Biotechnology firms burn through tens of millions of dollars of cash trying to prove their novel therapies work.
In 10 days, the federal government is going to tell them how they might be able to recoup some of those expenses.
The recently passed health-overhaul legislation contains $1 billion for biotechnology firms with fewer than 250 employees to claim a tax credit or receive a cash grant. (Big Pharma need not apply.)
That may not sound like much given the hundreds of small biotech firms around the nation, but Chris Molineaux, president of Pennsylvania Bio, said it would be a much-needed “shot in the arm” for companies in our region.
It’s not clear at all how much a company would receive, only that the amount would be no more than 50 percent of the expenses connected with a “qualified therapeutic discovery project.” So we’re not talking about rewarding a company that’s stamping out vitamin E pills, but a firm that’s involved in projects trying to lower the cost of health care or treat unmet medical needs.
“This region and Pennsylvania is ripe with potential, with a lot of scientists and start-up activity,” said Molineaux, whose organization has 389 members.
It’s also ripe with a lot of law firms and tax consultants eager to help biotech firms rush to apply once the rules of the road are published by the Treasury Department on May 22.
So far, many advisers are taking their cues from the $2.3 billion Qualifying Advanced Energy Project Credit, which was included in the $787 billion economic-stimulus plan. That tax credit is aimed at manufacturers working on electric vehicles and renewable-energy technology.
Scott Balestrier, tax managing partner of BDO Seidman L.L.P., based in Philadelphia, said he believed biotech firms would show more interest in receiving a cash grant rather than a tax credit. Since most biotechs aren’t taxable now and may never get into the black, a tax credit wouldn’t be beneficial, he said.
My grandmother was a big believer that “every little bit helps.” But then, she wasn’t involved the $79.1 billion U.S. biotech industry.
The amount of venture capital raised by biotech firms in 2009 was $4.6 billion, the second-highest amount behind the record $5.5 billion raised in 2007, according to consulting firm Ernst & Young.
So this $1 billion tax-credit program would be equivalent to about one quarter’s worth of venture investment.
Still, Molineaux likened it to how Pennsylvania approached its share of the nationwide tobacco litigation settlement. The state used a portion of the money to fund “life- sciences greenhouses” that over the years “sparked a lot of new companies,” he said.
So long, Scranton
The new head of Pennsylvania’s economic development agency may be a familiar face from Scranton.
No, not Michael Scott of Dunder Mifflin. It’s Austin Burke, president of the Greater Scranton Chamber of Commerce.
Burke, 64, would succeed George Cornelius as secretary of the state Department of Community and Economic Development should the Pennsylvania Senate confirm the nomination by Gov. Rendell.
In January, Cornelius, the former chief executive of Arkema Inc., agreed to become the president of Bridgewater College in Virginia. Set to leave by June 30, Cornelius has run the state agency since early 2009.
Burke has spent 30 years as president of the Scranton chamber. His new gig won’t last nearly as long. With Rendell leaving office in January 2011, Burke won’t have enough time to switch paper suppliers.
So don’t even think of cold-calling him. You hear me, Dwight?