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Maryland Gearing Up to Build New $91.5M Life-Sci Economic Development Agency

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Maryland is gearing up to launch a new agency for its life-sciences economic-development effort early next year — part of a series of industry-building moves that include a reorganization announced last week for the existing department charged with job attraction and retention.
 
The new Maryland Biotechnology Center will be designed as “a one-stop shop” linking life sciences employers to economic incentives, business assistance, and other state services, Lawrence Mahan, senior strategic advisor for biotechnology with the state Department of Business and Economic Development, told BioRegion News last week.
 
“It will ramp up in the current fiscal year 2009, and I would say, most likely, after the first of the year,” Mahan said in an interview.
 
“It is highly anticipated that some DBED staff will be utilized to be the staff in the new center. The exact number? That’s getting looked at right now,” Mahan added. “It will likely be a mix of people shifting around [from the economic development department] to the center, plus DBED has some vacancies, and those could be used for the center if new hires are desired.”
 
In a revised DBED organization chart distributed to employees, the agency said the biotech center will be “designed to assist bio entrepreneurs, fund life-sciences research, develop bio curricula and provide workforce and education training grants.
 
Also planned is an aggressive marketing program, a federal life-sciences task force, aggressive bio industry networking, and a bio ambassador program.
 
“Working closely with industry partners, the MBC will concentrate on efforts to create new biotechnology companies, sustain the growth of successful enterprises, and leverage Maryland’s unique life sciences assets in the academic and federal sectors to advance Maryland’s role as a global biotechnology leader,” according to DBED.
 
Mahan would not discuss details of how the center would achieve those goals,  saying they will not be made public before mid-November. At that time, the 15-member Maryland Life Sciences Advisory Board, appointed by Gov. Martin O’Malley, is expected to release a strategic plan aimed at drawing more life-sciences employers and their jobs to Maryland.
 
“You are definitely going to see some similarities” with the nation’s first one-stop state agency focused on life-sciences economic development — the North Carolina Biotechnology Center, Mahan added.
 
Like that agency, the Maryland biotech center will receive state funding and serve as a portal to state services, and will act as a force to forge a more cohesive life-sci sector from the state’s universities, nonprofit research institutions, businesses, and business groups.
 
But the two centers will differ when it comes to funding. This fiscal year, the NC biocenter operates on a $17.6 million budget, of which $13.1 million comes from state government. The balance comes from other sources, ranging from interest and dividends from investments in life-sci companies, to income from conferences held at the biotech center’s Hamner Conference Center, which has 19,000 square feet of meeting space.
 
By contrast, Maryland’s new biotech center will subsist this fiscal year on $6 million of DBED funding, the first portion of $91.5 million in combined subsidies over 10 years that O’Malley has committed under his $1.1 billion, 10-year Maryland BIO 2020 package of programs, unveiled this past June.
 

The new Maryland Biotechnology Center “will provide help in answering where-to-go questions: ‘Where do I go for funding?’ ‘What types are available?’ ‘Where do I go for space?’”

By funding the biotech center through BIO 2020, O’Malley avoided the uncertainty of pursuing life-sciences funds from the state legislature each year when it crafts a budget.
 
This spring, a $332.9 million shortfall in state tax receipts, blamed on the weak economy, prompted Maryland lawmakers to propose slashing the state’s stem-cell research award budget from last fiscal year’s $23 million to anywhere from $5 million to $18 million. O’Malley and legislative leaders ultimately agreed to spend $19 million this fiscal year.
 
BIO 2020 calls for a minimum $20 million for each of 10 years, or at least $200 million, for stem-cell research, starting with FY 2010.
 
The state’s fiscal climate is unlikely to improve soon. Last week, the Maryland Board of Revenue Estimates headed by Comptroller Peter Franchot released an updated revenue forecast warning that the state would miss its $14.5 billion budget forecast by $431.9 million when the current fiscal year ends June 30, 2009.
 
“Writedowns to the sales tax and individual income tax are primarily responsible for these changes. In our judgment, downside risks predominate and will continue to do so until the national economy resumes sustained growth,” the board wrote in its Sept. 9 report.
 
Franchot has chided O’Malley — the two are political rivals within the Democratic party who have clashed frequently on issues — for failing to cut enough spending; the governor rejected the criticism, citing new taxes and cuts agreed to earlier this year and at a special legislative session late last year.
 
