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Biotech Firms May Get Up to $5 Million Tax Credit
(Update1)

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By Drew Armstrong

May 21 (Bloomberg) -- Biotechnology companies with fewer than 250 employees may get as much as $5 million each in U.S. government tax credits to help pay for development of “promising” new therapies.

The program gives companies with fewer than 250 employees as much as a 50 percent credit on investments that the government judges will create “promising” therapies and products, according to an Obama administration fact sheet. Investments made in 2009 and this year are eligible.

The $1 billion in credits may help offset the effects of the slow economy for companies that don’t yet have products on the market. GlycoMimetics Inc., a closely held company based in Gaithersburg, Maryland with 25 employees, will apply to help pay for the development of its experimental treatments for sickle cell anemia, said Chief Executive Officer Rachel King.

“This is a very difficult environment to raise money in for any biotech company,” King said yesterday in a telephone interview. “To the extent that we can take advantage of these credits, we can put the money in our coffers and it will help the development of this drug.”

The drug, called GMI-1070, is in the second of three stages of testing normally needed for U.S. regulatory approval. Getting the tax credit will help fund the next phase of clinical testing, King said. GlycoMimetics also wants to test the drug for certain types of blood cancer, she said.

Unmet Medical Needs

The tax credit program is part of the health-care overhaul law signed by President Barack Obama in March. Under the program, the government will evaluate biotechnology projects, assessing whether they “produce new therapies, address unmet medical needs, reduce health care costs or advance the goal of curing cancer,” according to the fact sheet, provided by the Treasury Department.

The credits will “help advance research to fund and find life saving treatments” and will also “increase the competitiveness of our biotech industry,” Treasury Secretary Tim Geithner said on a conference call today.

The U.S. recession has tightened access to investment capital, the lifeblood of the biotechnology industry, during the past two year, National Institutes of Health Director Francis Collins said on the conference call.

Much-Needed Shot

“This program brings a much-needed shot in the arm to small life science companies for whom the capital markets have been frozen,” Biotechnology Industry Organization Chief Executive Officer Jim Greenwood said in a press release.

While the administration expects thousands of applications for the credits, it didn’t have an exact estimate of what size each would be or how many companies would qualify, officials said on the conference call.

“We would like to see a scenario where most eligible projects do get a grant,” Ellen Dadisman, spokeswoman for the Biotechnology Industry Organization, said yesterday in a telephone interview.

Biotech firms will have until July 21 to get their applications to the government. The Treasury department plans to evaluate whether the projects that companies are seeking funds for will create jobs or make the U.S. biotechnology industry more competitive. The NIH also will review the applications.

To contact the reporter on this story: Drew Armstrong in Washington at [e-mail].
Last Updated: May 21, 2010 11:50 EDT