-science accomplishments, Mr. Ferrara established strong working relationships with the General Assembly and with all the different gubernatorial administrations over the years.

"He never promised pie in the sky. It was always, 'You give us this — we can do that,'" Marone said.

The career of Dr. Marcella Fierro, who retired as the state medical examiner in 2008, overlapped that of Mr. Ferrara's.

"Paul made Virginia a better, safer place to live by leading and directing a laboratory whose work protected the innocent as well as convicting the guilty. I am saddened to hear the news. We had lunch a few weeks ago, and he looked so well," she said.

Fierro said Mr. Ferrara built the premier state forensic lab in the country. "It had innumerable firsts, all of which required considerable leadership when you have to persuade people to do something that has not been done before," she said.

"I used to admire him incredibly because he would get money and staff. I could try for here and hereafter and not get any," Fierro said.

"And," she said, "He's a nice guy."

Peter Neufeld, a cofounder of the Innocence Project, in New York, said of Mr. Ferrara, "He preached the gospel of DNA, both to convict and exonerate with extraordinary exuberance and the criminal justice system will be indebted for that contribution."

In addition to his wife, Mr. Ferrara's survivors include three sons, Mark S. Ferrara of Oneonta, N.Y., Paul G. Ferrara of Des Moines, Iowa, and Anthony D. Ferrara of Richmond; two brothers, Richard Ferrara of Davie, Fla., and James Ferrara of San Francisco; a sister, Mary Wyatt of The Villages, Fla.; and a grandson.

By Frank Green
Richmond Times-Dispatch

Health Diagnostic Lab Wins VABIO Company of the Year

Congratulations to Health Diagnostic Laboratory (HDL) of Richmond, winner of the 2011 Virginia Bioscience Company of the Year Award. The award, presented May 26 at a special reception at the Pfizer Consumer Products Research Laboratory in Richmond, recognizes the biotech or medical device company that has distinguished itself from its peers with strong overall performance and best exemplifies the innovative spirit of the Virginia life sciences community.

Mark Herzog, executive director of VABIO, presented the award to Tonya Mallory, CEO of HDL.

The Virginia Bioscience Company of the Year Award was presented by the Virginia Biotechnology Association and sponsored by the law firm Cooley LLP and Pharmaceutical Researchers and Manufacturers of America.

Del. Scott Lingamfelter Wins Virginia Bioscience Award

The Virginia Biotechnology Association (VABIO), today announced that L. Scott Lingamfelter, a member of the Virginia House of Delegates from Woodbridge, received the Virginia Bioscience Legislative Leadership Award for his exemplary efforts on behalf of the bioscience industry during the 2011 Session of the Virginia General Assembly.

“Delegate Lingamfelter played a key role in the passage of legislation to match Small Business Innovation Research (SBIR) awards and to protect and fund Virginia’s commitment to the Commonwealth Research and Commercialization Fund (CRCF),” said Mark A. Herzog, executive director of VABIO. “The CRCF is designed to spark early-stage commercialization and job creation in high-growth, high-wage technologies such as biotechnology.”

The Virginia Biotechnology Association has only recognized a handful of state legislators with this special distinction.

“Technology, and biotechnology in particular, will be a major component of a vibrant Virginia economy going forward,” said Delegate Lingamfelter in a statement following the award presentation. “ I'm glad to have played a small part in working with the Governor and leaders with an economic vision for Virginia by advancing legislation that will attract and grow more high-tech companies to Virginia.”

The SBIR program, signed into law by President Reagan in 1982, is the largest innovation program in the United States. SBIR offers competition-based awards to stimulate technological innovation among small private sector businesses with significant commercial applications. Many famous, high-tech firms, such as Qualcomm, first got their start via this important program. These awards are extremely competitive; historically only about 15% of all Phase One applications are approved.

“The Virginia SBIR Match Program was first created in 2009 but no funding had been provided,” said Mr. Herzog. “We are grateful to Delegate Lingamfelter and his colleagues in the General Assembly for including the $2 million in the 2012 budget.”

Previous recipients of the award include: Delegate Steve Landes of Weyer’s Cave; Delegate Mark Sickles of Fairfax; Delegate John O’Bannon of Henrico; Delegate Sam Nixon of Chesterfield, Delegate Joe May of Loudoun and Senator Mark Herring, also from Loudoun.

