Booster shot for biotechs
By NJBIZ Staff
When the federal Treasury took the wraps off a $1 billion tax credit program that’s designed to spur innovation among small biotech firms, the state’s many players in the industry let out a collective shout.
The Therapeutic Discovery Credit program, created as part of President Barack Obama’s health care reform bill, allocates credits of up to $5 million per company, and applicants can have no more than 250 employees to qualify. Companies have until Sept. 30, to apply, with federal authorities aiming to award funding by Oct. 29.
CEO Robert Shorr said his Cranbury firm, which develops new cancer drugs, anticipates qualifying for about $5 million from the new tax credit, to be used to fund clinical trials that will better target drugs to patients.
“A great deal of responsibility is being placed on the pharmaceutical companies to make sure the drugs will be effective,” he said.
Shorr said the additional trials will “allow us to tell which patients are most likely to benefit from a drug, and to form large enough clinical trials to make mathematically significant statements [so] that at the end of the day, we have the right product for the right patients. The result will be a longer and a higher quality of life.”
He said the federal funding will “allow patients to have access to new, better-performing drugs more quickly — and given the ability to expand out the testing to match the right drug with the right disease, we will have more favorable outcomes.”
Cornerstone will use the tax credit money for clinical trials for a new drug-delivery technique, which could be on the market in about two years, and for a new class of cancer drugs that could be available in three to five years.
If James Sapirstein, CEO of Manalapan-based Tobira, has his druthers, his company would use funds from the federal tax credit in part to bring back some of the five employees he recently was forced to lay off.
“We’re hoping for something in the seven figures,” he said. “It will pay to employ several people.”
Tobira’s main project, Sapirstein said, is the development of novel compounds to treat HIV and AIDS, and inflammatory diseases. He now has a staff of eight.
Sapirstein said he was in the trenches campaigning for the federal tax credit as part of the emerging companies board for the Biotechnology Industry Organization, in Washington, D.C. He also said he helped lobby Sen. Robert Menendez (D-Hoboken) to advance the legislation.
Companies that receive the tax credit, Sapirstein said, can use it as a lifeline until other financing sources become available — it would be of significant help to Tobira, he added, which — like its contemporaries — needs help to maintain the programs it is moving forward on. Tobira currently uses about 30 consultants to bring down costs, including in roles where he had to eliminate staff, such as the vice president of manufacturing. “We certainly have a lot of work to go around,” he said.
And funding from the tax credit could help keep high-paying jobs in New Jersey as states such as California, Florida and Texas grow more aggressive in luring companies. “We felt we were losing our edge a little bit,” he said.
“The $1 billion tax credit program is going to stimulate the economy by adding jobs and allowing small biotechs … to further their programs,” said Karen Miller, manager of U.S. operations at the Danish biotechnology company, which has its U.S. headquarters in Princeton.
Symphogen, which develops antibodies for the prevention and treatment of serious diseases such as infections and cancer, is planning to apply for the tax credit, she said.
“Like many other small biotechs, our budget is very, very tight, and having an opportunity to recoup 50 percent of our expenses up to $5 million is a gift that doesn’t come along often, especially from the government,” she said.
“This credit/grant will help us re-think some decisions on projects that we had put off until next year, and hopefully, allow us to hire additional personnel to move those projects forward,” Miller said, declining to provide specifics on the projects that the tax credit would help to support.
Symphogen, which opened its U.S. headquarters in Princeton last November, currently has two employees in New Jersey, but plans to expand. Miller declined to elaborate on the expansion, but at the time of Symphogen’s U.S. opening last year, Miller said they planned to expand its office within the next six to 12 months.
VICUS THERAPEUTICS LLC
Morristown-based Vicus, which focuses on cancer drugs, is particularly excited about the program’s possibilities.
“The beauty about this particular program is that it lets you choose between a tax credit or a cash grant,” said CEO John Maki. “We, along with many biotechs, are in a ‘proof-of-concept’ stage, and have not generated profits yet — so a tax credit really wouldn’t be of much benefit at this point. We’re basically at the stage where we’re making ‘go or no-go’ research and development decisions,” he said. “It’s tough to get venture funding at this stage, so a cash grant would be very helpful. We’re definitely going to apply, but we also know there’ll be a lot of competition for it.”
ELUSYS THERAPEUTICS INC.
Elizabeth Posillico, Elusys’ president and CEO, called the tax credit program “just the kind of thing that small companies need,” even though she’s not sure the biopharmaceutical company in Montville’s Pine Brook section will apply.
She said benefits could radiate beyond the companies and affect the state’s economy, as “we have a lot of small startup companies that are faced with the struggle” to receive funding.
One advantage of the program is that it offers grants to companies that do not have the tax liability to receive a credit, Posillico said.
“Our research activity should certainly qualify,” she said; the company focuses on developing antibody-based therapies to treat infectious diseases.
Posillico said the program could provide the funding that small biotech and pharmaceutical companies are seeking in a tight market — “a huge incentive to get some of those more risky, early-stage therapies funded.”
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