Massachusetts Life Sciences Initiative: Stakeholder Update

The Massachusetts Life Sciences Initiative: Stakeholder Update Presented by: Luis Barros SVP of Investments and Industry Development Massachusetts Life Sciences Center March 6, 2009

Overview of the Life Sciences Initiative FY 09-10 Strategic Priorities Certification Process Programs Tax Incentives MLSC Investment Fund Programs Investments and Returns to Date What You Can Expect to See in the Next Few Months

State investments in the life sciences “Super Cluster” to: Promote economic development Support the Commonwealth’s world-class academic medical centers, research institutions, universities and industry leaders Promote a highly skilled and educated workforce Create an industry-friendly environment Strengthen and protect Massachusetts’ global leadership position in the Life Sciences Support the development of treatments, therapies and cures Chapter 130 of the Acts of 2008 –Major Objectives

The Massachusetts Life Sciences Law –Key Elements • 10-year, $1b investment: • $500m in Capital Funding (20 year bonds) • Just under $300M in targeted investments identified in the law • $250m (through annual $25m budget appropriations) for the MA Life Sciences Investment Fund • $250m in tax incentives (with an annual cap of $25m) to be awarded to “certified life sciences projects”

Secretary of Housing and Economic Development Greg Bialecki Secretary of Administration and Finance Leslie Kirwan President of the UMass System Jack Wilson, PhD A CEO of a Massachusetts-based life sciences corporation Josh Boger, PhD, President and CEO, Vertex Pharmaceuticals A researcher involved in the commercialization of biotechnology, pharmaceuticals or medical diagnostic products Lydia Villa-Komaroff, CEO, Cytonome A physician licensed to practice medicine in the Commonwealth and affiliated with an AMC Peter Slavin, MD, President, Massachusetts General Hospital A person with financial expertise in the life sciences Marc Beer, former CEO, ViaCell Inc. The Massachusetts Life Sciences Law –MLSC Board of Directors

Massachusetts Life Sciences Center Scientific Advisory Board • Lila Gierasch, Ph.D.,Professor of Biophysical Chemistry, Department of Biochemistry, University of Massachusetts Amherst • Richard A. Goldsby, Ph.D., John Woodruff Simpson Lecturer and Professor of Biology, Amherst College • Jeffrey Leiden, M.D., Ph.D., Managing Director, Clarus Ventures • David T. Scadden, M.D., Professor of Medicine, Harvard University, Co-Chair, Department of Stem Cell and Regenerative Biology, Harvard University, Co-Director, Harvard Stem Cell Institute, Director, MGH Centerfor Regenerative Medicine • Alan E. Smith, Ph.D., Chief Scientific Officer, Genzyme Corp. • Allison Taunton-Rigby, Ph.D., CEO and Director, RiboNovix, Inc. • Philip Zamore, Ph.D., Professor, Biochemistry and Molecular Pharmacology, UMass Medical School • CHAIR: Harvey Lodish, Ph.D.,Whitehead Institute, and Professor of Biology and of Bioengineering, MIT • James Barry, Ph.D.,Vice President, Corporate Research and Advanced Technology Development, Boston Scientific • Doug Cole, M.D., General Partner, Flagship Ventures • James J. Collins, Ph.D.,Professor of Biomedical Engineering, Boston University • George Q. Daley, M.D., Ph.D.,Children's Hospital Boston, Harvard Medical School, Harvard Stem Cell Institute • Patricia K. Donahoe, M.D.,Director of the Pediatric Surgical Research Laboratories and Chief Emerita of Pediatric Surgical Services at Massachusetts General Hospital, and the Marshall K. Bartlett Professor of Surgery at the Harvard Medical School • Jonathan Fleming, M.P.A., Managing General Partner, Oxford Bioscience Partners • Jean M. George, M.B.A., Partner, Advanced Technology Ventures

Overview of the Life Sciences Initiative FY 09-10 Strategic Priorities Certification Programs Tax Incentives MLSC Investment Fund Programs Investments and Returns to Date What You Can Expect to See in the Next Few Months

