Helping Small Businesses
A 500-employee small business limit applies to companies focused on R&D in biotechnology; R&D in the physical, engineering, and life sciences; and manufacturing of in vitro diagnostic substances, of biological products, and of pesticide and other agricultural chemical manufacturing. Businesses in two life science specialties can employ up to 750 people and still be considered small: medicinal and botanical manufacturing; and pharmaceutical preparation manufacturing.
Safi Bahcall, Ph.D., CEO of Synta Pharmaceuticals, agrees that policies that encourage R&D small businesses would indeed be helpful. The company focuses on developing small molecules for cancer and chronic inflammatory diseases. “Our goal is to become the next Genentech, the next Merck and own our drugs, and that would of course create a lot of jobs. What we would like to do is keep those jobs in the United States,” Dr. Bahcall, member of a working group on the future of the U.S. science and technology research enterprise, which consults with the President’s Council of Advisors on Science and Technology, told GEN.
He pointed out, though, that “right now the United States is not really competitive in terms of the incentives being offered for job creation in R&D small businesses,” Dr. Bahcall said. For example, France offers a much more generous research tax credit.
That credit, according to the Invest in France Agency, amounts to 30% of total annual expenditure on research activities of up to €100 million (about $137.4 million) and 5% of yearly expenditure above that level. The 30% rate rises to 40% and 35% in the first and second years, respectively, for first-time research tax credit applicants.
With nothing comparable in the U.S. to consider, Synta and other R&D-intensive companies are listening closely as other nations beckon. France as well as Canada have approached Synta, offering incentives if the company relocates R&D jobs from the U.S. Nearly a third of small U.S. biotech companies have been approached to move their R&D operations offshore, according to a survey prepared for BIO.
CEOs surveyed named China and India as two prime destinations. While Synta maintains a 120-person headquarters in Lexington, MA, Dr. Bahcall said the company also carries out some operations overseas, working with Chinese and Canadian companies on part of its R&D and with firms in Western Europe in manufacturing.
Nonetheless, Gebhardt and Dr. Bahcall both said that the payroll tax cuts are welcome and believe that it could sway at least some employers still on the fence about expanding their workforces.