If Princeton-based biotechnology firm Agile Therapeutics can eventually get federal approval to bring its promising new female contraceptive patch to market, credit will go to more than just the company’s employees and investors.
New Jersey taxpayers have also played a role in the firm’s rise, thanks to a state-administered tax-incentive program that helps small technology and biotechnology firms like Agile make it through the crucial but often lean years of research and development.
The 17-employee firm recently received $6 million in new capital by participating in the state’s Technology Business Tax Certificate Transfer Program, which lets emerging companies raise cash by selling unused tax credits to other companies.
Al Altomari, Agile’s president and chief executive officer, said the money is being invested directly into the company’s efforts to complete a successful clinical study of its contraceptive-patch product.
“This is real cash,” Altomari told NJ Spotlight in an interview. “It’s incredibly important to finish the study. It’s going right into the clinic, those dollars.”
There’s been much debate in Trenton in recent years about whether some of the state’s higher-profile corporate tax-incentive programs have become too generous as Gov. Chris Christie and Democratic legislative leaders have tried to reinvigorate the state economy in the wake of the last recession.
In all, more than $6 billion in future tax breaks have been awarded to companies since Christie, a second-term Republican, took office in early 2010. The tax incentives provided through programs like Grow NJ are used primarily to lure companies into New Jersey — or to keep them from leaving. And though the pace of the state’s economic recovery has generally been slow during Christie’s tenure, 2015 marked New Jersey’s best year for growth in over a decade.
But the Technology Business Tax Certificate Transfer Program predates the controversy over the state’s bigger tax-incentive programs, which Christie and lawmakers revampedin 2013. And it works in an entirely different fashion.
Instead of offering companies incentives that could weaken future state tax collections, the transfer program links up qualified technology firms that have unused tax credits for net operating losses and research and development with other companies seeking to buy them. The credits are then sold at a discount, giving the startups the ability to raise capital that, in some cases, can be the difference between remaining viable or going out of business.
More than 500 businesses have been able to get $860 million in capital through the transfer program since it was created in 1999, according to the New Jersey Economic Development Authority, which operates the state’s tax-incentive programs.
The transfer program is particularly useful to emerging life-sciences businesses, which are capital-intensive and can take years to become profitable, said Debbie Hart, the president and chief executive officer of BioNJ, a trade organization for the state’s biotechnology industry.
In addition to raising much-needed capital, the transfer program can also help companies attract more financing or even set the stage for a public offering. One of its early success stories is Summit- based Celgene, which started in 1998 with fewer than 100 employees and has grown into a 2,600-employee company with over $750 million in profits.
“It’s a very successful program, and it’s delivering a benefit to the state of New Jersey,” Hart said.
The success of the transfer program has also mirrored the overall growth of the state’s life-sciences industry, Hart said. There were just 30 viable companies in the mid-1990s, and now there are more than 400 in 2016.
And of the new drugs approved last year by the U.S. Food and Drug Administration, Hart said, a full 50 percent were awarded to companies with a footprint in New Jersey.
“The trend fortunately for New Jersey has been growth,” she said. “We expect that growth to continue.”
[related]For Agile, the $6 million it received through the transfer program in December marks the third time the company has been able to cash in its state tax credits for much-needed capital.
In 2010, the company received $670,000 in capital in that Altomari said raised Agile from its “deathbed.” Then, in 2014, the company was able to get another $3.6 million by selling unused state tax credits, funding that helped it launch a successful public offering.
“That got us public,” Altomari said. “It was the bridge.”
He said the latest capital infusion is helping the company complete its much-needed clinical trial and then, hopefully, transition into the manufacturing phase. If it succeeds, women will be able to swap their daily birth-control pill for a patch that they would instead wear on a weekly basis.
The overall goal of the product is to make it easier for women to prevent unplanned pregnancies, which can happen when they forget to take one or more of their daily birth-control pills.
“There’s a need in the marketplace for this product,” Altomari said. “It’s been a labor of love for us.”