Work Plan for MLSC Ramp UpDeveloping the MLSC’s Business Model • July – September ‘08 • “Active Listening” to: • Universities, Research Institutes and Academic Medical Centers • Industry Executives • Investment Community • Trade Organizations • Professional Societies • Key Opinion Leaders • Other Life Sciences Initiatives • Economic Development Groups • Small Business Leaders MARKET INPUT BOARD andSABINPUT MLSC PORTFOLIO STRATEGY Solicitations Decision Criteria Performance Metrics Positioning and Branding

Strategic PrioritiesKeyQuestions What important unmet needs and challenges does the Life Sciences community face that could be addressed by the Center? Where are the best opportunities for the MLSC to have impact? What are the implications for the MLSC’s top priorities for the next 2-3 years? MLSC Investment Portfolio High Invest too little, too broadly to make an impact Worst Case Breadth of Investments Make focused investments at adequate levels to make impact Large Market, Difficult to Enter and Penetrate Best Case Low Low High Size of Investments

Strategic PrioritiesWhere Do Stakeholders Believe the MLSC Can Make a Difference? Stakeholders Included in the Center’s Active Listening Phase Recommended Priorities for the MLSC • FUND EARLY-STAGE COMPANIES and TECHNOLOGY TRANSFER • PROMOTE WORKFORCE DEVELOPMENT • STRENGTHEN THE COMPETITIVE POSITION OF ACADEMIC and MEDICAL RESEARCH INSTITUTIONS • SERVE AS A CONVENER AND COORDINATOR • Investment and Economic Development Communities • AcademicCommunity • Medical Community • Industry • Community

MLSC FY ’09 Programs At-a-GlanceAddress Priorities of the Life Sciences Community Working Capital Innovation Program(funds other promising opportunities) Pre-Clinical Regulatory Review Clinical Adoption/ Marketing Commercial-ization Clinical Trials Regulatory Approval Therapeutic Candidate Lead Optimization Product Prototype Development Translational Research Investor Risk Reduction Life Sciences Accelerator Program (Companies) Education and Workforce Dev Program (Academic and Non-Profit Institutions) New Faculty Young Investigator Cooperative Research (Tech Transfer) MLSC Investment Fund Programs = $12M Leverage Outside Capital Workforce Development $25M Tax Incentive Program $15M Capital Investments Program

Certifying Life Sciences Companies The Life Sciences Act requires that any company receiving monetary benefits must be certified by the Life Sciences Center, with the exception of applications to the Small Business Matching Fund. The MLSC will certify companies as they apply for funding. The Life Sciences Act contains claw-backs and decertification procedures if companies do not reach their promised project employment/revenue/ROI goals. Proposed approach to certification: Definition of “life sciences” company as specified in the Act User friendly web-based process for applicants Will not bar early-stage companies from receiving investments; calibrated responses as appropriate for small or early stage companies vs. large, more mature companies Certification is not an independent attribute – the Center will only certify companies that are funded • The same certification questions will be embedded in all program applications, along with questions specific to the funding being requested

$250 million over 10 years Maximum of $25 million per year 9 different credits/benefits Applicable to companies at all development stages Several credits are refundable (ITC, FDA User Fee, R&D Expense) Non-transferable Refundability protects intended beneficiaries Life Sciences Center has full discretion over recipients and criteria Consultation with DOR and ANF required by statute Each beneficiary must be a “certified life sciences company” MLSC Tax Incentive Program – Overview • Year 1 Timeline for Tax Incentive Program Applications • Online application live – January 1, 2009 • Application deadline – May 15, 2009 • Awards announcement – no later than September 15, 2009

Emerging technology Fund,Tax Exempt Industrial Financing Financing: Workforce Training: Workforce Training Fund Tax Structure and Incentives: R&D Tax Credits Investment Tax Credit Single Sales Tax Factor TIF Agreements Infrastructure: CDAG, PWED, MORE MLSC’s Early Stage Program Objective:Help Smooth the Difficult Financial Path to Market Current State Economic Development Programs Current programs helplate stage companies Universities, Institutes, Medical Centers Companies 1250 Launch Patent Filing 1000 Discovery Development 750 Initial R&D Product/prototype Discovery, identification Preclinical Phase I Phase II Phase III FDA/510k Review Approval 500 Public Equities & Debt 250 Annual Net Cash Flow (in millions) Corporate 0 Grantsand Angels Venture Funding Venture Funding Mezzanine Financing Public Equities &IPO -250 Time in Market Funding Gap Funding Gap -500 Highest Risk & Lowest Valuation Medium Risk & Medium Valuation Lowest Risk & Highest Valuation MLSC Support MLSC Support MLSC Support