The Virginia Biotechnology Association (VaBIO) is the statewide non-profit organization that promotes the scientific and economic impact of the life sciences industry in the Commonwealth of Virginia. Approximately 200 biotechnology, pharmaceutical and medical device companies are based in Virginia, mainly clustered around universities in Blacksburg, Charlottesville, Richmond, Norfolk and Northern Virginia. For more information about the impact of the bioscience industry in Virginia, please visit www.vabio.org.

Building On A Firm Foundation

A new R&D tax credit, among other programs and projects, could help Virginia reach the upper echelon of life sciences states.

All across the Commonwealth of Virginia, biomedical innovators are pursuing a shared passion to help their fellow citizens live longer, healthier lives. These dedicated researchers, in nearly 200 biotechnology and medical device firms clustered around research universities such as the University of Virginia, Virginia Commonwealth University, George Mason University and Virginia Tech, are expanding the frontiers of modern medicine. They are pioneering new drugs, more effective therapeutics and life-saving medical devices. According to a new study by Miami-based Archstone Consulting, there were more than 1,500 active clinical trails conducted last year by Virginia researchers on new drugs, including those targeting cancer, diabetes, HIV/AIDS, mental health disorders and respiratory diseases.

In addition to the National Science Foundation (NSF) and biopharma companies with facilities in Virginia such as Pfizer, Merck, Novozymes, Abbott Laboratories, Boehringer Ingelheim, Teva Pharmaceuticals, ATCC and SRI International, the Commonwealth is also home to one of the most advanced bioscience research institutes in the world. The Janelia Farm Research Campus of the Howard Hughes Medical Institute (HHMI) opened in October 2006. Located on a 689-acre (279-hectare) property in Northern Virginia, the unique, world-class biomedical research complex represents a $500-million investment by HHMI, one of the largest biomedical research philanthropies in the world. Several hundred of the world's top researchers from diverse disciplines use emerging and innovative technologies to pursue biology's most challenging problems.

Clearly, biotechnology has asserted itself as a vital contributor to Virginia's economic growth.

According to the Battelle/BIO State Biosciences Initiatives 2010 report, from 2001 to 2008, bioscience employment in Virginia grew by 23 percent, compared to 6-percent total growth statewide and 3.5-percent across all sectors in the U.S. Between 2001 and 2008, the number of Virginia bioscience companies grew by 55 percent, in contrast to 18-percent growth in the private sector statewide, and 14 percent across the U.S.

In Virginia, bioscience organizations directly employ more than 20,000 people. Indirectly — through biomedical suppliers, vendors and services-related companies — more than 80,000 jobs are dependent on Virginia's life science industry. All told, Virginia's biopharmaceutical and device sector generated products and services valued at more than $13 billion in 2008.

New Tools Help, But Stronger Educational Focus Will Help Keep Up With the Neighbors

Founded in 1607 by a venture-backed company in London, Virginia has always been a welcoming home for entrepreneurs and start-up companies. That continues today as private investors recognize the long-term value of Virginia's robust biotechnology industry. Between 2004 and 2009, Virginia biotechnology companies attracted $405 million worth of venture capital. That puts Virginia in the top 20 nationally (19th).

Underlying this hopeful news are some potentially worrisome issues. Like many states, Virginia's educational requirements need to be reviewed, particularly to get more students prepared for careers in the science, technology, engineering and mathematics (STEM) fields. A state's concentration of STEM graduates generally is considered to be a bellwether of its future ability to compete for jobs and economic growth, especially in the global economy. In fact, a recent study notes that Virginia is one of only 17 states without a biology requirement for high school graduation (biology is one of three laboratory options).

Indeed, bioscience research provides fertile soil to nurture ideas from seedlings to useful products and services. And on the surface, Virginia's biotech sector seems to match up well in terms of the percentage of research-and-development activity taking place at state academic institutions. In fiscal year 2008, Virginia ranked 17th in the nation in the amount of academic research and development dollars spent on biosciences. Of the $70.55 billion in academic funding, more than $550 million was allocated to biosciences research in Virginia.

That's good enough to place Virginia in the top 20, but it also indicates how far the Commonwealth has to go. Virginia is bookended by two states — North Carolina and Maryland — that rank fifth and sixth in the nation, respectively. In short, state policy-makers and the research community must take action now to gain full advantage of future growth in the life sciences industry.

