Client Alerts
April 29, 2010

Biotechnology companies receive R&D incentive from Health Care Reform

Stites & Harbison, PLLC, Client Alert, April 29, 2010

Small biotechnology and pharmaceutical companies got a dose of incentive from Health Care Reform in the form of a Federal tax credit and grant program. The Therapeutic Discovery Project Tax Credit program (“TDPC”) sets aside $1 billion dollars for credits and grants to qualifying companies investing in research and development in therapeutics.

Qualifying companies, with no more than 250 employees, can apply to receive a credit for up to 50% of their investments in a Qualified Therapeutic Discovery Project (“Discovery Project”). For start-up companies not yet generating profits, the benefits of the program can be received in the form of a nontaxable grant. Under the TDPC, a start-up company that invests $2 million dollars in a Discovery Project could receive a check for $1 million from the Treasury.

Qualified Therapeutic Discovery Projects are designed to further research and development of pharmaceuticals or biologics useful for treating or preventing diseases or conditions. Such Discovery Projects can include conducting pre-clinical activities, clinical trials, and clinical studies, and projects designed to secure FDA approval of a therapeutic. Other examples include projects designed to diagnose diseases or to aid in guiding therapeutic decisions, such as biomarker-based technology; and projects designed to develop products and methods for delivery or administration of a therapeutic.

Guidelines and application procedures will be released before May 21, 2010. Companies interested in pursing a credit or grant under the program should begin planning now to ensure early submission of their application after the guidelines have issued.

Qualified investments occur in 2009 and 2010 (or fiscal years 2010 and 2011) for expenses necessary for a Discovery Project. Companies selected to receive a credit or grant will be selected based on whether the project shows potential: (1) to result in new therapies to treat areas of unmet medical need; to prevent, detect, or treat chronic or acute diseases; to reduce long-term health care costs in the United States; or to significantly advance the goal of curing cancer within 30 years; and (2) to create and sustain high quality, high paying U.S. jobs; and (3) to advance the competitiveness of the United States in the fields of life, biological, and medical sciences.

Those interested in receiving updates when the guidelines and application procedures are released can contact Mandy Wilson Decker at [email protected].

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Intellectual Property Litigation Health Care - Life Sciences Technology & Commercialization Intellectual Property & Technology Biotechnology/Life Sciences