Accelerator Program At-a-Glance • 5-Year Loan • $100-$500K target range • 10% Interest rate • Unsecured • Payable on financing event of at least $5M • Preference for matching other sources of capital • Pre Series A & Opportunistic • Life science sectors as defined by the statute: device/diagnostics, biotech, pharmaceuticals, bioinformatics, etc. • Round 1 Timeline • Application deadline – March 6, 2009 • Awards announcement – no later than April, 21, 2009

Investments and Returns: The Bottom Line It’s been just seven months since the signing of the Life Sciences Act, and we are already seeing a substantial return on this investment, both in jobs created, and in support for life-saving scientific research. • To date the MLSC has committed $33 million in public funding to support growth in the life sciences • These investments have leveraged more than $327 million in additional private investment • These investments are projected to create more than 850 new jobs across the state And we have only just begun!

Corporate Consortium Program The MLSC is committed to highly leveraging the public tax dollars that we invest by attracting matching dollars from the private and non-profit sectors. At its December 2008 meeting, the MLSC Board of Directors approved the launch of the MLSC’s Corporate Consortium Program, with Johnson & Johnson as the charter corporate member. Other major life sciences corporations have expressed interest in joining. Highlights of the program include: Funds the MLSC’s mission by attracting matching corporate investments in our (industry-targeted) programs The MLSC will initially seed the Program with a minimum of $500K from each corporate participant MLSC’s internal team will conduct sourcing, due diligence and decision; manage portfolio of investments Final investment decisions are made by MLSC’s Board Has committed a minimum of $500,000 to match investments made by the MLSC in FY 2009-10

Investments and Return to Date On October 31, 2008 the MLSC Board voted to provide a $5.2 million grant to the Town of Framingham for construction of a new wastewater facility to serve the Framingham Technology Park. The Framingham wastewater project will allow Genzyme Corporation to build a new facility and create 300 new manufacturing jobswithin the next year. “This grant represents a partnership between the state, a local community, and the private sector to meet infrastructure needs, while creating hundreds of jobs here in Massachusetts. This is the sort of targeted investment we must continue making even during challenging economic times, as we work to foster economic growth in Massachusetts.” - Governor Deval Patrick, Metrowest Daily News

Investments and Return YTD In May 2008, RainDance Technologies President and CEO Chris McNary announced that the company would move its operations from Connecticut to Lexington, Massachusetts. McNary cited the Commonwealth’s $1 Billion Life Sciences Initiative “as the stimulus for RainDance’s decision to relocate to Lexington from out of state this May.” RainDance employs 54 people at its Lexington facility. The MLSC and the Life Sciences Initiative are attracting quality life sciences companies to the Commonwealth. In December 2008 the MLSC awarded the Harvard School of Engineering & Applied Sciences and Physics Department, in collaboration with RainDance Technologies, a $250,000 annual grant for three years to develop a new fluorescence activated cell sorter that will “further advance the growth of droplet biology and the positioning of RainDance and Harvard as world innovation centers for this important technology – as well asbolster the goals of the State’s Life Sciences Initiativeand further position Massachusetts as a biotech industry leader.” (Chris McNary)

Investments and Return to Date • The Center is helping Massachusetts companies expand and create jobs. • In January, 2009, the MLSC Board of Directors approved a $7.4 million grant, to be paid over two years, that will facilitate the expansion of Organogenesis, a Canton-based regenerative medicine company. Organogenesis was the first company to successfully commercialize and mass produce a living cell product. The company forecasts that the Center’s investment will bring the following returns: • A return on investment for the Commonwealth of approximately $6 million in annual tax revenue by 2013; • A greater than twofold increase in the company’s workforce by 2013, including the creation of approximately 280 new jobs; • Leveraging of more than $50 million in private investment; • A world leading regenerative medicine manufacturing facility as an anchor of the industry within the state; and • Potential for substantial federal grants directed to Massachusetts.