Seeking to capitalize on the growing nucleus of innovative research-based companies, Virginia Gov. Robert F. McDonnell earlier this year signed into law the Virginia Refundable Research & Development Tax Credit, which recognizes the enormous upfront expenses emerging advanced technology companies typically absorb during the arduous journey of bringing cutting-edge products and services to market. Virginia is now one of only a handful of states that provides a refundable credit that gives cash-strapped bioscience companies more elbow room to pursue their innovative ideas, without having to worry quite as much about meeting expenses before revenue comes rolling in. These "pre-profitable" biotech firms are eligible for up to a 15-percent tax credit or refund of their "qualified" R&D expenses, and up to 20 percent if they partner with Virginia's public or private universities.

The new legislation complements the Virginia Innovation Investment Act, enacted by the General Assembly in 2010. That initiative rewards Virginians who invest in advanced technology companies with a 100-percent exclusion from capital-gains taxes if an investment is made in the next three years.

And that is not all. Virginia also matches SBIR awards, provides aggressive tax credits for angel investors, has a state-funded seed-stage investment program and a stable corporate tax rate of only 6 percent. All of this in a state that consistently ranks first or second as the best place for business in America.

Virginians themselves have plenty of cause for optimism about the impact of biotechnology on their lives. Those sanguine sentiments go far beyond new tax policies and investment, as pivotal as those elements continue to be. Biotechnology-driven advances are saving lives or managing debilitating diseases everyday for millions around the world.

Like their counterparts nationally, these are the ideals that animate the ambitious, innovative and driven people who are the face of Virginia's burgeoning life sciences cluster.

Mark A. Herzog
The Site Selection Life Sciences Report

Hopewell's Osage Bio Energy Plant For Sale

The nation's first major barley-to-ethanol factory has been put up for sale before it ever fully opened in Hopewell.

Osage Bio Energy on Monday cited "unfavorable market conditions" as the reason for its decision to sell the company and its Appomattox ethanol plant in Hopewell.

The company said it will not start production at the plant. Osage said it will lay off all but a "core group" of the plant's 55 employees as it seeks to sell the property.

Heather Scott, a spokeswoman for Osage, declined to say how many employees would remain.

Osage's key investor, the private-equity firm First Reserve Corp. of Greenwich, Conn., decided to sell the company and its assets, Scott said.

"We are very hopeful this is still a great thing for Virginia and Hopewell," Scott said. "It will just be transitioned to a potential new owner that will come in and run this company and produce ethanol."

Osage, founded in 2007, planned to make ethanol for gasoline blends used in local markets.

The company started construction in 2008 on the $160 million plant, located on a 55-acre parcel in Hopewell. The plant was only in production for several days before a fire in September 2010 caused by a mechanical failure interrupted production.

Scott said Monday that the fire was not connected to the decision to the sell the plant.

The plant was expected to bring up to $2 million a year in tax revenue for the city of Hopewell.

"The city is pleased that the new plant has been constructed," City Manager Ed Daley said. "This is a major investment in our community. We are anxious for the sale to be completed so operations can begin."

Daley said he did not know all the components of the plant or what else other than ethanol could be produced there if a buyer could not be found.

The company had planned to produce up to 65 million gallons of ethanol at the plant, using up to 30 million bushels of barley a year, much of it from farmers in Virginia.

Osage obtained barley through Perdue AgriBusiness, which contracts with farmers to grow the crop. "Perdue is responsible for the receipt of the grain, so they will work with the growers on that," Scott said.

By: John Reid Blackwell
Richmond Times-Dispatch

New Patent Expands Keraderm's Portfolio

A Blacksburg company has received its fourth patent in pursuit of a lighted device that treats nail and skin infections.

The patent, granted April 5, expands Keraderm Corp.'s portfolio of three patents and broadens the company's hold on its technology, CEO William Cumbie said.

Keraderm is developing a medical device for the dermatology market. The new patent covers "a different way to generate the light," Cumbie said.

Cumbie said the patent could be thought of as an additional picket in a protective fence the company is building around itself. For technology protection, "you want to build a fence. This is just one more panel that we're putting on the fence," he said.

