“Can Small to Mid-sized Life Science Businesses Thrive in New Jersey?”
October 25, 2018
By Erika Ballo, CPA
New Jersey has a long tradition of innovation; it was the workplace for Thomas Edison and Albert Einstein. No surprise then that New Jersey is for life science companies what the Silicon Valley is for technology and New York is for capital markets: New Jersey is the hub for life science companies in U.S.
Life science companies in the start-up and development phases are looking for location, talent, partnerships, a strong business climate, commercialization, funding, and exit strategies.
New Jersey, one of the smallest states in the U.S., is home to twelve of the largest biopharmaceutical companies in the world. These companies are a great resource for talent, partnering opportunities and exit strategies. Also, this assures the proximity of specialized vendors that start-up or midsize life science companies need.
New Jersey has more than 225,000 scientists and engineers in its very highly educated workforce as well. Home to many prestigious colleges and universities such as Princeton University and Rutgers University, the state also boast several teaching hospitals including Robert Wood Johnson Hospital and Hackensack University Medical Center. These are all great resources for collaboration and innovation for small to mid-sized life science businesses.
In attracting and keeping talent, one has to consider that people who work in the pharmaceutical and life sciences field have a life outside of their work. Accessibility to high performing schools, good quality of life and the best health care is important.
According to the U.S. News 100 Best High Schools report, 10% of the high schools on the list are located in New Jersey. Also, one can catch a Broadway show, diverse music venues and fantastic exhibits within the hour, and accessibility to some of the best hospitals in the nation in New York, New Jersey or Philadelphia is a great advantage.
Of course, there’s a price to pay for the quality of life we have here. Just like all the positives listed above, we also have congested roads and high sales and income taxes. New Jersey is the most densely populated state in the U.S. In order to keep New Jersey competitive, these issues need to be addressed.
Some colleges and universities in New Jersey are setting up business incubators and accelerators to help start-up companies. These incubators/accelerators provide offices, labs, equipment, shared administrative office space and often have business consultants available to offer expertise. One example is the Enterprise Development Center, on the campus of NJIT, which is a “cooperative and resourceful ecosystem for start-ups and small-businesses.” Another example is the Institute for Life Science Entrepreneurship (“ILSE”), an “integrated research facility and network that will accelerate life science innovation.”
In addition, the New Jersey Economic Development Authority (“EDA”) is an independent state agency that is heavily involved with the life sciences industry. The Commercialization Center for Innovative Technologies is the leading incubator in New Jersey dedicated to life sciences and biotechnology companies.
Moreover, there are organizations such as BioNJ that work to bring together life science innovators, entrepreneurs, commercialization experts and investors. They work with leaders in Trenton and Washington D.C. to advance the industry. Another example is the HealthCare Institute of New Jersey, whose mission is to “raise awareness, understanding and public support for the research based biopharmaceutical and medical technology industry among New Jersey’s elected and appointed officials, media, citizens and opinion-leaders”. The state of New Jersey has programs to attract and retain businesses to the state. Small and mid-sized life science companies may benefit from a variety of tax credits. For example, the New Job Investment tax credit gives businesses tax credits for creating or retaining local jobs. The Research and Development tax credit allows businesses to reduce their tax liability based on the research activity that they perform in New Jersey. The Angel Investment tax credit is an incentive for investors to fund start-up companies in the state; and the Technology Business Tax Certificate Transfer program allow for qualified, unprofitable NJ-based technology or biotechnology companies to sell a portion of their net operating losses and research and development tax credits to unrelated profitable corporations.
Small life science companies need specialized vendors and sales channels. The New Jersey Department of Labor study shows that there are 3,200 life science establishments in the state. Most of these establishments are serving the pharmaceutical and biotech companies. So New Jersey has the advantage of having an already established specialized vendor and sales network that small to mid-sized life science businesses can benefit from.
Small to mid-sized companies cannot survive without adequate funding. New Jersey has several advantages. The large pharmaceutical companies often partner and fund start-ups to try an idea without actually committing too many resources. In addition, there are venture capital funds specifically looking to invest in life science companies. As an example, the NJ CoVest Fund provides seed funding for technology and life science companies. The EDA also hosts a New Jersey Founders and Funders meeting with the goal of introducing emerging technology and life science companies and angel and institutional investors. Lastly, it cannot be ignored that the world largest capital market is just a across the river in New York City. With good networking, entrepreneurs can develop personal relationships with investors and find appropriate funding.
A good exit strategy in a company’s later stages is just as important as finding funding in the start-up phase. Thus, being in the proximity of the largest pharmaceutical and biotech companies is a great advantage.