A Little Bit May Go a Long Way - Drug Discovery and Development

While the merits of health care reform have been—and will continue to be—debated, small biotech research firms saw some positive results in early November. And, the good news came from a surprising source: the U.S. Internal Revenue Service (IRS).

In early November, several thousand small biotech companies were recipients of tax credits and grants to help finance research efforts. The grants ranged from a few thousand dollars to nearly $250,000 and totaled $981 million. More than 90 companies received tax credits for 2009 and 2010 adding up to $18.7 million.

This grand total of $1 billion allocated for credits and grants had a $5 million limit for each eligible applicant. Since awards were made by project, some applicants received more than one grant or credit.

The Qualifying Therapeutic Discovery Project tax credit was introduced as part of the Patient Protection and Affordable Care Act of 2010. Its intent was to provide tax credits and grants to smaller biotechnology firms—no more than 250 employees—that show significant potential to produce breakthrough medical therapies, support jobs, and increase U.S. competitiveness.

According to program requirements, the research efforts should result in new therapies to treat areas of unmet medical need or prevent, detect or treat chronic or acute diseases and conditions; reduce the long-term growth of health care costs in the United States; or significantly advance the goal of curing cancer within 30 years.

The IRS, in conjunction with the Department of Health and Human Services, approved applications for projects. The IRS determined the credit or grant amount for each approved project.

Will the grants and credits advance research? Can few thousand dollars really make a difference? BIO, the biotechnology industry advocacy group, conducted a survey (through Penn Schoen Berland) of leaders at emerging biotech companies. The reaction to the Therapeutic Discovery Project (TDP) was overwhelmingly positive.

• 75% of the respondents indicate that TDP will have a very positive or positive impact on job sustainability.
• 72% indicated that it will have a very positive or positive impact on U.S. biotech competitiveness.
• 76% said it will have a very positive or positive impact on advancing life-saving therapies and cures.

Based on survey results, TDP is likely to help biotech job growth and sustainability. More than two-thirds of the respondents said that if their company received a tax credit, they would be able to create more jobs. The tax credit is incentive for to keep research operations in the U.S., said 67% of respondents.

Most encouraging was the optimism of the biotech leaders. Nearly all said the grant or credit would somewhat likely or very likely advance their research. As the industry emerges from tough economic times, that is a positive investment to take to the bank.