Rival No. 1?
 
While it will emulate many features of its North Carolina biotech center counterpart, the Maryland biotech center should not be viewed as a head-on challenge to the Tar Heel State’s one-stop bio agency, Mahan said.
 
“They’re not really rival number one. They’ve been doing some good stuff,” Mahan said. “But they have the advantage of building something up from nothing, and doing it in this somewhat monolithic manner, whereas we built a lot of programs in different ways. Our challenge is to work to integrate them, and build them, and diversify them.”
 
North Carolina’s biotechnology center helped persuade Novartis to choose the Tar Heel State over Maryland and Georgia as the site of a new $600 million manufacturing plant for cell culture-derived influenza vaccines, a facility set to employ 350 people by 2013.
 
In return for promising the jobs, the Swiss biotech giant was awarded a combined total of about $40 million in economic-development incentives from North Carolina’s state government, as well as from Wake County and the town of Holly Springs, NC. The 300,000-square-foot plant is now under construction in Holly Springs, and set for completion in late 2009 or early 2010.
 
“The biggest problem Maryland has is attracting the big pharma. Maryland is top of the line when you look at the biotech startups. We have a great university system with lots of research going on,” as well as the presence of the National Institutes of Health and US Food and Drug Administration, said Richard Clinch, director of economic development at the Jacob France Institute of the University of Baltimore.
 
“What we’ve lacked, as the Novartis case showed, is big pharma manufacturing. We have Human Genome Sciences and MedImmune, and that’s about it,” Clinch told BRN. “The big question is, ‘How does Maryland attract manufacturing?’ That’s a tough question. The Novartis case showed that Maryland is at a disadvantage when you look at business costs.”
 
O’Malley cited the Novartis setback during his successful campaign for governor in 2006. A Democrat in his first term, O’Malley unseated Republican incumbent Robert Ehrlich, who has returned to private law practice, in part by promising to boost Maryland’s biotechnology effort and allay fears that employers will move out for other states in search of lower business costs.
 
Those fears resurfaced last year after MedImmune, Maryland’s largest home-grown biotech company, was acquired for $15.6 billion by British drug giant AstraZeneca. AZ has promised to keep MedImmune operations in the state, and the company has proceeded with the planned construction of a new $250 million, 710,000-square-foot biologics manufacturing facility in Frederick, Md.
 
The plant, slated to open early next year, is projected to create 225 jobs to help support a $170 million, five-year award from the US Department of Health and Human Services to develop influenza vaccines for pandemic and seasonal purposes.
 
Early last year, shortly after taking office, O’Malley and state lawmakers agreed to create the advisory board. Among its goals:
  • Promote life-sciences research, development, commercialization, and manufacturing in the state;
  • Promote collaboration and coordination among the state’s life-sciences organizations;
  • Promote collaboration and coordination among Maryland research universities;
  • Craft strategies to draw into the state more life-sciences jobs and investment;
  • Support federal life-sci facilities, defined to include support for education, transportation, housing, and capital investment; and
  • Recommend policies to help fund new facilities and link entrepreneurs to venture capital.
The advisory board will hear from university presidents about their life-sciences efforts, and their recommendations for boosting the industry in Maryland, when it holds its next meeting on Sept. 24 at the University of Maryland Baltimore County.
 
Weeks before the strategic plan becomes public, the advisory board will receive a formal study on Oct. 29 from the Battelle Memorial Foundation assessing the strengths and challenges of Maryland’s life-sci effort. That effort will include “analyzing the state’s core competencies and talents, and where academic institutions, companies, and other institutes see themselves 10 to 15 years from now, in terms of what direction would they like the state to pursue, what kind of programs would they like to see expanded,” Mahan told BRN.
 
The Battelle study was designed to complement the assessments made by the advisory board’s working groups — each focused on different topics, including capital formation, education and workforce development, leveraging the presence of federal agencies in Maryland, marketing and promoting the state to life-sciences companies globally, creating startup and early-stage pipeline programs, and encouraging technology transfer and translational research involving academic institutions and nongovernmental organizations.
 
“Some of the ideas that have continuously percolated throughout the working groups of the life sciences advisory board have been that Maryland has a wealth of programs, but sometimes it’s very hard for that individual starting a company to access a particular resource. They’re not sure where to begin. They’re not sure how to go from A to B to C. Sometimes, in going from A to B to C, they’re duplicating their time and effort,” Mahan said.
 
