1 Life Science Initiative 2018 Annual Report

2 Life Science Initiative 2018 Annual Report

Introduction

In December 2016, Governor Andrew M. Cuomo announced an ambitious plan for a groundbreaking new initiative that would spur the growth of a world-class life science research cluster in New York and expand the state’s ability to commercialize this research to grow its life science economy. As a result, the April 2017 state budget allocated $520 million for tax credits, grants and investment capital for a New York State Life Science Initiative, to be administered by Empire State Development (ESD), the state’s chief economic development agency. The vision for the Life Science Initiative is simple: to make New York the leading frontier of commercial life science innovation.

The life science industryi presents an unprecedented opportunity for New York’s economy. A major driver of economic growth nationally, the life science industry generates $316 billion in annual economic output in the United States, or two percent of GDP.ii Further, life science is one of the few sectors in the U.S. economy that has recorded significant real wage growth since the year 2000.iii Life science industry jobs provide high average annual salaries for New Yorkers—ranging from $74,800 in the Mohawk Valley to more than $235,000 in the Mid-Hudson.iv Additionally, certain areas of the life science economy, such as the pharmaceutical and biotechnology sectors, result in higher-than-typical capital investment and spending.

New York’s assets position it to become a leader in the life science industry. The state is home to award-winning researchers, billions of dollars in research grants and one of the foremost public health systems in the country. Furthermore, New York is home to a diverse financial center, a leading technology sector and unparalleled population and genetic diversity. These assets will play a key role in enabling path-breaking commercial life science innovations in the years to come.

Specifically, New York is third in the nation in Federal National Institutes of Health (NIH) grants, boasting seven of the top 50 NIH-funded biomedical research institutions and $2.38 billion in annual grants.v Additionally, the state has produced more than 500 Howard Hughes Medical Institute grant recipients, as well as seven Nobel Prize winners in Physiology & Medicine and nine Lasker Award winners since 1990. The Life Science Initiative will commercialize New York State’s unparalleled academic research assets and unlock an untapped pipeline of innovation—while ensuring that homegrown startups remain in New York.

New York is also home to the state Department of Health’s Wadsworth Center, which is one of the oldest and largest state public health laboratories in the country. The Life Science Initiative is securing public-private partnerships that capitalize on and commercialize Wadsworth’s basic research assets, creating jobs and serving as a magnet to attract other companies and collaborations to the state. These transformative public-private partnerships will differentiate

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New York from competitor states and demonstrate the considerable commercial potential of the lab.

New York also has the advantage of possessing a robust academic community with the potential to spin out innovative startup companies. Today, the majority of drugs in the late stage development pipeline for mid-to-large size pharmaceutical companies come from external sources, such as academia and small startups.vi The share of biopharma industry revenue from external sources increased from 41 percent in 2005 to 50 percent in 2014, and this share is expected to increase further in the next decade.vii This industry trend holds immense promise for New York.

A key focus of the Life Science Initiative will be to attract, grow and retain life science companies in regions of the state with clusters of existing life science activity. The co-location of firms in a similar industry generates network effects by synergistically allowing such firms to benefit from their proximity to each other’s assets, activities and talent. By seeding New York’s already-budding industry clusters, the Initiative will lay a foundation for a thriving, connected life science ecosystem statewide. In this way, New York regions will be supported to build life science capacity locally, collaborate regionally and connect globally.

With the above in mind, the following pages offer an inaugural report on the operations and accomplishments of New York State’s Life Science Initiative in accordance with certain statutory requirements.viii The report provides background on the Initiative, summarizes the $520 million in planned investment, describes a number of exciting life science projects that have already been initiated and lists other information with respect to the operations and accomplishments of the Life Science Initiative. The report does not detail all life science activities underway in the state, nor does it articulate every asset, incentive or benefit available to a life science company operating in New York State. New York possesses the raw assets to forge a new, cutting-edge path for the life science sector. To this end, we have assembled a statewide network of resources, strategically linked to unlock these assets and expand New York’s life science economy. Our efforts will ensure that New York’s homegrown life science talent and companies have a place to live and thrive. And with the proper investment, the life science industry will serve as an engine of job creation and opportunity for New Yorkers from all walks of life. Sincerely,

Howard Zemsky Empire State Development President, CEO and Commissioner

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New York State Life Science Initiative Resources

Strategic initiatives to grow New York State’s life science economy

Refundable tax credits for R&D expenditures, available for new life science companiesix

Tax credits for job creation initiativesx

Matching funds expected from industry partners for public-private partnerships

$320M Programs, Grants and

Project Funding

$100M Research and

Development Tax Credits

$100M Excelsior Jobs

Program Tax Credits

$100M+ Private Investment

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Inaugural Year Overview

To achieve its mission of attracting, growing and retaining startups in New York, ESD is implementing a stepwise approach to life science cluster development. The Life Science Initiative has made investments that: leverage existing life science intellectual property from New York academic institutions; enhance and train talent; support entrepreneurs; build infrastructure; and provide incentives. These projects are aligned with the way in which life science industry clusters establish and thrive.

