Start-ups welcome a jump-start; Tech council encourages more tax incentives
BYLINE: KATHLEEN GALLAGHER, Staff, Milwaukee Journal Sentinel
NeoClone Biotechnology International LLC is a poster child for what can happen when the state gives incentives to investors in young, emerging companies.
In the two years Wisconsin has been offering tax credits for such investments, NeoClone has used all but $37,000 of the $1 million allocated to each qualified company, said Deven McGlenn, the Madison biotech company's chief executive officer.
NeoClone, founded in 1999 based on technology developed at the University of Wisconsin-Madison, has raised about $1.4 million since it started fund raising in 2001.
"But the vast majority of that money was raised after the enactment of Act 255, which clearly accelerated investment in our business," McGlenn said.
Act 255 is legislation that in 2004 directed the state to begin offering a 25% tax credit - a dollar-for-dollar reduction of taxes owed - to investors in companies that qualified for the program. The law authorized $65 million of tax credits over 10 years: $3 million a year for angel investors and $3.5 million a year for early- and seed-stage venture investors.
Thursday the Wisconsin Technology Council released a position paper encouraging more.
The council released three in a series of 18 white papers it intends to publicize in the next six weeks to get a voice in some of the issues the Legislature will grapple with regarding Wisconsin's budget for the two years ending June 30, 2009.
The council is suggesting that an increase to as much as $25 million of credits a year from $6.5 million could be used by the state's young companies. The council also recommends raising the cap on how much one company can use from its current limit of $1 million worth on $4 million of investments from multiple investment funds.
"Act 255 has been a tremendous addition to the landscape in Wisconsin, but there are other mountains to climb, and improvements that need not cost the state much money could yield benefits for years to come," said Tom Still, the council's president.
The two other papers the tech council released Thursday said:
* Wisconsin should expand the mission of the Wisconsin Health and Educational Facilities Authority. WHEFA has done a good job for the last 30 years of bonding for non-profit projects, and its authority could easily be expanded to cover working capital for projects connected to non-profit facilities.
"This could be another source of revenue to help with start-up activities that could be generated by non-profit research institutions," Still said. The change wouldn't cost the state anything because WHEFA's bonds are exempt from federal taxes, but not state taxes, he said.
* Enact an education tax credit that would help Wisconsin companies more quickly and efficiently hire and train the workers they need. The credit could be used at any Wisconsin college, university or technical college, Still said.
"This proposal has been before the Legislature on a couple of occasions and fallen just short, but we think the time is right to push it over the top," Still said.
NeoClone had nearly $500,000 in sales in 2005 and is projecting more than $1 million this year, McGlenn said. It sells its monoclonal antibodies to people doing basic research and diagnostics, and boasts a way of making them that's "better, faster and cheaper," he said.
Such antibodies, produced in bulk to act against a single target, have been used in recent years to develop so-called smart drugs such as Herceptin, used to fight breast cancer. NeoClone hopes to eventually use its patented technology to develop drugs, and believes it is poised for some "major discoveries" in 2007, McGlenn said.
"Right now we're looking to raise $1.5 million. It would be really nice if I had more tax credits available to assist me in the process," he said.
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