The studies by Battelle and the working groups, Mahan said, are also designed to update a series of older reports assessing how Maryland can best grow its life-sci sector. Among them:
  • 1991: DBED called for developing an incubator, staging more venture capital fairs, awarding state funds to smaller biotechs in ways that also draw for them more private capital, and “an emphasis on attracting a major pharmaceutical company to locate in Maryland.”
  • 1996: A Bioscience Industry Advisory Committee called for speeding up the state’s process for obtaining facility permits, avoiding state rules that go beyond federal regulations, reducing the state’s income tax, and expanding tax credits.
  • 2003: DBED and the Maryland Technology Development Corp. or TEDCO develop a draft 33-page Bioscience Strategic Plan. It recommends the state should reduce or eliminate the personal property taxes of businesses and raise spending on technology grants, venture capital attraction, tech transfer, and capital projects for new state university labs. The report is a casualty of that year’s change of governors, from Democrat Parris Glendening to Ehrlich.
Reorganizing DBED
 
Mahan discussed Maryland’s new biotech center on Sept. 10, two days after O’Malley announced plans to reorganize DBED and streamline its operations, and sharpen the state’s economic-development efforts.
 
O’Malley is cutting the number of DBED’s divisions from seven to three — an “economic-development” unit focused on linking businesses already in Maryland to sources of financing and worker training; a “marketing and business-development” unit charged with attracting businesses to the state; and a unit focusing on tourism, film and the arts.
 
DBED said it will fold its former divisions of regional development, small business, and finance programs into its new economic-development division. The marketing/business development division will include the former division of business development, while the tourism/film/arts division unites operations previously within their own separate divisions.
 
“So many times when we would work with business owners, they would need financing. They would need workforce training assistance. Having them go to this division, and that division, and that division, it didn’t make a whole lot of sense,” Karen Glenn Hood, a DBED spokeswoman, told BRN last week. “[The reorganization] makes it so much easier for the business. They don’t have to go to three or four different places.”
 
Neither the biotechnology center, nor Maryland’s new Office of International Trade & Investment, will fall into any of DBED’s new divisions, but operate as offices reporting solely to David Edgerley, Maryland’s secretary of business and economic development. The trade office — which recently expanded its Asian presence by opening an office in South Korea — will succeed a DBED division carved out of the business-development unit four months ago.
 
Edgerley’s deputy, Clarence Bishop, will oversee the administration/technology, economic policy, research, and legislative affairs functions previously within two former DBED divisions.
 
“We needed to streamline some of our processes and functions. Glenn Hood said.
 
Glenn Hood said the DBED reorganization will neither trigger layoffs within, nor expand, the agency’s staff of nearly 300 people. The reorganization will also not affect the agency’s budget for the current fiscal year, which is about $132 million — compared with $123.6 million the previous fiscal year, a 6.8 percent increase.
 
The reorganization appears to be an effort to address criticism aimed at the state in a report issued last year by a regional economic development group. The Economic Alliance of Greater Baltimore said Maryland must streamline and increase its life-sci attraction effort before the region can emerge as the state’s second-largest biotech cluster after Montgomery County.
 
“Just as the region is attaining the required critical mass, there is rising concern that there are too many state and local economic-development groups focused on biosciences in Maryland,” the report added. “Firms in the market are confused by who does what. They do not view economic developers as a unified team with specific roles working toward common goals,” the economic alliance concluded in its report,Biosciences in Greater Baltimore.
 
The 2007 report included interviews with numerous leaders of life sciences businesses and regional economic development groups. “While venture funding from DBED and TEDCO is absolutely critical, the region must also identify other sources to tap for early-stage funding of biotechnology companies,” Steve Kozak, executive director of the Greater Baltimore Technology Council, said in the report.
 
In an interview with BRN last week, Kozak hailed the new Maryland Biotechnology Center.
 
“That’s great for entrepreneurs. In talking to them, they’re looking for that one call, that one place where they can go to for their questions and concerns. We’ve been calling for it. The state listened, and we love that,” Kozak said. “This will provide help in answering where-to-go questions: ‘Where do I go for funding?’ ‘What types are available?’ ‘Where do I go for space?’”

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