The Life Science Initiative is also being guided by the Governor’s Life Science Advisory Board, which includes 16 recently-appointed luminaries in industry, academia and venture capital. In this regard, the state is acting as a convener for the industry in ways that it never has before, ensuring communication, collaboration and a thriving ecosystem across the state. By maintaining a productive dialogue with experts in the industry, ESD will plan strategically for the future and strengthen implementation of the Initiative.

Since its April 2017 legislative authorization, the Life Science Initiative has active commitments totaling $125 million in state funding for six distinct projects, which together are expected to leverage over $700 million in co-investment over seven years. These six projects, and their awards from the Life Science Initiative, include:

• The Empire Discovery Institute ($37.05 million);

• The JLABS @ NYC incubator construction at the New York Genome Center ($17 million);

• The New York Fund for Innovation in Research and Scientific Talent (NYFIRST) grant program ($15 million);

• A partnership between the Wadsworth Center and ILÚM Health Solutions focused on preventing antibiotic-resistant infections ($22.4 million);

• A partnership between the Wadsworth Center and Regeneron Pharmaceuticals focused on researching Lyme disease treatments ($24 million); and

• The Regeneron Pharmaceuticals Manufacturing Expansion Project ($10 million).

The next section of this report describes each project in additional detail.

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2017-2018 Life Science Projects

Empire Discovery Institute: Turning Basic Life

Science Research into Commercial Opportunity

Approved by ESD in May 2018, the Empire Discovery Institute (EDI) is a groundbreaking new organization created to fast track translation of the existing basic life science research conducted by its three founding partner institutions into a robust pipeline of clinically relevant and commercially viable therapeutics and diagnostics. By harnessing the expertise of the pharmaceutical industry and academia, EDI identifies and invests in discovery research candidates most likely to be commercially viable, ultimately creating new companies that will support life science clusters in Western New York and the Finger Lakes.

The University at Buffalo, University of Rochester and Roswell Park Cancer Institute have partnered to form EDI as a new, 501(c)(3) non-profit to capitalize on the wealth of their early stage research and to expedite its progress toward commercial viability. These institutions possess an enormous repository of untapped research assets, which are ripe for commercialization. ESD’s investment of $37.05 million to support five years of EDI operations enables EDI to more rapidly tap into more than $1.15 billion of NIH-funding received by the three partner institutions over the past five years.xi

By leveraging academic and industry resources and expertise, EDI will create a more efficient path to the successful commercialization of early stage life science research, ultimately creating patents, new companies, revenue and jobs for New York State.

EDI Operates at the Earliest Phases of the Drug Discovery Process:

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EDI employs three strategies to lower the costs of drug development and create valuable new intellectual property:

1. Commercializing Existing Untapped Academic Assets: EDI taps directly into the early-stage life science research resulting from the substantial NIH and other research funding ($1.15 billion) received by its three partner institutions over the past five years. EDI leverages the complementary assets of industry and academia to more efficiently and effectively translate this research into commercially viable drug candidates.

2. Early Stage De-risking: By refocusing time and funding on the early stage discovery research candidates that are most likely to succeed, EDI increases research efficiency, reducing the amount of time and risk in developing a commercially viable therapeutic.

3. Capital Efficiencies: The opportunity cost of investment at the early pre-clinical stages is much higher than at later stages. EDI focuses on early stages of research, where efficiencies create greater savings due to the time value of money.

Academic research selected to enter the EDI pipeline will receive the industry expertise and resources needed to de-risk the technology to the point where it can be used to spin out a new life science company or be licensed to a biopharmaceutical company. All spin-out companies will be required to locate in New York State. EDI’s three partner institutions are pooling resources, sharing space, jointly fundraising and generating economies of scale to facilitate the cost-effective development of novel therapeutics from their intellectual property portfolios.

