Angel investor tax credits are one way states are trying to stimulate investment in seed and early stage biotechnology companies. The idea is that it will help companies grow in the state and produce jobs and ultimately attract even more business to the state.
Biopharmaceutical company Edge Therapeutics is the first biotechnology company to benefit from New Jersey’s angel investor tax credit program signed by Gov Chris Christie earlier this year and which went into effect last month. It recently submitted an investigational new drug application for a drug delivery system designed to optimize treatment for delayed cerebral ischemia.
Edge Therapeutics received $17,500 from angel investor Jonathan Perelman who got shares in the company in return. The program grants angel investors a tax credit of up to 10 percent of their investment. The $25 million program limits tax credits to $500,000 per investment. Qualifying companies must have under 225 employees and 75 percent of them have to reside in the state. The companies have to do research, manufacturing or technology commercialization within the state.
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Edge Therapeutics raised $18 million in a Series C round in June to carry out a Phase 2 clinical study for the prevention of delayed cerebral ischemia, a life-threatening complication of subarachnoid hemorrhage.
Delayed cerebral ischemia is caused by a ruptured brain aneurysm or traumatic head injury. It’s a restriction of blood supply to tissue which deprives the tissue of oxygen and glucose, causing damage. The treatment is designed to improve patient outcomes by dealing with the acute, debilitating conditions after brain hemorrhage that have no current effective treatment, according to a company statement.
Earlier this year Virginia boosted investment in its Angel Investor Tax Credit program by $1 million to $5 million for the 2014 tax year.
Fewer than half the states in the nation have some form of angel investor tax credit program. Most focus on technology or Internet-based companies. Maryland’s program focuses on biotechnology companies. It offers income tax credits equal to half of eligible investments for investors in Qualified Maryland Biotechnology Companies. The program offers incentives investments of up to $250,000 in seed and early stage biotech companies.
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Angel investor tax credits have generated support for the potential benefits they can generate for states that want to grow business but criticism because they have not necessarily attracted new investors but simply rewarded those who were going to make those investment anyway.
