A $1 billion tax-credit program to revive the languishing U.S. biotech industry opens for applications today. For many companies, the Therapeutic Discovery Project Program will actually mean a cash grant to help develop a drug or diagnostic. Applications won't go through scientific peer review, but they will get a look from staff at the National Institutes of Health (NIH).
Buried within the new health care reform law, the program was championed by senators Max Baucus (D–MT), chair of the Senate Finance Committee, and Robert Menendez (D–NJ). They wanted to help the many small biotech companies devastated by the lack of venture capital funding since the financial crisis began in 2007. "An entire generation of biotech projects was being shelved," says Alan Eisenberg, executive vice president for Emerging Companies and Business Development at the Biotechnology Industry Organization in Washington, D.C. BIO pushed for the program along with patient-advocacy groups.
Biotech companies with fewer than 250 employees can apply  for a tax credit for up to 50% of their 2009 and expected 2010 investments in a specific project, to a maximum of $5 million per company. Because many start-up companies are not yet profitable, the Treasury Department will send them a check instead. NIH Director Francis Collins likes the idea: "I actually think this could be a very useful program at a time where many of these companies are starved for capital," he told a House of Representatives committee last week.
To qualify, the project has to meet the following criteria: It must prevent, detect, or treat a disease; treat an area of unmet medical need; reduce health care costs; or contribute toward curing cancer within 30 years. Applications will be reviewed by subject matter experts at NIH and other health agencies to see if "they show a reasonable potential to meet the statutory goals," says NIH's Jo Anne Goodnight, who oversees NIH's small-business research grants. Then officials at the Internal Revenue Service will review the project's potential to create jobs and advance U.S. competitiveness. NIH has a Web page  with more information.
But unlike the rules for a similar tax-credit program for energy projects , Treasury won't rank the proposals. Instead, the money will be divvied up among everyone who qualifies. If BIO is right that roughly 1200 companies will be eligible, the average payoff could be less than $1 million.
Companies must apply by 21 July, and IRS expects to notify them by the end of October.