Lucrative New Opportunity For Small to Mid-Sized Biotechnology Companies

Overview of the Qualifying Therapeutic Discovery Project Credit

The Qualifying Therapeutic Discovery Project Credit ("the Credit") was created by Congress as part of the Patient Protection and Affordable Care Act passed on March 23, 2010. The potential incentive for small to mid-sized biotechnology companies is significant but there are limited funds available and there is a short two year window to take advantage of the incentive on a first come, first serve basis.

Biotechnology

Consequently, the time to act is now or you will miss out on this opportunity.

Lucrative New Opportunity For Small to Mid-Sized Biotechnology Companies

This article will outline the positive and negative aspects of The Credit and why you must begin the process immediately to obtain your piece of the pie.

Net Benefit Examples

Before delving into the details of the Credit, let's look at two examples of the potential benefit for eligible companies. An important aspect of the Credit is that companies cannot take the same expenses toward the Credit and the R&D Credit. (The R&D Credit may be utilized for other expenses). These examples illustrate both the size of the incentive for the Credit but also how it compares to the R&D Tax Credit.

Benefit Comparison Example: Medical Device Maker

Sampling of Activities:

Drug Delivery Devices

Treatment Delivery Systems

Therapeutic Care Equipment

Medical Monitoring Devices

Qualified Expenditures:

2009 - Million

2010 - Million

Benefit Comparison:

Estimated net benefit under the R&D Tax Credit: 5,000

Estimated net benefit under The Credit: ,625,000

Benefit Comparison Example: Biopharmaceutical Development

Sampling of Activities:

Pharmaceutical Research

Clinical Trials

Pre-Clinical Research and Testing

Qualified Expenditures:

2009: Million

2010: .5 Million

Benefit Comparison:

Estimated net benefit under the R&D Tax Credit: 2,500

Estimated net benefit under the Affordable Care Credit: 2,500

Overview of The Credit

Biotechnology firms have a lucrative opportunity to recover newly created Federal grants and tax credits. Under the Patient Protection and Affordable Care Act, eligible firms can apply for a tax credit or non-taxable cash grant in an amount equal to 50% of investments made in qualified therapeutic discovery projects. Congress mandated the creation of a new program, administered by the Secretary of the Treasury ("the Secretary"), to consider grants and credits by the end of May 2010. While the scope of activities covered by the Qualifying Therapeutic Discovery Project Credit ("the Credit") is broad, the amount of funds and years of eligibility are limited.

Broad in Scope

The Credit goes beyond existing investment tax incentives. Under the new law, expenses incurred in pursuit of any project designed to develop a "product, process, or technology" that furthers the "delivery or administration of therapeutics" are qualified. Moreover, projects designed to treat or diagnose a disease or condition may be qualified.

Consideration will be given to those projects that show reasonable potential to result in:

1) new therapies that treat areas of unmet medical need;

2) new therapies that prevent, detect, or treat chronic or acute diseases and conditions;

3) reduction of long-term health care costs in the United States; and

4) significant advancement of the goal of curing cancer within a 30-year period.

Like other investment tax credits, national job creation and retention is an important part of the law. When considering grants and credits, the Secretary will take into account the potential to create and sustain high paying U.S. jobs, as well as the potential benefit to U.S. competitiveness in the fields of life, biological, and medical sciences.

Eligible Companies

Firms that employ medical researchers, biomedical engineers, and other personnel with a background in life sciences should consider this opportunity.

Here is a list of companies that may have eligible projects for The Credit:

• Pharmaceuticals

• Medical, Drug Delivery and Health Device Manufacturers

• Biopharmaceutical Engineering Firms

• Genetic Research Firms

• Biomedical Engineering Firms

• Life Sciences Companies

• Health Sciences Companies

• Health Diagnostics Manufacturers

• Biomedical Manufacturing

• Therapeutic Treatment Companies

• Biomaterial Firms

• Tissue Engineering Companies

• Biomedical Optics Firms

• Cancer Research Companies

• Cancer Treatment Firms

• Radiology Companies

• Nanotechnology Firms

Major Benefits of The Credit

Unlike other investment tax incentives:

1. Applicants for the Credit are not required to have current taxable income.

2. Firms with no tax liability can apply for a grant in lieu of a tax credit.

3. The Credit has a statutory response time of 30 days.

a. Firms applying for the tax credit will be approved or denied by the Treasury Department within 30 days from the date of application.

b. Firms applying for a grant must be paid within 30 days from the later of the date of application or the date the qualified investment is made.