$1.15B NIH grants received

by EDI partners over five years

$37M NYS investment to unlock pipeline of

research

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New York Fund for Innovation in Research and

Scientific Talent (NYFIRST)

NYFIRST is a new $15 million competitive grant program being administered by ESD. Grants are

available for New York State medical schools to support the establishment or upgrading of their

laboratories for the purpose of recruiting exceptional translational life science researchers. By

encouraging the recruitment of talented researchers from outside of New York State, NYFIRST is

growing the base of translational life science researchers at the state’s academic medical

research institutions. Enhancing translational research capabilities increases the potential for

more life science patents, which in turn increases the state’s ability to commercialize this

research, as well as to attract additional researchers. Medical schools may receive grants of up

to $1 million and are required to provide a match of 2:1 for each grant.

Eligibility, program guidelines and information about how to apply for NYFIRST grants is available

on the ESD website: https://esd.ny.gov/ny-first-program.

2:1 Match from

medical schools

$1M In grant support

available per award

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JLABS @ NYC: An Incubator for Innovation

To foster idea generation and breakthrough innovations in the life science industry, ESD awarded capital funding of $17 million to support the launch of JLABS @ NYC, a collaboration between Johnson & Johnson Innovation and the New York Genome Center. ESD’s funding supported the renovation of 30,000 square feet of space at the New York Genome Center with wet and dry laboratory equipment and facilities. Johnson & Johnson Innovation’s JLABS @ NYC will operate the new lab facility as an incubator for life science companies.

To help attract, grow and retain early stage companies in New York State, JLABS @ NYC will

provide entrepreneurs with:

• Access to state-of-the art, affordable lab space; • Cutting-edge industry expertise and resources from J&J Innovation; and • Dynamic networking events connecting companies to investors and talent.

JLABS @ NYC will also act as a hub and a magnet for New York’s growing life science industry, generating network effects and connecting stakeholders.

In total, the facility has capacity for up to 30 life science startups focused on biotech, pharmaceuticals, medical devices and consumer health.

JLABS @ NYC opened in June 2018 with 26 resident companies, including the four winners of the JLABS @ NYC QuickFire Challenge, with each winner receiving one year of residence in JLABS @ NYC, including access to a bench, workstation and the global JLABS community.

30,000 Square feet of new

lab space

26 New startups

currently housed in JLABS @ NYC

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Wadsworth Center Public Health Laboratory: A

Valuable Asset for Public-Private Partnerships

In a boon to the Life Science Initiative, Governor Cuomo has also committed $750 million in separate funding to rebuild the Wadsworth Center. As one of the oldest and largest state public health laboratories in the nation, the Wadsworth Center lab has accumulated unique capabilities and expertise that can attract and support innovative commercial partnerships and private investment. The imminent construction of a new, unparalleled and state-of-the-art lab built for the 21st century is attracting public-private partnerships to grow the state’s life science ecosystem. The Wadsworth Center will serve as a flagship project and commercial magnet for New York State, with ongoing potential to create new jobs and revenue.

The Governor’s commitment to rebuild the lab is already paying off. With the resources of the

Life Science Initiative, ESD has already secured two private sector biopharmaceutical companies

to partner with the Wadsworth Center. Each of the two new partnerships leverages the state’s

unique public health research assets to bring new commercial life science activity to the Capital

Region. One of these partnerships will relocate ILÚM Health Solutions, a subsidiary of Merck and

Co., from New Jersey to the Capital Region, indicating the ongoing ability of the lab to attract

industry activity while supporting its crucial public health mission. The second partnership will

tap into the expertise and resources of Regeneron Pharmaceuticals, an existing New York State

company, in order to help address the pressing public health issue of Lyme disease.

ILÚM/Merck-Wadsworth Partnership: Focus on Preventing and Treating Antibiotic-Resistant Infections

ESD has secured ILÚM Health Solutions and OpGen, Inc. to partner with Wadsworth. ILÚM, a subsidiary of Merck and Co., is relocating its operations to the Capital Region from New Jersey and is anticipated to create 115 new jobs over five years. Wadsworth will contribute its expertise and assets in infectious disease surveillance and prevention to the partnership, and ILÚM and OpGen’s work will help prove the value of the lab for future industry partnerships. ILÚM will also act as an anchor institution for other firms, generating labor mobility in the region and facilitating cluster growth.

