Louisiana’s growing biosciences sector could be stymied by recent tax break changes that could make it more difficult for startups to find early-stage financing, a report says.
The report, released Wednesday by the trade group LouisianaBio and law firm Baker Donelson, relied on feedback from surveys of companies, academic research institutions and venture capital firms connected with the state’s biosciences industry.
The report discusses current views on workforce development and hiring activity, access to capital and accessibility to local services for startups to grow.
“We need a few grand-slam home runs to encourage that money to come off the sidelines,” Baker Donelson attorney David Rieveschl said Wednesday about the prospects of luring more investment in the sector.
In recent years, more than 100 new companies have been created and more than $100 million has been raised by startups throughout the state, the report said.
Perhaps the greatest challenge facing the bioscience industry is limited access to staged funding. “Despite there being private groups in Louisiana that enthusiastically invest in early-stage life sciences companies, there are not yet enough of these investors in the state,” the report said.
There’s also a misperception that business incubator programs, such as the New Orleans BioInnovation Center and the Louisiana Emerging Technology Center in Baton Rouge, are either full or not built to handle current demand, specific studies or scaling-up processes.
Another issue facing the industry: An ongoing drain of young talent, who tend to leave Louisiana and launch companies elsewhere, the report said.
The report makes a handful of recommendations to improve the industry’s business climate, such as encouraging local and state officials to find ways to offer tax breaks and publicly-funded incentives to startups, as well as supporting business pitch competitions, networking events and other programs that match investors with local life-science companies.
Tapping private funding is an ongoing challenge for entrepreneurs because of a longer lead time and the often-significant amount of money required before commercialization of products, the report says. There’s also general unpredictably and inherent regulatory risks.
In Louisiana, life-sciences entrepreneurs who responded to the survey reported relying on a variety of funding sources to get going, with more than half of the money coming from personal financing, friends and family.
State lawmakers haven’t made it any easier, according to the report. Changes put in place last year to Louisiana’s research and development tax credit make it less generous and limit a company’s ability to convert the credit to cash.
The report found that only a fraction of those surveyed — 11 percent of entrepreneurs and 7 percent of corporations — reported participating in state-led workforce development initiatives, such as the Quality Jobs program, which offers payroll rebates for new full-time jobs created in a handful of target industries.
“These data indicate that the respondents most likely are not aware of such programs,” the report concluded, recommending that a centralized database listing such opportunities would be beneficial.
Despite the state’s shortcomings, the report found that it offers the biosciences sector several advantages.
For example, Louisiana is among only a handful of states with at least two medical school campuses in the same city, which provides “an incredible opportunity for the development of the life-sciences ecosystem,” according to the report. Louisiana also is considered one of the top dozen states for research and development in the agricultural biotechnology sector.
Rhonda Melancon, executive director of LouisianaBio, said the report’s findings showed that the local biosciences sector has made big strides in the past five years.
“The fact that there still seems to be a lot of optimism in the industry across Louisiana definitely stood out to me,” Melancon said. “It sounds to me like we just need to continue doing the things that we’ve been doing and focus on trying to see how we can fill in some of the gaps that were identified by the report.”
Follow Richard Thompson on Twitter, @rthompsonMSY.