Bio firms short on venture capital

Study of biotechs in Md. puts amount at up to $100 million

February 02, 2002|By Bill Atkinson | Bill Atkinson,SUN STAFF

Private venture capital funds are not providing enough money to support Maryland's rapidly growing biotechnology industry, according to a study released yesterday by the Maryland Department of Business and Economic Development and two other organizations.

The study found that the state's biotechnology industry has a "venture capital funding gap" of $50 million to $100 million annually.

Maryland also ranks 12th out of a dozen states in private venture capital financing relative to the number of biotechnology firms in each state.

The state's biotechnology industry has grown quickly in recent years, and ranks as the third largest in the nation behind California and Massachusetts.

"Maryland has created a vibrant and positive environment for the biosciences industry. There is more that can be done to nourish this industry, particularly in the private sector," said David S. Iannucci, secretary of the state's Department of Business and Economic Development.

The study recommends a number of ways to spur investment in biotechnology companies including:

The creation of a new state-supported bioscience venture capital fund.

Using money from settlements of lawsuits against tobacco companies.

Using a greater share of money managed by the state pension system.

"There is absolutely room in a $30 billion pension fund to have a small percentage dedicated to venture investments," Iannucci said. "We would encourage the Maryland pension trustees to take a very careful and healthy look" at the proposal.

He said the recommendations are "all things that should be debated in the months ahead. None of them are the answers themselves."

The study by accounting firm Ernst & Young LLP was requested by the General Assembly. It was financed by Iannucci's department; MdBio Inc., a private firm that works closely with biotechnology companies; and the Maryland Technology Development Corp., a state entity that helps get technological advances developed by university researchers into the marketplace.

About 330 biotechnology companies are based in Maryland and they employ about 40,000 people. The state has invested more than $566 million in technology based economic development programs and infrastructure since 1991.

Iannucci said there are more than 40 biotechnology companies in Maryland that have a product at some stage of development, and the state should find ways to keep those companies in Maryland as they grow, he said.

"That is where access to private venture capital will be crucial to keeping those 40 companies."

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