To advance its commercialization goals, Keraderm is conducting clinical trials and could have results by the end of the year, Cumbie said. The early stage company based at the Virginia Tech Corporate Research Center has yet to generate revenue, but has garnered investments of about $4.5 million, Cumbie said.

Some of the money came from NewVa Capital Partners, a fund through which the Virginia Tech Foundation, Carilion Clinic and Third Security support firms in the NewVa region of Southwest Virginia.

It will take additional money to bring the lighted treatment device to market, though the amount depends on the approach, Cumbie said.

The company contends that drugs are ineffective in curing fungal nail infections, which are embedded in the nail, but that its microbe-destroying light has yielded results. The light penetrates the nail and either kills the infectious microbes or renders them incapable of reproducing, the company told the U.S. Patent and Trademark Office.

Keraderm is hoping the same or similar technology can be proven to combat infections of the skin.

By Jeff Sturgeon
The Roanoke Times

Biotech Is Making Life Better In Virginia

Op-Ed by Mark Herzog, printed in the Virginia Gazette and the Daily Press

Virginia's bioscience leaders met this week in Williamsburg to discuss the opportunities and challenges facing health care, public policy and biomedical innovation in the commonwealth. For more than 20 years, biomedical innovators across our state have pursued a shared passion to help their fellow citizens live longer, healthier lives.

All across the commonwealth, dedicated researchers in nearly 200 biotechnology and medical device firms are expanding the frontiers of modern medicine. They are pioneering new drugs, more effective therapeutics and life-saving medical devices

Virginia companies have developed nearly 80 marketable biotechnology products, with another 50 or so undergoing the arduous process of clinical trials.

Clearly, biotechnology has asserted itself as a vital contributor to Virginia's economic growth.

According to the Battelle/BIO State Biosciences Initiatives 2010 report, from 2001 to 2008, bioscience employment in Virginia grew by 23 percent, compared to 6 percent total growth statewide and 3.5 percent across all sectors in the U.S.

In Virginia alone, biotechnology organizations directly employ more than 20,000 people. Indirectly through suppliers, vendors and services-related companies, Virginia's biotechnology industry employs nearly 80,000 people. All told, Virginia's biotech sector generated products and services valued at more than $13 billion in 2008.

Underlying this hopeful news are some potentially worrisome issues. Like many states, Virginia's educational requirements need to be reviewed, particularly to get more students prepared for careers in the science, technology, engineering and mathematics (STEM) fields. A state's concentration of STEM graduates generally is considered to be a bellwether of its future ability to compete for jobs and economic growth, especially in the global economy. In fact, a recent study notes that Virginia is one of only 17 states without a biology requirement for high school graduation (biology is one of three laboratory options).

On the surface, Virginia's biotech sector seems to match up well in terms of the percentage of research and development activity taking place at state academic institutions like the College of William and Mary, Eastern Virginia Medical School and Old Dominion University. In fiscal year 2008, of the $70.55 billion in total academic funding nationwide, more than $550 million was allocated to biosciences research in Virginia.

That's good enough to place Virginia in the top 20, but it also points up how far the commonwealth has to go. Virginia is bookended by two states — North Carolina and Maryland — that rank fifth and sixth in the nation, respectively. In short, state policy-makers and the research community must take action now to gain full advantage of future growth in the life sciences industry.

Seeking to capitalize on the nucleus of innovative research-based companies, Gov. Robert F. McDonnell earlier this year signed into law the Virginia Refundable Research & Development Tax Credit, which recognizes the enormous upfront expenses emerging advanced-technology companies typically absorb during the arduous journey of bringing cutting-edge products and services to market.

The refundable aspect of the tax credit gives cash-strapped bioscience companies more elbow room to pursue their innovative ideas without having to worry quite as much about meeting expenses before revenue comes rolling in.

The new legislation complements the Virginia Innovation Investment Act, enacted in 2010. That initiative rewards Virginians who invest in advanced technology companies with a full exclusion from capital-gains taxes if an investment is made in the next three years.

Biotechnology-driven advances are saving lives or managing diseases every day for millions around the world. Biotech treatments have increased life expectancy for cancer patients by three years since 1980. Three years may not sound like much, but if you're a parent it can seem like a new lease on life — it may be just enough time to watch a grandchild graduate from college or walk a daughter down the aisle on her wedding day.