Limitations

Firms considering a grant or credit must take action now because of the following limitations:

1. Under current law, The Credit is only applicable to qualified investments made during the 2009 and 2010 tax years.

2. The amount of funds currently available is capped at billion.

3. The credit is limited to firms with 250 employees or less.

These limitations will result in intense competition for the funds currently allocated.

Program Administration

Under the new law, the Secretary must establish a program to administer the Credit not later than 60 days from the date of enactment. Though the Secretary has not released new details yet, it is clear that application and approval of funds will occur relatively quickly. Though the exact details of the program have not been released, eligible firms must begin tax planning.

Summary

In our estimation, the positive aspects of the Qualifying Therapeutic Discovery Project Credit are enormous but there is a small window of opportunity to take advantage of The Credit.

Given the administration and scrutiny of existing tax incentives, such as the R&D tax credit, those tax consultants with a background in science and engineering are particularly well suited to capture this new opportunity. Tax consultants with these qualifications are in the best position to help taxpayers properly identify qualified therapeutic investment projects. Eligible firms should contact a qualified tax advisor immediately.

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The authors are Karim Solanji, J.D., Director and Mark Lauber, VP of Marketing both of Paradigm Partners. Paradigm Partners is a national tax consulting firm specializing in niche tax services such as the R&D Tax Credit, Qualifying Therapeutic Discovery Project Credit, the IC-DISC (U.S. Exporters' Tax Incentive), WOTC (Federal and State Hiring Tax Incentives), Section 179 and Cost Segregation. Mark's email is MLauber@ParadigmLP.com and his phone number is (281) 558-7100 X-105. Our website is http://www.ParadigmLP.com.

Biotech Companies Are A Focus Point For Investors

America's population is getting older and demanding more medication and procedures to keep them in good health. That makes biotech companies particularly attractive to investors. Not only do these companies provide potential employment opportunities for many, they also may offer the investor an opportunity to offset some of the losses experienced in other sectors. For those investing in their future by seeking careers in biotech, the area also provides ample opportunity for growth and solid employment.

Buying stock or seeking jobs in this area both require vigilance in selecting the right company. In many ways, job or career seeking individuals look for the same stability and financial strength as investors. Both groups depend on the company sustaining growth and remaining strong even during tough economic times so selecting the right company becomes imperative for both groups of people.

Biotechnology

According to a recently published report by Ernst & Young, LLP called "Focus on Fundamentals: The Biotechnology Report," The companies involved in the biotechnology sector provide greater security to both the job seeker and investor because of their investment in not only the research and development of new products but also their investment in their future by retaining secure capital reserves.

Biotech Companies Are A Focus Point For Investors

Company philosophy, sales growth, profitability, trading stability, level of debt and employee performance among other factors, all play an important role in the company's financial success. These are important factors to consider regardless of the sector, before purchasing a stock or seeking employment. Each company grows its business differently from others. Look for a company that offers potential for growth without sacrificing its profitability or financial strength.

Some companies, for instance, believe that bigger is better regardless of financial situations. During hard economic times, maintaining a company with a high level of debt often calls for layoffs, thus creating investor concern and lower stock prices. It should also be of concern for those seeking a career. If the company has to cut back employees, your job may be on the line at a time where other employment is difficult to find.

While a Large Biotech Company is a sign of prestige to both investor and those seeking careers, smaller companies may offer big opportunities. If you find a smaller company that formed alliances with a larger more established pharmaceutical firm, you may have a bigger potential for growth in the areas of both jobs and the future growth of stock prices.

These companies caught the eye of large pharmaceutical firms that recognize marketable products. The larger company has the resources to not only do additional research on the smaller company's product and get it to market but also know the potential for sales of the product. Those seeking careers with this type of smaller company should look into the potential of stock purchase programs as part of the company's financial package.

Strong fundamentals, a good pipeline of products and a competent team at the helm of the company offer the investor and those seeking careers an abundant opportunity for a secure and prosperous future. As the American public ages, more and more demand creates an ever-growing need for the products produced by those in the biotech sector. This does not mean that the investor should stop using fiscally sound practices of diversification, quite the contrary. However, it does mean that the well-informed investor should include biotech stocks in their portfolio to boost their returns. Selecting the best companies in that sector will make a difference for fiscal future of both the job seeker and investor.