$22.4M NYS investment in ILÚM Partnership

$37.5M ILÚM

co-investment

115 Jobs to be created

over five years

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ILÚM will work with Wadsworth to fight the spread of antibiotic-resistant infections through the creation of a sustainable reporting, tracking and surveillance network that can be applied in hospitals across the state. OpGen will contribute a genomic test for antibiotic-resistant pathogens for use at hospitals in the network. The surveillance network is intended to improve patient outcomes and save health care dollars by integrating real-time epidemiological surveillance data with rapid delivery of results to caregivers through a web-based and mobile software platform.

The network will create jobs in the Capital Region with a high possibility to expand operations and further facilitate cluster growth. It will also result in: improved patient outcomes, fewer outbreaks of significance, reduced antibiotic use and savings for the health care system.

There is a clear need to more effectively prevent, detect and stop the spread of antibiotic- resistant infections. Within New York State, antibiotic resistance is becoming more common in healthcare facilities, affecting the most medically fragile populations. The Centers for Disease Control and Prevention estimates the annual US medical expenditure on antibiotic resistance is nearly $20 billion in excess direct healthcare costs, with additional costs of up to $35 billion due to lost productivity.xii The Life Science Initiative, in securing partners to collaborate with Wadsworth, is facilitating economic development while also advancing New York State as a leader in addressing key public health issues.

Regeneron-Wadsworth Partnership: Focus on Preventing and Treating Lyme Disease

ESD has also secured Regeneron Pharmaceuticals as a private sector partner to collaborate with the Wadsworth Center. Like the partnership with ILÚM, the Regeneron partnership will prove the value of the lab as a collaborator for future private sector partners.

Regeneron is partnering with the Wadsworth Center to study new diagnostics, prophylactics and treatments for Lyme disease. Both Regeneron and Wadsworth possess unique, complementary scientific assets that will be leveraged to address this public health issue.

Lyme disease is among the fastest growing infectious diseases in the United States. More efficient and specific diagnostic tests are necessary to quickly and accurately identify Lyme disease infections and more effective treatments are needed.

$24M NYS investment in

Regeneron partnership

$24M Regeneron

co-investment

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Each of the new Wadsworth partnerships demonstrates the lab’s potential to be further leveraged for public-private partnerships to help grow the life science industry. Through enhanced collaboration with the private sector, the lab will see its discoveries more rapidly carried through to commercial viability. And by gaining access to Wadsworth’s unique public health assets, such as its repository of biospecimens, its genomic capabilities and its regulatory authority, private partners will have unprecedented opportunities to tackle unaddressed health issues and grow their businesses. Further, with the growing importance of genomics, bioinformatics and personalized medicine in the life science industry, public assets such as those possessed by Wadsworth will become increasingly essential. All of these factors leave Wadsworth well-positioned to capitalize on the industry trend toward partnerships between the private and public sectors.

Regeneron Manufacturing Expansion: Investing in

Good Manufacturing Practices

Importantly, in September 2018, as a further sign of the life science industry’s growth, the Governor announced that Regeneron would also undertake a major expansion in the state, investing approximately $800 million over seven years to upgrade its corporate and manufacturing facilities and grow its existing in-state employment of 5,400 by creating an additional 1,500 new full-time jobs at its Rensselaer County campus.

To encourage Regeneron’s expansion in New York State, ESD offered the company up to $140 million in performance-based incentives, a portion of which is supported through Life Science Initiative funding, including $10 million in Life Science Initiative capital grant funding.

Moving Forward

In its inaugural year, by listening to the state’s life science community and understanding its needs, the New York State Life Science Initiative has laid a strong foundation for retaining and nurturing homegrown life science companies, while also attracting new startups to the state. The $125 million in total investments currently under implementation are specifically designed to address the long-identified gaps and opportunities in the state’s life science ecosystem.

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Summary of Life Science Initiative Operations

April 2017 – September 2018

Dedicated Life Science Initiative Funding Funding Source Appropriated Disbursed Remaining

Grants, Project Funding and Program Costsxiii

$320,000,000 $19,239,140 $300,760,860

Other State Life Science Incentives Incentive Total

Available Status Description

Excelsior Jobs tax credits

$100,000,000 Life science industry allocation implemented in April of 2017. Currently accepting rolling application submissions. One award of $400,000 made in April of 2018.

Information about the program, regulations, eligibility and how to apply can be found at: https://esd.ny.gov/excelsior-jobs-program

Refundable tax credits for R&D expenditures

$100,000,000 First applications expected in 2019 for 2018 tax benefit year.

