Washington Editor

WASHINGTON - Newly proposed legislation aims to help biotech companies better access capital by expanding the use of net operating losses after becoming profitable or following a business-driven merger with another biotech company.

The bill, introduced by Sen. Rick Santorum (R-Pa.) and Rep. Melissa Hart (R-Pa.), is called the Biotechnology Future Investment Expansion (BIOFIX) Act of 2005. Specifically, it would amend Section 382 of the Internal Revenue Code for biotech firms, which is intended to discourage buyouts of companies with heavy losses on their books in order to receive tax benefits in the form of write-offs.

"This is an anomaly in the tax code that was never intended when the law was put into place," Morrie Ruffin, the executive vice president of capital formation and business development at the Biotechnology Industry Organization, told BioWorld Today. "The biotech companies, because of their unique financing structure, have gotten swept up in this Section 382 exclusion when that was never the intention."

Hart noted that start-up firms, in particular, are "hampered by complicated and costly tax provisions that hinder their ability to invest in research and development." Santorum added that "current limitations imposed in the tax code prevent many biotech start-ups from taking advantage of tax incentives."

The measure would allow biotech companies to continue to claim net operating losses, which Ruffin called "very important assets," as tax deductions in spite of ownership changes that come from equity financings. In particular, BIOFIX would remove that obstacle written into law in 1986 and enable the net operating loss carry-forward to continue.

"What [lawmakers] didn't foresee at that point in time," Ruffin said, "were the circumstances that are fairly unique to our industry, with [money-losing] companies going through successive rounds of financing. How many other industries actually do that, where you have investors continuing to buy into companies that are still in a loss position while developing a lead product and awaiting approval?"

Hart noted that incentives worked into the bipartisan bill encourage research and development and "allow biotechnology firms to concentrate on what they do best." Santorum added that legislators "must do what we can to make sure that biotech companies have the necessary incentives, given their unique start-up costs and the length it takes to get products to market."

A previous draft of the BIOFIX bill was introduced in 2003, and Ruffin said BIO is looking for the first opportunity to attach the new version to any piece of legislation that will move either this year or at some point next year. In the bigger picture, the proposed measure will be part of larger, more comprehensive tax legislation being drafted right now.

Feds Warn of Tamiflu Counterfeiting

The antiviral Tamiflu (oseltamivir, from F. Hoffmann-La Roche Ltd.), which is gaining worldwide attention because of its suggested ability to combat the effects of bird flu, also could be in the sights of scam artists.

Federal health officials yesterday warned of counterfeit versions of the drug and said consumers should be vigilant, though no such cases have been reported in the U.S. But Mike Leavitt, the secretary of the Department of Health and Human Services, cautioned that the recent surge in demand for Tamiflu has created "a situation that is ripe for counterfeiting." The World Health Organization estimates that overall drug counterfeiting has grown to a $34 billion market. His comments came during a conference call to alert the general population about the importance of getting vaccinated against the seasonal flu.

Acting FDA Commissioner Andrew von Eschenbach said the agency is "enhancing our counterfeit alert network," a partnership between the agency, professional organizations and consumer groups to recognize false products. He also stressed collaborative efforts with federal customs officials to stop counterfeits from entering the country, as well as authentication technologies "to track and trace" such products. At the same time, he said the FDA's MedWatch product surveillance system would be used to detect unforeseen events "that would be indicative" of counterfeit usage.

Leavitt noted that the U.S. government's official pandemic flu preparations would soon be released.

With bird flu continuing to spread - there are new reports of the H5N1 virus strain in Russia and the UK - Roche has been under fire to make Tamiflu more available. The drug can take up to a year to produce, and the Swiss pharmaceutical firm, which reportedly has bought 90 percent of the world's harvest of one of its main ingredients, the spice star anise, has agreed to talk with four major generic drug makers about producing the antiviral. Roche also faces the possibility that India could allow Tamiflu generics without company consent.

Delays Announced In ESC Vote

The Senate won't vote until sometime next year on a proposed bill that that would overturn limitations on federal funding for embryonic stem cell research because of a busy calendar. The bill already has passed the House of Representatives, and has the votes to pass in the Senate, though President Bush has said he would veto the measure.

For the White House administration, avoiding what could prove to be an unpopular veto might be beneficial right now for the president, who has seen his approval rating drop to lower than 40 percent in recent weeks.

Other proposed stem cell legislation, including the Stem Cell Therapeutic and Research Act of 2005 bill that some regard as a pro-life friendly alternative, also continues to await Senate action. That bill's main sponsor, Rep. Christopher Smith (R-N.J.), recently pressed the matter at a news conference that included NBA Hall of Famer Julius Erving, who stood alongside Smith and others in advocating the measure that proposes to establish a national infrastructure for collecting stem cells derived from cord blood.

FDA Names Top Safety Official

The agency last week named a new drug safety czar.

Gerald Dal Pan was named director of the office of drug safety. Previously, he was the head of the division of surveillance, research and communication support, part of the safety office that falls under the Center for Drug Evaluation and Research. Dal Pan will report directly to Steven Galson, CDER's director.

"We spend about half our resources across the center on drug safety," Galson told a generic drug company audience, later adding that current drugs "are safer than they've ever been."

Still, critics voiced displeasure over the hierarchy. Those advocates had called for such a position to be independent of CDER, which maintains the FDA's drug approval responsibilities.