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Biotech R&D Tax Credit - Healthcare Reform's 50% Tax Credit For Small Biotechnology Companies

A little noticed amendment in the 2010 Healthcare Reform legislation is a 50% tax credit for small biotech companies who perform qualifying research and development. The credit was promoted by Senators from Washington, Massachusetts, and New Jersey. Although all details are not yet available it is clear that:

* Qualifying companies must have 250 employees or less

Biotechnology

* Only a limited number of activities will qualify.

Biotech R&D Tax Credit - Healthcare Reform's 50% Tax Credit For Small Biotechnology Companies

* Qualified projects must be approved by the Secretary of the Treasury in consultation with the Secretary of Health and Human Services.

* It will apply to activities and expenses occurring in 2009 and 2010.

* It is available to pass through entities such as partnerships, S corps, as well as traditional C corps.

* For non-taxpaying entities a tax free grant of equal value can be made.

* Qualifying "therapeutic discovery projects" must have the potential to do one of three things:

* Result in new therapies "to treat areas of unmet medical need" or "to prevent, detect or treat chronic or acute diseases and conditions,"

* Or "to reduce long-term health care costs in the United States"

* Or "significantly advance the goal of curing cancer within a 30-years period."

* Other factors to be considered are projects with the greatest potential

* To "create and sustain high quality, high paying jobs in the United States, and"

* To "advance United States competitiveness in the fields of life, biological and medical sciences."

There is a limitation to the tax credit. Total funds available are billion over both 2009 and 2010. Details of the program could be available as early as June, 2010. Credit application filings should begin 30 days later. The challenge for smaller biotechnology companies will be first understanding the requirements, and then documenting their activities and expenses.

In many ways this is like the challenges for companies filing for §41 Research Tax Credits. This creates justifiable concern. For decades large corporations spending millions on R&D have also spent millions on tax advisors trying to figure out how to document their R&D expenses to qualify for federal and state research tax credits. This dilemma has caused companies to develop complex, time consuming and costly processes for interviewing R&D engineers and trying to reconstruct R&D activity, expenses, and critical supporting documentation well after the fiscal year end. The result has often been incomplete documentation, inaccurate reporting, and a significant loss of tax credits on IRS audit.

To avoid this dilemma, smaller companies must look to documentation methodologies that have proven to capture the maximum QRE (those of you already filing for §41 credits know this as qualified research expense), while also complete, accurate and contemporaneous documentation to demonstrate the qualifying activities. Considering the short time companies will have to prepare their documentation for this new Biotech Tax Credit, it could be difficult.

One possible solution is to assemble teams of tax accountants to survey your activities, receipts, and other documentation, and then prepare, item by item a report that will support your claim. Unfortunately, this is prohibitively expensive and even for the biggest firms, often unreliable.

Other solutions use high technology. In the past few years a few companies have developed systems that allow engineers to record data into spreadsheets or project management applications. The limitation of these systems is that it puts the burden of knowing what qualifies for tax credit on the engineer or other operations personnel.

Another solution is to have all reporting personnel document their R&D activity on a central database. This can be called a resource information exchange. There are service providers using this methodology and in at least one case packaging that online service with research tax credit expertise. The advantage to the subscribing company is that these high-tech services are significantly less costly, highly efficient, and very accurate.

In the words of Rick Humphrey, President of RIX® Technology, LLC, "Resource information exchange services typically offer what every small company is looking for to obtain this new Biotech Tax Credit. They are comparatively inexpensive, easy to learn and use, and will allow them to start documenting current R&D activity immediately. Most services allow for backfill of prior activities in the set-up process and would capture all 2009 activity and expenses. But the real benefit of online technology and databases is that it is a permanent resource, a knowledge base for future reference and use."

Small companies who are on tight budgets simply can't afford the huge fees of public accounting or large specialty tax firms, especially if they lose a significant amount of their credit on IRS review. So picking the right system and methodology for documenting their R&D activity is very important. It is especially important for pass-through entities that can directly benefit investors and for start-up firms that are not yet in a taxpaying situation. This methodology is already proven to provide the maximum allowable tax credits as efficiently as possible while providing additional benefits, including the ability for rapid filing.