Like their counterparts nationally, these are the ideals that animate the ambitious, innovative and driven people who are the face of Virginia's burgeoning biotechnology cluster.

Herzog is the executive director of the Virginia Biotechnology Association.

Virginia Tech Proposes 5 New Degrees

The engineering, biological science and nanotechnology degrees would help students interested in higher-level science fields better prepare for graduate school.

And, the degrees could initiate new partnerships with the Virginia Bioinformatics Institute at Tech. There, laboratory scientists work cooperatively with high-level computer programmers and other scientists to produce new cancer treatments, among many other sponsored research projects.

Developed in consultation with alumni who work in real estate, that degree proposal would incorporate studies in engineering, agriculture and business, among other elements. If it is ultimately offered, the degree is expected to allow students to take advantage of a housing market rebound, Wubah said.

It is also thought that graduates of the program would be well-positioned in the field because officials found that about "25 percent of Northern Virginia real estate is controlled by Hokies," Wubah said.

All the new proposed degrees would emphasize interdisciplinary studies and undergraduate research -- two major areas of focus at Tech.

In fact, research and interdisciplinary elements will be required for any new undergraduate programs, Wubah said.

"Siloed programs ... are not the future," he said. "The major problems we face ... can't be solved in one discipline. If you take energy, water. Solving those problems takes understanding beyond one discipline."

Requiring biology students, for example, to also take a course in physics and another in chemistry produces graduates who are aware of how other scientific disciplines affect their own field.

"They will have an area they will focus on. But we want them to think laterally," Wubah said.

Wubah came to Tech in 2009 from the University of Florida, where he served as associate provost for undergraduate academic affairs. Since his arrival, he has adopted a review system for new degree proposals similar to one used by graduate school Dean Karen DePauw.

Under this system, concept plans for new degrees are reviewed first by the dean, and then by a committee system within the university. Market research and a detailed explanation of how the degree will prepare students for academia or the work force are required.

If approved by the University Council and the board of visitors, the plan then goes to the State Council of Higher Education for Virginia, and in some cases the Southern Association of Colleges and Schools, for final approval.

From start to finish, implementation of new degrees normally takes about three years, Wubah said.

Both the undergraduate and graduate offices keep and monitor a prioritized list of new program proposals that is reviewed on an annual basis.

Since 2004, the graduate school has used the same process to add 11 new doctoral and master's degrees, as well as certificates and dual degree programs, DePauw said.

Since coming to Tech in 2002 from Washington State University, DePauw has nurtured a resurgence of graduate education at Tech. That resurgence has been instrumental in boosting Tech's overall goal of increasing funded research contracts, as well as helped foster the university's diversity and equity goals.

DePauw echoed Wubah's comments on the importance of an interdisciplinary approach to new degree development, saying she has watched the trend grow in importance over the past 20 years.

Research and science have not been the only areas of focus for the grad school, however. DePauw pointed to the creation of a doctorate in rhetoric and writing and Master of Arts in foreign languages, cultures and literature, and creative technologies.

Research and STEM (science, technology, engineering and mathematics) remain the primary focus of Tech's growth, however.

Increasing research funding has been a signature goal of President Charles Steger's administration, and it has become more important as the university looks to high-tech companies, federal agencies and others for grant money to help offset declining state funding.

Officials say that outside money helps fund salaries, erect buildings and buy laboratory equipment, among other benefits.

By: Tonia Moxley
Roanoke Times

2011 Virginia State Science Fair Awards for Biotechnology

The Virginia Biotechnology Association (VABIO) in conjunction with the Chesapeake Bioscience Education Foundation presented awards at the 2011 Virginia State Science and Engineering Fair on Saturday, April 2, 2011, at Old Dominion University in Norfolk. The volunteer judges studied the abstracts prior to their arrival at the Fair and then voted on the top ten projects to interview one-on-one. Photos from the competition are available here.

"Once again, the students' projects amazed the judges. It was hard to choose among so many excellent projects," said Mark Herzog, VABIO executive director.

