The New York Times reported this week that biotechnology executives joined the crowd queuing up on Capitol Hill for help. The biotech industry, battered like so many others by the credit crunch and market meltdown, wants Congress to let money-losing companies collect tax credits now that under current law they can’t collect until they become profitable.
A change in the law could mean a windfall of hundreds of millions — even billions — of dollars for the industry. A significant amount of this largess would likely trickle down to San Diego, home to 700 biotech companies, the third largest concentration in the country behind the Bay Area and Boston.
From the Times story:
The big profitable biotech companies like Amgen and Genentech remain financially sound. But of the 370 publicly traded American biotechnology companies, the number with less than six months cash on hand is approximately 125 — nearly double the total last year, according to the Biotechnology Industry Organization, a trade group. Developing a drug can require hundreds of millions of dollars and 10 years or more, so even in good economic times some small companies struggle to raise money.
But with financial markets in turmoil, investors have become reluctant or unable to provide the infusions of cash, pushing many biotech companies to the brink.
The story went on to give more specifics on the proposal:
The industry’s idea is to let companies turn their very weakness — their huge losses — into an asset. Under current law, net operating losses can eventually be used to offset some taxes once a company is profitable. But that does little good for companies struggling with losses and a lack of cash now.
So the industry’s proposal would let companies receive payments from the government now in exchange for giving up those tax deductions later. The industry would agree to a cap, perhaps $30 million, on the amount any single company could receive.
In the coming weeks and months I will be gathering as much information as I can on how local biotech companies are weathering the recession. Please pass along any information concerning resources I should be tapping into as well as tips from the front lines. You can e-mail me at david.washburn@voiceofsandiego.org.