Investments and Return to Date On November 17th, 2008 the MLSC joined with Governor Patrick and Senate President Murray to announce funding of $10 million to renovate the Loeb Lab at the Marine Biological Laboratory in Woods Hole. The project will create 200 jobs in the building trades at it’s peak, and up to 50 permanent jobs in the life sciences. The state’s commitment of $10 million was leveraged by MBL to receive an additional $15 million in private funding from the Howard Hughes Medical Institute (HHMI). According to Dr. Gary Borisy, Director and CEO of the MBL, the MLSC’s commitment of $10 million helped secure the HHMI grant.

Investments and Return to Date In October 2007 the MLSC Board of Directors approved funding to support the creation of an International Stem Cell Registry and Embryonic Stem Cell Bank at the University of Massachusetts Medical School. The MLSC is investing $7.7 million in the UMass Medical School Stem Cell Bank and $570,000 in the Stem Cell Registry. On September 11, 2008 the MLSC and UMass Medical School announced the official launch of the International Stem Cell Registry. Announcement of the Stem Cell Bank will occur this winter. With optimism around the Obama Administration’s lifting federal restrictions on embryonic stem cell research, the Center’s stem cell investments will help position Massachusetts to compete for new federal research dollars, as well as provide stem cell lines to national and international academic and commercial organizations.

Investments and Return to Date In 2008, the MLSC launched a $12 million Matching Grant Program for new investigators, faculty positions, and cooperative research. To date $10.6 million has been awarded. These grants: • Are enabling 11 young Massachusetts scientists to continue their research, establish independent laboratories and possibly secure larger-scale NIH funding • Are improving the ability of five (5) universities and academic medical centers across Massachusetts to compete more effectively for top faculty • Are funding research collaborations between six (6) industry and academic partners focused on new therapies and technologies with high commercialization potential • Will accelerate the translation of treatments and therapies “from the research bench to the bedside” The Center’s grants leveraged $10.6 million in matching funds from private and public research institutions and industry sponsors -- creating a $21 million investment in translational research across the Commonwealth

Investments and Return to Date The Matching Research Grants have been broadly diverse: • New Investigator Grants 11 awards ($3.75 million over 3 years) • Beth Israel • Boston University • Broad Institute • Harvard Medical School • Massachusetts General Hospital • MIT(2) • Tufts Veterinary Medical School • UMass Amherst • UMass Lowell • Whitehead Institute • Faculty Start-up Grants 5 awards ($3.75 million over 3 years) • Boston University • Brandeis • UMass Amherst • UMass Boston • UMass Lowell • Cooperative Research Grants 6 awards ($4.5 million over 3 years) • Brigham & Women’s Hospital • Harvard University, School of Engineering & Applied Science • Immune Disease Institute • Massachusetts General Hospital • UMass Lowell • UMass Medical School Awarded July 08 Awarded July 08 Awarded Dec 08

Investments and Return to Date • In September 2008 the Life Sciences Talent Initiative report, Growing Talent, was released jointly by the MLSC and Mass Biotechnology Council. • The Report: • Examines the life sciences workforce needs throughout the Commonwealth • Quantifies workforce needs in the Massachusetts life sciences cluster • Establishes foundation for MLSC workforce development programs

What You Can Expect in the Next Few Months Upcoming events: Roundtable discussions regarding MLSC programs and application process (ongoing) MLSC headquarters opening (by May 1, 09) Museum of Science event with Legislators (March, 09) Opening of Massachusetts Embryonic Stem Cell Bank (TBD) Groundbreaking events in Framingham and Woods Hole (TBD) Showcase Research Matching Grants awardees (Ongoing) Bio 2009 (May 18-21, 09 in Atlanta) Roundtable discussions with key constituent groups including disease advocacy organizations and regional economic development groups

Massachusetts Life Sciences Initiative: Stakeholder Update