Information about the program, regulations, eligibility and how to apply and an application can be found at: https://esd.ny.gov/life-science-tax-credit-program

Total $200,000,000

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Active Life Science Project Commitments Project Total Project Cost Life Science Initiative

Funding Commitment

Disbursed

Empire Discovery Institute (EDI)

$47,400,000 $35,400,000 $0

University of Rochester (EDI Planning Grant)

$1,650,000 $1,650,000 $0

NYFIRST $45,000,000 $15,000,000 $0

JLABS @ NYC $17,000,000 $17,000,000 $17,000,000

ILÚM/Merck-Wadsworth Partnership

$59,883,000 $22,400,000 $0

Regeneron-Wadsworth Partnership

$48,000,000 $24,000,000 $0

Regeneron Manufacturing Project

$800,000,000 $10,000,000 $0

Total $1,018,933,000 $125,450,000 $17,000,000

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Endnotes

i Under the statutory and regulatory guidelines of the Life Science Initiative, “life science” includes any science that expands the understanding of human physiology and has the potential to lead to medical advances or therapeutic applications including, but not limited to: agricultural biotechnology, biogenerics, bioinformatics, biomedical engineering, biopharmaceuticals, biotechnology, chemical synthesis, chemistry technology, diagnostics, genomics, image analysis, marine biology, marine technology, medical devices, nanotechnology, natural product pharmaceuticals, proteomics, regenerative medicine, RNA interference, stem cell research, clinical trials and veterinary science. ii “New York’s Next Big Industry: Commercial Life Sciences” – Partnership Fund for New York City (2017). http://pfnyc.org/wp-content/uploads/2016/07/New-Yorks-Next-Big-Industry-Commercial-Life-Sciences-Partnership-Fund-for-New-York-City.pdf iii “Industry Trends & Insights Report: Life Sciences in New York City” – New York City Economic Development Corporation (2014). https://www.nycedc.com/sites/default/files/filemanager/Resources/Economic_Data/industry_trends/Industry_Trends__Life_Sciences.pdf iv Economic Modeling Specialists, Intl. data (2017). v “NIH Awards by Location and Organization” – NIH Research Portfolio Online Reporting Tools (Accessed 2018). https://report.nih.gov/award/index.cfm?ot=&fy=2017&state=NY&ic=&fm=&orgid=&distr=&rfa=&pid=#tab1 vi “Measuring the return from pharmaceutical innovation” – Deloitte Center for Health Solutions (2015). https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/life-sciences-health-care/deloitte-uk-measuring-the-return-from-pharma-innovation-2015.pdf vii “External Innovation: How biopharma companies are bolstering R&D pipelines through deal-making” – Deloitte Center for Health Solutions (2017). https://www2.deloitte.com/content/dam/insights/us/articles/3788_External-innovation/DI_External-innovation.pdf

viii This annual report has been prepared in accordance with the statutory requirements of Section 16-aa (5) of the New York State Urban Development Corporation Act (Chapter 174 of the Laws of 1968, as amended). Of note, for some categories of information, such as economic impacts and federal funding awards, limited data was available for the reporting period due to a lag in available data and the early stages of many initiatives, which were first authorized in the April 2017 State budget. Additional information on these topics will be provided in subsequent annual reports. ix Tax credits available for the 2018 tax year. Information about the program, regulations, eligibility, how to apply and an application can be found at: https://esd.ny.gov/life-science-tax-credit-program

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x Information about the program, regulations, eligibility and how to apply can be found at: https://esd.ny.gov/excelsior-jobs-program x Includes costs associated with Life Science Initiative’s active projects, program administration costs and costs not associated with active projects. xi “NIH Awards by Location and Organization” – NIH Research Portfolio Online Reporting Tools (Accessed 2018). https://report.nih.gov/award/index.cfm#tab2 xii “Report to the President on Combating Antibiotic Resistance” – President’s Council of Advisors on Science and Technology (2014). See: https://www.wadsworth.org/sites/default/files/WebDoc/report-to-the-president-on-combating-antibiotic-resistance.pdf. Images provided courtesy of the New York State Department of Health.

Cover image: 3D cryo-EM structure of the protein synthesizing machinery, the small (28S) ribosomal subunit, present within the powerhouse of the cell, the mammalian (Bos taurus) mitochondria. Yellow: 12S rRNA; Purple: r-proteins.