California biotech companies are rallying behind proposed new state legislation, which would extend the time period that biotech companies have for claiming a tax deduction based on net operating losses.

The Mercury News reports:

The business leaders say their companies often labor for 15 years or more at a cost of hundreds of millions of dollars before they can get a drug approved for sale and generate enough revenue to climb out of the red. Yet under California law, they typically have only 10 years to claim a tax deduction based on their net operating losses.

Consequently, by the time they earn enough to pay state income taxes, many of them have lost the opportunity to claim the deduction. .  . .

That’s why [Assemblywoman Sally] Lieber has introduced a bill to double that deduction period, mirroring federal law. The measure, AB1370, which specifically gives biopharmaceutical businesses 20 years to claim their tax credits, was unanimously approved by the Assembly on June 6.

If it becomes law, it could give the biotech industry a big boost, according to Matthew Gardner, president of BayBio, an industry trade group based in South San Francisco.

While similar measures have failed twice before, supporters claim that this time is different, as there is more biotech support within assembly than existed in the past.  Three states–Florida, Illinois, and New York–already have a law on the books similar to this one being considered.

According to The Mercury News, this bills is not  the only way in which states are attempting to establish tax breaks for biotech companies:

Some[states] – including New Jersey and Hawaii – allow the firms to sell or trade their net operating loss credits to other businesses.

The article raises an interesting issue regarding tax deductions.  Is the bill a good idea for California’s taxpayers, or does it mean that we just have to bear more of the state’s tax burdens?

In case you missed it, The New York Times ran an interesting story yesterday: "A Challenge to Gene Theory, A Tougher Look At Biotech."

The New York Times article stated:

Last month, a consortium of scientists published findings that challenge the traditional view of how genes function. The exhaustive four-year effort was organized by the United States National Human Genome Research Institute and carried out by 35 groups from 80 organizations around the world. To their surprise, researchers found that the human genome might not be a “tidy collection of independent genes” after all, with each sequence of DNA linked to a single function, such as a predisposition to diabetes or heart disease.

Instead, genes appear to operate in a complex network, and interact and overlap with one another and with other components in ways not yet fully understood. According to the institute, these findings will challenge scientists “to rethink some long-held views about what genes are and what they do” . . . .

With that link now in place, the report is likely to have repercussions far beyond the laboratory. The presumption that genes operate independently has been institutionalized since 1976, when the first biotech company was founded. In fact, it is the economic and regulatory foundation on which the entire biotechnology industry is built.

The article goes on to state the following:

Evidence of a networked genome shatters the scientific basis for virtually every official risk assessment of today’s commercial biotech products, from genetically engineered crops to pharmaceuticals.

“The real worry for us has always been that the commercial agenda for biotech may be premature, based on what we have long known was an incomplete understanding of genetics,” said Professor Heinemann, who writes and teaches extensively on biosafety issues.

“Because gene patents and the genetic engineering process itself are both defined in terms of genes acting independently,” he said, “regulators may be unaware of the potential impacts arising from these network effects.”

Needless to say, the article was provocative.  Does this new finding that scientists don’t know quite as much as they thought they did really shake the foundations of biotechnology?  Does this now mean that biotech commercialization is actually putting the public at risk?

With all due respect to The New York Times, I can’t help but thing that this is "much ado about nothing."  The biotech industry may have some new challenges to face, but I hardly think that news of this research is going to have a significant impact on the industry.  So, scientists decide that they didn’t know as much as they thought they did–how does that change all the discoveries and innovation that have already come out of the industry?  Do these new findings really erase those achievements?  Of course not.

The New York Times pointed to a possible effect on previously granted gene patents as one possible effect of these findings.  While it is plausible to think that gene patents could be affected by this new research, I think it is a stretch to extend the reach of those findings much further.  But apparently everyone does not share that view–certainly not The New York Times.  It will be interesting to watch and see how this story unfolds in the future.

The California Stem Cell Report reported on the plan released by the California Institute for Regenerative Medicine ("CIRM") on how to distribute the $85 million in research money to twenty-five researchers. 

According to author David Jensen of the California Stem Cell Report, the plan "shed some light on issues related to have and have-not institutions, quality of grant recipients and spreading the CIRM wealth geographically around the state."  Jensen writes:

Under the plan, the awards would go to persons who hold fulltime, faculty-level positions at academic or non-profit institutions in California and who are "young," meaning in the early stages of their careers. Academic institutions with a medical school could submit four applications in support of new Ph.D.’s and two new physician-scientist faculty members. Institutions without a medical school would be limited to two applications. The grants would go for research, salaries and possibly educational loans. They are akin to Pioneer grants awarded by the National Institute of Health. . . .

The discussion of the faculty award program reflected some of the questions recently rippling through CIRM. Do the big, well-established programs continue to receive generous grants? How much should go to institutions without the reputations and facilities that UC San Francisco and Stanford have? Should the location of institutions be a consideration? Does spreading the money around mean that unworthy science is being funded?

These are questions that we as taxpayers should all be considering: how should the CIRM be dividing up all that research money?  Did Californians intend that young researchers should get the money and build their careers in part on this research money?  Or did taxpayers envision something different taking place?

I have mixed feelings on the issue myself. 

