Qualifying Therapeutic Discovery Project Tax Credit ... A Big Win for U.S. Life Science Companies?

Colleagues,

A recent article in Xconomy caught my eye.

It appears that the new Qualifying Therapeutic Discovery Project Credit, recently passed in the Healthcare Reform legislation, may be worthy of the attention of the vigilant life science CEO. I think it may offer some important financial benefits for your company ...

The extended article on this topic is at: http://www.xconomy.com/national/2010/04/08/biotechs-second-big-win-in-healthcare-reform-a-tax-credit-bonanza/?single_page=true

... Dean Zerbe has also provides a detailed description of this program in a recent posting at Forbes.com: http://www.forbes.com/2010/03/26/health-reform-biotech-tax-credit-p......

ENJOY!

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... Excerpts from the above:

* Life science research companies employing less than 250 workers qualify for this tax credit.

* If your company has a tax liability, you can get a 50 percent tax credit;

* If you have no tax liability, you can get a grant in the same amount that is tax-free.

* The credit covers qualified investments in “therapeutic discovery projects.”

What is a "therapeutic discovery project?

The research program must fulfill at least one of the following three criteria:

1) It is designed to treat diseases via preclinical research or clinical studies for the purpose of getting FDA approval of the treatment.

2) It is designed to diagnose diseases or find molecular factors (e.g. biomarkers) related to diseases by developing diagnostics that can be used to make therapeutic decisions.

3) It is designed to develop some methodology that would advance the delivery or administration of therapeutics.

This appears to be a pretty wide net to me (CC).

However, there are some additional criteria that will also be used to judge the research applications:

* The research should have direct or indirect medical benefits.

* The research effort “will treat areas of unmet medical needs or prevent, detect or treat chronic or acute diseases or conditions.”

* Programs that will cut long-term health care costs are also favored, as are projects that have the potential of curing cancer.

* Finally, applications that will create sustainable, high quality jobs and advance U.S. competitiveness in the life sciences will also be preferred.

The program scope & duration are limited, i.e., you may need to move fast to eat!:

* The total amount of tax credits and grants appear to be capped at $1 billion

* It is designed to cover expenses incurred in 2009 and 2010 only.

* The Treasury Department will administer the program:

- It is supposed to have this program in place 60 days after the legislation is approved

- Applications are supposed to start being approved 30 days after that.

- This means companies could begin getting credits or grants as early as late June 2010.

There are still many questions that need to be answered about how this program will be administered. For example, biotech companies are clearly eligible, but will medical device companies that meet the above criteria qualify as well?

With that said, the Qualifying Therapeutic Discovery Project Credit may be worth your while to focus upon, research, and then move quickly to secure if you qualify!

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