In the case of the Biotech Tax Credit it is particularly important to have a system of documentation that the IRS can access easily and methodically. With an online system, activity and expenses are collected contemporaneously (gathered at the time of activity and including all qualified expenditures that occur) and maintained in a database. This online database allows the IRS, with client controlled access, to examine the data online without having to visit and disrupt your operation. If that isn't possible, make sure you have your supporting documentation readily available and in one location. With the Biotech Tax Credit rapid response is particularly important because competitors will be soaking up their portion of the billion quickly while others wait for Treasury approval.

For small to medium sized biotechnology companies this is a huge opportunity. As a quote from Sen. Menendez website1 states, this "Creates a credit that would encourage investments in new therapies to prevent, diagnose, and treat acute and chronic disease, lower health care costs."

With the new Biotech R&D Tax Credit many companies will be able to turn their early development costs into cash long before they reap the benefit of their products going to market. But, don't wait too long to get in line. The bank for this benefit will empty quickly.

Written by:

Nick Vasilieff

Freelance Writer/Consultant

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Nickolai Vasilieff is an entrepreneur and freelance writer with a background in international business, sales and marketing. He is now practicing as a free-lance technical writer helping companies produce high quality professional profiles, articles, user-stories, and other marketing materials.

During his 20-year tenure as President and CEO of TPI, Vasilieff worked with over 150 companies from over 35 countries to expand markets, managing sales, marketing and operations, and introducing over 250 products and services.

Currently Vasilieff works as EVP with Rix Technology, LLC, on the introduction of a new and exciting online based technology for documenting R&D activity specifically for research tax credit. The potential market for this application includes all US based companies doing over 0m in annual sales. RIX also has industry specific modules, such as the RIX Biotech Module released in April 2010. Vasilieff is responsible for all marketing, sales, and client ralations for the company.

Nick Vasilieff
http://www.vasilieff.com

Pharmaceutical Industry in India, Top Pharma Companies and Jobs

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Pharmaceutical companies in India are growing at a very fast pace and this has made the Indian pharmaceutical industry as the second largest growing industry. Also the pharmaceutical industry in India is the third largest in the world, which will be of US$20 billion by 2015. Mergers and acquisitions are the part of this growth. The compounded annual growth rate of pharma in India is 12-15% and the global figures are 4-7% for the period of 2008-2013. With such a profound growth of pharmaceutical companies in India numerous pharmaceutical jobs can be seen. This in turn is helping biotechnology industry and booming the biotechnology jobs in India.

Angel Broking has done a research on the growth of pharmaceutical industry and found that by 2015 the pharmaceutical industry in India will be in the top 10 markets. Yet another finding of FICCI-Ernst & Young study reveals that the population of high income group in India is rising which will give rise to more influx of MNCs and expensive drugs.

Pharmaceutical companies along with native companies are also competing with the top MNCs. Such a profound growth is because of the heavy population figures and with the increasing number of middle class people and their income the access to drugs and medicines is also increasing. But still the low-priced generics are popular in Indian pharmaceutical industry.

From India in year 2007-08 total of US$ 8.25 billion were exported and there was seen 29% rise in this figure in 2009. MR Anand Sharma, Union Minister of Commerce said that pharmaceutical sector in India has grown and it is the major contributor to exports from India. In 1990 the amount was meager as compare to today's massive figures.

Initiatives by Government

1. Tax breaks are offered to pharma industry


2. New procedure for the development drugs


3. Proper clinical procedures


4. New Millennium Indian Technology Leadership Initiative and the Drugs and Pharmaceuticals Research Programme - Two schemes launched by the government.

Some Vital Information on Pharmaceutical Companies in India

• In terms of volume - India's pharmaceutical industry is the third largest in the entire world.


• In terms of value - India's pharmaceutical industry ranks fourteenth


• By 2015 - It will be in the list of top 10 global pharmaceutical markets and it will touch US $ 20 billion.


• 2008-2009 - Saw 29% growth in exports of pharmaceutical drugs as compared to 2007


• 2013 - Indian formulation market is expected to touch US$ 13.7 billion

Top 10 Pharmaceutical Companies in India

• Ranbaxy


• Dr Reddy's Laboratories


• Cipla


• Sun Pharma Industries


• Lupin Labs


• Aurobindo Pharma


• GlaxoSmithKline Pharma


• Cadila Healthcare


• Aventis Pharma


• Ipca Laboratories

R Oberoi is associated with Manpower from India and recommends http://www.manpowerindia.net for searching and finding information on all kinds of jobs.