The Biotechnology Industry Organization believes that fully realizing the promise of biotechnology requires a comprehensive national strategy that fine-tunes some policies and overhauls others.
BIO’s set of policy proposals address two vital needs:
1) the need to re-engineer the biotech economic model, and
2) the need to re-invent the idea-to-market pathway for biotech cures and other products.
Below is that plan:
Small Business Tax Incentives
Removing Financing Restrictions: Section 382 Net Operating Loss Reform
Section 382 of the Internal Revenue Code restricts the usage of net operating losses by companies that have undergone an “ownership change.” However, small biotech companies are unintentionally caught in its scope due to their reliance on outside financing and investment deals. Exempting net operating losses generated by qualifying research and development by a small business from Section 382 and redefining “ownership change” to exclude certain qualified investments (like those in rounds of venture financing) would enable small biotech companies to increase their value when preparing for mergers or initial public offerings.
Nearly a third of small U.S. biotech companies
have been approached to move their R&D
operations offshore, and CEOs named China
and India as two prime destinations.
Source: Therapeutic Discovery Project Post-Award Survey.
Penn Schoen Berland, prepared for BIO.
Incentives for Non-Investor Capital
Increasing R&D Investment: Tax Holiday on Repatriated Investments in Small Biotechs Many small biotechnology companies rely on collaborations with large multi-national corporations to fund their research and development. A repatriation tax holiday on funds brought back to the United States from abroad would incentivize these large companies to repatriate earnings they are holding overseas and give them the ability to invest in and collaborate with small biotechs conducting groundbreaking research here at home.
Rewarding Innovative R&D Businesses: U.S. Innovation Box
Many Western European countries have implemented reduced corporate tax rates on income stemming from certain types of intellectual property. Allowing for a reduced corporate rate on this type of income would make investment in U.S. biotechnology more attractive and competitive, and would provide innovative companies with a greater return on their R&D expenses — allowing them to undertake more research projects here in the United States.
Most big pharmaceutical companies have
announced significant cuts to research and
Source: Reuters: “Analysis: Big Pharma strips down
broken R&D engine,” 11 May 2011.
Supporting Industry Collaborations: Section 197 Amortization Reform
Small biotechs typically have intangible assets that are amortizable under Section 197 of the Internal Revenue Code. Reforming that law to provide for faster cost recovery for intangible assets acquired by investors would encourage large company investors to invest at an earlier stage in small biotech companies’ research.