As a young attorney myself in my early thirties, I tend to believe that young professionals are in large part hungrier for opportunities than are more established professionals.  I am a hard worker, but let’s be honest–I really don’t aspire to be putting in the kind of hours I have been working the last three or so years in getting my business off the ground twenty years from now.  If I am still working that hard, it may have the effect of cutting my own life short.  In truth, I already feel like it has, and it has only been a little over three years–not twenty.   While there are late bloomers, i.e. professionals who really "bloom" as experts in their fields later in life, I think that by and large it is a fair statement to think that younger professionals will be more driven in the early years of their careers.

On the other hand, there is a good argument that the money should be distributed to those researchers who are already experts in the field so that they can do more research on the areas they built their life’s research on.  If you go back to the analogy of me as a young attorney, there is no doubt that in twenty years I will be much more expert in my field than I am today.  In fact, my expertise grows little by little each year. 

So, what’s more important: the "young drive" and "hunger" for success?  Or the years of establishing a career and developing expertise?  That seems to be the question grappled with in every field.  But should we be grappling with it here in distributing all of this taxpayer money?  Well, the decision seems to have already been made.  Now, it’s up to us as taxpayers to decide whether or not our tax dollars have been put to good use.

The blogosphere is buzzing today about Freeman Dyson’s article in The New York Review of Books titled, "Our Biotech Future."  In this column, Dyson describes a world where biotechnology predominates every aspect of life.

Among Dyson’s predictions are as follows:

Will the domestication of high technology, which we have seen marching from triumph to triumph with the advent of personal computers and GPS receivers and digital cameras, soon be extended from physical technology to biotechnology? I believe that the answer to this question is yes. Here I am bold enough to make a definite prediction. I predict that the domestication of biotechnology will dominate our lives during the next fifty years at least as much as the domestication of computers has dominated our lives during the previous fifty years.

Dyson further states:

I see a bright future for the biotechnology industry when it follows the path of the computer industry. . . . .Every orchid or rose or lizard or snake is the work of a dedicated and skilled breeder. There are thousands of people, amateurs and professionals, who devote their lives to this business. Now imagine what will happen when the tools of genetic engineering become accessible to these people. There will be do-it-yourself kits for gardeners who will use genetic engineering to breed new varieties of roses and orchids. Also kits for lovers of pigeons and parrots and lizards and snakes to breed new varieties of pets. Breeders of dogs and cats will have their kits too.

Domesticated biotechnology, once it gets into the hands of housewives and children, will give us an explosion of diversity of new living creatures, rather than the monoculture crops that the big corporations prefer. New lineages will proliferate to replace those that monoculture farming and deforestation have destroyed. Designing genomes will be a personal thing, a new art form as creative as painting or sculpture.

Few of the new creations will be masterpieces, but a great many will bring joy to their creators and variety to our fauna and flora. The final step in the domestication of biotechnology will be biotech games, designed like computer games for children down to kindergarten age but played with real eggs and seeds rather than with images on a screen. Playing such games, kids will acquire an intimate feeling for the organisms that they are growing. The winner could be the kid whose seed grows the prickliest cactus, or the kid whose egg hatches the cutest dinosaur. These games will be messy and possibly dangerous. Rules and regulations will be needed to make sure that our kids do not endanger themselves and others. The dangers of biotechnology are real and serious.

Dyson makes some interesting predictions in his article.  While many of them are very likely uses of biotechnology, others seem to take science a bit too far.  However, he does pose an interesting question for us all: what should be the future of biotechnology?  Where should we go with the science?  Should biotechnology be as integrated in our lives as high technology now is? 

These questions are, of course, far from new, but perhaps the reason they are getting so much discussion today on the blogosphere is the timing of them being posed again to us.  So much of what was envisioned previously in high technology has become a reality to us all in today’s world.  It’s a fair question to ask again: where will all of these novel biotech developments take us?  And, more importantly, do we as a society really want to go there?

As many of you are likely aware, I have had a number of recent interviews and speaking engagements.  The most recent interview was with Sky Radio’s Dennis Michaels.

I sat down with Dennis to discuss some of the recent developments facing the biotech industry, including the MedImmune v. Genentech decision, the generics legislation introduced earlier this year (this was taped prior to the introduction of the new legislation), and the increase in biotech outsourcing.  Dennis provided me a copy of the audio recording of the interview, which I wanted to share with blog readers.  Please click here to listen.

Big-cap biotech stocks are no longer exceeding expectations on Wall Street, according to a report by Asx300.blogspot.com.

That report states as follows:

Shares of Genentech (DNA) the world’s biggest biotech by market cap, have declined 15% since reaching a 52-week high on Jan. 22. The stock fell 5% in June, even after a two-day surge last week. Amgen (AMGN) is down 19% for 2007 and 16% the last two months.Celgene (CELG) has dipped 13% since reaching an all-time high on May 22.  Financial returns aren’t the problem. Those three firms along with peers like Gilead Sciences (GILD), Biogen Idec (BIIB) and Genzyme (GENZ) regularly have double-digit sales and profit growth. Most are expected to continue doing so over the near term. Genentech has grown sales and earnings at least 36% in each of the last 10 quarters, but analysts expect growth to decelerate in each of the next four.

What is to blame for this change?

The report points to new challenges facing the industry such as the Food and Drug Administration requiring more data and causing more delays in drug approvals, and also to the new fears of generic competition, which traditionally were only an issue that big pharma had to contend with. 

These statistics provide a first glimpse at how biotech may be impacted by the newly proposed generics bill as well as some of the other issues currently facing the industry.  While factors other than these issues are likely affecting the stocks too, there is certainly reason for the industry to take note of how issues in the news may already be affecting sales of stock.