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Jennifer Robison

Nevada Agency Targets New Jersey Companies

18 August 2006

NEVADA -- An agency bent on economic diversification is diversifying its recruiting pitch.

The Nevada Development Authority, known for cheeky advertising campaigns that take pot shots at California's business climate, is reaching across the continent in a bid to capture some of New Jersey's prized biotechnology and life-sciences companies.

Earlier this month, the authority launched a $100,000 advertising buy in four East Coast newspapers: the Times of Trenton (N.J.), the Press of Atlantic City, Business News New Jersey and the Philadelphia Inquirer.

The ad features Las Vegas Mayor Oscar Goodman flashing the peace sign while leaning on a 6 of hearts card that touts the city's business environment.

Nevada Development Authority President and Chief Executive Officer Somer Hollingsworth said the ad buys resulted from a July budget impasse in New Jersey that led to the shutdown of the state's 12 casinos. When New Jersey Gov. John Corzine's proposed budget included an increase in the state's sales tax from 6 percent to 7 percent to cover a $4.5 billion deficit, legislators refused to pass the spending plan.

The state ran out of money, and government offices including the Casino Control Commission closed. Without state inspectors to watch over them, casinos were shuttered for three days until legislators passed a spending plan. The new budget included Corzine's sales-tax boost.

"It was very obvious to us that (New Jersey businesses) are taxed to the point that no one wants any more taxes," Hollingsworth said. "With the casino shutdowns and the tax problems there, we saw an opportunity and decided to see what we could do."

The authority's goal: to siphon off some of New Jersey's biotech sector.

Biotech is vital to the New Jersey economy: New Jersey life-sciences companies spent more than $12 billion on research and development in 2003, according to the Biotechnology Industry Organization. More than half of the new medicines the federal Food and Drug Administration approves were developed in the Garden State. Global pharmaceutical companies including Merck & Co., Ortho-McNeil and Johnson & Johnson are headquartered there.

Authority officials said they hope some of the companion businesses that have clustered around Big Pharma will consider moving or expanding to Nevada.

"If we can get them out here, they'll see the cost of living is much lower," Hollingsworth said. "They can do the same business they're doing and put major dollars on their bottom line, just by moving here."

Philip Kirschner, president of the New Jersey Business & Industry Association, spotted the authority's ad in Business News New Jersey. The promotion caught his eye, he said, because he'd never seen relocation pleas from such a far-flung state. Most pitches for New Jersey business come from nearby states such as Virginia and the Carolinas.

Kirschner said the authority's ad was cause for concern.

"Every state wants to protect the base of companies it has," he said. "Obviously, any threat to that base is something that should be taken seriously."

Added James Hughes, dean of the Bloustein School of Planning and Public Policy at Rutgers University in New Brunswick, N.J.: "New Jersey should worry, and is starting to worry. New Jersey still has enormous concentrations of pharmaceutical headquarters, but the state has not focused much on economic development."

However, Kirschner and Hughes said Silver State officials have to overcome significant obstacles to draw companies away from the Eastern seaboard.

Life-sciences companies might hesitate to abandon New Jersey's massive concentration of biotech labor and capital for a market that doesn't have much of either thus far.

"(Biotech companies) have a lot of natural buyers for their products in New Jersey, and a lot of people who might acquire their companies when the founders cash out," Kirschner said. "There's a lot of talent already here that life-sciences companies can raid. We have the infrastructure, the major hospitals and the pharmaceutical companies. These are the collaborations scientists and businesspeople are looking for that you can't create overnight."

Also, Hughes said, the biotech businesses that are expanding are looking for locations near top-flight research universities in major cities such as Boston and San Diego. They're after the abundant doctorate holders and "faculty superstars" that big-name schools churn out, he said.

And life-sciences companies are unlikely to yield their positions near New York and Philadelphia, which have their own big biotech contingents. In addition, dual-income families living in central New Jersey can access about 9 million jobs in New York, Pennsylvania and New Jersey by car, rail or ferry -- a key factor that could help New Jersey retain biotech experts, Hughes said.

There's also hope in the state that Corzine, despite his sales-tax increase, will roll back some of the state's business levies.

Kirschner said the state's newest budget reversed a 4-year-old law that barred companies from claiming net operating losses. It also struck down the state's alternative minimum assessment, which ordered companies to pay taxes even if they lost money on the year.

Hollingsworth said he has a plan to maneuver around those hurdles.

He'll call on the new Nevada Cancer Institute to help with the authority's sales pitch. The institute has hired researchers from the University of Chicago, Yale University, Memorial Sloan-Kettering Cancer Center and MD Anderson Cancer Center.

"We'll have (institute researchers) tell recruits why they came from all over the world to Las Vegas," Hollingsworth said.

Hollingsworth said the cancer institute, the Lou Ruvo Alzheimer's Institute planned in downtown Las Vegas and the Nevada Neurosciences Institute are just a handful of developments that could attract biotech research and development to Las Vegas.

Next week, the authority will launch a direct-mail campaign targeting the top management at 250 biotech and life-sciences companies in New Jersey.

If response to the authority's initial marketing blitz is positive, the group will roll out a second ad in September giving specifics on Nevada's tax structure.

"We would like nothing better than to educate people and tell them, 'You don't have to commute from one state to another for work or home,'" Hollingsworth said. "We'll tell them, 'It's all here for you: quality of life, home -- everything is here.'"