Show Me the Money: How Stem Cell Researchers Can Obtain State Funds

Though states historically have taken a back seat to the federal government regarding funding biotech research that is no longer the case. States are aggressively using monies and other incentives to support stem cell and other life science research and development. This provides genuine opportunities for cell therapy companies looking for resources to help fund their operations. No matter where your company is located, by carefully examining policy options and developing a plan, you can obtain public capital – whether or not your state has a specific stem cell funding program.

While in years past stem cell research has been somewhat controversial in some political circles, there’s clear evidence that is changing. In fact, 2006 was a watershed year for stem cell research as a ballot initiative in Missouri was passed that amended the state’s Constitution, and Republican and Democratic candidates across the country who aggressively promoted their support for this research were elected or re-elected.

This development is being felt in state capitals as more and more states are developing programs to support stem cell research.

But that is part of a still larger trend that has been taking place for a few years. States are competing with each other to see which can do more for biotech companies – including those pursuing cell therapies. Simply put, states see the biotechnology industry as an economic development engine that can attract high wage jobs and federal funds as well as improve the broader business climate within their borders.

The result has been that states have become important sources of capital for companies. This has been particularly critical for stem cell research since the federal government’s funding policy has stalled since 2001.

Stem Cell Funding Programs

A handful of states have created programs to specifically fund adult and embryonic stem cell research.

The most notable example, of course, is California where Proposition 71 will provide about $3 billion for stem cell research. Other states that have enacted stem cell funding proposals include Maryland, Connecticut, New Jersey, and Illinois. Some states, such as Indiana, Virginia, and Ohio currently envision funding only adult or umbilical cord stem cell research. State programs have varying features but all require that grantees reside or perform work in that state.

At last count, 35 states have legislation pending regarding stem cell research. Some address the legal authority to perform research while others provide funding for researchers. For instance, the New York Legislature is currently considering a major financial commitment. Promoted by Governor Spitzer, this program would launch a $2 billion 10-year bond initiative for research and development, at least half of which is set aside for stem cell research.

Companies should pursue existing grant programs where possible. They should also become politically active to help shape programs currently being debated.

Other Biotech Funding Programs

Moreover, stem cell companies should be targeting broader state initiatives that fund biotech research and development. In addition to those specifically aimed at stem cell research, virtually every state has a program (or programs) designed to provide assistance to biotech companies. According to a 2006 Battelle report, states will spend billions of dollars to support bioscience research and infrastructure. Programs are designed primarily to attract and retain companies as well as to expand capacity of universities and modernize academic and medical research facilities.

Specific initiatives include: building research facilities; incentives to encourage university/industry partnerships; investing state funds in privately managed funds that target technology companies; R&D tax credits; and creating bioscience or technology investment funds.

For example, the State of Washington created a $350 million Life Science Discovery Fund that will provide grants for 10 years for life science research and industry development. Maryland established the Maryland Biotechnology Investment Incentive Act which provides tax credits for investment in emerging biotech companies. And South Carolina’s Life Sciences Act and Venture Capital Investment Act will allocate $220 million toward improving research capacity and infrastructure at state universities and $50 million to facilitate life science company creation and retention.

The bottom line is that no matter what state your company is located in, there are programs that provide funding. They could be specifically targeted toward adult or embryonic stem cell research or apply to the broader industry.

Cell therapy companies should see these as potential sources of capital. By performing strategic research on programs and decision makers in its home state, a company stands a good chance of obtaining needed funds.

Michael J. Werner is CEO of The Werner Group, www.thewernergroup.net