BIO

Creating the Policy Environment for Small Biotechs to Thrive

By Tom Dilenge

July 14, 2020

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All across the country small, emerging biotechnology companies are working to solve some of the most important and complex scientific challenges facing the world today. These innovators are racing to develop the medicines and vaccines that will help end the COVID-19 pandemic and ensure we are better prepared for the next one. They are also working to develop new foods that will help alleviate hunger and new sustainable fuels and other biobased materials that will improve our environment.

Simply put, these companies and their researchers are punching above their weight.

For example, more than 70 percent of COVID-19 R&D is being undertaken by small companies; and more than 50 percent of this important work originated inside the United States.

There are a host of factors that contribute to America’s leadership in biotechnology innovation. These include our country’s world-class research institutes, savvy risk-taking entrepreneurs and private investors willing to commit the capital needed to fund these important innovations.

But maintaining that leadership requires a policy and regulatory environment that keeps pace with the innovations happening in our labs.

The Republicans on the Ways & Means Committee took an important step in that direction by introducing four bills that would support small biotechs developing new medicines for pandemic threats and broadly encourage investment in the biotech industry.

Dr. Phil Gomez is the head of Siga Technologies, a small biotech startup based in New York City and with research facilities in Oregon. Dr. Gomez recently said:

“These bills represent a valuable approach to supporting our American companies on the front lines of fighting COVID-19 now and developing preparedness products for the future. They also will help encourage greater investment in the U.S. biotech industry generally to support its important mission of providing treatments and solutions for many of our most pressing health security issues. I hope that Congress can work in a bipartisan manner to enact this legislation quickly.”

As reported in Good Day BIO last week:

• Two bills in the package would provide more incentives for infectious disease research. The Start-ups for Cures Act and The More Cures Act, both sponsored by Rep. Devin Nunes (R-CA), make enhancements to the R&D credit, including an increased credit amount and refundability for qualifying research expenses.
• Another encourages investment in companies engaged in infectious disease drug development. The Infectious Disease Therapies Research and Innovation Act, sponsored by Rep. Mike Kelly (R-PA), helps small biotechs raise investment funds by allowing credits and losses associated with qualifying research to pass through to investors to offset other income.

• The package also includes one of BIO’s top capital formation priorities: Reform of the net operating loss (NOL) limitations under Section 382 of the tax code.  While Section 382 is intended to prevent abuse, it can also be triggered by investment in thriving small biotechs. This has the unintended consequence of chilling investments in biomedical innovation. The American Innovation Act, sponsored by Rep. Vern Buchanan (R-FL), would call off Section 382 for investments during a company’s startup phase, thereby preserving these valuable tax assets and encouraging investment.

As Ways & Means Committee Ranking Member Kevin Brady (R-TX) noted:

“These bills are vital for America’s future in order to increase investment in American innovation—leading to more cures not just for COVID-19, but for any future health crisis our country may face.”

We agree, and BIO looks forward to working with members on both sides of the aisle to build support for this important legislation and ensuring a policy environment where biomedical research continues to thrive.