A new analysis by the Information Technology and Innovation Foundation reveals a striking trend among the world's top 2,500 research and development investors. Among the top 2,500 global investors in research and development in 2021, only 260 small, pre-profit firms existed, with 193 of them being biotech and biopharmaceutical start-ups from the United States, according to an Aug. 21 news release.
“The United States is unique in having a vibrant and research-intensive biopharmaceutical start-up system,” Trelysa Long, policy analyst at ITIF and author of the report, said in the release. “But small, pre-profit firms must travel an especially daunting path from the research phase to winning market approval for their innovations. Most burn through invested equity for years while conducting research, making tax incentives critical.”
The report calls on U.S. Congress to implement targeted tax reforms to support these risk-taking firms and sustain the country's biopharmaceutical leadership, highlighting their significance in the sector and the need for incentives. The analysis was conducted by the ITIF, a leading think tank for science and technology policy, the release reported
The report advocates for Congress to fortify the United States' leadership in the biopharmaceutical realm by implementing targeted tax reforms. These reforms aim to optimize incentives for these audacious risk-takers due to their pivotal role in the nation's biopharma sector and the high-risk investments they undertake in pursuit of innovations that benefit both the U.S. economy and global society, the release said.
Remarkably, the 193 U.S. biopharma newcomers constitute 85% of all small biopharma firms among the world's top R&D investors. This starkly underscores the sector's profound contribution to the dynamism and vitality of the U.S. economy, according to the release.
The report also probes the R&D investments made by these nascent biopharma entities. In 2021, these firms averaged a substantial $712,258 in R&D investment per employee, dwarfing the $373,997 spent by other small, research-intensive firms globally. This level of commitment translates to a significant 18% of the entire R&D investments in the expansive U.S. biopharma sector, the release said.
The report extends a series of policy recommendations aimed at nurturing innovation within the biopharmaceutical industry: Foremost, it urges Congress to enact the American Innovation and Jobs Act, a comprehensive legislation package designed to bolster innovation among small firms. This encompasses doubling credit limits for small firms' payroll tax offset, broadening gross receipts for companies utilizing R&D tax credits and extending the payroll tax offset period to eight years. Furthermore, the report champions the repeal of the Tax Cuts and Jobs Act provision that presently mandates firms to amortize, rather than expense, their R&D expenditures, the release reported.