After talking with each of the students, the judges made their final selections:

First Place: Charlotte Nina Keeley and Emily Jane Keeley
“Creating a SmartBandage: A Nanoparticle-Embedded Polymer to Detect Local Oxygen Levels in Wounds” (ENT007)
Category: Engineering: Materials and Bioengineering
Region: Charlottesville

Second Place: Choonh-Seoup Youn
“Regulation of Telomerase Activity in Prostate Cancer Cell by a Novel Protein, DEK” (CMI003)
Category: Cellular – Molecular Biology
Region: Fairfax

Third Place: Benjamin Tyler Cobb and John Conor Moran
“Identification of Novel Stress – (Cortisol) Dependent Cisplatin Resistance in Lung and Breast Cancer Cells” (CMT002)
Category: Cellular - Molecular Biology
Region: Fairfax

Thank you to our VaBIO Judges:
David Anderson, Vice President Scientific Affairs, Lyotropic Therapeutics, Inc.
Martin Chapman, President, Indoor Biotechnologies, Inc.
Michael Francis, Research Associate, LifeNet Health
Mark Herzog, Executive Director, Virginia Biotechnology Association
Eugene Maurakis, Director of Science Education, Science Museum of Virginia
Roy Ogle, Director of Regenerative Medicine, LifeNet Health
Gary Pekoe, Founder, Arkios Biodevelopment International
Patrick Sachs, Research Associate, LifeNet Health

The winners are eligible to be considered for the 2011 Virginia BioGENEius Challenge team that will compete at the national challenge in June at the BIO Convention in Washington, DC.

Local News Video: New Biotech Labs for Charlottesville

The historic former home of Coca-Cola in Charlottesville is getting a new high-tech future. Monday morning, the city announced a major development will fill the space on Preston Avenue with labs and research companies. This project is a first for the city.



Citycampus Biotechnology Center will begin transforming the 72-year-old former soda bottling plant into state-of-the-art labs. The city and Virginia Biotechnology Association presented the plans Monday morning.

Citycampus Center will be the first fully-equipped wet lab space in Charlottesville - labs where researchers can test chemicals, drugs, and biological materials. Indoor Biotechnologies Incorporated is buying the building from Coke and will be the lead tenant in Citycampus.

The United Kingdom based company sells allergy and asthma products and services around the world.

Indoor Biotechnologies President Martin Chapman said, "If we provide space for expansion, we can clearly develop more of that industry and hopefully recruit biotech companies to come from other parts of the state, which would be terrific."

The project to rehabilitate the 1939-era Coca Cola building will cost Indoor Biotechnologies $3-$5 million and will take about two years to finish. At full-build out, the facility will create 110-150 high-tech, high-paying jobs.

The city expects the project will keep UVA research spin-off companies in Charlottesville.

Click here for the video link: http://www.nbc29.com/category/175568/video-landing-page?clipId=5701013&autostart=true

Insmed Regains NASDAQ Compliance

Insmed Incorporated (Nasdaq CM: INSMD), a biopharmaceutical company, today announced that it has received notification from The NASDAQ Stock Market that it has regained compliance with the minimum $1.00 per share bid price requirement.

To regain compliance with the bid price rule, Insmed was required to maintain a minimum closing bid price of $1.00 per share or more for a period of at least 10 consecutive business days. On March 16, 2011, the closing price of Insmed's common stock was $5.02 per share, the tenth consecutive business day the stock price had closed above $1.00 per share. The NASDAQ Capital Market has indicated that this matter in now closed.

Insmed will continue to trade on The NASDAQ Capital Market.

March 21, 2011
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ADial Pharmaceuticals, Led by UVA Profs, Raises $4.1M

According to an SEC filing, ADial Pharmaceuticals, L.L.C., developer of medications to treat addictions, completed a $4.1 million offering.

The company was founded by Prof. Bankole Johnson, who serves as president and chairman.

Dr. Johnson is Alumni Professor and Chairman of the Department of Psychiatry and Neurobehavioral Sciences at the University of Virginia. He is well-known for his discovery of compounds that have been effective in the treatment of alcoholism. Professor Johnson also received national media attention for his appearance in the Home Box Office (HBO) original documentary feature, "Addiction", which won the prestigious Governors Award, a special Emmy Award, from the Academy of Television Arts and Sciences.

Dr. Johnson is named in the filing, along with CEO William B. Stilley and CFO John F. Riccardi; and directors Robert S Capon, Mike L. King, Ming D Li, and Wendy L Yarno.

Capon, King and Li are all members of the University of Virginia faculty. Capon was also the co-founder and former CEO of Charlottesville-based Adenosine Therapeutics.

March 16, 2011
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