the Internet of Things. Google, Apple, and IBM are all angling to find ways into healthcare. “A lot of it is IT, data,” Hammack said. “You can get data from a lot of products, not just software. You can get data from [medical] devices.”
Though initial public offering activity continued into this year, healthcare IPOs appear to be tapering. In 2013 and 2014, 344 healthcare companies backed by private equity or venture capital raised $70 billion through initial public stock offerings, Hammack said. In 2015, so far, 89 healthcare IPOs have raised $14 billion. At the current pace, the health sector is projected to finish the year with 119 IPOs, a decline from last year. He added that recent healthcare IPOs have priced below their initial price ranges. But Hammack points out that most exit activity for healthcare companies—about 85 percent—comes from mergers and acquisitions. Large pharmas acquire to shore up drug pipelines. Hammack said that medical technology deal flow is down this year due to the absence of mega-deals involving large companies, such as Medtronic’s (NYSE: [[ticker:MDT]]) takeover of Covidien last year.
—Life sciences multiplying. North Carolina should not worry about growing to become No. 1 or 2 in life sciences, Mullen said. The likelihood that the Research Triangle will displace the Bay Area or Boston/Cambridge is virtually nil. But he urged North Carolina to build on its strengths, such as its research universities. Most of the innovation in pharma comes from academic centers, and North Carolina’s universities have been robust technology developers. What the state lacks, he said, is sufficient local venture capital to support innovation spun out of university labs.
The state budget attempts to help fill the VC gap by creating a Venture Multiplier Fund, a fund that will invest alongside VCs in early-stage companies. The state will finance the new fund by allocating 10 percent of the state’s fund for unclaimed bank accounts, wages, insurance policy proceeds, and other property that has been turned over to the state. For 2015, that fund stands at $480 million. Sam Taylor, president of NCBIO, said the investments will be managed by a third party and selected by a committee. But he added it was not yet clear how high- or low-risk the fund would be, though he said he expects it will seek investments in companies that are already generating revenue.
While the state budget continues the One North Carolina Fund, which provides companies up to $50,000 to match federal Phase 1 Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) grants, lawmakers did not extend the R&D tax credit, which was used by some larger biotech companies to offset research expenses.
—The Biotech Center’s future. The North Carolina Biotechnology Center, a state-funded nonprofit entity that supports the life sciences industry with a mix of programs, including grants and loans for early-stage companies, faced the prospect of losing its state budget allocation. Though the proposed House budget’s initial proposal retained the center’s $13.6 million in funding, the Senate slashed the allocation altogether. The final state budget kept the Biotech Center funding intact.
Nelson Dollar, a state representative, said executives from life science companies of all sizes sent him numerous letters explaining to him how the Biotech Center helped them. He added that in the future, funding the Biotech Center “hopefully won’t be an issue.” State Senator Bill Rabon said lawmakers support the Biotech Center’s role in helping life science companies grow and expand in North Carolina.
“Statistics show that companies that start here or relocate here tend to stay here and create jobs here,” Rabon said. “That’s what the Senate likes to see.”
Image courtesy of Flickr user Bill Brooks under a Creative Commons license.
