In the last couple decades the biotechnology industry has seen substantial growth globally and in the United States where the industry has reached a market capitalization of over $1 trillion (EY Biotechnology Industry Report). Growth in the biotech industry has soared as well in North Carolina following the state’s long-term investment starting in the 1980s with the creation of the North Carolina Biotechnology Center (NCBiotech), a nonprofit based in Research Triangle Park. As a testament of NC’s biotech industry strength, Genetic Engineering & Biotechnology News ranked the Raleigh-Durham area as one of the top 10 biotech clusters in the country based on National Institute of Health funding, venture capital funding, patents, lab space, and jobs. Today, there are over 600 life science companies in NC employing 61,000 people at an average salary of $81,000.
Battelle, a nonprofit research and development organization, conducted an extensive assessment in 2008 of North Carolina’s life science industry which has since been updated most recently in 2014. According to Battelle’s Report, from 2001 to 2012, employment growth in the life science industry rose 31% compared to just 1% for total private sector employment in NC. Additionally, the total economic impact on output in NC of the life science industry in 2014 is valued at $73 billion, a 60 percent increase from 2008.
The life science industry growth in NC has also been fueled by NCBiotech loans. NCBiotech has made loans to 168 companies and of that 168, 95 are operating in NC which combined makeup over 2,100 jobs and almost $2 billion in revenue. Moreover, Battelle estimates a combined $70 million in state and local government revenues based on those 95 companies operating in NC. According to Biotechnology Center’s CEO, Doug Edgeton, they view their work as “a catalyst” for biotech firms by providing startup loans. The Center provides three low-interest loans:
- Company Inception Loan: provides up to $75,000 for business inception
- Small Business Research Loan: provides up to $250,000 for research and development
- Strategic Growth Loan: provides up to $500,000 to venture capital groups to fund biotechnology companies that need corporate development support
On average, for every dollar loaned to companies by NCBiotech, an additional $112 is raised. In addition to those loans, NCBiotech also provides grants to educational institutions for research. In their last fiscal quarter, NCBiotech provided $2.5 million in grants and loans which is more than they have awarded in previous two quarters combined.
Advanced Liquid Logic: Since 2003, this group has received $468,000 in NCBiotech loans. By 2011, they attained 17 patents, created 80 jobs, and launched their first product in 2011 which led to $55 million in follow-on funding.
KeraNetics: Received $150,000 in loans from NCBiotech which led to the creation of 16 jobs, 5 under-development products, and $26 million in follow-on funding. The company recently built a manufacturing facility in Kannapolis which created over 100 jobs.
Despite the growth of the life science industry and the successes of the North Carolina Biotechnology Center, there are concerns that funding for NCBiotech will be cut in the future. Since much of its funding comes directly from the state, any cuts could potentially hamper the nonprofit’s ability to provide startup and small business loans. Last year, NC’s Senate had called for the elimination of all funding towards NCBiotech while the House wanted to maintain the $13.6 million in funding. That number is below Battelle’s estimate of $45 million in state revenues that is raised by the 95 biotech companies that were awarded NCBiotech loans. Now that the North Carolina General Assembly is back in session, NCBiotech will find out soon if its funding is to continue. Although growth in the biotech industry is strong in North Carolina, according to the Battelle report, venture capitalists are more keen on investing in technology that is ready for clinical trial which emphasizes the importance of the North Carolina Biotechnology Center’s startup and small business loans and grants.
Omar Kashef is a third-year graduate student seeking a dual-degree in Public Administration and Information Science and is currently a Fellow with the Development Finance Initiative.