South Orange Company Thriving After Boost From NJEDA

SOUTH ORANGE, NJ — A South Orange-based manufacturing company is thriving in the township, and it's due in part to support from the New Jersey Economic Development Authority (EDA).

According to the EDA, more than 500 hospitals and dialysis clinics in the United States currently use water-filtration systems from medical device maker Nephros Inc. to decrease the incidence of infectious diseases.

The company recently built out a new, 8,000-square-foot facility in South Orange, and has seen rapid growth over the past year, jacking up sales to $3.8 million, a 65 percent increase from 2016. Nephros has also grown from nine to 14 employees and raised nearly $3 million in investment capital in recent weeks, the EDA stated last week.

Founded in 1997, the company, whose name means “kidney” in Greek, originally focused on creating blood-purification technologies for patients with end-stage renal disease (ESRD). In recent years, the company has shifted its short-term focus to developing water filters for infection control in medical facilities, specifically designed for use at sinks, showers and ice machines, the EDA stated.

Since pivoting its focal point to infection control in 2015, the number of hospitals using Nephros’ products has swelled from 50 to over 500, the EDA stated.

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One of the cogs behind the company’s recent success has been its participation in the New Jersey Technology Business Tax Certificate Transfer (NOL) Program.

What’s the NOL? According to the EDA:

“The Technology Business Tax Certificate Transfer Program enables qualified, unprofitable NJ-based technology or biotechnology companies with fewer than 225 US employees (including parent company and all subsidiaries) to sell a percentage of net operating losses (NOL) and research and development (R&D) tax credits to unrelated profitable corporations.”

Nephros Chief Financial Officer Andy Astor said that the NOL program gave the company a huge financial boost.

“It took the place of a fundraising round for us, providing the operating capital we need for the foreseeable future,” Astor said. “Without it, we would have needed to bring in additional capital by either diluting our existing investors or adding debt to our balance sheet.”

“The NOL Program allowed us to sell not only our current NOLs, but also those we sustained in previous years,” Astor stated. “The NOL Program was an excellent bridge to our goal of achieving cash flow break-even in 2018.”

“To see New Jersey companies like Nephros flourish as a result of our NOL Program reinforces the kind of impact that smart, targeted investments in growing companies can have for New Jersey’s economy,” EDA Chief Executive Officer Tim Sullivan said.

Unprofitable technology and life sciences companies have until June 30 to apply to participate in the 2018 NOL Program. The application and a list of benefits and requirements can be found here.

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Photo: CFO Andy Astor (via NJEDA)